<PAGE>
As filed with the Securities and Exchange Commission on February 5, 1999
Registration Statement No. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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iXL Enterprises, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 7373 58-2234342
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
----------------
1888 Emery St., NW
Atlanta, GA 30318
(800) 573-5544
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
----------------
U. BERTRAM ELLIS, JR.
Chief Executive Officer
iXL Enterprises, Inc.
1888 Emery St., NW
Atlanta, GA 30318
(404) 267-3800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
JAMES S. ALTENBACH MARGARET A. DAVENPORT GREGORY C. SMITH
Minkin & Snyder Debevoise & Plimpton Skadden, Arps, Slate,
One Buckhead Plaza 875 Third Avenue Meagher & Flom LLP
3060 Peachtree Road, New York, NY 10022 525 University Avenue
Suite 1100 (212) 909-6000 Palo Alto, CA 94301
Atlanta, GA 30305 (650) 470-4500
(404) 261-8000
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
----------------
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] ____
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ____
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ____
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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- ----------------------------------------------------------------------------
Title of Each Class of Maximum Aggregate Amount of
Securities to be Registered Offering Price (1) Registration Fee
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<S> <C> <C>
Common Stock, par value $.01 per
share................................. $86,250,000 $23,978
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o).
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with a U.S. and Canadian offering of the registrant's Common
Stock (the "U.S. Prospectus") and one to be used in a concurrent international
offering of the Common Stock (the "International Prospectus"). The
International Prospectus will be identical to the U.S. Prospectus except that
it will have a different front cover page, underwriting section and back cover
page. The U.S. Prospectus is included herein and is followed by the alternate
front cover page, underwriting section and back cover page to be used in the
International Prospectus, which have each been labeled "Alternative Page for
International Prospectus".
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion
Preliminary Prospectus dated February 5, 1999
P R O S P E C T U S
Shares
[LOGO]
iXL ENTERPRISES, INC.
Common Stock
-----------
This is iXL Enterprises, Inc.'s initial public offering of Common Stock.
The U.S. underwriters will offer shares in the United States and Canada
and the international managers will offer shares outside the United States
and Canada.
We expect the public offering price to be between $ and $ per share.
Currently, no public market exists for the shares. After pricing of the
offering, we expect that the Common Stock will trade on the Nasdaq National
Market under the symbol "IIXL."
Investing in the Common Stock involves risks which are described in the
"Risk Factors" section beginning on page 10 of this prospectus.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price........ $ $
Underwriting Discount........ $ $
Proceeds, before expenses, to
iXL Enterprises, Inc........ $ $
</TABLE>
The U.S. underwriters may also purchase up to an additional shares at
the public offering price, less the underwriting discount, within 30 days from
the date of this prospectus to cover over-allotments. The international
managers may similarly purchase up to an aggregate of an additional
shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
We expect that the shares of Common Stock will be ready for delivery in New
York, New York on or about , 1999.
-----------
Merrill Lynch & Co. Donaldson, Lufkin & Jenrette
-----------
BancBoston Robertson Stephens
NationsBanc Montgomery Securities LLC
-----------
The date of this prospectus is , 1999
<PAGE>
Services
. Internet Strategy Consulting
. Internet-based Business Solutions
--Business Information Management Systems
--E-Commerce Systems and Services
--Interactive Learning Environments
--Digital Media
. Solution Sets(TM)
--Pitchman
--Siteman
. Industry Practice Groups
[Description of Inside Cover Art]
[iXL LOGO]_________________________VISION____________________________[CFN LOGO]
"To pioneer the use of digital technology to transform how business gets
done."
[iXL LOGO]We are a leading Internet services company which provides Internet
strategy consulting and comprehensive Internet-based solutions to
Fortune 1000 companies and other corporate users of information
technology.
We are "problem solvers" experienced in the use of technology to create new
opportunities for business.
We succeed by shortening the distance between the creation of ideas and the
realization of their economic benefit.
CFN is a sophisticated e- [CFN LOGO]
commerce platform for marketing
financial services and employee
benefits over corporate
intranets and the Internet, as
well as through a telesales
center.
CFN is a platform which brings providers of services and benefits together with
employees who want to purchase those services.
The CFN platform allows employees to compare, shop and purchase the services
they need easily and efficiently.
[E-TV LOGO]
We are developing technology, applications, content and expertise
for use in the emerging industry of digitally delivered information
and entertainment.
Our goal is to design and build navigational infrastructures, business models
and strategic relationships required for success in the enhanced television
marketplace.
Financial Services and Benefits
. Auto Insurance
. Homeowners Insurance
. Mortgages
. Home Equity Loans
. Auto Finance
. Long Term Individual Care
. Individual Life
. Vision Services
. Legal Services
iD5 Methodology
[Discover] [Define] [Design] [Develop] [Deploy]
Collect Formulate an Refine/document Build Deliver the
information Internet specifications elements final
relative to business of the required to solution.
the strategy. Internet implement the
engagement business Internet
objective. strategy. business.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 5
Risk Factors............................................................. 10
Use of Proceeds.......................................................... 21
Dividend Policy.......................................................... 21
Capitalization........................................................... 22
Dilution................................................................. 24
Pro Forma Consolidated Financial Information............................. 25
Selected Consolidated Financial Data..................................... 29
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 30
Business................................................................. 39
Management............................................................... 58
Certain Transactions..................................................... 67
Principal Stockholders................................................... 70
Description of Capital Stock............................................. 72
Shares Eligible for Future Sale.......................................... 76
United States Federal Tax Considerations for Non-U.S. Holders............ 77
Underwriting............................................................. 80
Legal Matters............................................................ 83
Experts.................................................................. 83
Additional Information................................................... 83
Index to Financial Statements............................................ F-1
</TABLE>
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FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events, including, among other things:
. Implementing our business strategy,
. Managing our rapid growth and employee costs,
. Managing CFN's expenditures and making CFN profitable,
. Expanding CFN's customer base,
. Integrating acquired businesses,
. Forecasting commerce and strategic Internet services market growth
and
. Competing in the strategic Internet services industry.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue" or the negative of such
terms or other comparable terminology.
Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause our and the strategic Internet
services industry's actual results, levels of activity, performance,
achievements and prospects to be materially different from those expressed or
implied by such forward-looking statements. These risks, uncertainties and
other factors include, among others, those identified under "Risk Factors" and
elsewhere in this prospectus.
We undertake no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise. In light of these risks, uncertainties, and assumptions, the
forward-looking events discussed in this prospectus might not occur. See "Risk
Factors."
----------------
3
<PAGE>
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
----------------
We are a Delaware corporation. Our principal executive offices are
located at 1888 Emery St., NW, Atlanta, GA 30318, and our telephone number is
(800) 573-5544. We maintain a World Wide Web site at www.iXL.com. The reference
to our World Wide Web address does not constitute incorporation by reference of
the information contained at the site. In this prospectus, the "Company,"
"iXL," "we," "us" and "our" refer to iXL Enterprises, Inc. and its subsidiaries
(but not to the underwriters listed in this prospectus), including the
businesses acquired by us, unless the context otherwise requires, and "CFN"
refers to the Company's subsidiary Consumer Financial Network, Inc. and its
subsidiaries. In addition, "Common Stock" refers to our common stock, $.01 par
value per share, "Acquired Companies" refers to those businesses which we have
acquired since January 1, 1997, and "1998 Acquired Companies" refers to those
Acquired Companies which we have acquired during 1998. See "Description of
Capital Stock."
iXL(TM), the iXL logo, Interactive Excellence(TM), Internet
Excellence(TM), the CFN logo, CFN(TM), Consumer Financial Network(TM), iD5(TM)
and the names of products and services offered by iXL Enterprises, Inc. and
Consumer Financial Network, Inc. are trademarks, registered trademarks, service
marks or registered service marks of iXL Enterprises, Inc. and Consumer
Financial Network, Inc. This prospectus also includes product names, trade names
and trademarks of other companies.
4
<PAGE>
SUMMARY
This summary may not contain all the information that may be important to
you. You should read the entire prospectus, including the financial data and
related notes, before making an investment decision. Upon the completion of
this offering, the only class of our capital stock outstanding will be our
Common Stock. Except where otherwise indicated, all information in this
prospectus (a) assumes the automatic conversion of Class A, Class B and Class C
Convertible Preferred Stock and Class A and Class B Common Stock into Common
Stock, (b) assumes the exchange of shares of Common Stock for all
outstanding shares of Class D Nonvoting Preferred Stock upon the closing of
this offering, (c) assumes the automatic conversion of warrants to purchase
shares of Class B Convertible Preferred Stock, and warrants to purchase Class A
and Class B Common Stock, into 2,246,000 warrants to purchase shares of Common
Stock, (d) assumes the cashless exercise of warrants which are mandatorily
exercisable upon the closing of this offering into shares of Common Stock
and (e) assumes the Underwriters' over-allotment option will not be exercised.
iXL Enterprises, Inc.
We are a leading Internet services company which provides Internet
strategy consulting and comprehensive Internet-based solutions to Fortune 1000
companies and other corporate users of information technology. We help
businesses identify how the Internet can be used to their competitive advantage
and use our expertise in creative design and systems engineering to design,
develop and deploy advanced Internet applications and solutions.
Our service offerings include Internet strategy consulting, e-commerce
systems, business information management systems, interactive learning
environments, digital media services, traditional web site development,
customized hosting, proprietary sales presentation systems and web publishing
technology. We use our extensive engineering capabilities to deliver complex
Internet-based business solutions by employing proven technologies such as
Java, XML, Perl, CGI, C and C++. To foster the best possible solutions and
service, we have assembled industry practice groups including professionals
with expertise in the business practices and processes of specific industries.
In addition, we utilize an engagement methodology (iD5) which defines and
delineates business procedures and processes to take full advantage of best
practices developed throughout our Company. We offer our services primarily on
a fixed price basis. In 1998 our clients included BellSouth, Carlson Wagonlit
Travel, Chase Manhattan Bank, First USA, Gateway, GE, Lucent, Time Warner and
WebMD.
The Internet represents a revolutionary and powerful new opportunity for
business. International Data Corporation expects dramatic growth in total e-
commerce transaction volume, projecting an increase from $32 billion in 1998 to
$426 billion in 2002. Many companies currently do not have the capabilities
required to conduct e-commerce with suppliers and customers. These companies
are looking to independent service providers that can assist them in taking
full advantage of the Internet's ability to improve their business. We expect
this to drive growth in the worldwide Internet development services market,
which according to IDC, will grow from $7 billion in 1998 to $44 billion by
2002.
We have expanded rapidly since our founding in March 1996 through a
combination of acquisitions and internal growth. We have completed 34
acquisitions to gain critical mass, experienced professionals, industry
expertise, technical skills and geographic coverage. As of December 31, 1998,
we had approximately 1,300 employees. We have invested in our management
information systems to create a scalable organization
5
<PAGE>
capable of maximizing the sharing of our knowledge base and the utilization of
our staff. Our headquarters is located in Atlanta, Georgia and we have 18
regional offices located throughout the United States and in England, Germany,
Spain and Italy.
In addition to our strategic Internet services offerings, we have
developed Consumer Financial Network, Inc., a sophisticated e-commerce platform
for marketing financial services and employee benefits over corporate intranets
and the Internet, as well as through a telesales center. CFN has contracted
with competing providers of various financial services (automobile, homeowners
and other lines of personal insurance, home mortgages, home equity loans, auto
finance, long-term care insurance, term life insurance and prepaid legal
services) to create a platform for comparison shopping and purchase of these
services. CFN's platform is provided at no cost to large companies and
associations for distribution as a human resources benefit to their employees
or members. CFN service providers include Nationwide Mutual Insurance Co.,
Liberty Mutual Insurance Co., and Chase Manhattan Mortgage Corporation. Member
companies include Nextel and DaimlerChrysler. CFN receives a fee from the
financial service providers for each sale of their services through the CFN
network. CFN's equity is owned 88% by the Company and 12% by General Electric
Capital Corporation.
Our goal is to become the preferred provider of strategic Internet
services and to become a leader in Internet-delivered financial services and
employee benefits. To achieve this goal, our strategy is to leverage and expand
our industry expertise, develop our technology capabilities, expand our
geographic coverage, capture and disseminate our knowledge and best practices,
expand our client relationships, attract, train and retain experienced
professionals, and enhance and extend the CFN platform.
6
<PAGE>
The Offering
<TABLE>
<S> <C>
Common Stock offered:
U.S. Offering............... shares
International Offering...... shares
-------------
Total...................... shares
Shares outstanding after the
U.S. and International
Offerings.................. shares(1)
Overallotment Option........ shares of Common Stock
Use of Proceeds............. We estimate that the net proceeds from this offering
(without exercise of the over-allotment option) will be
approximately $ million. We intend to use these net
proceeds for (a) repayment of indebtedness and (b)
general corporate purposes, including working capital
requirements and acquisitions. See "Use of Proceeds."
Risk Factors................ See "Risk Factors" for a discussion of factors you should
carefully consider before deciding to invest in the
shares of the Common Stock.
Nasdaq National Market
Symbol..................... "IIXL"
</TABLE>
- --------
(1) Excludes a currently undeterminable number of shares of Common Stock
issuable upon the exercise of certain contingent rights of preferred
stockholders of Consumer Financial Network, Inc. to exchange their shares
of Consumer Financial Network, Inc. capital stock for shares of the
Company's Common Stock. See "Description of Capital Stock--CFN's Series A
Convertible Preferred Stock." Also excludes as of February 5, 1999 (a)
23,489,725 shares of Common Stock subject to outstanding options at a
weighted average exercise price of $7.67 per share, (b) 2,246,000 shares of
Common Stock subject to outstanding warrants at a weighted average exercise
price of $6.99 per share, and 7,510,275 shares of Common Stock reserved for
options to be granted under our 1996 Stock Option Plan, 1998 Non-Employee
Stock Option Plan and 1999 Employee Stock Option Plan and (c) 4,000,000
shares of Common Stock to be registered pursuant to a Registration
Statement on Form S-4 for use in future acquisitions.
7
<PAGE>
Summary Historical and Pro Forma Consolidated Financial Information
The following summary historical and pro forma consolidated financial
information and pro forma as adjusted information should be read in conjunction
with "Pro Forma Consolidated Financial Information," "Selected Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's audited Consolidated Financial
Statements included elsewhere in this prospectus. The Consolidated Statement of
Operations Data set forth below for the years ended December 31, 1997 and 1998
and the Consolidated Balance Sheet Data at December 31, 1998, are derived from
and qualified by reference to, the Company's audited Consolidated Financial
Statements, which appear elsewhere in this prospectus. The acquisitions of the
Acquired Companies, described herein, were accounted for using the purchase
method and accordingly, the actual Consolidated Statement of Operations Data
reflects the results of operations of these businesses from their respective
acquisition dates. The summary pro forma and pro forma as adjusted information
does not purport to represent what our results actually would have been if such
events had occurred at the dates indicated, nor does such information purport
to project our results for any future period. The pro forma Consolidated
Statement of Operations Data gives effect to the acquisitions of the 1998
Acquired Companies as if they had occurred on January 1, 1998 and the pro forma
Consolidated Balance Sheet Data as if (a) the sale and issuance of 22,825
shares of Class A Convertible Preferred Stock (which shall be converted into
2,282,500 shares of Common Stock upon the closing of this offering) that
occurred subsequent to December 31, 1998 (the "Equity Financing") occurred as
of December 31, 1998 and (b) the repayment of approximately $10 million of
revolving debt that occurred subsequent to December 31, 1998 (the "Revolving
Debt Repayment") occurred as of December 31, 1998.
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------
1997 1998 1998
Actual Actual Pro Forma
-------- -------- ---------
(in thousands, except per
share data)
<S> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenues........................................ $ 18,986 $ 64,767 $ 87,160
Cost of revenues................................ 11,343 44,109 57,790
-------- -------- --------
Gross profit.................................. 7,643 20,658 29,370
Sales and marketing expenses.................... 3,903 16,397 17,519
General and administrative expenses............. 9,114 28,770 37,279
Research and development expenses............... 4,820 4,408 4,413
Stock option and warrant expenses............... -- 2,454 4,299
Depreciation.................................... 1,408 5,217 5,895
Amortization.................................... 5,531 16,354 29,817
-------- -------- --------
Loss from operations.......................... (17,133) (52,942) (69,852)
Other income (expense), net..................... 116 (28) (138)
Loss on equity investment....................... (1,443) (1,640) (1,640)
Interest income................................. 136 750 777
Interest expense................................ (238) (770) (1,748)
-------- -------- --------
Loss before income taxes...................... (18,562) (54,630) (72,601)
Income tax benefit (expense).................... 1,550 -- (8)
-------- -------- --------
Net loss...................................... (17,012) (54,630) (72,609)
Dividends and accretion on mandatorily
redeemable preferred stock..................... -- (9,099) (9,099)
-------- -------- --------
Net loss available to common stockholders..... $(17,012) $(63,729) $(81,708)
======== ======== ========
Basic and diluted net loss per common share..... $ (2.60) $ (5.41) $ (5.08)
Weighted average common shares outstanding...... 6,540 11,777 16,088
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
As of December 31, 1998
------------------------------
Pro Forma as
Actual Pro Forma Adjusted(1)
------- --------- ------------
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents...................... $19,259 $31,984
Working capital................................ 27,119 39,844
Total assets................................... 135,215 147,940
Debt, including current portion................ 21,420 11,420
Mandatorily redeemable preferred stock......... 65,679 65,679
Mandatorily redeemable preferred stock of
subsidiary.................................... 9,839 9,839
Stockholders' equity........................... 17,824 40,549
</TABLE>
- --------
(1) As adjusted to reflect (a) the automatic conversion of Class A, Class B and
Class C Convertible Preferred Stock and Class A and Class B Common Stock
into Common Stock upon the closing of this offering, (b) the exercise of
warrants which are mandatorily exercisable upon the closing of this
offering into shares of Common Stock (assuming a cashless exercise),
(c) the exchange of shares of Common Stock for all outstanding shares
of Class D Nonvoting Preferred Stock upon the closing of this offering and
(d) this offering and the application of our estimated net proceeds
(assumed to be $ million) after deducting the underwriting discount and
the estimated offering expenses that we will pay.
9
<PAGE>
RISK FACTORS
Investing in our Common Stock will provide you with an equity ownership
interest in iXL. As an iXL stockholder, you may be subject to risks inherent in
our business. The performance of your shares will reflect the performance of
our business relative to, among other things, our competition, general economic
and market conditions and industry conditions. The value of your investment may
increase or decline and could result in a loss. You should carefully consider
the following factors as well as other information contained in this prospectus
before deciding to invest in shares of the Common Stock.
We Have a Limited Operating History
We were founded in March 1996. As a result, your evaluation of us and our
prospects will be based on a limited operating history. Our business model and
strategy have evolved and are continually being revised. In addition, our
historical results of operations do not fully give effect to the operations of
the companies we have acquired and the pro forma financial information included
in this prospectus is based in part on the separate pre-acquisition financial
reports of the companies we have acquired. Consequently, our historical results
of operations and pro forma financial information may not give you an accurate
indication of our future results of operation or prospects.
Because we are in an early stage of development, we are subject to
numerous risks, particularly as a result of the new and rapidly evolving
markets in which we operate. These risks include the need to successfully
implement our business model and strategy and, as necessary, to revise our
model and strategy as industry conditions and competition change. In
particular, CFN's business model is new and untested, which creates additional
risk as to the successful adoption of this model as well as CFN's ability to
implement it. To address these risks, we must, among other things, continue to
develop the strength and quality of our operations, successfully complete new
acquisitions, integrate our historical and future acquisitions, maximize the
value delivered to clients, respond to industry and competitive developments
and to attract, retain and motivate qualified employees. We cannot be sure that
we will be successful in meeting these challenges and addressing these risks.
If we are unable to do so, our business, results of operations and financial
condition would be materially and adversely affected.
We Have an Accumulated Deficit and Anticipate Future Losses
We have incurred substantial losses since our inception and we anticipate
continuing to incur substantial losses for the foreseeable future. As of
December 31, 1998, we had an accumulated deficit of approximately $73 million.
Although we have experienced revenue growth, this growth may not be sustainable
or indicative of future results of operations. Our revenue composition has
changed substantially from inception, and we expect further change as our
business develops. Historically, a substantial majority of our revenue was
derived from traditional web site development and implementation of our
Solution Sets(TM) (templated applications which can be customized). To succeed,
we must leverage our existing relationships to substantially increase our
revenue derived from more comprehensive strategic Internet services. CFN has
expended and will continue to expend significant resources to build electronic
data interchange interfaces with its participating institutions, to grow its
infrastructure, to add additional participating companies and employees and to
establish access to the CFN platform for participating companies' employees.
These development expenses must be incurred well in advance of the recognition
of revenue. CFN recognizes revenue upon completion of an end-user transaction
through the CFN operating network, which also will require the realization of
expenses in advance of related revenue. CFN's performance will depend in large
part upon CFN's ability to estimate accurately these resource requirements and
the revenues generated by customers engaging in the transactions with service
providers on the CFN platform. To date, the volume of transactions on CFN has
been limited and, accordingly, the revenue recognized has been minimal. We
intend to continue to invest heavily in acquisitions, infrastructure,
development and marketing. As a result, we may not be able to achieve or
sustain profitability. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
10
<PAGE>
Potential Fluctuations in Quarterly Results Could Affect Our Common Stock
Trading Price
As a result of our limited operating history, rapid growth and the
emerging nature of the markets in which we compete, we believe that quarter-
to-quarter comparisons of results of operations for preceding quarters are not
necessarily meaningful. You should not rely on the results of any one quarter
as an indication of our future performance. Additionally, quarterly results of
operations may fluctuate significantly in the future as a result of a variety
of factors, many of which are outside our control. In particular, revenue in
the fourth quarter of 1998 was favorably impacted by several large
engagements. The Company does not expect to experience a comparable increase
in revenue growth during the first quarter of 1999, and the Company may not
experience comparable increases in the remainder of 1999.
If in some future quarter, whether as a result of such a fluctuation or
otherwise, our results of operations fall below the expectations of securities
analysts and investors, the trading price of our Common Stock would likely be
materially and adversely affected. Factors that may cause our quarterly
results to fluctuate include, among others:
. the amount and timing of expenditures by our clients for strategic
Internet services;
. our success in finding and acquiring suitable acquisition
candidates;
. our ability to attract, train and retain skilled management,
strategic, technical and creative professionals;
. the productivity of our employees;
. the amount and timing of expenditures related to the development
of CFN;
. pricing changes in the industry;
. the introduction of new services, new technologies and new systems
by us or our competitors;
. unanticipated technical, legal and regulatory difficulties with
respect to use of the Internet; and
. economic conditions specific to Internet technology usage.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Failure to Properly Manage Growth Could Adversely Affect Our Business and
Stockholders' Equity
Our business has grown significantly, and we anticipate future internal
growth and growth through acquisitions. For example, from January 1, 1997 to
December 31, 1998 our staff increased from approximately 90 to approximately
1,300 employees. We expect further growth in our operations in the future.
This growth has and will continue to increase the demands on our management,
operating systems and internal controls. Consequently, our existing management
resources and operational, financial, human and management information systems
and controls may be inadequate to support our future operations. We cannot be
sure that we will be able to manage our growth successfully. As a result of
these concerns, we can also not be sure that we will continue to grow, or, if
we do grow, that we will be able to maintain our historical growth rate.
Our Reliance on Acquisitions Could Adversely Affect Our Business
We anticipate that a material portion of any future growth will be
accomplished by acquiring existing businesses. Most of our growth in personnel
has been through acquisitions. The success of this plan depends upon, among
other things, our ability to integrate acquired personnel, operations,
products and technologies into our organization effectively, to retain and
motivate key personnel of acquired businesses and to retain customers of
acquired firms. We cannot guarantee that we will be able to identify suitable
acquisition opportunities, obtain any necessary financing on acceptable terms
to finance such acquisitions, consummate such acquisitions or successfully
integrate acquired personnel and operations. We have typically acquired
companies from their employee shareholders in return for a payment primarily
in shares of our Common Stock. These shares of Common Stock will become
eligible for sale once certain securities laws holding periods and
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any applicable contractual lock-ups have expired. Typically, we have not used
earn-outs or similar deferred payments in connection with our acquisitions. As
a result, we may have difficulty retaining employees who received significant
amounts of Common Stock once they are able to sell their shares of Common Stock
following this offering. In addition, as a public company, it may be more
difficult to acquire additional companies or the cost of acquiring these
companies may increase relative to the cost of acquiring similar companies when
we were a private company. Our acquisitions involve certain other risks,
including the assumption of additional liabilities, potentially dilutive
issuances of equity securities and diversion of management's attention from
other business concerns.
Our Fixed-Price Contracts Involve Financial Risk
Most of our contracts are currently on a fixed-price basis, rather than a
time and materials basis. Further, the average size of our contracts is
currently increasing, which results in a corresponding increase in our exposure
to the financial risks of fixed price contracts. On larger contracts, we try to
price these fixed-price contracts on a three-phase basis (strategic review,
design and implementation), with each phase priced separately, immediately
prior to its commencement. We assume greater financial risk on fixed-price
contracts than on time and materials engagements, especially those contracts
that are not priced on a three-phase basis. We cannot be sure that we will be
able to price our larger contracts on a three-phase basis. Currently less than
a third of our revenues are from contracts priced on a three-phase basis. We
have only a limited history in estimating our costs for our engagements,
particularly for larger projects. We have had to commit unanticipated resources
to complete certain projects, resulting in lower gross margins on certain
contracts. We may experience similar situations in the future. In addition, we
typically assume the fixed-price contracts of the companies we acquire. If we
fail to estimate accurately the resources and time required for an engagement,
to manage client expectations effectively or to complete fixed-price
engagements within our budget, on time and to our clients' satisfaction, we
would be exposed to cost overruns, potentially leading to losses on these
engagements. This failure could materially and adversely affect our business,
results of operations and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Failure to Attract, Train and Retain Employees Could Increase Costs or Limit
Growth
Our future success will depend in large part upon our ability to attract,
train and retain additional highly skilled executive-level management and
creative, technical, consulting, and sales personnel. Competition for such
personnel is intense, and we cannot be sure that we will be successful in
attracting, training and retaining such personnel. Historically we have
experienced significant employee turnover. Most of our employees have joined us
recently, either through acquisitions or otherwise, and to realize our business
objectives, we must add a significant number of new employees. A substantial
amount of training is required to integrate these employees into our business.
In addition, most of our employees are not subject to noncompetition
agreements, and any such agreements in any event may be difficult to enforce.
As a result, our employees may leave us and work for our competitors or start
their own companies in competition with us. Our ability to contain payroll
expenses and to control employee turnover will have a significant impact on our
profitability. If we fail to attract, train and retain key personnel, our
business, results of operations and financial condition will be materially and
adversely affected.
We Operate in a Developing Market for Strategic Internet Services
The market for strategic Internet services is relatively new and is
evolving rapidly. Our future growth is dependent upon our ability to provide
strategic Internet services that are accepted by our existing and future
clients as an integral part of their business model. Demand and market
acceptance for recently introduced services are subject to a high level of
uncertainty. The level of demand and acceptance of strategic Internet services
is dependent upon a number of factors, including the growth in consumer access
to and acceptance of new interactive technologies (such as the World Wide Web),
companies adopting Internet-based business models, the development of
technologies that facilitate two-way communication between companies and
targeted audiences, and the acceptance of strategic Internet services.
Significant issues concerning the
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commercial use of these technologies (including security, reliability, cost,
ease of use and quality of service) remain unresolved and may inhibit the
growth of Internet business solutions that utilize these technologies.
Industry analysts and others have made many predictions concerning the
growth of the Internet as a business medium. Many of these historical
predictions have overstated the growth of the Internet. These predictions
should not be relied upon. Consequently, the market for our services may not
develop, our services may not be adopted and individual personal computer users
in business or at home may not use the Internet or other interactive media for
commerce and communication. If the market for strategic Internet services fails
to develop, or develops more slowly than expected, or if our services do not
achieve market acceptance, our business, results of operations and financial
condition will be materially and adversely affected.
We Generally Do Not Have Long-Term Contracts and Need to Establish
Relationships with New Clients
Our clients generally retain us on a project by project basis, rather
than under long-term contracts. As a result, a client may or may not engage us
for further services once a project is completed. In addition, in order to
become profitable, we need to establish and develop relationships with
additional Fortune 1000 companies and other corporate users of information
technology. The absence of long-term contracts and the need for new clients
create an uncertain revenue stream. To the extent that we are unable to add new
major clients or to secure new engagements with existing clients, our business,
results of operations and financial condition will be materially and adversely
affected.
In addition, our existing clients may unilaterally reduce the scope of,
or terminate, existing projects. The termination of our business relationship
or a material reduction in the use of our services by any of our significant
existing clients or our failure to obtain significant new clients would
materially and adversely affect our business, results of operations and
financial condition.
CFN's Business is Subject to Many Risks
CFN must demonstrate the viability of its business model, expand its
customer base and solidify its provider network to become profitable. We cannot
be sure that CFN will be able to expand its customer base by increasing the
number of companies and organizations whose employees are given access to the
CFN platform or that such employees will adopt and use the CFN platform to
purchase offered services. Many of the providers of services on the CFN
platform are doing so on a trial basis, and none of the providers have long-
term contracts with CFN. Most of CFN's contracts terminate on or before
December 31, 1999 or December 31, 2000. We cannot be sure that these contracts
will be renewed or extended or, if renewed or extended, what the terms would
be. We cannot guarantee that providers of services will continue to view
participation on the CFN platform as an attractive opportunity that does not
detract from the providers' other distribution channels or lines of business.
CFN has expended and will continue to expend significant resources to
build electronic data interchange interfaces with its participating
institutions, to grow its infrastructure, to add participating companies and
employees, and to establish access to the CFN platform for participating
companies' employees. These development expenses must be incurred well in
advance of the recognition of revenue. CFN recognizes revenue upon completion
of an end-user transaction through the CFN operating network, which also will
require the realization of expenses in advance of related revenue. CFN's
performance will depend in large part upon CFN's ability to estimate accurately
these resource requirements and the revenues generated by customers engaging in
the transactions with service providers on the CFN platform. Expenses and
investments must be incurred well in advance of the potential transactions
intended to generate revenue to justify this cost structure.
The success of CFN will depend, among other things, on the willingness of
consumers to alter their traditional means of acquiring the products offered
through CFN's platform and instead to acquire these products through the CFN
network. We do not know if these customers will find the price or other aspects
of the CFN services more attractive than other alternatives available. CFN has
no control over the prices quoted by the services providers over the CFN
platform. To date, the volume of transactions on CFN has been limited and,
accordingly, the revenue recognized has been minimal. The amount of completed
transactions on the CFN
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platform will depend heavily on, among other things, the attractiveness of the
pricing of products and services accessible through the CFN platform. CFN has
not yet serviced the volume of service providers and customers that it must
successfully integrate into the CFN platform in order to become a profitable
business. The failure of CFN to address successfully or remove these risks
could adversely affect our business, results of operations and financial
condition. See "Business--Consumer Financial Network."
Our Business is Subject to General Economic Conditions
Our revenues and results of operations will be subject to fluctuations
based upon the general economic conditions in the United States and, to a
lesser extent, abroad. If there is a general economic downturn or a recession
in the United States, we expect that business enterprises, including our
customers and potential customers, would substantially and immediately reduce
their budgets or delay implementation of Internet-based business solutions. A
deterioration in existing economic conditions could therefore materially and
adversely affect our business, results of operations and financial condition.
Our Business is Subject to Continuous Technological Change
The market for strategic Internet services is characterized by rapid
ongoing technological change, changes in user and client requirements and
preferences, frequent new service and product introductions embodying new
processes and technologies, and evolving industry standards and practices that
could render our existing service practices and methodologies obsolete. The
market for the financial services provided through the CFN platform is also
characterized by rapid ongoing technological change, changes in participating
company, employee and service provider requirements and preferences, new
service and product introductions, and evolving industry standards that could
render CFN's existing service practices and methodologies obsolete. Our success
will depend, in large part, on our ability to improve our existing services,
develop new services and solutions that address the increasingly sophisticated
and varied needs of our current and prospective clients, and respond to
technological advances, emerging industry standards and practices, and
competitive service offerings. We may not be successful in responding quickly,
cost-effectively and sufficiently to these developments. If we are unable, for
technical, financial or other reasons, to adapt in a timely manner in response
to changing market conditions or these requirements, our business, results of
operations and financial condition would be materially adversely affected.
Loss of Key Management Personnel Could Adversely Affect Our Business
Our success depends largely on the skills of certain key management and
technical personnel, as well as key management and technical personnel of
companies acquired by us. The loss of one or more of our key management and
technical personnel may materially and adversely affect our business, results
of operations and financial condition. In addition, several of our executive
officers have recently joined the Company. We do not maintain key man insurance
for any of our employees other than our Chief Executive Officer. We cannot
guarantee that we will be able to replace any of such persons in the event
their services become unavailable. See "Management."
We Operate in a Highly Competitive Market with Low Barriers to Entry
While the market for strategic Internet services is relatively new, it is
already highly competitive and characterized by an increasing number of
entrants that have introduced or developed products and services similar to
those offered by us. We believe that competition will intensify and increase in
the future. Our target market is rapidly evolving and is subject to continuous
technological change. As a result, our competitors may be better positioned to
address these developments or may react more favorably to these changes, which
could have a material adverse effect on our business, results of operations and
financial condition. We compete on the basis of a number of factors, including
the attractiveness of the strategic Internet services offered, the breadth and
quality of these services, creative design and systems engineering expertise,
pricing, technological innovation, and understanding clients' strategies and
needs. Many of these factors are beyond our control. Existing or future
competitors may develop or offer strategic Internet services that provide
significant technological, creative, performance, price or other advantages
over the services offered by us.
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Our competitors can be divided into several groups: Internet strategy
services providers; large information technology consulting services providers;
computer hardware and service vendors; strategic consulting firms; and
interactive advertising agencies. We also may compete with telecommunications
companies. Although most of these types of competitors to date have not offered
a full range of Internet professional services, many are currently offering or
have announced their intention to do so. These competitors at any time could
elect to focus additional resources in our target markets, which could
adversely affect our business, results of operations and financial condition.
Many of our current and potential competitors have longer operating histories,
larger customer bases, longer relationships with clients and significantly
greater financial, technical, marketing and public relations resources than we
do. Competitors that have established relationships with large companies but
have limited expertise in providing Internet solutions may nonetheless be able
to successfully use their client relationships to enter our target market or
prevent our penetration into their client accounts. We believe that our primary
competitors currently are International Business Machines Corporation, USWeb
Corporation, Sapient Corporation and smaller Internet services providers.
Additionally, in pursuing acquisition opportunities we may compete with
other companies with similar growth strategies, certain of which may be larger
and have greater financial and other resources than we have. Competition for
these acquisition targets likely could also result in increased prices of
acquisition targets and a diminished pool of companies available for
acquisition.
There are relatively low barriers to entry into our business. We have no
patented or other proprietary technology that would preclude or inhibit
competitors from entering the Internet professional services market. Therefore,
we must rely on the skill of our personnel and the quality of our client
service. The costs to develop and provide Internet services are low. Therefore,
we expect that we will continually face additional competition from new
entrants into the market in the future, and we are subject to the risk that our
employees may leave us and may start competing businesses. The emergence of
these enterprises could have a material adverse effect on our business, results
of operations and financial condition.
The success of CFN will be highly dependent upon CFN's services becoming
available to a large number of participating employees. We expect CFN to face
competition from an increasing number of sources in the marketplace. CFN
competes with other Internet-based providers of financial and other services,
as well as traditional providers of these services. Traditional insurance
companies compete with us by providing group rates to corporate employees. CFN
believes that its primary and more direct competitors currently are HomeCom
Communications, Inc., ValueSearch, Inc. and Answer Financial Inc. CFN also
faces competition from Microsoft Corporation, which currently provides
comparative quotes for home mortgages on the Internet. If CFN fails to compete
successfully against current or future competitors, our business, results of
operations and financial condition will be materially and adversely affected.
See "Business--Competition."
We Have Significant Future Capital Needs Which Are Subject to the Uncertainty
of Additional Financing
We believe that our available cash resources and credit facilities,
combined with the net proceeds from this offering, will be sufficient to meet
our presently anticipated working capital and capital expenditure requirements
for at least the next 12 months. However, we may need to raise significant
additional funds sooner in order to support our growth, develop new or enhanced
services and products, respond to competitive pressures, acquire complementary
businesses or technologies or take advantage of unanticipated opportunities. In
particular, we are required to invest up to an additional $8.7 million in CFN
if CFN does not raise these funds through alternate means before November 3,
1999. Our future liquidity and capital requirements will depend upon numerous
factors, including the success of our existing and new service offerings and
competing technological and market developments. We may be required to raise
additional funds through public or private financing, strategic relationships
or other arrangements. We cannot be sure that such additional funding, if
needed, will be available on acceptable terms or at all. Furthermore, any
additional debt financing, if available, may involve restrictive covenants,
which may limit our operating flexibility with respect to certain business
matters. If additional funds are raised through the issuance of equity
securities, the percentage ownership of our existing stockholders will be
reduced, our stockholders may experience additional dilution in net book value
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per share, and such equity securities may have rights, preferences or
privileges senior to those of our existing stockholders. If adequate funds are
not available on acceptable terms, we may be unable to develop or enhance our
services and products, take advantage of future opportunities, complete our
acquisition program or respond to competitive pressures, any of which would
have a material adverse effect on our business, results of operations and
financial condition.
We May Have to Issue Common Stock to Preferred Stockholders of CFN
In certain circumstances, preferred stockholders of CFN may exercise
their right to exchange their CFN preferred stock for a currently
undeterminable number of shares of Common Stock. The exchange ratio is based
upon the market value of Common Stock and the appraised value of the CFN common
stock into which the CFN preferred stock is convertible (or, in certain
circumstances, the liquidation value of the CFN preferred stock). Such
contingent rights arise upon certain events effecting a change of control of
CFN or upon certain circumstances after November 3, 2001. If such rights are
exercised, our stockholders may incur substantial dilution. See "Description of
Capital Stock--CFN's Series A Convertible Preferred Stock" and "Dilution."
We Could Face Potential Liability to Clients
Many of our consulting engagements involve the development,
implementation and maintenance of Internet and other software applications that
are critical to the operations of our clients' businesses. Any defects or
errors in these applications could result in delayed or lost revenues, adverse
customer reaction and negative publicity regarding us and our services, or
could require expensive corrections, any of which could materially and
adversely affect our business, results of operations and financial condition.
Our failure or inability to meet a client's expectations could injure our
business reputation or result in a claim for substantial damages against us,
regardless of our responsibility for such failure. Our standard contracts limit
our damages arising from negligent acts, errors, mistakes or omissions in
rendering strategic Internet services. However, we cannot be sure that these
contractual provisions will protect us from liability for damages. Furthermore,
our general liability insurance coverage may not continue to be available on
reasonable terms or in sufficient amounts to cover one or more large claims, or
the insurer may disclaim coverage as to any future claim. The successful
assertion of one or more large claims against us that are uninsured, exceed
available insurance coverage or result in changes to our insurance policies,
including premium increases or the imposition of a large deductible or co-
insurance requirements, could materially and adversely affect our business,
results of operations and financial condition.
iXL Ventures are Subject to Many Uncertainties
We have occasionally invested in, and may continue to invest on an
opportunistic basis in, businesses engaged in the "new media and e-commerce"
segment of the technology industry. Our investments in these types of
businesses have typically consisted of the provision of capital and the
devotion of our time and resources in developing these new businesses. The
extent to which this industry will continue to grow is uncertain. Furthermore,
the businesses in which we invest are generally unproven and involve
substantial risk and may never be profitable. Even if they are successful,
these businesses may sustain losses for extended periods of time. These
businesses also may require additional financing, and we may not be willing or
able to secure the necessary financing. However, we are under no obligation to
provide any such financing. See "Business--iXL Ventures."
Our International Operations and Expansion Involve Financial and Operational
Risk
We have established three subsidiaries in Europe, and we intend to expand
our operations further into international markets. Revenue from our
international operations was minimal in 1998. We have only minimal experience
in managing international offices and only limited experience in marketing
services to international clients. We expect to incur significant costs in
expanding our international presence. Revenues from our
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international offices may prove inadequate to cover the expenses of
establishing and maintaining our international offices and marketing to
international clients. We cannot be sure of the extent to which the use of the
Internet or the demand for strategic Internet services will develop in
international markets.
In addition to the uncertainty as to our ability to generate revenues
from foreign operations and expand our international presence, there are
certain risks inherent in doing business on an international level, such as
unexpected changes in regulatory requirements, export and import restrictions,
tariffs and other trade barriers, difficulties in staffing and managing foreign
operations, longer payment cycles, problems in collecting accounts receivable,
political instability, fluctuations in currency exchange rates, software
piracy, seasonal reductions in business activity and potentially adverse tax
consequences, any of which could materially and adversely affect our
international operations and, consequently, our business, results of operations
and financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Year 2000 Compliance Issues May Adversely Affect Our Business
Many currently installed computer systems and software products are coded
to accept only two-digit entries to identify a year in the date code field.
Consequently, on January 1, 2000, many of these systems could fail or
malfunction because they may not be able to distinguish between 20th century
dates and 21st century dates. Accordingly, in the coming year, many companies,
including our customers, potential customers, vendors and strategic partners,
may need to upgrade their systems to comply with applicable "Year 2000"
requirements.
Because we and our clients are dependent, to a very substantial degree,
upon the proper functioning of our and their computer systems, a failure of our
or their systems to correctly recognize dates beyond December 31, 1999 could
materially disrupt our operations, which could materially and adversely affect
our business, results of operations and financial condition. Additionally, our
failure to provide Year 2000 compliant products and services to our clients
could result in financial loss, reputational harm and legal liability. Likewise,
the failure of the computer systems and products of the third parties with which
we transact business to be Year 2000 compliant could materially disrupt their
and our operations, which could materially and adversely affect our business,
results of operations and financial condition. For a discussion of our Year 2000
readiness program, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Risks."
Government Regulation and Legal Uncertainties Related to CFN Could Adversely
Affect Our Business
The business of CFN is subject to extensive regulation under the
financial services and insurance laws of the United States and the states in
which it offers services. The failure to comply with regulatory requirements
can lead to revocation, suspension or loss of licensing status, termination of
contracts and legal and administrative enforcement actions. Licensing laws and
regulations often differ materially between states and within individual
states. Such laws and regulations are subject to amendment and reinterpretation
by the agencies charged with their enforcement. Many aspects of CFN's
operations, however, have not been subject to federal or state regulatory
interpretation. The use of the Internet in the marketing and distribution of
these products is relatively new and presents issues, such as limitations on
the scope of an insurance regulator's jurisdiction and whether Internet service
providers, gateways, portals or cybermalls are (a) engaging in the solicitation
or sale of insurance policies or other financial products, (b) receiving
commissions based on the sale of regulated products or (c) otherwise
transacting business requiring licensure under the laws of one or more states.
Accordingly, the insurance and financial services laws and regulations and
interpretations thereof are subject to uncertainty and change. We cannot be
sure that a review of CFN's operations will not result in a determination that
could materially and adversely affect CFN and, consequently, our business,
results of operations and financial condition. Moreover, regulatory
requirements are subject to change from time to time and may in the future
become more restrictive, thereby making compliance more difficult or expensive
or otherwise affecting or restricting CFN's ability to conduct its business as
now conducted or proposed to be conducted. See "Business--Consumer Financial
Network."
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Intellectual Property Risks Could Adversely Affect Our Business
We have a variety of copyrights, trademarks, trade secrets (including our
methodologies, practices and tools) and other intellectual property rights. We
have also filed patent applications for the CFN platform and for Siteman, but
we cannot be sure that these applications will be granted or that any future
patents will not be challenged, invalidated or circumvented. We also cannot be
sure that the rights granted under any patents or our other intellectual
property will provide us with a competitive advantage. To protect our rights in
our various intellectual properties, we rely on a combination of trademark and
copyright law, trade secret protection and confidentiality agreements and other
contractual arrangements with certain of our employees, affiliates, clients,
strategic partners, acquisition targets and others to protect our proprietary
rights. We cannot guarantee that the protective steps we have taken will be
adequate to deter misappropriation of proprietary information or that we will
be able to detect unauthorized use and take appropriate steps to enforce our
intellectual property rights. We have also registered several of our trademarks
in the United States and internationally. Effective trademark, copyright and
trade secret protection may not be available in every country in which we offer
or intend to offer our services. We cannot be sure that the steps taken by us
to protect our proprietary rights will be adequate or that third parties will
not infringe or misappropriate our copyrights, trademarks and similar
proprietary rights, or that we will be able to detect unauthorized use and take
appropriate steps to enforce our rights. In addition, although we believe that
our proprietary rights do not infringe on the intellectual property rights of
others, we cannot be sure that other parties will not assert infringement
claims against us or claim that we have violated such intellectual property
rights. Such claims, even if not meritorious, could result in the expenditure
of significant financial and managerial resources.
We Have Concentration of Stock Ownership
Upon completion of this offering, Kelso Investment Associates V, L.P. and
Kelso Equity Partners V, L.P. (collectively, "Kelso") and CB Capital Investors,
L.P. ("CB") will beneficially own approximately % and %, respectively, of
the outstanding Common Stock ( % and %, respectively, of the outstanding
Common Stock if the Underwriters' over-allotment option is exercised in full).
These stockholders have entered into an agreement providing that so long as
they own more than 5% of our Common Stock, designees of Kelso and CB will be
included on our slate of directors submitted for stockholder election. As a
result of their ownership of Common Stock and this nomination agreement, these
stockholders will have significant influence over the election of directors of
the Company. Furthermore, given the size of their individual holdings, these
stockholders may be able to exercise significant influence over other matters
requiring stockholder approval, including the approval of significant corporate
transactions. For example, such concentration of ownership may have the effect
of delaying or preventing a change in control of the Company. See "Management--
Amended Stockholders Agreement," "Principal Stockholders," "Certain
Transactions" and "Description of Capital Stock--Certain Antitakeover Effects
of Provisions of the Certificate of Incorporation, Bylaws and Delaware Law."
External Factors Could Affect Our Common Stock Trading Price
Prior to this offering, you could not buy or sell our Common Stock
publicly. An active public market for our Common Stock may not develop or be
sustained after the offering. If such a market does not develop or is not
sustained, it may be difficult for you to sell your shares of Common Stock at a
price that is attractive to you. We will negotiate and determine the initial
public offering price with the representatives of the Underwriters based on
several factors. This price may vary from the trading price of our Common Stock
after the offering. See "Underwriting."
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Variations in the trading price of our Common Stock may result from a
number of factors, some of which are beyond our control, including:
. general economic and stock market conditions;
. changes in financial estimates by securities analysts;
. earnings and other announcements by, and changes in market
valuations of, strategic Internet service providers, information
technology consulting services providers and Internet companies;
. announcements of technological innovations or new services or
products by our competitors; and
. trading of our Common Stock.
In addition, the stock market has experienced significant price and
volume fluctuations that have particularly affected the trading prices of
equity securities of many technology companies. These price and volume
fluctuations often have been unrelated to the operating performance of the
affected companies. In the past, following periods of volatility in the market
price of a company's securities, securities class action litigation has often
been instituted against such a company. This type of litigation, regardless of
the outcome, could result in substantial costs and a diversion of management's
attention and resources, which could materially and adversely affect our
business, results of operations and financial condition. Also, in connection
with our acquisition strategy and financing activities, we have issued many
shares of our Common Stock to a large number of people and entities under
exemptions from the relevant securities laws. If the trading price of our
Common Stock significantly decreases, one or more of these investors may file a
claim against us for a refund of their investment or for other damages.
Although we do not believe that any of these claims would succeed, the cost to
us of one or more successful claims could materially and adversely affect our
business, results of operations and financial condition. For a discussion of
certain reasons why the trading price of our stock may decrease as a result of
fluctuations in our quarterly results of operations, see "--Potential
Fluctuations in Quarterly Results Could Affect our Common Stock Trading Price."
Provisions of Our Certificate of Incorporation, Bylaws, and Delaware Law Could
Deter Takeover Attempts
Our Board of Directors may issue up to 5 million shares of Preferred
Stock and may determine the price, rights, preferences, privileges, and
restrictions, including voting and conversion rights, of these shares of
Preferred Stock. These determinations may be made without any further vote or
action by our stockholders. The issuance of Preferred Stock may make it more
difficult for a third party to acquire control of us. In addition, the rights
of the holders of Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be
issued in the future. Further, certain provisions of Delaware law, our
Certificate of Incorporation and our Bylaws could delay or impede a merger,
tender offer or proxy contest involving the Company. In particular, Section 203
of the Delaware General Corporation Law could prohibit us from engaging in a
business transaction with certain interested stockholders for a period of three
years and our Certificate of Incorporation and Bylaws require advance notice
for stockholder proposals and director nominations to be considered at a
meeting of stockholders. See "Description of Capital Stock--Blank Check
Preferred Stock" and "--Certain Antitakeover Effects of Provisions of the
Certificate of Incorporation, Bylaws and Delaware Law."
Availability of Significant Amounts of Common Stock for Sale Could Adversely
Affect Its Market Price
Sales of a substantial number of shares of Common Stock in the public
market following this offering could adversely affect the market price for the
Common Stock. Upon completion of the offering, we will have outstanding an
aggregate of shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options. Of
these shares, all of the shares sold in this offering will be freely tradeable,
unless such shares are purchased by our affiliates, as that term is defined in
Rule 144
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under the Securities Act of 1933, as amended (the "Securities Act"). The
remaining shares of Common Stock held by stockholders are "restricted
securities" as that term is defined in Rule 144 under the Securities Act.
Restricted securities may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rules 144 or 701
promulgated under the Securities Act. As a result of contractual restrictions,
the 180 day lock-up described below and the provisions of Rules 144 and 701,
additional shares will be available for sale in the public market as follows:
(a) no restricted securities will be eligible for immediate sale on the date of
this prospectus; (b) restricted securities issuable pursuant to stock
options will be eligible for sale 90 days after the date of this prospectus;
(c) restricted securities (plus shares of Common Stock issuable
pursuant to stock options) will be eligible for sale upon expiration of the
lock-up agreements described below 180 days after the date of this prospectus;
and (d) the remainder of the restricted securities will be eligible for sale
from time to time thereafter upon expiration of their respective one-year
holding periods.
Stockholders holding substantially all of the Common Stock outstanding
prior to the offering and the currently exercisable options to purchase Common
Stock and all of our executive officers and directors have executed lock-up
agreements that limit their ability to sell Common Stock. These stockholders
have agreed not to sell or otherwise dispose of any shares of Common Stock for
a period of at least 180 days after the date of this prospectus without the
prior written approval of Merrill Lynch. Merrill Lynch may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to lock-up agreements. Stockholders holding a majority of
the Common Stock outstanding prior to this offering have the right to demand
the registration of their shares for sale to the public market at any time
after the expiration of the 180 day lock-up described above. In addition,
substantially all of the holders of shares of Common Stock and warrants to
purchase shares of Common Stock are entitled to certain rights to participate
with respect to registration of such shares for sale in the public market.
There could also be shares of Common Stock issuable upon the exercise of
certain contingent rights of preferred stockholders of CFN to exchange their
CFN capital stock for a currently undeterminable number of shares of our Common
Stock. We may file a Registration Statement on Form S-8 after 180 days of the
date of this prospectus to register shares of Common Stock reserved for
issuance under our stock option plans, thus permitting the resale of shares of
Common Stock received upon exercise of stock options by non-affiliates in the
public market without restriction. Finally, we intend to register 4,000,000
shares of Common Stock pursuant to a "shelf" Registration Statement on Form S-4
for use in future acquisitions. After issuance, such shares could be sold in
the public markets, subject to the 180 day lock-up described above. See
"Description of Capital Stock" and "Shares Eligible for Future Sale."
We Will Have Significant Unallocated Net Proceeds
Approximately $10 million of the net proceeds of this offering will be
used to repay certain outstanding debt. We have not designated any specific
uses for the remaining net proceeds of this offering. Therefore, we will have
broad discretion in how we use our net proceeds, which may include general
corporate purposes, such as working capital requirements and acquisitions. The
failure of management to apply these proceeds effectively could materially and
adversely affect our business, results of operations and financial condition.
Investors Will Incur Immediate Dilution and May Experience Further Dilution
The initial offering price is substantially higher than the net tangible
book value per share of the outstanding Common Stock immediately after the
offering. If you purchase Common Stock in the offering, you will incur
immediate and substantial dilution in the net tangible book value per share of
Common Stock from the price you pay per share for Common Stock. We also have
outstanding a large number of stock options and warrants to purchase Common
Stock with exercise prices significantly below the estimated initial public
offering price of the Common Stock. To the extent such options or warrants are
exercised, there will be further dilution. In addition, we expect to continue
our program to acquire suitable businesses through at least the
20
<PAGE>
foreseeable future, and we intend to file a "shelf" Registration Statement to
register 4,000,000 shares of our Common Stock which will be used as acquisition
consideration. We intend to grant substantial stock options to our employees.
There could also be shares of Common Stock issuable upon the exercise of
certain contingent rights of preferred stockholders of CFN to exchange their
CFN capital stock for a currently undeterminable number of shares of our Common
Stock. See "Dilution."
USE OF PROCEEDS
The net proceeds to the Company from the sale of shares of Common Stock
in this offering are estimated to be $ million ($ million if the
Underwriters exercise their over-allotment option in full), based upon an
assumed offering price of $ per share and after deducting underwriting
discounts and commissions and estimated offering expenses of $ payable by
the Company. The principal purposes of this offering are to obtain additional
capital and to create a public market for the Company's Common Stock which will
facilitate future access by the Company to the public equity markets. The
Company expects to use approximately $10 million of such net proceeds to repay
indebtedness outstanding as a term loan under the Company's credit facility
(the "Term Debt Repayment"). The maturity date for this indebtedness is
June 30, 2001, and the interest rate on the outstanding amount is currently
9.75%. The Company will have significant discretion in the use of the remaining
net proceeds of this offering for general corporate purposes.
The Company regularly evaluates potential domestic and international
acquisition candidates, and is currently holding preliminary discussions with a
number of such candidates. If, after due diligence review and negotiation, such
companies can be acquired on a basis considered fair to the Company and its
stockholders, the Company may proceed with such acquisitions. None of these
potential acquisitions is currently considered to be pending or probable. The
Company intends to file a "shelf" Registration Statement on Form S-4 to
register 4,000,000 shares of its Common Stock for use in future acquisitions.
The Company expects most of its future joint ventures or acquisitions to
involve the issuance of additional shares of the Company's Common Stock. To the
extent the Company chooses to use cash as consideration for future
acquisitions, the Company may use the proceeds from this offering or it may
obtain additional financing.
Pending use of the net proceeds for the above purposes, the Company
intends to invest such funds in short-term, interest-bearing, investment-grade
obligations. See "Risk Factors--We Will Have Significant Unallocated Net
Proceeds."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on the Common
Stock. The Company does not expect to pay any cash dividends in the foreseeable
future. Under the terms of its credit agreement, the Company is restricted from
paying dividends to its stockholders. Upon the closing of this offering,
shares of Common Stock will be exchanged for all outstanding shares of Class
D Nonvoting Preferred Stock (the "Class D Preferred Stock Exchange"), which has
previously accrued dividends at a rate of 12% per annum.
21
<PAGE>
CAPITALIZATION
The following table sets forth the cash and cash equivalents, current
portion of long-term debt and capitalization of the Company (a) as of December
31, 1998; (b) pro forma to reflect (1) the Equity Financing, and (2) the
Revolving Debt Repayment; and (c) pro forma as adjusted to reflect (1) the
automatic conversion of Class A, Class B and Class C Convertible Preferred
Stock and Class A and Class B Common Stock into Common Stock upon the closing
of this offering, (2) the exercise of warrants which are mandatorily
exercisable upon the closing of this offering into shares of Common Stock
(assuming a cashless exercise), (3) the Class D Preferred Stock Exchange and
(4) the sale of the shares of Common Stock offered hereby and the application
of the estimated net proceeds therefrom. This table should be read in
conjunction with "Selected Consolidated Financial Data," "Pro Forma
Consolidated Financial Information" and the Company's Consolidated Financial
Statements and Notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
December 31, 1998
----------------------------------------------------
Pro Forma
Actual Pro Forma as Adjusted
--------------- --------------- -----------------
(in thousands except share and per share data)
<S> <C> <C> <C>
Cash and cash equivalents... $ 19,259 $ 31,984 $
=============== =============== ==============
Current portion of long-term
debt....................... $ 868 $ 868 $
=============== =============== ==============
Long-term debt.............. $ 20,552 $ 10,552 $
Mandatorily redeemable
preferred stock:
Class D Nonvoting
Preferred Stock(1)(2)..... 24,473 24,473
Class B Convertible
Preferred Stock(3)(4)..... 37,683 37,683
Class C Convertible
Preferred Stock(5) ....... 3,523 3,523
Series A Convertible
Preferred Stock of
CFN(6).................... 9,839 9,839
Stockholders' equity:
Class A Convertible
Preferred Stock(7)........ 2 2
Class A Common
Stock(8)(9)............... -- --
Common
Stock(4)(9)(10)(11)(12)... 163 163
Additional paid-in
capital(2)................ 94,420 117,145
Accumulated deficit........ (73,106) (73,106)
Treasury stock............. (888) (888)
Note receivable from
stockholder............... (900) (900)
Unearned compensation...... (1,867) (1,867)
--------------- --------------- --------------
Total stockholders'
equity.................. 17,824 40,549
--------------- --------------- --------------
Total capitalization..... $ 113,894 $ 126,619 $
=============== =============== ==============
</TABLE>
- --------
(1) $.01 par value, 50,000 shares (at December 31, 1998, and Pro Forma) and 0
shares (Pro Forma as Adjusted) authorized, respectively; 35,700 shares (at
December 31, 1998 and Pro Forma) and 0 shares (Pro Forma as Adjusted)
issued and outstanding, respectively.
(2) Consideration received upon issuance of Class D Nonvoting Preferred Stock
was allocated to the 35,700 outstanding shares of Class D Nonvoting
Preferred Stock issued to date ($22,465) and the minimum number of shares
of Common Stock issuable upon the redemption of Class D Nonvoting Preferred
Stock ($13,235) based on their relative fair values at the time of
issuance.
(3) $.01 par value, 100,000 shares (at December 31, 1998 and Pro Forma) and 0
shares (Pro Forma as Adjusted) authorized, respectively; 98,767 shares (at
December 31, 1998 and Pro Forma) and 0 shares (Pro Forma as Adjusted)
issued and outstanding, respectively.
(4) Excludes 12,460 shares of Class B Convertible Preferred Stock subject to
outstanding warrants at an exercise price of $458.00 per share, which will
convert into warrants to purchase 1,246,000 shares of Common Stock at an
exercise price of $4.58 per share upon the closing of this offering.
(5) $.01 par value, 15,000 shares (at December 31, 1998 and Pro Forma) and 0
shares (Pro Forma as Adjusted) authorized, respectively; 9,232 (at December
31, 1998 and Pro Forma) and 0 shares (Pro Forma as Adjusted) issued and
outstanding, respectively.
(footnotes continued on following page)
22
<PAGE>
(6) $.01 par value, 24,900,000 shares (at December 31, 1998, Pro Forma and Pro
Forma as Adjusted) authorized, respectively; 13,333,334 shares (at December
31, 1998, Pro Forma and Pro Forma as Adjusted) issued and outstanding,
respectively.
(7) $.01 par value, 250,000 shares (at December 31, 1998 and Pro Forma) and 0
shares (Pro Forma as Adjusted), authorized, respectively; 177,291 (at
December 31, 1998), 200,116 shares (Pro Forma), and 0 shares (Pro Forma as
Adjusted) issued and outstanding, respectively.
(8) $.01 par value, 75,000,000 shares (at December 31, 1998 and Pro Forma) and
0 shares (Pro Forma as Adjusted) authorized, respectively; 0 shares (at
December 31, 1998, Pro Forma, and Pro Forma as Adjusted) issued and
outstanding, respectively.
(9) Excludes 500,000 shares of Class A Common Stock subject to outstanding
warrants at an exercise price of $10.00 per share, which will convert into
warrants to purchase 500,000 shares of Common Stock at an exercise price of
$10.00 per share upon the closing of this offering.
(10) Previously designated as the "Class B Common Stock". $.01 par value,
200,000,000 (at December 31, 1998, Pro Forma and Pro Forma as Adjusted)
authorized, respectively; 16,082,489 shares (at December 31, 1998 and Pro
Forma), and shares (Pro Forma as Adjusted) issued and outstanding,
respectively.
(11) Excludes (a) 500,000 shares of Common Stock subject to outstanding
warrants at an exercise price of $10.00 per share, which will convert into
warrants to purchase 500,000 shares of Common Stock at an exercise price
of $10.00 per share upon the closing of this offering, (b) 240,006 shares
of Common Stock subject to outstanding warrants which are mandatorily
exercisable upon the closing of this offering and (c) 31,000,000 shares of
Common Stock reserved for options granted or to be granted under the
Company's 1996 Stock Option Plan, 1998 Non-Employee Stock Option Plan and
1999 Employee Stock Option Plan (collectively, the "Stock Option Plans").
(12) Excludes a currently undeterminable number of shares of Common Stock
issuable upon the exercise of certain contingent rights of preferred
stockholders of CFN to exchange their CFN capital stock for shares of the
Company's Common Stock. See "Description of Capital Stock." Also excludes
4,000,000 shares of Common Stock to be registered pursuant to a
Registration Statement on Form S-4 for use in future acquisitions. "Risk
Factors--Investors Will Incur Immediate Dilution and May Experience
Further Dilution."
23
<PAGE>
DILUTION
The pro forma net tangible book value of the Company at December 31, 1998
was $ , or $ per share of Common Stock. Pro forma net tangible book value
per share represents the amount of total tangible assets less total liabilities
and mandatorily redeemable preferred stock divided by , the number of shares
of Common Stock treated as outstanding on a pro forma basis after giving effect
to (a) the Equity Financings, (b) the conversion of Class A, Class B and Class
C Convertible Preferred Stock and Class A and Class B Common Stock into Common
Stock upon the closing of this offering, (c) the assumed cashless exercise of
warrants which are mandatorily exercisable upon the closing of this offering
into shares of Common Stock and (d) the Class D Preferred Stock Exchange.
After giving effect to the sale by the Company of shares of Common Stock
offered hereby at an assumed public offering price of $ per share (after
deducting underwriting discounts and commissions and estimated offering
expenses), the Company's pro forma net tangible book value at December 31, 1998
would have been $ , or $ per share. This represents an immediate increase
in net pro forma tangible book value to existing stockholders of $ per share
and an immediate dilution of $ per share to new investors. The following
table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share: .................... $
Pro forma net tangible book value per share as of December 31,
1998(1)...........................................................
Increase per share attributable to new investors...................
---
Pro forma net tangible book value per share giving effect to this
offering............................................................
----
Dilution per share to new investors.................................. $
====
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1998, the differences between existing stockholders and new investors with
respect to the number of shares of Common Stock purchased from the Company, the
total consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------- ---------------------- Price
Number Percent Amount Percent Per Share
-------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockhold-
ers(1)................. % $ % $
New investors...........
-------- -------- ---------- --------- ----
Total................... % $ % $
======== ======== ========== ========= ====
</TABLE>
- --------
(1) Includes as of December 31, 1998, approximately 2,282,500 shares of Common
Stock issued in connection with (a) the Equity Financing, (b) the
conversion of Class A, Class B, and Class C Convertible Preferred Stock and
Class A and Class B Common Stock into Common Stock upon the closing of this
offering, (c) the exercise of warrants which are mandatorily exercisable
upon the closing of this offering into shares of Common Stock (assuming
a cashless exercise) and (d) the Class D Preferred Stock Exchange.
The foregoing table excludes a currently undeterminable number of shares
of Common Stock issuable upon the exercise of certain contingent rights of
minority stockholders of CFN to exchange their CFN capital stock for shares of
Common Stock and also excludes (a) 23,489,725 shares of Common Stock subject to
outstanding options at a weighted average exercise price of $7.67 per share,
and 7,510,275 shares of Common Stock reserved for options to be granted under
the Company's Stock Option Plans, (b) 2,246,000 shares of Common Stock subject
to outstanding warrants at a weighted average exercise price of $6.99 per share
and (c) 4,000,000 shares of Common Stock to be registered pursuant to a
Registration Statement on Form S-4 for use in future acquisitions. See
"Description of Capital Stock" and "Risk Factors--Investors Will Incur
Immediate Dilution and May Experience Further Dilution."
24
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The Consolidated Financial Statements of the Company and the historical
audited financial statements of certain of the Acquired Companies are included
elsewhere in this prospectus. The unaudited Pro Forma Consolidated Financial
Information presented herein should be read in conjunction with those financial
statements and related Notes.
The unaudited Pro Forma Consolidated Financial Information of the Company
for the year ended and as of December 31, 1998 include adjustments to give
effect in the unaudited Pro Forma Condensed Consolidated Statement of
Operations for the acquisitions of the 1998 Acquired Companies as if they had
occurred on January 1, 1998; and in the unaudited Pro Forma Condensed
Consolidated Balance Sheet (a) pro forma as if the Equity Financing and the
Revolving Debt Repayment occurred as of December 31, 1998 and (b) pro forma as
adjusted as if (1) the conversion of Class A, Class B and Class C Convertible
Preferred Stock and Class A and Class B Common Stock into Common Stock upon the
closing of this offering occurred as of December 31, 1998, (2) the exercise of
warrants mandatorily exercisable upon the closing of this offering into
shares of Common Stock (assuming a cashless exercise) occurred as of December
31, 1998, (3) the Class D Preferred Stock Exchange occurred as of December 31,
1998 and (4) the sale of the shares of Common Stock offered hereby and the
application of the estimated net proceeds therefrom occurred as of December 31,
1998.
The acquisitions of the Acquired Companies have been accounted for using
the purchase method and accordingly, each purchase price has been allocated to
the tangible and identifiable intangible assets acquired and liabilities
assumed on the basis of their fair values on the acquisition dates. The
historical carrying amounts of identified net tangible assets, including cash,
accounts receivable, property and equipment, and accounts payable, approximated
their fair values. Identifiable intangible assets aggregating $2.1 million and
the purchase price in excess of identified tangible and intangible net assets
acquired in the amount of $65.4 million, allocated to goodwill are being
amortized on an entity by entity basis over their estimated useful lives,
primarily two to three years.
The fair value of the Common Stock issued as consideration for the 1998
Acquired Companies was determined based upon periodic independent appraisals of
the Common Stock.
The Pro Forma Condensed Consolidated Statement of Operations are not
necessarily indicative of the results of operations that would have been
achieved had the transactions been in effect as of the beginning of the periods
presented and should not be construed as being representative of future results
of operations.
25
<PAGE>
Pro Forma Condensed Consolidated Statement Of Operations
For The Year Ended December 31, 1998
<TABLE>
<CAPTION>
1998
Historical Acquired Pro Forma Pro Forma
Company Companies Adjustments(2) Pro Forma as Adjusted(5)
---------- --------- -------------- --------- --------------
(in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 64,767 $ 22,393 $ -- $ 87,160 $ --
Cost of revenues........ 44,109 13,681 -- 57,790 --
-------- -------- -------- -------- ----
Gross profit.......... 20,658 8,712 -- 29,370 --
Sales and marketing
expenses............... 16,397 1,122 -- 17,519 --
General and
administrative
expenses............... 28,770 8,509 -- 37,279 --
Research and development
expenses............... 4,408 5 -- 4,413 --
Stock option and warrant
expenses............... 2,454 1,845 -- 4,299 --
Depreciation............ 5,217 678 -- 5,895 --
Amortization............ 16,354 -- 13,463 (3) 29,817 --
-------- -------- -------- -------- ----
Loss from operations.. (52,942) (3,447) (13,463) (69,852) --
Other expense, net...... (28) (110) -- (138) --
Loss on equity
investment............. (1,640) -- -- (1,640) --
Interest income......... 750 27 -- 777 --
Interest expense........ (770) (332) (646)(4) (1,748) --
-------- -------- -------- -------- ----
Loss before income
taxes................ (54,630) (3,862) (14,109) (72,601) --
Income tax expense...... -- (8) -- (8) --
-------- -------- -------- -------- ----
Net loss.............. (54,630) (3,870) (14,109) (72,609) --
-------- -------- -------- -------- ----
Dividends and accretion
on mandatorily
redeemable preferred
stock.................. (9,099) -- -- (9,099) --
-------- -------- -------- -------- ----
Net loss available to
common stockholders.. $(63,729) $ (3,870) $(14,109) $(81,708) $ --
======== ======== ======== ======== ====
Basic and diluted net
loss per common
share(1)............... $ (5.41) $ (5.08) $ --
======== ======== ====
Weighted average common
shares outstanding(1).. 11,777 16,088 --
======== ======== ====
</TABLE>
26
<PAGE>
Pro Forma Condensed Consolidated Balance Sheet
As of December 31, 1998
<TABLE>
<CAPTION>
Historical Pro Forma Pro Forma
Company Adjustments(2) Pro Forma as Adjusted(5)
---------- -------------- --------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Assets
Cash and cash
equivalents............ $ 19,259 $12,725 $ 31,984 $ --
Accounts receivable
(net).................. 17,737 -- 17,737 --
Unbilled revenues....... 8,089 -- 8,089 --
Prepaid expenses and
other assets........... 3,355 -- 3,355 --
-------- ------- -------- ----
Total current
assets............. 48,440 12,725 61,165 --
Property and equipment,
net.................... 27,975 -- 27,975 --
Intangible assets, net.. 56,481 -- 56,481 --
Other non-current
assets................. 2,319 -- 2,319 --
-------- ------- -------- ----
Total assets........ $135,215 $12,725 $147,940 $ --
======== ======= ======== ====
Liabilities And
Stockholders' Equity
Accounts payable........ $ 6,438 $ -- $ 6,438 $ --
Deferred revenues....... 6,072 -- 6,072 --
Accrued liabilities..... 7,943 -- 7,943 --
Current portion of long-
term debt.............. 868 -- 868 --
-------- ------- -------- ----
Total current
liabilities........ 21,321 -- 21,321 --
Long-term debt.......... 20,552 (10,000) 10,552 --
-------- ------- -------- ----
Total liabilities... 41,873 (10,000) 31,873 --
Mandatorily redeemable
preferred stock........ 65,679 -- 65,679 --
Mandatorily redeemable
preferred stock of
subsidiary............. 9,839 -- 9,839
Stockholders' equity
Class A Convertible
Preferred Stock...... 2 -- 2 --
Common Stock.......... 163 -- 163 --
Additional paid-in
capital.............. 94,420 22,725 117,145 --
Accumulated deficit... (73,106) -- (73,106) --
Note receivable from
stockholder.......... (900) -- (900) --
Unearned
compensation......... (1,867) -- (1,867)
Treasury stock at
cost................. (888) -- (888) --
-------- ------- -------- ----
Total stockholders'
equity............. 17,824 22,725 40,549 --
-------- ------- -------- ----
Total liabilities,
mandatorily
redeemable
preferred stock and
stockholders'
equity............. $135,215 $12,725 $147,940 $ --
======== ======= ======== ====
</TABLE>
27
<PAGE>
Notes To Pro Forma Consolidated Financial Information
The following adjustments were applied to the Company's Consolidated
Financial Statements and the financial data of the 1998 Acquired Companies to
arrive at the unaudited Pro Forma Consolidated Financial Information.
(1) Potential Common shares consist of Class A Convertible Preferred Stock,
Class B Convertible Preferred Stock and Class C Convertible Preferred Stock
(using the as-converted method) and stock options and warrants (using the
treasury stock method), which are excluded from the computation as their
effect is anti-dilutive.
(2) Reflects the Equity Financing and the Revolving Debt Repayment as if each
occurred as of December 31, 1998.
(3) To record amortization expense for the year ended December 31, 1998 related
to the identifiable intangible assets and goodwill acquired in connection
with the acquisitions of the 1998 Acquired Companies. Such amounts are
amortized on an entity by entity basis over the estimated useful life of
each asset with goodwill amortized primarily over two to three years.
Certain of the acquisition agreements with respect to the acquisition of
the 1998 Acquired Companies required that certain shares issuable at the
acquisition date be placed in escrow. Such shares will either be issued to
the previous owners of these 1998 Acquired Companies or returned to the
Company based upon whether certain performance targets of the respective
1998 Acquired Company are achieved. As of December 31, 1998, the Company
has excluded 237,304 shares of Common Stock that have not been earned under
the terms of the acquisition agreements from the recognized purchase price
calculations. Any purchase price adjustments resulting from the issuance of
these escrowed shares to the previous owners of these 1998 Acquired
Companies will be recognized as adjustments to goodwill and will be
amortized over the remaining period of the expected benefit. See note 3 to
the Company's Consolidated Financial Statements as of and for the year
ended December 31, 1998.
(4) To reflect the reduction in interest expense of $371,000 as if certain debt
of the 1998 Acquired Companies paid off in connection with the acquisitions
was paid as of January 1, 1998, and the increase in interest expense of
$1.0 million as if the cash paid related to the 1998 Acquired Companies was
borrowed on January 1, 1998.
(5) Reflects (a) the automatic conversion of 200,116 shares of Class A
Convertible Preferred Stock, 98,767 shares of Class B Convertible Preferred
Stock, and 9,232 shares of Class C Convertible Preferred Stock, into
30,811,500 shares of Common Stock, (b) the exercise of warrants which are
mandatorily exercisable upon the closing of this offering into shares
of Common Stock (assuming a cashless exercise), (c) the sale by the Company
of shares of Common Stock offered at an assumed public offering price of
$ per share after deducting the estimated underwriting discounts and
commissions and offering expenses payable by the Company as described under
"Use of Proceeds," (d) the Class D Preferred Stock Exchange and (e) the
Term Debt Repayment.
28
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected Consolidated Financial Data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's audited Consolidated Financial
Statements included elsewhere in this prospectus. The Company commenced
operations effective May 1, 1996. The various acquisitions of iXL Interactive
Excellence, Inc., Creative Video, Inc., Creative Video Library, Inc.,
Entrepreneur Television, Inc., CFN, Memphis On-Line, Inc. and the Acquired
Companies in each fiscal reporting period were accounted for using the purchase
method, and accordingly, the statement of operations data of the Company for
all periods presented reflect the results of operations from these businesses
from their respective acquisition dates. The Consolidated Statement of
Operations Data set forth below for the eight months ended December 31, 1996,
the years ended December 31, 1997 and 1998 and the Consolidated Balance Sheet
Data at December 31, 1996, 1997 and 1998, are derived from and qualified by
reference to, the Company's audited Consolidated Financial Statements, which
appear elsewhere in this prospectus.
<TABLE>
<CAPTION>
Eight Months Years Ended
Ended December 31,
December 31, -------------------
1996 1997 1998
------------ -------- ---------
Consolidated Statement of (in thousands, except per share
Operations Data: data)
<S> <C> <C> <C>
Revenues...................... $ 5,379 $ 18,986 $ 64,767
Cost of revenues.............. 3,577 11,343 44,109
------- -------- ---------
Gross profit................ 1,802 7,643 20,658
Sales and marketing expenses.. 812 3,903 16,397
General and administrative
expenses..................... 1,247 9,114 28,770
Research and development
expenses..................... -- 4,820 4,408
Stock option and warrant
expenses..................... -- -- 2,454
Depreciation.................. 372 1,408 5,217
Amortization.................. 928 5,531 16,354
------- -------- ---------
Loss from operations........ (1,557) (17,133) (52,942)
Other income (expense), net... 48 116 (28)
Loss on equity investment..... (249) (1,443) (1,640)
Interest income............... 32 136 750
Interest expense.............. (30) (238) (770)
------- -------- ---------
Loss before income taxes.... (1,756) (18,562) (54,630)
Income tax benefit............ 302 1,550 --
------- -------- ---------
Net loss.................... (1,454) (17,012) (54,630)
Dividends and accretion on
mandatorily redeemable
preferred stock.............. -- -- (9,099)
------- -------- ---------
Net loss available to common
stockholders............... $(1,454) $(17,012) $ (63,729)
======= ======== =========
Basic and diluted net loss per
common share................. $ (0.37) $ (2.60) $ (5.41)
======= ======== =========
Weighted average common shares
outstanding.................. 3,972 6,540 11,777
======= ======== =========
<CAPTION>
As of December 31,
--------------------------------
1996 1997 1998
------------ -------- ---------
Consolidated Balance Sheet
Data: (in thousands)
<S> <C> <C> <C>
Cash and cash equivalents..... $ 409 $ 23,038 $ 19,259
Working capital............... 217 23,879 27,119
Total assets.................. 16,472 55,640 135,215
Debt, including current por-
tion......................... 691 1,273 21,420
Mandatorily redeemable pre-
ferred stock................. -- 29,930 65,679
Mandatorily redeemable pre-
ferred stock of subsidiary... -- -- 9,839
Stockholders' equity.......... 12,989 19,978 17,824
</TABLE>
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with "Selected
Consolidated Financial Data," "Pro Forma Consolidated Financial Information"
and the Company's Consolidated Financial Statements, including the Notes
thereto, included elsewhere in this prospectus. Except for the historical
information contained herein, the discussion in this prospectus contains
forward-looking statements that involve risks, uncertainties and assumptions
such as statements of the Company's plans, objectives, expectations and
intentions. The cautionary statements made in this prospectus should be read as
being applicable to all related forward-looking statements wherever they appear
in this prospectus. The Company's actual results, levels of activity,
performance, achievements and prospects could differ materially from those
discussed below. Factors that could cause or contribute to such differences
include those discussed in "Risk Factors," as well as those discussed elsewhere
herein.
Overview
The Company is a leading Internet services company which provides
Internet strategy consulting and comprehensive Internet-based solutions to
Fortune 1000 companies and other corporate users of information technology. The
Company helps businesses identify how the Internet can be used to their
competitive advantage and uses its expertise in creative design and systems
engineering to design, develop and deploy advanced Internet applications and
solutions.
The Company was formed in March 1996, and since that time has acquired a
total of 34 companies. All of the Company's acquisitions have been accounted
for using the purchase method. Therefore, the historical financial data include
the results of operations of Acquired Companies from their respective
acquisition dates. The Company has incurred substantial losses since its
inception and anticipates continuing to incur substantial losses for the
foreseeable future. As of December 31, 1998, the Company had an accumulated
deficit of approximately $73 million. Although the Company has experienced
revenue growth, this growth may not be sustainable or indicative of future
results of operations.
The Company's customers generally retain the Company on a project-by-
project basis. The Company typically does not have material contracts that
commit a customer to use its services on a long-term basis. Revenue is
recognized primarily using the percentage of completion method on a contract-
by-contract basis. The Company's use of the percentage of completion method of
revenue recognition requires management to estimate the degree of completion of
each project. To the extent these estimates prove to be inaccurate, the
revenues and gross profits reported for periods during which work on the
project is ongoing may not accurately reflect the final results of the project.
Any anticipated losses on projects are charged to earnings when identified. The
Company primarily prices its projects on a fixed-price basis, rather than on a
time and materials basis, and it typically assumes the fixed-price contracts of
companies it acquires. iXL has begun implementation of an internally developed
estimation process to determine the fixed price for an engagement, and
standardize pricing throughout its offices. This methodology incorporates
standard personnel billing rates, project implementation risks and the overall
technical complexity of the project. The Company believes that the
standardization of pricing throughout its network of offices will decrease
project pricing risk. The Company attempts to price larger, fixed-price
contracts on a three-phase basis (strategic review, design and implementation),
with each phase priced separately, immediately prior to its commencement. Less
than a third of the Company's revenues are currently derived from contracts
priced on a three-phase basis. See "Risk Factors--Our Fixed-Price Contracts
Involve Financial Risk."
Through both acquisitions and its directed marketing efforts, the Company
has established a diversified base of clients in a wide range of industries,
including the industries targeted by the Company's marketing efforts. For the
year ended December 31, 1998, the Company's top 10 clients accounted for 21% of
the Company's pro forma revenues whereas the Company's top 10 clients accounted
for 12% of pro forma revenues for 1997.
30
<PAGE>
The Company's revenues are comprised of fees from Internet strategy
consulting, Internet-based business solutions and iXL Solution Sets. The
Company's revenue composition has changed substantially from inception, and the
Company expects further change as its business develops. Historically, a
substantial majority of the Company's revenues has been derived from
traditional web site development and the implementation of iXL's Solution Sets.
To succeed, the Company must leverage its existing relationships and establish
new relationships in order to substantially increase the revenues derived from
more comprehensive strategic Internet services.
The Company's expenses include cost of revenues, sales and marketing,
general and administrative, and research and development expenses. Cost of
revenues includes salaries, benefits and related overhead expenses associated
with the generation of revenues. Sales and marketing expenses include
promotion, and new business generation expenses and the salary and benefit
costs of personnel in these functions. General and administrative expenses
include management, accounting, legal and human resources costs. Research and
development expenses include salary and benefit costs of technical personnel
developing Solution Sets and component frameworks.
The Company's future success will depend in large part upon its ability
to attract, train and retain additional highly skilled executive-level
management and creative, technical, consulting, and sales personnel.
Competition for such personnel is intense, and the Company is unsure that it
will be successful in attracting, training and retaining such personnel.
Historically the Company has experienced significant employee turnover, and its
ability to control employee turnover will have a significant impact on its
profitability.
CFN has expended and will continue to expend significant resources to
build electronic data interchange interfaces with participating institutions,
to grow its infrastructure, to add additional participating companies and
employees, and to establish access to the CFN platform for participating
companies' employees. These development expenses must be incurred well in
advance of the recognition of revenue. CFN recognizes revenue upon completion
of an end-user transaction through the CFN operating network, which also will
require the realization of expenses in advance of related revenue. To date, the
volume of transactions on CFN has been limited and, accordingly, the revenue
recognized has been minimal. As a result, the Company may not be able to
achieve or sustain profitability. See "Risk Factors--CFN's Business is Subject
to Many Risks."
The Company incurred stock compensation expense related to its option
grants for the year ended December 31, 1998, totaling $1.6 million. The Company
will recognize approximately $653,000 in 1999, $651,000 in 2000, $405,000 in
2001 and $158,000 in 2002 in stock compensation expense relating to the grant
of certain options to employees in 1998.
Because the Company is in an early stage of development, it is subject to
numerous risks, particularly as a result of the new and rapidly evolving
markets in which it operates. These risks include the need to successfully
implement its business model and strategy and, as necessary, to revise the
Company's model and strategy as industry conditions and competition change. In
particular, CFN's business model is new and untested, which creates additional
risk as to the successful adoption of this model as well as CFN's ability to
implement it. To address these risks, the Company must, among other things,
continue to develop the strength and quality of its operations, successfully
complete new acquisitions, integrate its historical and future acquisitions,
maximize the value delivered to clients, respond to industry and competitive
developments and attract, train and retain and motivate qualified employees.
The Company cannot be sure that it will be successful in meeting these
challenges and addressing these risks. If the Company is unable to do so, its
business, results of operations and financial condition would be materially and
adversely affected.
31
<PAGE>
Acquisition Program
The Company has acquired a total of 34 businesses since its inception and
intends to continue acquiring similar businesses. The Company evaluates
acquisitions based on numerous quantitative and qualitative factors.
Quantitative factors include historical and projected revenues and
profitability, geographic coverage and contract backlog. Qualitative factors
include strategic and cultural fit, management skills, customer base and
technical proficiency. Most of the consideration paid by the Company for prior
acquisitions has been in the form of Common Stock. The Company anticipates that
Common Stock and options to acquire Common Stock will continue to constitute
most of the consideration used to make future acquisitions. The Company's
acquisition program will result in additional ownership dilution to investors
participating in this offering. See "Risk Factors--Investors Will Incur
Immediate Dilution and May Experience Further Dilution."
The acquisitions have been accounted for using the purchase method. The
results of operations of the acquired entities are consolidated with those of
the Company from the date of the acquisition. For each acquisition, a portion
of the purchase price is allocated to the tangible and identifiable intangible
assets acquired and liabilities assumed based on their respective fair market
values on the acquisition date. A portion of the purchase price in excess of
tangible and identifiable intangible assets and liabilities assumed is
allocated to goodwill and amortized on a straight-line basis over the estimated
period of benefit, which primarily ranges from two to three years. For the year
ended December 31, 1998, amortization expense was $16.4 million. The Company
expects additional acquisition related amortization expense as a result of its
acquisition program.
The Company anticipates that a material portion of its future growth will
be accomplished by acquiring existing businesses. Most of the Company's growth
in personnel has been through acquisitions. The success of this plan depends
upon, among other things, the Company's ability to integrate acquired
personnel, operations, products and technologies into its organization
effectively, to retain and motivate key personnel of acquired businesses and to
retain customers of acquired firms. The Company cannot assure that it will be
able to identify suitable acquisition opportunities, obtain any necessary
financing on acceptable terms to finance such acquisitions, consummate such
acquisitions or successfully integrate acquired personnel and operations. See
"Risk Factors--Failure to Properly Manage Growth Could Adversely Affect Our
Business and Stockholders' Equity" and "--Our Reliance on Acquisitions Could
Adversely Affect Our Business."
32
<PAGE>
1998 Quarterly Pro Forma Results of Operations
The following tables present the unaudited pro forma quarterly results of
operations, which include adjustments to give effect to the acquisitions of the
1998 Acquired Companies as if they had occurred on January 1, 1998. Primarily
because of the Company's large number of acquisitions in 1998, the Company
believes that its historical financial statements are not necessarily
indicative of future results of operations. The Company has therefore included
its quarterly results of operations on a pro forma basis to facilitate the
understanding of the effects of business acquisitions on the Company's
operations. The pro forma quarterly results of operations are not necessarily
indicative of the results of operations that would have been achieved had the
transactions been in effect as of the beginning of the periods presented and
should not be construed as being representative of future results of
operations. The pro forma quarterly results of operations should be read in
conjunction with the unaudited Pro Forma Condensed Consolidated Statement of
Operations and the historical audited financial statements of the Company and
certain of the 1998 Acquired Companies and related notes. See "Pro Forma
Consolidated Financial Information."
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------------
March 31, 1998 June 30, 1998 September 30, 1998 December 31, 1998
-------------- ------------- ------------------ -----------------
(in thousands)
<S> <C> <C> <C> <C>
Revenues................ $ 15,437 $ 18,663 $ 23,800 $ 29,260
Cost of revenues........ 10,116 13,144 16,034 18,496
-------- -------- -------- --------
Gross profit............ 5,321 5,519 7,766 10,764
Sales and marketing ex-
penses................. 2,537 3,280 4,801 6,901
General and administra-
tive expenses.......... 6,117 8,694 9,537 12,931
Research and development
expenses............... 937 1,327 1,214 935
Stock option and warrant
expenses............... -- 345 1,500 2,454
Depreciation............ 982 1,190 1,421 2,302
Amortization............ 7,414 7,424 7,135 7,844
-------- -------- -------- --------
Loss from operations.... $(12,666) $(16,741) $(17,842) $(22,603)
======== ======== ======== ========
</TABLE>
Revenues. Revenues were $15.4 million, $18.7 million, $23.8 million and
$29.3 million in the quarters ended March 31, June 30, September 30 and
December 31, 1998 respectively. Increases were primarily attributable to an
increased number of engagements for existing and new customers, as well as an
increased engagement size. In particular, revenues in the fourth quarter were
favorably impacted by several large engagements during this period. The Company
does not expect to experience a comparable increase in revenue growth during
the first quarter of 1999, and the Company may not experience comparable
increases in the remainder of 1999.
Cost of revenues. Cost of revenues was $10.1 million, $13.1 million,
$16.0 million and $18.5 million in the quarters ended March 31, June 30,
September 30 and December 31, 1998 respectively. Cost of revenues as a
percentage of revenues was 66%, 70%, 67% and 63% in the quarters ended March
31, June 30, September 30 and December 31, 1998 respectively. The second
quarter increase to 70% was primarily attributable to the integration of
acquired companies, including employee training. The third and fourth quarter
decreases to 67% and 63%, respectively, were primarily attributable to the
Company's emphasis on obtaining contracts with higher gross margins. The fourth
quarter decrease was also attributable to the absence of any acquisitions in
this period.
Sales and marketing expenses. Sales and marketing expenses were $2.5
million, $3.3 million, $4.8 million and $6.9 million in the quarters ended
March 31, June 30, September 30 and December 31, 1998 respectively. The
increases were primarily attributable to the development of infrastructure and
the creation and expansion of the Company's sales and product management
staffs. The Company expects its sales and marketing expenses to increase.
33
<PAGE>
General and administrative expenses. General and administrative expenses
were $6.1 million, $8.7 million, $9.5 million and $12.9 million in the quarters
ended March 31, June 30, September 30 and December 31, 1998 respectively. The
increases were primarily attributable to the expansion of management
infrastructure necessary to support the growth in the Company's operations,
including the development of CFN. The Company expects its general and
administrative expenses to increase.
Research and development expenses. Research and development expenses of
$937,000, $1.3 million, $1.2 million and $935,000 in the quarters ended March
31, June 30, September 30 and December 31, 1998 respectively were primarily
attributable to the development of Solution Sets and component frameworks.
Stock option and warrant expenses. Stock option and warrant expenses were
$345,000, $1.5 million and $2.5 million in the quarters ended June 30,
September 30 and December 31, 1998 respectively. In the fourth quarter,
approximately $800,000 related to the issuance of warrants in connection with
marketing services provided to the Company. The remaining expenses related to
the issuance of employee stock options. The Company will recognize an
additional expense over the vesting terms of these options. See "--Overview."
Depreciation. Depreciation expenses of $982,000, $1.2 million, $1.4
million, and $2.3 million in the quarters ended March 31, June 30, September 30
and December 31, 1998 respectively were primarily attributable to investments
in physical infrastructure at the acquired companies after acquisition.
Amortization. Amortization expenses of $7.4 million, $7.4 million, $7.1
million and $7.8 million in the quarters ended March 31, June 30, September 30
and December 31, 1998 respectively were attributable to the goodwill recorded
in connection with the twenty-four acquisitions which took place during 1998.
See "--Acquisition Program."
As a result of the Company's limited operating history, rapid growth and
the emerging nature of the markets in which it competes, the Company believes
that quarter-to-quarter comparisons of results of operations for preceding
quarters are not necessarily meaningful. Investors should not rely on the
results of any one quarter as an indication of our future performance.
Additionally, quarterly results of operations may fluctuate significantly in
the future as a result of a variety of factors, many of which are outside the
Company's control. If in some future quarter, whether as a result of such a
fluctuation or otherwise, the Company's results of operations fall below the
expectations of securities analysts and investors, the trading price of our
Common Stock would likely be materially and adversely affected. See "Risk
Factors--Potential Fluctuations in Quarterly Results Could Affect Our Common
Stock Trading Price" and "--External Factors Could Affect Our Common Stock
Trading Price."
Annual Results of Operations
Years Ended December 31, 1998 and December 31, 1997
The following discussion relates to the Company's actual operating
results for the periods noted. These operating results include the operations
of the companies acquired by the Company during the periods referenced from the
date of acquisition only. As a result, the Company believes the operating
results for the year ended December 31, 1998 are not comparable to the
operating results for the year ended December 31, 1997. See "Pro Forma
Consolidated Financial Information."
Revenues. Revenues increased $45.8 million to $64.8 million for the year
ended December 31, 1998 from $19.0 million for the year ended December 31,
1997. This increase was attributable to the Company's acquisition program, an
increase in the size and number of client engagements, and, to a lesser extent,
the development and growth of industry practice groups. CFN accounted for
$251,000 of the Company's 1998 revenues.
34
<PAGE>
Cost of revenues. Cost of revenues increased $32.8 million to $44.1
million for the year ended December 31, 1998 from $11.3 million for the year
ended December 31, 1997. The increase was primarily attributable to the
integration of the 1998 Acquired Companies and, to a lesser extent, employee
training and the development of CFN. CFN had no revenues or cost of revenues
during 1997.
Sales and marketing expenses. Sales and marketing expenses increased
$12.5 million to $16.4 million for the year ended December 31, 1998 from $3.9
million for the year ended December 31, 1997. This increase was primarily
attributable to the development of the Company's sales and marketing
infrastructure and staff.
General and administrative expenses. General and administrative expenses
increased $19.7 million to $28.8 million for the year ended December 31, 1998
from $9.1 million for the year ended December 31, 1997. The increase was
primarily attributable to the acquisitions of the 1998 Acquired Companies,
associated integration costs and the expansion of management infrastructure to
support the growth in the Company's operations.
Research and development expenses. Research and development expenses
decreased by $412,000 to $4.4 million for the year ended December 31, 1998 from
$4.8 million for the year ended December 31, 1997. Research and development
costs in 1998 were primarily related to the continued development of an
automated quote system at CFN. The purchase price of BoxTop Interactive, Inc.
included a $2.4 million charge to in-process research and development expenses
in 1997 relating to an Internet-based video conferencing product under
development which had not reached technological feasibility. Certain related
core technology was valued as existing technology and not included in the value
of the acquired in-process technology. The value of the purchased in-process
technology was determined by estimating the projected net cash flows including
future revenues to be earned upon commercialization of the product and the
costs to complete the development of the technology. Strong revenue growth was
projected for this product through 1999; thereafter, revenue was expected to
increase moderately each year through 2001. The cash flows were then discounted
to present value at 35%, a rate of return that considers the relative risk of
achieving the projected cash flows and the time value of money. Finally, the
present values of the cash flows of the discrete projection period were summed
to determine the fair market value of the purchased in-process technology. In
the fourth quarter of 1998, due to the introduction of competing products
utilizing alternative technologies into the market, management decided to cease
further investment in the development of this product.
Depreciation. Depreciation expenses increased $3.8 million to $5.2
million for the year ended December 31, 1998 from $1.4 million for the year
ended December 31, 1997. The increase related to the depreciation of assets of
the Acquired Companies and investments in physical infrastructure at the
Acquired Companies after acquisition.
Amortization. Amortization expenses increased $10.9 million to $16.4
million for the year ended December 31, 1998 from $5.5 million for the year
ended December 31, 1997. The increase was a result of the goodwill recorded in
connection with the twenty-four acquisitions which took place during 1998 and
the four acquisitions which took place during 1997.
Interest expense. Interest expense increased to approximately $800,000 in
1998 primarily due to borrowings under the Company's credit facility.
Year Ended December 31, 1997 and Eight Months Ended December 31, 1996
The operating results for the eight months ended December 31, 1996 date
from the Company's inception in March of 1996. Due to this shorter operating
period, the Company's early stage of development during this period, and the
numerous acquisitions effected during 1996 and 1997, the Company believes the
operating results for the year ended December 31, 1997 are not comparable to
the operating results in the eight months ended December 31, 1996.
35
<PAGE>
Revenues. Revenues increased $13.6 million to $19.0 million for the year
ended December 31, 1997 from $5.4 million for the eight months ended December
31, 1996. This increase was a result of the Company's acquisition program and a
full year of operations in 1997.
Cost of revenues. Cost of revenues increased $7.7 million to $11.3
million for the year ended December 31, 1997 from $3.6 million for the eight
months ended December 31, 1996. This increase was a result of the Company's
acquisition program and a full year of operations in 1997.
Sales and marketing expenses. Sales and marketing expenses increased $3.1
million to $3.9 million for the year ended December 31, 1997 from $812,000 for
the eight months ended December 31, 1996. This increase was a result of the
Company's acquisition program and a full year of operations in 1997.
General and administrative expenses. General and administrative expenses
increased $7.9 million to $9.1 million for the year ended December 31, 1997
from $1.2 million for the eight months ended December 31, 1996. This increase
was a result of the Company's acquisition program and a full year of operations
in 1997.
Research and development expenses. Research and development expenses were
$4.8 million for the year ended December 31, 1997. This included $2.4 million
from the acquisition of BoxTop Interactive, Inc. which was allocated to in-
process technology. The remaining expense is primarily related to the
development of CFN's infrastructure.
Depreciation. Depreciation expenses increased $1.0 million to $1.4
million for the year ended December 31, 1997 from $372,000 for the eight months
ended December 31, 1996. The increase was related to the depreciation of assets
of the Acquired Companies and investments in physical infrastructure at the
Acquired Companies after acquisition.
Amortization. Amortization expenses increased $4.6 million to $5.5
million for the year ended December 31, 1997 from $928,000 for the eight months
ended December 31, 1996. The increase primarily was attributable to the
amortization of goodwill and intangible assets recorded in connection with the
four 1997 acquisitions. The increase is also attributable to a charge related
to the discontinued use of a brand name and the result of a full year of
operations in 1997.
Interest expense. Interest expense from capital leases, building mortgage
and loans from stockholders resulted in the increase in interest expense of
$208,000 in 1997 compared to 1996.
Income tax. The recognition of the income tax benefit of $1.6 million for
1997 is due to the net operating losses incurred by the Company which were
utilized to offset certain long-term deferred tax liabilities acquired in the
acquisitions.
As of December 31, 1997 and 1998, the Company had net operating loss
carryforwards for federal income tax purposes of approximately $11.8 million
and $46.6 million, respectively. The Company acquired loss carryforwards of
approximately $2.7 million in 1997 and $6.2 million in 1998. The carryforwards
expire in varying amounts through 2018. The use of acquired net operating loss
carryforwards is restricted in accordance with Internal Revenue Service
regulations. A valuation allowance has been recorded against the Company's net
deferred tax asset as management believes it is more likely than not that they
will not be realized. See Note 10 to the Company's Consolidated Financial
Statements.
36
<PAGE>
Liquidity and Capital Resources
Since its inception, the Company has financed its operations primarily
through private sales of its capital stock, which totaled approximately $132.2
million in aggregate net proceeds through January 31, 1999 (including
approximately $22.7 million from the sale of 22,825 shares of Class A
Convertible Preferred Stock in January 1999). On July 29, 1998, the Company
entered into a credit facility (as amended from time to time, the "Credit
Facility") with Chase Manhattan Bank ("Chase Bank") providing for borrowings of
up to $20 million. At December 31, 1998, approximately $20 million of
borrowings were outstanding under the Credit Facility. In January 1999, the
Company repaid all amounts then outstanding (approximately $10 million) under
the revolving facility provided under the Credit Facility. Additionally, the
Company expects to repay all amounts outstanding (approximately $10 million)
under the term facility provided under the Credit Facility with a portion of
the net proceeds of the offering. This term facility commitment will terminate
upon this payment, and hence only the revolving commitment of $10 million will
remain available under the Credit Facility. The Company's obligations under the
Credit Facility are secured by substantially all of the assets of the Company
and its domestic subsidiaries other than CFN and CFN's subsidiaries and by all
of the stock of the Company's domestic subsidiaries (other than CFN's
subsidiaries) and 65% of the stock of the Company's foreign subsidiaries.
Borrowings under the Credit Facility accrue interest at a rate of 2% plus the
greater of (a) Chase Bank's prime rate or (b) .5% plus the weighted average of
the rates on overnight Federal funds transactions.
At December 31, 1998, the Company had approximately $19.3 million in cash
and cash equivalents. For the period from inception to December 31, 1998, the
Company used approximately $49.2 million, $27.9 million and $27.7 million to
fund operating activities, acquisition activities, and capital expenditures,
respectively. These expenditures were financed primarily with proceeds of sales
of the Company's capital stock.
iXL is required to invest an additional $8.7 million in CFN, if CFN does
not raise these funds through alternate means by November 3, 1999. In addition,
at December 31, 1998, the Company had outstanding commitments for capital
expenditures totaling approximately $5.4 million, primarily related to the
expansion and improvement of its Atlanta, New York and Denver offices. The
remainder of the Company's significant commitments consist of obligations
outstanding under operating leases.
The Company believes its available cash resources and credit facilities,
combined with the net proceeds of this offering, will be sufficient to meet its
anticipated working capital and capital expenditure requirements for at least
the next 12 months. However, the Company may need to raise significant
additional funds sooner in order to support its growth, develop new or enhanced
services and products, respond to competitive pressures, acquire complementary
businesses or technologies or take advantage of unanticipated opportunities.
See "Risk Factors--We Have Significant Future Capital Needs Which Are Subject
to the Uncertainty of Additional Financing."
Year 2000 Risk
Many currently installed computer systems and software products are coded
to accept only two-digit entries to identify a year in the date code field.
Consequently, on January 1, 2000, many of these systems could fail or
malfunction because they may not be able to distinguish between 20th century
dates and 21st century dates. Accordingly, many companies, including the
Company and the Company's customers, potential customers, vendors and strategic
partners, may need to upgrade their systems to comply with applicable "Year
2000" requirements.
Because the Company and its clients are dependent, to a very substantial
degree, upon the proper functioning of its and their computer systems, a
failure of its or their systems to correctly recognize dates beyond December
31, 1999 could materially disrupt operations, which could materially and
adversely affect the Company's business, results of operations and financial
condition. Additionally, the Company's failure to provide Year 2000 compliant
products and services to our clients could result in financial loss, reputation
harm and legal liability.
37
<PAGE>
In 1998, the Company formed a Year 2000 Assessment and Contingency
Planning Committee (the "Y2K Committee") to review both its information
technology systems, hardware and software, and its non-information technology
systems, and where necessary to plan for and supervise the remediation of those
systems. The Y2K Committee is headed by the Chief Information Officer of iXL,
Inc. and the Chief Technology Officer of iXL, Inc. Other members of the Y2K
Committee include two full-time outside consultants and one full-time and four
part-time company employees. The Y2K Committee, utilizing the Company's iD5
engagement methodology, has divided the Company's Year 2000 efforts into five
phases: discovery (currently 80% complete), definition (currently 50%
complete), design, development and deployment. Each of these phases is
scheduled to be complete by the end of May 1999. The Company believes it has
identified its mission critical systems. The Company has obtained confirmations
from the providers of these systems that they are Year 2000 compliant. The
Company expects to conduct internal tests of such systems as part of its
Year 2000 efforts.
The Company has initiated communication with significant vendors, to
determine the extent to which they are vulnerable to Year 2000 issues. The
Company has not yet received sufficient information from all parties about
their remediation plans to predict the outcome of their efforts.
The Company has not made an assessment with respect to its clients of the
extent to which they might be vulnerable to Year 2000 issues. Likewise, the
Company has not made an assessment with respect to other third parties with
which it transacts business to determine the extent to which these parties
might be vulnerable to Year 2000 issues.
The Company is developing contingency plans for critical individual
information technology systems and non-information technology systems for
implementation, if required, due to Year 2000 risks not fully resolved by the
Company's Year 2000 program. Management currently believes that the Year 2000
risk will not pose significant operational problems for the Company's computer
systems. However, there can be no assurance that the Company's Year 2000
program, including consulting with third parties, will avoid any material
adverse effect on the Company's operations, customer relations or financial
condition. The Company estimates the total cost of its Year 2000 program to be
approximately $156,000, $40,000 of which has been incurred as of December 31,
1998. However, there can be no assurance that the actual costs incurred will
not be materially higher than this estimate. See "Risk Factors--Year 2000
Compliance Issues May Adversely Affect Our Business."
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133). This statement establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. The Company will be required to adopt FAS 133 for the quarter ended
March 31, 2000. The Company has not entered into any derivative financial
instruments.
38
<PAGE>
BUSINESS
Overview
We are a leading Internet services company which provides Internet
strategy consulting and comprehensive Internet-based solutions to Fortune 1000
companies and other corporate users of information technology. We help
businesses identify how the Internet can be used to their competitive advantage
and use our expertise in creative design and systems engineering to design,
develop and deploy advanced Internet applications and solutions.
Industry Background
Growth of the Internet
The Internet has grown rapidly in recent years, spurred by developments
such as easy-to-use web browsers, a large and growing installed base of
advanced personal computers, the adoption of faster and more cost efficient
networks, the emergence of compelling web-based content and commerce
applications, and the growing sophistication of the user base. According to
International Data Corporation ("IDC"), a leading research firm, the number of
Internet users was 98 million worldwide at the end of 1998, and will continue
to grow to 320 million by the end of 2002. The broad acceptance of the Internet
has also led to the emergence of intranets (secure web sites accessible only
within a given company) and extranets (intranets also available to select
outsiders) as new global communications and commerce environments, representing
a significant opportunity for enterprises to interact in new and different ways
with customers, employees, suppliers and partners.
Growth of E-Commerce
The initial commercial use of the Internet was as an informational and
advertising medium (i.e., brochureware). From this origin the Internet is
evolving into a platform for conducting transactions and establishing virtual
storefronts and trading networks. Companies have also begun to expand their use
of efficient and low-cost Internet-based technologies to replace or enhance
traditional operations such as customer service, supply chain management,
employee training and communication. In addition, companies such as eBay,
Amazon.com and E*Trade have each extended beyond conventional models for the
sale and delivery of goods and services by operating an Internet-only business
and maintaining a limited physical presence. IDC expects dramatic growth in
total e-commerce transaction volume, projecting an increase from $32 billion in
1998 to $426 billion in 2002.
Market for Strategic Internet Services
The Internet represents a revolutionary and powerful new opportunity for
business. Many companies that do not currently utilize the Internet are being
forced to reevaluate their business models and to adopt or supplement existing
Internet-based business solutions. The development and implementation of
Internet-based solutions require the successful integration of strategy
consulting, creative design and systems engineering skills. Historically,
expertise in these areas either has not existed within an organization or has
been located in disparate functional areas. Accordingly, many businesses have
chosen to outsource a significant portion of the development, design and
maintenance of their intranets, extranets, web sites and e-commerce
applications to independent service providers who can capitalize on their
accumulated strategic, creative and technical expertise. Such outsourcing needs
have generated worldwide demand for Internet professional services, which IDC
estimates will grow from $7 billion in 1998 to $44 billion in 2002. See "Risk
Factors--We Operate in a Developing Market for Strategic Internet Services."
Companies increasingly are discovering that many traditional service
providers lack the requisite expertise to implement comprehensive Internet-
based solutions. Many information technology service providers lack the
creative and marketing skills required to build audiences and deliver unique
and compelling content and also lack Internet expertise and implementation
capabilities. Advertising and marketing communications firms typically lack the
extensive technical skills and expertise with legacy (e.g., mainframe) systems
integration required to produce the increasingly complex solutions demanded by
clients. Many strategy consulting firms lack Internet expertise, marketing
perspective and implementation capabilities to deliver comprehensive solutions.
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A number of Internet services firms have emerged to address these needs.
However, many of these smaller providers tend to develop expertise in a limited
number of industry segments because of the relatively small number of Internet
solution engagements they have completed. Furthermore, the ability of many of
these firms to service clients is constrained by their smaller size, limited
geographic scope and lack of capital resources. In addition, many of these
firms lack the depth, management and infrastructure necessary to develop the
capability required to meet the increasingly larger and more complex needs of
an expanding, sophisticated client base. See "Risk Factors--We Operate in a
Highly Competitive Market With Low Barriers to Entry," "--We Operate in a
Developing Market for Strategic Internet Services."
The Company believes that as businesses' familiarity and sophistication
with Internet technologies grow, so will the need for Internet services
providers who can help formulate a focused, strategic and integrated approach
to the implementation of Internet-based business solutions that enhance their
clients' businesses. The Company believes that the rapidly increasing demand
for Internet solutions, combined with the inability of many current providers
to integrate the strategic, creative and technical skills required by clients,
has created significant market opportunities for strategic Internet service
providers such as iXL.
iXL Solution
iXL uses its expertise in strategy consulting, creative design and
systems engineering to provide services that help clients identify and
capitalize on Internet-driven opportunities to improve and expand their
businesses. Key elements of the iXL solution are:
. Comprehensive Strategic Internet Services. iXL provides a
comprehensive set of strategic Internet services to clients
looking to enhance their existing business model by integrating
their business processes with an Internet strategy. The Company
believes its advantage lies in its ability to assist clients in
the development of an appropriate Internet strategy and then to
deploy the appropriate Internet services necessary to implement
that strategy. Typical iXL engagements include the strategic
application of e-commerce solutions to enhance existing business
processes, the identification of new business processes and
opportunities created by the Internet, the use of creative design
and marketing to acquire, cross-sell and retain consumers online,
and the integration of web-based applications with legacy systems.
The Company believes that the breadth and focus of iXL's service
offerings allow iXL to meet its clients' Internet needs from
strategy to deployment in an efficient and cohesive manner.
. Sophisticated Technology Solutions. The Company uses its extensive
engineering capabilities to deliver complex Internet-based
business solutions. iXL's engineers provide application
development and systems integration services by employing proven
Internet technologies such as Java, XML, Perl, CGI, C and C++.
Typical solutions include developing Internet-enabled business
applications, integrating web-based applications with legacy
systems and databases, and building sophisticated e-commerce
platforms. During 1998, to support its growing technology
development capability, the Company substantially increased its
engineering staff from approximately 50 to over 300 through
acquisitions and new hires. The Company has also established
strategic affiliations with leading technology vendors such as
Microsoft, Intel, Sun, and Oracle. These affiliations typically
allow the Company early access to training, product support and
technology developed by these companies.
. Geographic Coverage and Benefits of Scale. The Company believes
its geographic coverage allows it to better serve its clients on a
local basis, helping to forge strong, long-term client
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relationships and service the widespread offices of its clients
and their customers and vendors. As of December 31, 1998, iXL had
offices in Atlanta, GA; New York, NY; Los Angeles, San Francisco,
San Diego, and Santa Clara, CA; Washington, D.C.; Chicago, IL;
Boston, MA; Denver, CO; Charlotte, NC; Richmond, VA; Memphis, TN;
Norwalk, CT; London, England; Berlin and Hamburg, Germany; Madrid,
Spain; and Rome, Italy. The Company's internal information
technology infrastructure links its various offices and leverages
the expertise of its professionals throughout the organization.
The Company's scale enables it to handle larger, more complex
engagements, expand its base of knowledge and best practices and
employ more experts, spreading their cost and expertise over a
larger enterprise.
. Use of Engagement Methodology (iD5) to Deliver Solutions. The
Company utilizes an engagement methodology known as iD5 (Discover,
Define, Design, Develop, Deploy). iD5 governs and directs all
phases of project management from initial engagement definition to
final solutions delivery. These procedures are updated
periodically to reflect new best practices identified throughout
the Company. The goal of iD5 is to provide consistent procedures
for all engagement phases which encourage usage of best practices,
while providing clients with greater clarity of expectations,
regular progress reports, and a higher degree of project
organization. Accordingly, the Company believes iD5 helps it
achieve on-time and on-budget solutions, capture its best
practices and integrate acquired businesses.
. Multidisciplined Team Approach. iXL staffs engagements with a
multidisciplined team of professionals including project managers,
strategic consultants, creative designers, information architects
(professionals whose expertise includes both artistic design and
technology), industry experts and software engineers. By
assembling these multidisciplined teams of professionals, the
Company believes that it provides comprehensive Internet-based
solutions to clients.
. Experienced Senior Executives. The Company's senior management
team is highly experienced in a variety of disciplines relevant to
the Company's ability to grow and to service the needs of its
clients. iXL's senior executives have managed both emerging and
mature businesses in a variety of industries, including media and
entertainment, technology, travel and financial services. The
Company's management also includes an experienced acquisition team
that has successfully acquired and integrated a large number of
businesses in various industries.
iXL Strategy
The Company's goal is to become the leading provider of strategic
Internet services to Fortune 1000 companies and other corporate users of
information technology. To achieve this objective, iXL is pursuing the
following strategies:
. Leverage and Expand Industry Expertise. The Company has assembled
industry practice groups including experienced professionals with
expertise in the business practices and processes of specific
industries. The Company believes its industry expertise enables it to
provide effective Internet strategy consulting and services tailored to
the special needs of its clients in these industries. In addition,
industry expertise reduces the learning curve on new engagements,
improving efficiency of implementation and reducing project delivery
times. The Company's strategy is to expand its existing industry
practice groups by recruiting senior professionals from major consulting
firms and companies in the relevant industries. The Company also
acquires companies with specific industry expertise. The Company has
established practice groups, which are in varying stages of development
and staffing, in the
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Banking & Financial Services, Media & Entertainment, Travel,
Telecommunications and Healthcare industries. The Company believes
that these industries have been leaders in the utilization of
Internet-enabled technologies. See "--iXL Industry Practice
Groups."
. Continue to Develop Technology Capabilities. The Company has
significant capabilities in systems engineering and applications
development which it uses to deliver complex Internet-based
business solutions. iXL intends to hire additional software
engineers and develop new technology skill-sets to deliver the
best possible solutions and meet the evolving needs of clients.
The Company's research and development team is dedicated to
identifying, testing and defining new Internet-based technologies.
In addition, the Company has established a library of reusable
software objects and templates from its client engagements, which
continues to grow as projects are completed. The Company intends
to increasingly leverage this library to deliver solutions rapidly
and cost-effectively. The Company believes this will be a
significant advantage when providing services under fixed-price
contracts.
. Expand Geographic Coverage. Since its inception, the Company has
expanded its geographic presence aggressively through a
combination of acquisitions and internal growth. iXL has 19
offices located throughout the United States and in England,
Germany, Spain and Italy. The Company believes its broad
geographic coverage allows it to serve its clients on a local
basis, helping to forge strong, long-term client relationships,
and to serve the widespread offices of its clients and their
customers and vendors. The Company's strategy is to continue its
geographic expansion through additional acquisitions and external
hiring.
. Capture and Disseminate Knowledge and Best Practices. The
Company's employees have developed a broad base of knowledge and
best practices through numerous strategic Internet services
engagements and from prior experience. The Company's strategy is
to capture this broad range of knowledge and best practices for
dissemination throughout the Company, and to continue to expand
these capabilities through acquisitions and external hiring.
During the course of its client engagements, iXL also identifies
distinct solutions which can be developed into and distributed as
new iXL Solution Sets (templated applications which can be
customized). iXL accomplishes this dissemination in part through
frequent iXL Summits, where employees within a given discipline
meet in person to receive education and share best practices. The
Company's Technical Operations Center also plays a critical role
in the dissemination process, linking all of the Company's local
offices via a comprehensive Internet protocol-based network
combined with a centralized knowledge management system.
. Expand Client Relationships. The Company has established business
relationships with a diverse base of clients. The Company's
strategy is to leverage its industry expertise, technology skills,
and scale by expanding the scope of client relationships into
broader engagements, including Internet strategy consulting,
creative design, systems engineering and application development
services.
. Attract, Train and Retain Experienced Professionals. The Company's
growth and its ability to provide strategic Internet services is
based in large part on its ability to attract, train and retain
experienced professionals. iXL's strategy is to expand its
existing expertise by recruiting senior professionals from major
consulting firms, creative design firms and information technology
services firms as well as from other strategic Internet services
companies. The Company maintains an informal, team driven and
results oriented culture that is attractive to energetic, talented
professionals and provides incentives for its employees through a
competitive compensation plan, equity ownership and its stock
option plans. The Company provides training on a continuing basis
for its employees through its iXL University programs, which are
designed to address the rapidly changing technological environment
in which its employees are engaged.
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. Pursue Strategic Acquisitions. The Company intends to continue to
pursue strategic acquisitions that provide additional skilled
management, technical and creative personnel, client
relationships, technological skills, industry expertise and
geographic coverage.
iXL Engagement Methodology (iD5)
iXL has developed an engagement methodology known as "iD5" which governs
and directs all phases of project management from initial engagement definition
to final solutions delivery. iD5 consists of five distinct, clearly delineated
stages which provide iXL's clients with clear expectations of both the
engagement process and the solutions to be provided. The five stages are:
. Discover. Collect information relevant to the engagement
objective.
. Define. Formulate an Internet business strategy.
. Design. Refine and document specifications of the Internet
business strategy.
. Develop. Build elements required to implement the Internet
business strategy.
. Deploy. Deliver final solution(s).
iD5 enables iXL to effectively serve its clients by (a) clarifying client
expectations, (b) promoting consistent and efficient service, (c) combining
strategic, creative and technical competencies, (d) minimizing solutions
delivery time and (e) establishing benchmarks regarding best practices.
iD5 is periodically revised and improved to assimilate and deploy new
tools and new best practices developed in the course of the Company's many
engagements throughout all of its offices. Through this process, all iXL
offices benefit from the knowledge gained in the course of engagements by any
iXL office.
iXL Services
The Company believes it offers clients a single source for the
comprehensive range of services required to identify, design, develop and
deploy Internet-based business solutions which complement or expand
conventional business processes. The services that the Company provides include
Internet strategy consulting, Internet-based business solutions, and iXL's
Solution Sets.
Internet Strategy Consulting
The Company offers consulting services to its clients with the objective
of developing Internet solutions that augment a client's overall business
strategy. iXL offers Internet strategy consulting that combines its knowledge
of industry dynamics and business processes with an understanding of the
client's specific needs. The Company has established practice groups, which are
in varying stages of development and staffing, in the Banking & Financial
Services, Media & Entertainment, Travel, Telecommunications and Healthcare
industries. The Company also employs strategy consultants with general business
and Internet expertise. The Company presently employs approximately 55
professionals who provide strategy consulting services.
While Internet strategy consulting directly generates only a small
percentage of iXL's revenues, the Company believes that Internet strategy
consulting will be an important service offering which will differentiate iXL
from many of its competitors. By offering strategy consulting services, the
Company believes it can leverage the consulting and strategy planning expertise
of its various industry experts into engagements which will utilize the
services provided by other iXL practice groups.
Internet-Based Business Solutions
The Company's revenues are principally derived from the design and
delivery of Internet-based business solutions. These solutions typically are
web-based applications, many of which integrate with a client's legacy computer
system. Such solutions can incorporate multiple capabilities including Internet
strategy consulting, creative design, information architecture, software
engineering, project management, and audio, video and animation production.
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Among its Internet-based business solutions, the Company offers e-
commerce systems and services, business information management systems,
interactive learning environments, digital media services, and web site
development and hosting services.
. E-Commerce Systems and Services. The Company designs, develops and
deploys sophisticated e-commerce applications for bringing buyers
and sellers together via the Internet. In 1998, iXL created over
sixty different e-commerce applications on behalf of its clients,
ranging from online retail sites to electronic procurement
systems. The Company's strength in e-commerce lies in its ability
to integrate third party software with a client's existing
computing and network infrastructure to create a robust e-commerce
environment for the client's customers and prospects. The
Company's technology group utilizes a set of core e-commerce
enabling technologies from companies including Microsoft and
Netscape (for e-commerce server applications), Oracle, Sybase and
Informix (for database platform development) and Sun and Hewlett-
Packard (for networking products and services). iXL also maintains
its own reusable middleware code library. In addition, the Company
works with specific application providers such as Intershop,
CyberCash, Accipiter and NetGravity to produce e-commerce
applications that integrate storefront creation tools, business
management tools and payment solutions for the Internet. The
Company has created secure e-commerce applications for online
credit card payment services, micropayment and Internet check
transactions and expanded its core e-commerce applications
capabilities by providing VeriSign PKI certificate services as
part of a complete security solution.
. Business Information Management Systems. The Company designs and
develops sophisticated computer based business information
management systems. These include database-driven web sites that
help clients manage their customer, supplier, and vendor
relationships more effectively and provide secure database access.
Some of these web sites also have the capacity to recognize and
profile the types of information a user is typically interested
in, and to provide that information automatically to the user
during future visits to the site. As part of its Business
Information Management Systems capability, the Company develops
intranets and extranets which enable its clients to communicate
with employees, customers, suppliers and vendors, as well as track
and store critical business data and other information.
. Interactive Learning Environments. The Company has developed
expertise in providing education and training using interactive
multimedia and web technology. The Company employs instructional
designers who create and adapt training materials for use in
multimedia and online environments. Interactive learning
environments have been attractive to service industry
organizations which are geographically dispersed, rely on
employees with a common base of skill sets and experience high
turnover. The Company has developed several customized solutions
to meet the needs of its clients and is developing an additional
iXL Solution Set to facilitate the creation and publication of
interactive training courses. iXL's learning environments utilize
RealNetworks G-2 streaming, Microsoft Media Technologies,
Macromedia Dreamweaver, Flash, TopClass and Podium web-based
training systems. See "--iXL Solution Sets" and "--Employees."
. Digital Media Services. iXL has developed solutions that combine
video, audio, animation, graphics and content into digital media
presentations. These media are also frequently utilized to create
Internet-based presentations. iXL possesses expertise in numerous
post-production editing technologies including Quantel Editbox,
Flame and Avid. iXL also provides video production services
including the design, scripting, production, testing and
distribution of audio and video clips and full broadcast-quality
presentations. In addition, the Company owns the worldwide
perpetual rights to a comprehensive stock video library of over
500,000 clips. iXL has also developed expertise in the design of
user menu and navigation systems for
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digital video discs (DVDs). iXL works with enabling technologies
such as Real Networks (audio and video-enabled environments),
Object Design (specialized object data management tools) and Live
Picture (high-resolution imagery with low network bandwidth
utilization). The Company also has an Enhanced Television (E-TV)
group that is developing technology, applications, content and
expertise for use in the emerging industry of digitally delivered
IP-based (Internet Protocol) information and entertainment.
Currently, the Company is working with cable television operators,
telecommunications companies, satellite broadcasters, hardware
manufacturers, software developers and content providers to design
and build the navigational infrastructures, business models and
strategic relationships required for success in the E-TV
marketplace.
. Traditional Web Sites and Hosting. To provide complete Internet
solutions, iXL offers development of traditional web sites and
state-of-the-art web site hosting services through its Memphis, TN
and San Jose, CA hosting facilities. The Company's hosting
capabilities are offered primarily to clients who require unique
and specific hosting technology.
iXL Solution Sets
The Company uses its technology development capabilities to create
custom applications based on a common, reusable framework and component
library. These "iXL Solution Sets" can be customized and implemented quickly
and cost-effectively. The Company believes that its Solution Sets meet the
needs of clients for fast, replicable and easily implemented solutions for
computer based presentations and multiple web site deployment and content
management. iXL's Solution Sets include:
. Pitchman(R). Pitchman is a presentation tool which combines high-
end graphics, animation, video and audio in an easy-to-transport
and easy-to-display laptop computer format which allows the user
to synchronize with the latest version of the presentation via a
corporate intranet or the Internet. Sales and marketing
professionals are the primary market for Pitchman. The Company has
sold over 500 Pitchman laptop presentations to various clients
including British Airways, Time Warner, News Corporation and
Scudder Kemper.
. Siteman(TM). Siteman is a state-of-the-art browser-based system
for creating and managing up to thousands of web sites that share
a common style and similar look. Siteman allows novice users to
quickly design and build custom web sites by selecting from a
library of templates and adding content. It also enables users to
easily edit content online, yet restricts them from modifying
specified content areas and the overall style of the sites. iXL
also provides support for end users who need assistance in
creating sites with this product. The Company developed Siteman,
recently sold it to a third party, and currently licenses Siteman
from that third party on a non-exclusive basis. Siteman clients
have included AutoConnect, Carlson Wagonlit Travel and WebMD.
. The Company is also developing an additional iXL Solution Set
designed to facilitate the creation and publication of interactive
training courses.
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iXL Industry Practice Groups
The Company has established practice groups in the Banking & Financial
Services, Media & Entertainment, Travel, Telecommunications and Healthcare
industries. These practice groups are in varying stages of development and
staffing. The Company is also in the process of developing practice groups for
the Technology and Retail industries. To build its industry practice group
expertise, the Company leverages the experience of its employees who have
previously worked for major consulting firms or companies in the relevant
industries. The Company has utilized its industry expertise in serving the
clients listed below. These clients, included for illustrative purposes, are
not intended to be representative of the Company's clients generally.
<TABLE>
<CAPTION>
Industry Clients
-------- -------
<S> <C>
Banking & Financial Services................. Chase Manhattan Bank
First USA
Merrill Lynch
Scudder Kemper
Media & Entertainment........................ Cox Enterprises
News Corporation
Time Warner
Universal Studios
Travel....................................... Budget Rent a Car
Carlson Wagonlit Travel
Delta Air Lines
Virgin Atlantic
Telecommunications........................... BellSouth
Lucent
Premiere Technologies
Healthcare................................... Eli Lilly
HBOC
WebMD
</TABLE>
Sales and Marketing
The role of the Company's marketing program is to create and sustain
preference and loyalty for the iXL brand as a leading provider of strategic
Internet services. Marketing occurs at the corporate and local levels. The
corporate marketing department has overall responsibility for communications,
advertising, public relations and the Company's web site, and also engineers
and oversees central marketing and communications programs for use by each of
the Company's local offices. At the local level, each office also has its own
marketing representative responsible for building brand awareness within each
geographic region. These local representatives report to the President of each
office, with the Executive Vice President for Worldwide Marketing of iXL, Inc.
having overall responsibility and oversight.
The Company's sales force totals approximately 105 sales representatives.
Each of the Company's offices has its own sales representatives who sell all
services offered by the Company to the clients and prospects located in their
geographical region. These local representatives report to the President of
each office, with the Executive Vice President for Worldwide Operations of the
Company having overall responsibility and oversight.
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Examples of iXL Internet Solutions
The following examples illustrate the Company's strategic Internet
service capabilities:
Budget Rent a Car
Budget Rent a Car ("Budget") engaged iXL to implement an Internet
strategy, including an online reservation engine for its drivebudget.com
website. iXL's solution utilized a sophisticated reservations booking engine
that integrates directly with Budget's mainframe-driven customer reservation
and inventory control systems. This integrated system allows Budget to
accurately identify vehicles that are available in rental inventory at a given
Budget location. In addition to pricing and booking reservations via the
Internet, Budget's customers can view available vehicles and access vehicle
specifications such as seating and cargo space. The system also provides travel
planning functions including maps, travel safety tips, and time and distance
calculations.
To promote awareness of the site, iXL designed an online marketing
campaign, including an extensive search engine optimization effort, which has
resulted in increasing online bookings and reservations. Through this shift to
an online environment, Budget believes it is realizing significant cost-savings
and achieving stronger customer relationships by providing more choice, control
and convenience.
Chase Manhattan Bank
iXL's client relationship with Chase Manhattan Bank ("Chase Bank") began
with a single project in the second quarter of 1998, and has expanded to
include projects for four of Chase Bank's six largest divisions and for the
bank's investment company, Chase Capital Partners. The Company believes the
Banking and Financial Services practice group's industry expertise has enabled
iXL to broaden the scope of its relationship with Chase Bank.
Among its current projects for Chase Bank, iXL is building an electronic
bill presentment and payment ("EBPP") system which will allow Chase Bank
customers to view banking statements and pay bills online. The data from the
EBPP system also drive Chase Bank's Value-Added Online Marketing system,
designed by iXL, which profiles Chase Bank customers by the banking services
they utilize, their credit profile, and their Chase Bank web site browsing
habits.
Additionally, iXL is providing Internet services to Chase Bank's small
business group and its merchant services division. The focus of these
engagements is to create Internet business and product strategies and
facilitate the implementation of e-commerce. iXL is also working with Chase
Bank to overhaul the Chase.com web site to make the site more responsive and
effective for Chase Bank customers. iXL developed the strategic plan for this
assignment and is designing and developing the infrastructure and architecture
required to support a site that better integrates Chase Bank's online portfolio
of products and services.
WebMD
WebMD is the first full-service, nationwide, Internet-based healthcare
network that links physicians, hospitals, insurance companies and patients.
Since its inception in 1996, iXL has provided WebMD with a full range of
strategic Internet services, including initial definition of WebMD's Internet-
based healthcare services product to
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be offered via the WebMD.com web site. Once defined, systems design,
application development, engineering and hosting of the WebMD service was
performed by iXL, including the integration of over eighty databases capable of
online search and third-party online service offerings.
The WebMD.com web site provides doctors access to a suite of Internet-
based applications which are designed to enable them to manage their time more
efficiently and to serve patients more effectively. These applications provide
several centrally managed services, including communications functions,
insurance compliance, verification and payment processing, and storage and
tracking of patient test results. Because these services are offered online,
information and consultation can often be offered to patients without requiring
an office visit. Furthermore, WebMD offers continuing medical education courses
to physicians online. Patients can also gain access to the latest information
on a wide variety of health topics.
iXL also developed communications management software and applications
for WebMD that allow the redirection of messages across various platforms
including e-mail, voice-mail, fax, pager and phone, as well as peer-to-peer
information sharing via online chat room and bulletin board services. The
Company also created the interactive distance-learning component and knowledge
management systems of WebMD. iXL's Siteman Solution Set was the platform for
the web publishing component of the WebMD service. Additionally, iXL developed
the marketing programs for WebMD including Pitchman presentations for the
physician, patient and healthcare community.
Acquisitions
The strategic Internet services industry is highly fragmented, consisting
of a large number of small companies providing limited service offerings.
Therefore, an important element of iXL's growth strategy is the acquisition of
selected companies with complementary technologies and capabilities. The
Company's strategy has been to augment its growth through acquisitions of
small, regional strategic Internet services companies. By obtaining critical
mass in a particular regional market, the Company believes it is able to
provide the responsiveness and quality of service of a small company with the
greater depth and breadth of services of a large organization. The acquisitions
have resulted in a broad geographic presence, allowing iXL to compete more
effectively for national accounts. The Company's post-acquisition strategy is
to enhance the competitiveness and profitability of each acquired company.
The Company identifies acquisition candidates through its ongoing
industry searches, through its business network and through contact initiated
by companies seeking to be purchased. Potential targets are evaluated on
numerous quantitative and qualitative factors. Quantitative factors include
historical and projected revenues and profitability, geographic coverage and
contract backlog. Qualitative factors include strategic and cultural fit,
management skill, customer base and technical proficiency.
These factors are evaluated as part of a four-part assessment process:
(a) a detailed audit and operating assessment is initiated; (b) acquisition
pricing models are carefully evaluated; (c) specific technology skills and
capabilities are ascertained; and (d) management qualifications and
compatibility are appraised.
The Company's post-acquisition process includes the integration of all
financial reporting systems, operating procedures, and training programs into
the iXL culture and infrastructure. Integration typically begins before the
acquisition transaction has been closed, with a goal of total integration
promptly following closing. The Company's Technical Operations Center plays a
critical role in this process, connecting the acquired business' systems to the
Company's central systems. The Company's goal is to provide each of its offices
with all tools and resources needed to attain the maximum possible growth and
profitability. Accordingly, the Company has rarely used earn-outs in its
acquisitions because management believes such arrangements can impede the
integration of multiple acquired businesses in the same city by motivating them
to compete against one another.
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Historically, the Company has used its Common Stock for substantially all
of the consideration for its acquisitions. The Company anticipates that this
will continue in the future and intends to register 4,000,000 shares of Common
Stock pursuant to a "shelf" Registration Statement on Form S-4 for this
purpose. By maximizing the use of stock as acquisition consideration, the
Company believes that the acquired companies' management has a greater
incentive to focus on iXL's long-term growth through the appreciation of its
stock price. The Company also generally grants stock options to employees of
newly acquired companies as a means of increasing employee and management
retention.
The Company began its acquisitions in April 1996 when it acquired iXL
Interactive Excellence, Inc., Creative Video Library, Inc., Creative Video
Inc., and Entrepreneur Television, Inc., companies whose focus was to assist
corporate clients in the design and creation of multimedia and video
communication projects. In December 1996, the Company acquired Consumer
Financial Network, Inc., which, at such time, was a small traditional insurance
agent for corporate executives. CFN was seeking iXL's strategic and technical
assistance to sell insurance services over corporate intranets. Since the CFN
acquisition, iXL has developed and implemented the sophisticated CFN e-commerce
platform for marketing financial services and employee benefits electronically
over the Internet and corporate intranets. iXL has acquired 29 other companies
all engaged in related businesses. See "Risk Factors--Our Reliance on
Acquisitions Could Adversely Affect Our Business" and "--Failure to Properly
Manage Growth Could Adversely Affect Our Business and Shareholders' Equity."
The following table summarizes the Company's other acquisitions since
June 1996, listed in chronological order:
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<TABLE>
<CAPTION>
Number of Shares issued in
Employees at connection with
Businesses Acquired Primary Capabilities Date Acquired Acquisition Date Acquisition
------------------- -------------------- ------------- ---------------- ----------------
<C> <S> <C> <C> <C>
Memphis On-Line, Inc. ........... Hosting June 5, 1996 15 none
Memphis, TN
Webbed Feet, LLC................. Creative design February 14, 1997 1 40,000
Atlanta, GA
The Whitley Group, Inc. ......... Interactive multimedia April 4, 1997 20 454,400
Charlotte, NC
BoxTop Interactive Inc. ......... Creative design May 30, 1997 60 3,416,700
Los Angeles, CA
Swan Interactive Media, Inc. .... Software engineering July 28, 1997 15 283,900
Atlanta, GA
Small World Software, Inc. ...... Software engineering and January 23, 1998 26 271,356
New York, NY creative design
Green Room Productions, L.L.C. .. Travel expertise, February 5, 1998 28 344,270
San Francisco, CA creative design and
engineering
CCG Online....................... Travel expertise, March 27, 1998 23 266,000
Denver, CO creative design and
software engineering
Spin Cycle Entertainment, Inc. .. Creative design and May 8, 1998 20 155,200
Los Angeles, CA software engineering
Digital Planet................... Creative design and May 12, 1998 31 359,584
Los Angeles, CA software engineering
InTouch Interactive, Inc. ....... Software engineering May 12, 1998 11 195,834
Charlotte, NC
Micro Interactive, Inc. ......... Interactive multimedia May 14, 1998 35 740,000
New York, NY
CommerceWAVE, Inc. .............. E-commerce July 2, 1998 22 877,898
San Diego, CA
Wissing & Laurence, Inc. ........ Video production July 8, 1998 2 50,000
New York, NY
601 Design, Inc. ................ Video production July 16, 1998 7 200,000
New York, NY
Image Communications, Inc. ...... Creative design July 22, 1998 40 378,999
Vienna, VA
Campana New Media, S.L. and
The Other Media, S.L. .......... Creative design July 28, 1998 8 37,107
Madrid, Spain
Spinners Incorporated............ Creative design, July 30, 1998 31 674,132
Boston, MA software engineering and
financial
services expertise
Tekna, Inc. ..................... Software engineering and September 4, 1998 27 762,622
Richmond, VA creative design
LAVA Gesellschaft fur Digitale
Medien GmbH..................... Software engineering September 7, 1998 28 321,428
Hamburg, Germany
Larry Miller Productions, Inc.... Creative design September 9, 1998 33 113,823
Boston, MA
Denovo New Media Limited......... Creative design September 10, 1998 5 42,852
London, England
Exchange Place Solutions, Inc.... Financial services September 10, 1998 4 275,000
Atlanta, GA consulting
Pantheon Interactive, Inc........ Software engineering September 18, 1998 15 271,787
Santa Clara, CA
Two-Way Communications, L.L.C. .. Creative design and September 18, 1998 23 269,421
Chicago, IL healthcare expertise
NetResponse, L.L.C............... Strategy consulting, September 22, 1998 36 701,375
Arlington, VA software engineering and
creative design
Ionix Development Corporation.... Software engineering September 23, 1998 22 358,551
Chicago, IL
Pequot Systems, Inc.............. Financial services September 24, 1998 12 378,066
Norwalk, CT expertise and software
engineering
</TABLE>
50
<PAGE>
Strategic Alliances and Affiliations
The Company has entered into, and intends to continue entering into,
strategic alliances and affiliations with a select group of technology service
providers. The primary goals of iXL's strategic alliances and affiliations are
(a) to enhance iXL's overall service offerings, (b) to create or identify new
revenue opportunities through referrals and the creation of new service
offerings and (c) to increase iXL's credibility and visibility in the
marketplace through collaboration in joint marketing.
The Company has established strategic affiliations with, among others,
Microsoft, Intel, Sun and Oracle. These strategic affiliations provide the
Company early access to training, product support and technology.
The Company has also established strategic alliances with companies
offering technologies which serve important roles in the deployment or delivery
of iXL services. These alliances focus on the joint development of integrated
solutions which utilize the technologies offered by iXL's partners to deliver
the services designed by iXL. The Company's strategic alliances include
alliances with RealNetworks and @radical.media, Inc. Through its strategic
alliance with RealNetworks, a leading provider of media streaming technologies,
the Company will be presented as a preferred provider of content for events
streamed via RealNetworks technologies. Through its alliance with
@radical.media, which specializes in production and broadcast of high-end
commercial advertising campaigns, the Company expects to gain access to
@radical.media's clients seeking complimentary Internet solutions.
Technical Operations Center
The Company's Technical Operations Center is the Company's computer
systems center which links all of the Company's local offices with a
centralized knowledge management system. The Technical Operations Center
enables the Company to integrate operations of local offices into all facets of
the Company, including, financial reporting, e-mail, and dissemination of
knowledge and best practices. The Technical Operations Center allows for the
rapid integration of acquired businesses, facilitates collection and
dissemination of knowledge and best practices throughout the Company and
supports enterprise business systems. The Technical Operations Center maintains
its network operations and monitoring in Atlanta, with central data center and
intellectual property transit support from its data center in Memphis, TN, and
co-location facilities in San Jose, CA. The Technical Operations Center manages
the Company's general ledger accounting systems, global project and time
tracking systems, sales force automation, electronic messaging, central data
warehouse repository services, wide area network infrastructure, intellectual
property transport services and global digital security. These functions are
closely integrated in a worldwide iXL intranet that additionally supports human
resources and distance learning. The Company views the Technical Operations
Center as a key strategic asset, providing a platform to permit rapid growth
and a working model of the solutions the Company can design for its clients.
See "Risk Factors--Failure to Properly Manage Growth Could Adversely Affect Our
Business and Stockholders' Equity."
51
<PAGE>
Consumer Financial Network
Consumer Financial Network, Inc., or CFN (the equity of which is owned
88% by the Company and 12% by General Electric Capital Corporation), is a
sophisticated e-commerce platform for marketing financial services and employee
benefits over corporate intranets and the Internet, as well as through a
telesales center. CFN has contracted with competing providers of financial
services and employee benefits to create a platform for the comparison shopping
and purchase of these services. CFN is provided at no cost to large companies
and associations (typically with 5,000 or more employees) for distribution as a
human resources benefit to their employees or members. Currently, CFN provides
access to the following services:
<TABLE>
<CAPTION>
Financial Services Employee Benefits
------------------ -----------------
<S> <C>
Auto Insurance Long Term Care
Homeowners Insurance Individual Life Insurance
Mortgages Vision Services
Home Equity Loans Legal Services
Auto Finance
</TABLE>
Traditionally, the services currently offered by CFN have not been
presented on a standardized or comparable basis. Accordingly, consumers have
often been deterred from obtaining meaningful price comparisons from competing
services providers. Many consumers have been unable or unwilling to devote the
time required to compile comparative quotes and have instead relied on other
factors unrelated to the price or the terms provided in purchasing these
services.
The Company believes CFN is an attractive offering for consumers because
CFN enables them to receive explanatory information and an unbiased comparison
of products, services and quotes based on equivalent terms from multiple
providers of financial services and employee benefits. In addition, because (a)
CFN aggregates employees of multiple major companies and members of
associations, and (b) CFN aggregates a nationwide network of services providers
who compete for each individual members' business, CFN is often able to
negotiate discounted pricing for its customers. Consumers can access CFN online
(through their employers' and associations' intranets or password protected
Internet) or through telephone or fax.
The Company believes the CFN platform is attractive to services providers
because it is designed to (a) provide access to a highly desirable market
segment (employed consumers), (b) allow each provider to directly access its
preferred target market by including multiple providers of similar services,
(c) provide a lower cost of customer acquisition than traditional distribution
channels due to automated consumer access and bulk acquisition of consumers
through the participation of large employers and associations, (d) allow
providers to expand geographically and (e) allow providers to utilize automatic
payroll deduction to secure payment for services sold. As a result of the
benefits outlined above as well as the aggregated customer base available
through CFN, providers contracting with CFN may offer discounted rates and
other features that are more competitive than the individual rates and features
they otherwise may offer through traditional distribution channels.
CFN earns fees on each sale of services made through CFN. Currently, the
significant majority of consumer inquiries to CFN for services offered by CFN's
providers are made through CFN's telesales center. The Company's goal is for
the relative volume of online inquiries as well as the automation of the entire
process from inquiry to completed transaction to increase significantly in the
future as intranets become more widespread and as customers become more
familiar with the Internet. The Company believes that such an increase in
online inquiries in proportion to telesales center inquiries will reduce CFN's
support costs. CFN's performance will depend in large part upon CFN's ability
to estimate accurately the resource requirements and the revenues generated by
customers engaging in the transactions with service providers on the CFN
platform. Expenses and investments must be incurred well in advance of the
potential transactions intended to generate revenue to justify this cost
structure. See "Risk Factors--CFN's Business is Subject to Many Risks."
52
<PAGE>
Member Companies
The Company believes CFN is attractive to employers because it enables
them to offer to their employees, at no cost to the employer, a wide range of
financial services and employee benefits at generally discounted rates.
Initially, CFN has chosen to provide its platform to large companies and
associations as a no cost human resources benefit for their employees. Current
CFN member companies include:
<TABLE>
<S> <C>
Advantica Ritz Carlton Hotels
American Standard Ryder Corporation
Amerigas Simmons Mattress Company
BellSouth Society for Human Resource Management
Blue Cross/Blue Shield of TN Texas A&M University
DaimlerChrysler Thomson Corporation
Nextel Williams Companies
</TABLE>
Once CFN has established a relationship with a participating employer,
CFN's strategy is to become part of the payroll deduction system of the
employer. This arrangement allows employers more flexibility in their payroll
deduction systems, while enabling CFN to provide multiple services to
employees. Becoming part of the payroll deduction system also enhances CFN's
ability to retain employees as customers for its providers. Automatic payroll
deduction allows services providers to offer payment plans that are structured
around the frequency of payroll deductions and is the most desirable form of
payment for CFN's participating services providers.
Provider Network
CFN's platform includes property and casualty insurance, home finance,
automobile finance, legal services, long-term care, term life insurance and
vision plans. Providers available on the CFN platform include American Express
Property Casualty companies, Chubb Group of Insurance Cos., Liberty Mutual
Insurance Co., and Nationwide Mutual Insurance Co. in property and casualty
insurance; Banc One, Chase Manhattan Mortgage Corporation, Countrywide, First
Union National Bank and Travelers Home Mortgage Service in home finance; debis
Financial Services in automobile finance; Law Phone in legal services; Mass
Casualty and Transamerica in long-term care; Empire General Life in life
insurance and Vision Care Advantage in vision services.
The terms of these contracts range from one to three years. Most
contracts terminate either on or before December 31, 1999 or December 31, 2000,
and some contracts are on a trial basis only. The contracts specify the terms
of the agreement with CFN, generally including information on terms of pricing
to be provided, the fulfillment process, compensation to CFN, necessary
regulatory requirements, restrictions on use of consumer information provided
by CFN, indemnification, and intellectual property protection for CFN. There
are no minimum volume requirements required from CFN to providers. CFN is
currently working to obtain non-residential mortgage brokerage licenses where
necessary. In jurisdictions where the Company is currently not so licensed, the
Company provides mortgages through one of its providers which is appropriately
licensed.
Technology
CFN's e-commerce platform is comprised of a Java-enabled web-based front-
end, a rules-based decision support middleware suite, an advanced and flexible
back-end protocol for legacy system integration, and a state-of-the-art
database construct that maximizes the ability to manage customer information.
The e-commerce technology developed by CFN, for which CFN has two utility
patents pending, comprises an easily extensible multi-provider, multi-product
comparative "Quoting System". While the current application of the Quoting
System developed by CFN is for the dissemination of information about financial
services and employee benefits, the Quoting System has uses in many industries.
The Company believes this technology could be applied to other situations where
a consumer needs automated assistance in the selection of a service or product
to purchase from a field of varied products from different providers.
For a discussion of certain risks related to CFN, see "Risk Factors--
CFN's Business is Subject to Many Risks."
53
<PAGE>
Government Regulation
In most states, there are two broad categories of insurance agency
licenses, one for property and casualty insurance and the other for life and
health insurance. CFN's wholly-owned subsidiary, CFN Agency, Inc., a Delaware
corporation ("CFN Agency"), is licensed as a resident insurance agency for both
property and casualty insurance and life and health insurance by the state of
Georgia. For property and casualty insurance business, CFN Agency is licensed
as a nonresident corporate insurance agency or at least one employee of CFN
Agency ("CFN Employee Agent") is individually licensed as a nonresident
insurance agent in all fifty states. For life and health insurance business,
CFN Agency is licensed as a nonresident corporate insurance agency or at least
one CFN Employee Agent is individually licensed as a nonresident insurance
agent in thirty-six states.
Because of the lack of uniformity in state insurance agency licensing
laws, a corporate insurance agency cannot obtain an insurance agency license in
all fifty states. Some states do not issue insurance agency licenses to
corporations but only issue insurance agent licenses to individuals. Other
states (each, a "Foreign State") issue corporate insurance agency licenses only
if the state of residence of the applicant for a corporate insurance agency
license applicant reciprocates by issuing corporate insurance agency licenses
to insurance agencies resident in the Foreign State. In some states where CFN
Agency does not have a nonresident corporate insurance agency license, a CFN
Employee Agent is individually licensed in such states as a nonresident
insurance agent and the CFN Employee Agent transacts the business of CFN Agency
where permitted. If any such CFN Employee Agent's employment with CFN is
terminated, CFN Agency may not be able to transact its business unless and
until it has another employee who is individually licensed as a nonresident
insurance agent in the states where CFN Agency does not hold a nonresident
corporate insurance agency license. If a state in which CFN Agency does not
hold a nonresident corporate insurance agency license determines that CFN
Agency is transacting business in such state as an unlicensed insurance agency,
CFN Agency could be subject to fines and prohibited from doing insurance
business in such state.
Some states regulate prepaid legal plan companies as an insurance company
or their products as specialized legal expense products, while other states
regulate prepaid insurance plans as non-insurance services. In states that
regulate prepaid legal plan companies as insurance companies, the product is
usually classified as casualty insurance. Certain states' bar associations
require prepaid legal plans to file periodic information statements. CFN does
not believe it is subject to such requirements.
There can be no assurance that a state in which CFN Agency does not hold
a nonresident corporate insurance agency license will not assert that CFN
Agency is transacting business in such state as an unlicensed insurance agency.
Generally, commissions payable for the sale of insurance products cannot be
paid to, or received by, a person or entity that is not licensed as an
insurance agent or agency, as applicable. There can be no assurance that a
state in which CFN Agency does not hold a nonresident corporate insurance
agency license will not assert that commissions assigned by the CFN Employee
Agent to CFN Agency are an assignment of insurance commissions occurring in
such state to an unlicensed corporate insurance agency. In the states in which
CFN Agency does not hold a nonresident corporate insurance agency license, the
insurance companies that have contracted with CFN Agency pay commissions to the
CFN Employee Agent, who then assigns such commissions to CFN Agency. If a state
in which CFN Agency does not hold a nonresident corporate insurance agency
license determines that CFN Agency is wrongfully receiving an assignment of
insurance commissions in, or with respect to insurance policies sold in, such
state as an unlicensed insurance agency, both CFN Agency and the subject CFN
Employee Agent could be subject to fines and prohibited from doing business in
such state.
CFN Agency operates a telephone call center located in Duluth, Georgia.
Some of the CFN Employee Agents work in this telephone call center ("Call
Center Agents"). The Call Center Agents provide information and education to
consumers who are employees of client companies or members of client affinity
groups regarding the insurance products described on CFN's web site. Some of
the Call Center Agents are also licensed in states other than Georgia as
nonresident insurance agents; however, each Call Center Agent is not
54
<PAGE>
licensed as an insurance agent in all fifty states. There can be no assurance
that a state, in which a Call Center Agent is not licensed as a nonresident
insurance agent, will not assert that such Call Center Agent is, by providing
information and education to consumers about insurance products on the CFN web
site in such state, transacting insurance agent activities without being
licensed by such state as a nonresident insurance agent. If a state in which a
Call Center Agent does not hold a nonresident insurance agent license
determines that a Call Center Agent has transacted the business of an insurance
agent in such state, both CFN Agency and such Call Center Agent could be
subject to fines and prohibited from doing insurance business in such state.
For residential mortgage and auto finance business, CFN's wholly-owned
subsidiary, CFN Finance, Inc., a Delaware corporation ("CFN Finance"), is in
the process of applying, where necessary, for broker licenses to permit it to
operate its residential mortgage finance and, where required, its auto finance
programs. There is the possibility that some states may not grant such a
license to CFN Finance. Until such licenses are granted, CFN Finance has
entered into licensing agreements with a Federal savings and loan association
to operate CFN Finance's residential mortgage finance program in those states
which require licenses and CFN Finance has not yet received a license pursuant
to the authority granted under a Federal charter. CFN Finance's auto finance
program is being offered in states where no licenses are required for CFN
Finance. For the states that require auto finance broker licenses and from
which CFN Finance has not yet received such a license, CFN Finance has entered
into a licensing agreement with another Federal savings and loan association to
operate CFN Finance's auto finance program pursuant to the authority granted
under a Federal charter. Federal law governing the federal savings and loan
associations preempts the ability of states to require licenses of Federal
savings associations engaged in the business of residential mortgage brokerage
or auto finance brokerage. There can be no assurance that the residential
mortgage program licensing agreement will be renewed upon its expiration date
of October 31, 1999, the auto finance licensing agreement will be renewed upon
its expiration date of November 11, 1999, or that either agreement will not be
terminated sooner. Furthermore, should either agreement expire or terminate
there can be no assurance that another Federal savings and loan association
will agree to operate CFN Finance's residential mortgage or auto finance
program pending the approval of the applicable state licensing applications of
CFN Finance. There also can be no assurance that a state regulatory agency will
not challenge the current operation of either program by a Federal savings and
loan association. See "Risk Factors--Government Regulation and Legal
Uncertainties Related to CFN Could Adversely Affect Our Business."
iXL Ventures
As a complement to its core business, the Company has occasionally, on an
opportunistic basis, participated in the development of other Internet-related
businesses through iXL Ventures. The Company seeks to combine its management
experience, technical expertise and financial capital to develop new ideas.
When these new ideas warrant further development, the Company seeks strategic
investors to assist in the full development of these projects into viable
stand-alone businesses. CFN is the first major stand-alone business to emerge
from this process. Currently, other iXL Ventures include FANSonlyTM (University
Netcasting, Inc.) (a series of commercial Internet sites for leading colleges
and universities), Enhanced Television (E-TV) (digital interactive television
delivered via the Internet), and Last Minute Travel (an on-line discount travel
service).
Competition
While the market for strategic Internet services is relatively new, it is
already highly competitive and characterized by an increasing number of
entrants that have introduced or developed products and services similar to
those offered by the Company. The Company believes that competition will
intensify and increase in the future. Our target market is rapidly evolving and
is subject to continuous technological change. As a result, the Company's
competitors may be better positioned to address these developments or may react
more favorably to these changes, which could have a material adverse effect on
the Company's business, results of operations and financial condition. The
Company competes on the basis of a number of factors, including the
attractiveness of the strategic Internet services offered, the breadth and
quality of these services, creative design, engineering expertise, pricing,
technological innovation, and understanding clients' strategies and needs.
55
<PAGE>
Many of these factors are beyond our control. Existing or future competitors
may develop or offer strategic Internet services that provide significant
technological, creative, performance, price or other advantages over the
services offered by us.
The Company's competitors can be divided into several groups: strategic
Internet services providers; large information technology consulting services
providers; computer hardware and service vendors; strategic consulting firms;
and interactive advertising agencies. The Company also may compete with
telecommunications companies. Although most of these types of competitors to
date have not offered a full range of Internet professional services, several
have announced their intention to do so. These competitors at any time could
elect to focus their resources in the Company's target markets, which could
adversely affect our business, results of operations and financial condition.
Many of the Company's current and potential competitors have longer operating
histories, larger installed customer bases, longer relationships with clients
and significantly greater financial, technical, marketing and public relations
resources than the Company. Competitors that have established relationships
with large companies but limited expertise in providing Internet solutions may
nonetheless be able to successfully use their client relationships to enter the
Company's target market or prevent the Company's penetration into their client
accounts. The Company believes that its primary competitors currently are
International Business Machines Corporation, USWeb Corporation, Sapient
Corporation, and smaller Internet service providers.
Additionally, in pursuing acquisition opportunities we may compete with
other companies with similar growth strategies, certain of which competitors
may be larger and have greater financial and other resources than we have.
Competition for these acquisition targets likely could also result in increased
prices of acquisition targets and a diminished pool of companies available for
acquisition.
There are relatively low barriers to entry into the Company's business.
The Company has no patented or other proprietary technology that would preclude
or inhibit competitors from entering the Internet professional services market.
Therefore, the Company must rely on the skill of its personnel and the quality
of its client service. The costs to develop and provide Internet services are
low. Therefore, the Company expects that it will continually face additional
competition from new entrants into the market in the future, and the Company is
subject to the risk that its employees may leave the Company and start
competing businesses. The emergence of these enterprises could have a material
adverse effect on our business, results of operations and financial condition.
The success of CFN will be highly dependent upon CFN's services becoming
available to a large number of participating employees. CFN expects to face
competition from an increasing number of sources in the marketplace. CFN
competes with other Internet-based providers of insurance and other financial
services, as well as traditional insurance companies providing group rates to
corporate employees. CFN believes that its primary and more direct competitors
currently are HomeCom Communications, Inc., ValueSearch, Inc. and Answer
Financial, Inc. CFN also may compete with Microsoft Corporation, which
currently provides comparative quotes from home mortgages on the web. If CFN
fails to compete successfully against current or future competitors, CFN's
business results of operations and financial conditions will be materially and
adversely affected. See "Risk Factors--We Operate in a Highly Competitive
Market with Low Barriers to Entry."
Employees
As of December 31, 1998, the Company had approximately 1,300 employees,
including approximately 55 strategy consultants, 355 engineers and 300 creative
designers. None of the Company's employees is represented by a labor union. The
Company has experienced no work stoppages and believes its relationship with
its employees is good.
In an ongoing effort to train and develop its professionals, the Company
has established iXL University, a forum to educate its employees on issues
ranging from new technologies to office protocol. Employees may attend iXL
University in three ways: (a) attend live presentations in Atlanta; (b) view
the live
56
<PAGE>
webcast of such presentations; or (c) view at any time archived versions of
presentations through the iXL University website. In addition, the Company
holds regular company-wide meetings among leaders in specific practice areas.
The Company also takes advantage of its corporate intranet to foster company-
wide communications and knowledge management. See "Risk Factors--Failure to
Attract, Train and Retain Employees Could Increase Costs or Limit Growth."
Properties and Facilities
The Company's executive offices are located in Atlanta, consisting of
approximately 138,000 square feet of leased space, the lease for which expires
in 2007. With the exception of IXL-Memphis, Inc., which owns an approximately
15,000 square foot office building and an approximately 5,600 square foot
warehouse, the company leases space for its regional offices in the following
metropolitan areas: New York, NY; Los Angeles, San Francisco, San Diego, and
Santa Clara, CA; Chicago, IL; Boston, MA; Washington, D.C.; Charlotte, NC;
Richmond, VA; Denver, CO; Norwalk, CT; Hamburg and Berlin, Germany; London,
England; Rome, Italy; and Madrid, Spain. CFN leases space for its executive
offices in Duluth, Georgia.
Legal Proceedings
The Company currently and from time to time is involved in litigation
incidental to the conduct of its business. The Company is not a party to any
lawsuit or proceeding that, in the opinion of management of the Company, is
likely to have a material adverse effect on the Company. However, the Company
is involved in IXL Holdings, Inc. v. Talisman Productions, Inc., in the State
Court of Fulton County, Georgia, Civil Action File No. 98VS141584E. The Company
filed suit against Talisman on June 25, 1998 to collect an account receivable
for services rendered in the amount of $40,461.20. In response to the Company's
complaint, Talisman filed an Answer and Counterclaim seeking (a) damages in the
amount of $3,710,420 for lost profits allegedly sustained as a result of the
loss of Talisman's business relationship with BellSouth allegedly caused by the
Company's failure to deliver products to Talisman as promised, (b) damages in
the amount of $18,995 as reimbursement of the fees paid to the Company for the
products delivered by the Company to Talisman, based on a theory of unjust
enrichment, and (c) recovery of its litigation expenses, including attorney's
fees. The Company believes that the allegations in the Answer and Counterclaim
are without merit and intends to vigorously defend such action.
57
<PAGE>
MANAGEMENT
Executive Officers and Directors
Certain information regarding the executive officers and directors of the
Company as of February 5, 1999 is set forth below:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
U. Bertram Ellis, Jr.(1) 45 Chief Executive Officer and Chairman of the
Board of Directors
Kevin M. Wall 46 Vice Chairman and Director
James R. Rocco 44 Vice Chairman and Director
William C. Nussey 33 President and Chief Operating Officer of iXL,
Inc. and Director
C. Cathleen Raffaeli 42 President and Chief Operating Officer of CFN
Barry T. Sikes 46 Executive Vice President for Worldwide
Operations
M. Wayne Boylston 40 Executive Vice President, Chief Financial
Officer, Treasurer, and Assistant Secretary
David Clauson 44 Executive Vice President for Worldwide
Marketing of iXL, Inc.
Thomas R. Wall, IV(2) 40 Director
Frank K. Bynum, Jr.(1)(2)(3) 36 Director
I. Robert Greene(1)(2) 38 Director
Jerome D. Colonna 35 Director
Thomas G. Rosencrants(3) 49 Director
</TABLE>
- --------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
U. Bertram (Bert) Ellis, Jr. founded the Company in March 1996 and has
served as Chairman of the Board of Directors and Chief Executive Officer since
that time. Prior to founding the Company, Mr. Ellis founded Ellis
Communications, Inc., an owner of television and radio stations, in 1993, and
served as its President from 1993 to 1996. Prior to founding Ellis
Communications, Inc., Mr. Ellis served as President, Chief Executive Officer,
and Chief Operating Officer of Act III Broadcasting, Inc., an owner of
television stations, from 1986 to 1992. Mr. Ellis received a Bachelor of Arts
degree in Economics from the University of Virginia and a Masters of Business
Administration from the University of Virginia Graduate School of Business
Administration. Mr. Ellis also serves as a Director of WebMD, Inc.
Kevin M. Wall has served as Vice Chairman since April 1998 and as a
director since May 1997. Mr. Wall joined the Company in May 1997 upon the
acquisition by the Company of BoxTop Interactive, Inc., and served as the
President and Chief Executive Officer of BoxTop Interactive, Inc. from its
founding in 1995 until 1998. Prior to founding BoxTop Interactive, Inc., Mr.
Wall served as Chairman of BoxTop Entertainment, Inc., a television production
company specializing in network specials, from 1990 until 1995. Prior to
forming BoxTop Entertainment, Inc., Mr. Wall founded Radio Vision
International, Inc., a television production company specializing in network
specials and syndication of television specials, and served as its Chairman
from its founding until 1990. Mr. Wall attended Indiana University-Purdue
University Fort Wayne. Mr. Kevin Wall is not related to Mr. Thomas R. Wall, IV.
James R. Rocco has served as Vice Chairman since August 1998 and as a
director since April 1996. Mr. Rocco previously served as the President and
Chief Operating Officer of the Company from April 1996 until August 1998. Mr.
Rocco founded Creative Video, Inc. and served as its President from July 1986
until it was acquired by the Company in April 1996. Mr. Rocco graduated cum
laude from St. John's University in New York in 1976 with Bachelor degrees in
Communications and Business.
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<PAGE>
William C. Nussey has served as a Director of the Company since December
1997, and as the President and Chief Operating Officer of iXL, Inc. since
joining the Company in May 1998. From 1996 to May 1998 Mr. Nussey served as an
associate with Greylock Ventures, a private investment firm. In 1985,
Mr. Nussey co-founded Da Vinci Systems, Inc., a software and application design
company, and served as its Chief Executive Officer from its founding until its
sale in 1994 to ON Technology, Inc. After such sale, Mr. Nussey served as a
consultant to ON Technology while attending Harvard Business School. Mr. Nussey
received a Bachelor of Science degree in Electrical Engineering from North
Carolina State University and a Masters of Business Administration from Harvard
Business School.
C. Cathleen Raffaeli is the President and Chief Operating Officer of CFN,
and has served in such capacity since joining CFN in November 1998. From 1994
through 1998, Ms. Raffaeli held positions of increasing responsibility with
Citicorp, most recently as the Executive Director, Commercial Card Division.
From 1988 through 1994, Ms. Raffaeli held positions of increasing
responsibility with Chemical Bank, last serving as the Senior Vice President,
Mortgage Banking Division. Ms. Raffaeli received a Bachelor of Science Degree
in Finance from the University of Baltimore and a Masters of Business
Administration from New York University.
Barry T. Sikes has served as Executive Vice President for Worldwide
Operations since August 1998. Mr. Sikes previously served as Vice President--
Operations from April 1996 until August 1998. From 1991 until 1996, Mr. Sikes
served as the Chief Operating Officer of Creative Video, Inc. Mr. Sikes
received a degree in Electronics Engineering from The Cape Fear Institute.
M. Wayne Boylston has served as Chief Financial Officer, Executive Vice
President, Treasurer and Assistant Secretary since joining the Company in
August 1998. From 1990 until February 1998, Mr. Boylston held positions of
increasing responsibility with Healthdyne Technologies, Inc., most recently as
Vice President--Finance, Chief Financial Officer and Treasurer. From February
1998 until July 1998 Mr. Boylston served as a consultant to Healthdyne
Technologies, Inc. following its merger with Respironics, Inc. Mr. Boylston is
a Certified Public Accountant and has a Bachelor of Business Administration
degree from Emory University.
David Clauson has served as Executive Vice President for Worldwide
Marketing of iXL, Inc. since joining the Company in August 1998. From 1991
until July 1998, Mr. Clauson served in various positions of increasing
responsibility with subsidiaries of True North Communications, Inc., most
recently as the Senior Vice President/Worldwide Account Director of its Foote,
Cone & Belding subsidiary. Mr. Clauson has a Bachelor of Arts degree in
American Urban History from the University of California at Los Angeles.
Thomas R. Wall, IV has served as a Director of the Company since April
1996. Mr. Wall has held various positions of increasing responsibility with
Kelso & Company, a private investment firm, since 1983, and currently serves as
one of its Managing Directors. Mr. Wall also serves as a director of AMF
Bowling, Inc., Consolidated Vision Group, Inc., Cygnus Publishing, Inc.,
Mitchell Supreme Fuel Company, Mosler, Inc., Peebles Inc., and 21st Century
Newspapers, Inc. Mr. Wall received a Bachelor of Science degree in Business
Administration from Washington & Lee University. Mr. Thomas Wall is not related
to Mr. Kevin M. Wall.
Frank K. Bynum, Jr. has served as a Director of the Company since April
1996. Mr. Bynum has held various positions of increasing responsibility with
Kelso & Company since 1987, and currently serves as one of its Managing
Directors. Mr. Bynum also serves as a director of Cygnus Publishing, Inc.,
Hosiery Corporation of America, Inc., 21st Century Newspapers, Inc. and MJD
Communications, Inc. Mr. Bynum received a Bachelor of Arts degree in History
from the University of Virginia.
I. Robert Greene has served as a Director of the Company since December
1997. Mr. Greene has served as a General Partner with Chase Capital Partners
(formerly Chemical Venture Partners), an investment firm, since January 1999,
and previously served as a Principal thereof from 1994 through 1998. From 1988
to
59
<PAGE>
1994, Mr. Greene served as a Director and Principal of Prudential Equity
Investors, an investment firm. Mr. Greene also serves on the Investment
Committee of Flatiron Partners, LLC ("Flatiron") and the Advisory Board of
Techfund Capital, and is the President of the New York Venture Capital Forum.
Mr. Greene received a Bachelor of Science degree from the Wharton School and a
Masters of Business Administration degree from M.I.T./The Sloan School. Mr.
Greene serves as a Director of Multex.com, Inc.
Jerome D. Colonna has served as a Director of the Company since December
1997. Mr. Colonna co-founded Flatiron in August 1996 and has served as a
partner in Flatiron since such founding. Previously, Mr. Colonna co-founded CMG
@ Ventures L.P. in February 1995 and served as a partner therein until July
1996. From 1985 to 1995, Mr. Colonna served in various positions with CMP
Media, Inc., including Editorial Director, Interactive Media Group. From 1985
to 1993, he served in a variety of roles at Information Week, including that of
Editor. Mr. Colonna received a Bachelor of Arts degree from Queens College,
City University of New York. Mr. Colonna serves as a Director of GeoCities,
Inc.
Thomas G. Rosencrants has served as a Director of the Company since
January 1999. Mr. Rosencrants founded Greystone Capital Group, LLC in April
1997 and serves as its Chairman and Chief Executive Officer. Greystone Capital
Group, LLC is the General Partner for Greystone Capital Partners I, L.P. From
1991 to April 1997 he served as Senior Vice President and head of the Insurance
Research Group of The Robinson-Humphrey Company, Inc. Mr. Rosencrants is a
Chartered Financial Analyst, has a Masters of Business Administration from the
Roosevelt University in Chicago and a Bachelor of Arts Degree from the
University of Dayton.
The Company believes retention of its management is critical to its
success. See "Risk Factors--Loss of Key Management Could Adversely Affect Our
Business," and "Risk Factors--Failure to Attract, Train and Retain Employees
Could Limit Growth."
Board Committees
The Board of Directors has established an Executive Committee, a
Compensation Committee and an Audit Committee. The Executive Committee,
consisting of Mr. Ellis, Mr. Bynum, and Mr. Greene, is empowered to exercise
all powers and authority of the Board other than amending the Certificate of
Incorporation, recommend to the stockholders the sale of all or substantially
all of the assets of the Company or a dissolution of the Company, or amending
the Bylaws of the Company. The Compensation Committee, consisting of Mr. Thomas
R. Wall, IV, Mr. Bynum, and Mr. Greene, administers the Company's Stock Option
Plans, including approval of all options granted thereunder. The Audit
Committee, consisting of Mr. Bynum and Mr. Rosencrants, will recommend the
selection of independent public accountants to the Board of Directors, review
the scope and results of the audit and other services provided by the Company's
independent accountants, and review the Company's accounting practices and its
systems of internal accounting controls.
Director Compensation
The Company reimburses its directors for all out-of-pocket expenses
incurred in the performance of their duties as directors of the Company. The
Company currently does not pay fees to its directors for attendance at
meetings.
Amended Stockholders Agreement
The Amended Stockholders Agreement entitles certain stockholders to
designate nominees to the Company's board of directors as follows. The Amended
Stockholders Agreement entitles Kelso to designate as nominees two members of
the board of directors so long as Kelso holds 5% or more of the outstanding
Common Stock. CB has the right to designate as a nominee one member so long as
it owns at least 5% of the outstanding Common Stock. The Amended Stockholders
Agreement does not obligate any stockholder to vote its Common Stock in favor
of any nominated directors.
60
<PAGE>
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee of the Company serves as a member
of the board of directors or compensation committee of any entity that has one
or more executive officers serving as a member of the Company's Board of
Directors or Compensation Committee. See "Certain Transactions" for a
description of transactions between the Company and entities affiliated with
members of the Compensation Committee.
Employment Agreements
The Company has assumed the employment agreement originally executed as
of August 1, 1996 between Mr. Kevin Wall and BoxTop Interactive, Inc. Mr. Kevin
Wall's employment agreement was assumed by the Company in April 1998. This
agreement has a four year term expiring July 31, 2000. Pursuant to this
agreement, Mr. Kevin Wall's base annual salary shall be (a) $302,500 for the
one year period from August 1, 1998 through July 31, 1999, and (b) $332,750 for
the one year period from August 1, 1999 through July 31, 2000.
iXL, Inc. has entered into an employment agreement with Mr. Nussey.
Pursuant to this employment agreement, if the Company terminates Mr. Nussey's
employment without cause at any time or if Mr. Nussey Resigns for a Good Reason
(as defined in the agreement), (i) iXL, Inc. shall, for a period of eighteen
months or until Mr. Nussey begins employment with any other company, continue
to pay as payable pursuant to the employment agreement his salary and bonus as
severance pay and continue to provide benefits to him, and (ii) the vesting of
unvested stock options granted to Mr. Nussey pursuant to his employment
agreement shall be immediately accelerated twelve months, and all options which
remain unvested after such acceleration shall terminate. Upon a termination of
his employment by virtue of his death, Mr. Nussey's estate shall be entitled to
all salary payable to him for the remainder of the year of his death. In
addition, upon a termination of Mr. Nussey's employment by virtue of his death
or disability, Mr. Nussey or his estate shall be entitled to the pro rata
portion of his bonus with respect to the portion of the year prior to his death
or disability. The base salary for Mr. Nussey pursuant to his employment
agreements is $250,000 per year, and the target bonus is $50,000 per year. The
base salary and target bonus are to be reviewed annually, and may be increased
from time to time by iXL, Inc. Once increased, the base salary may not be
decreased and the target bonus may not be set at less than $50,000 per full
fiscal year. The employment agreement also provides that Mr. Nussey shall not
compete with the Company for a period of one year following the termination of
his employment.
Limitation on Liability and Indemnification Matters
Section 145 of the General Corporation Law of Delaware ("DGCL") permits
the indemnification of directors, officers, employees and agents of Delaware
corporations. The Company's Amended and Restated Certificate of Incorporation
and By-Laws provide that the Company shall indemnify its Directors and Officers
to the fullest extent permitted by the DGCL. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling the Company pursuant to the
foregoing provisions, the opinion of the Securities and Exchange Commission is
that such indemnification is against public policy as expressed in the Act and
is therefore unenforceable.
As permitted by the DGCL, the Company's Certificate of Incorporation also
limits the liability of directors of the Company for damages in derivative and
third party lawsuits for breach of a director's fiduciary duty except for
liability (a) for any breach of the director's duty of loyalty to the Company
or its stockholders, (b) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (c) for unlawful
payments of dividends or unlawful stock purchases or redemptions as provided in
Section 174 of the DGCL, or (d) for any transaction for which the director
derived improper personal benefit. The limitation of liability applies only to
monetary damages and, presumably, would not affect the availability of
equitable remedies such as injunction or rescission. The limitation of
liability applies only to the acts of omission of directors as directors and
does not apply to any such act or omission as an officer of the Company or to
any liabilities imposed under federal securities laws.
61
<PAGE>
The Underwriting Agreement with respect to the offering made hereby
provides for indemnification by the Underwriters and their controlling persons,
on the one hand, and of the Company and its controlling persons on the other
hand, for certain liabilities arising under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, or otherwise.
The Company intends to obtain directors' and officers' insurance
providing indemnification for certain of the Company's directors, officers,
affiliates, partners or employees for certain liabilities.
The Company has entered into agreements to indemnify its directors and
executive officers, in addition to indemnification provided for in the
Company's Bylaws. These agreements, among other things, indemnify the Company's
directors and executive officers for certain expenses (including attorneys'
fees), judgments, fines and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in the right of the
Company, arising out of such person's services as a director or executive
officer of the Company, any subsidiary of the Company or any other company or
enterprise to which the person provides services at the request of the Company.
The Company believes that these provisions and agreements are necessary to
attract and retain qualified directors and executive officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification is
expected to be required or permitted. The Company is not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification.
Executive Compensation
The following table sets forth information concerning the compensation
paid by the Company during the fiscal year ended December 31, 1998 to the
Company's Chief Executive Officer and each of the Company's four other highest
paid executive officers (collectively, the "Named Executive Officers"):
Summary Compensation Table (1)
<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation Awards
-------------------- -------------
Name and Options
Principal Position Year(2) Salary Bonus (# of Shares)
------------------ ------- -------- -------- -------------
<S> <C> <C> <C> <C>
U. Bertram Ellis, Jr................ 1998 $247,000 $100,000 338,889
Chairman and Chief 1997 232,300 -- 550,000
Executive Officer 1996 -- (3) -- 1,000,000
Kevin M. Wall....................... 1998 276,000 -- --
Vice Chairman 1997 167,800 -- 170,000
1996 -- -- --
James R. Rocco...................... 1998 180,600 50,000 106,056
Vice Chairman 1997 163,900 25,000 297,000
1996 105,600(3) -- --
William C. Nussey................... 1998 166,500(4) 50,000 1,844,276
President and Chief Operating
Officer 1997 -- -- --
of iXL, Inc. 1996 -- -- --
Barry T. Sikes...................... 1998 163,300 45,000 140,500
Executive Vice President for 1997 137,700 25,000 165,000
Worldwide Operations 1996 103,600(3) -- 255,000
</TABLE>
- --------
(1) Excludes certain executive officers of the Company whose annual base
salaries exceed salaries reported herein, but who were hired during 1998,
and hence did not earn more than the salaries reported herein.
(2) 1996 figures are for the eight months ended December 31, 1996.
(3) The annual base salaries for Mr. Ellis, Mr. Rocco, and Mr. Sikes were $0,
$175,000 and $140,000, respectively. The figures listed represent payment
for actual employment during the eight months ended December 31, 1996.
(4) Mr. Nussey's fiscal year 1998 salary is for approximately seven months
ended December 31, 1998. Mr. Nussey's annual base salary for fiscal year
1998 was $250,000.
62
<PAGE>
Option Grants and Exercises During Fiscal Year 1998
No stock options were exercised by the Named Executive Officers during
fiscal year 1998. The following table below sets forth individual grants of
stock options made during fiscal year 1998 to each of the Named Executive
Officers:
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock
Price Appreciation
Annual Compensation for Option Term(2)
----------------------------- -------------------
Number of
Securities % of Total Options
Underlying Granted to Exercise or
Named Executive Officer Options Employees in Base Price Expiration
and Principal Position Granted Fiscal Year(1) Per Share Date 5% 10%
- ----------------------- ---------- ------------------ ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
U. Bertram Ellis, Jr. .. 50,000 0.4% $3.00 02/26/08 $ 171,707 $ 362,264
Chairman and Chief 88,889 0.6% 3.00 02/26/08 305,257 644,026
Executive Officer 50,000 0.4% 3.50 02/26/08 146,707 337,264
50,000 0.4% 4.00 02/26/08 121,707 312,264
50,000 0.4% 4.50 02/26/08 96,707 287,264
50,000 0.4% 5.00 02/26/08 71,707 262,264
--------- ----
338,889 2.6%
========= ====
Kevin M. Wall .......... -- -- -- -- -- --
Vice Chairman
James R. Rocco ......... 500 * 1.00 02/26/08 2,717 4,623
Vice Chairman 5,556 * 3.00 02/26/08 19,080 40,255
100,000 0.8% 3.50 02/26/08 293,413 674,528
--------- ----
106,056 0.8%
========= ====
William C. Nussey ...... 5,176 * 3.50 05/01/08 24,040 49,010
President and Chief
Operating 389,100 2.9% 4.00 05/01/08 1,612,614 3,489,726
Officer of iXL, Inc. 900,000 6.8% 4.50 05/01/08 3,280,028 7,261,841
550,000 4.1% 10.00 05/01/08 -- 1,632,792
--------- ----
1,844,276 13.8%
========= ====
Barry T. Sikes.......... 500 * 1.00 02/26/98 2,717 4,623
Executive Vice President
for 100,000 .8% 3.50 02/26/98 293,413 674,528
Worldwide Operations 40,000 .3% 10.00 11/25/98 -- 118,748
--------- ----
140,500 1.1%
========= ====
</TABLE>
- --------
* represents less than 0.1%
(1) These options to purchase shares of Common Stock were granted under the
Company's 1996 Stock Option Plan and generally provide for vesting over
either four or five years.
(2) These columns show the hypothetical gains or option spreads of options
granted based on 5% and 10% assumed annual rates of compounded stock price
appreciation. The assumed rates of appreciation are mandated by the
Securities and Exchange Commission and do not represent the Company's
estimates or projections of the Company's future Common Stock prices.
63
<PAGE>
Year-End Option Values
The following table sets forth the number and value of exercisable and
unexercisable options held at December 31, 1998 by each of the Named Executive
Officers:
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 1998 December 31, 1998 (1)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
U. Bertram Ellis, Jr. .... 1,330,000 558,889 $6,925,000 $2,225,001
Chairman and Chief
Executive Officer
Kevin Wall (2)............ 703,900 102,000 4,505,145 510,000
Vice Chairman
James R. Rocco............ 178,740 225,216 683,070 883,632
Vice Chairman
William C. Nussey......... 521,009 1,323,267 1,153,327 2,929,228
President and Chief
Operating Officer
of iXL, Inc.
Barry T. Sikes............ 252,000 308,500 1,203,000 1,205,250
Executive Vice President
for
Worldwide Operations
</TABLE>
- --------
(1) Calculated by determining the difference between the deemed fair market
value of the securities on December 31, 1998 underlying the options (based
on preliminary valuations of the Company performed by independent
appraisers at the request of the Company) and the exercise price.
(2) Includes 635,900 options granted to Mr. Kevin Wall prior to the acquisition
of BoxTop Interactive, Inc. at an exercise price of $0.95 per share.
Stock Option Plans
1996 Stock Option Plan
General. The Company's 1996 Stock Option Plan (the "1996 Stock Option
Plan") was established to promote the success of the Company by providing an
additional means to attract and retain key personnel through added long term
incentives for high levels of performance and for significant efforts to
improve the financial performance of the Company. The 1996 Stock Option Plan
authorizes the granting of options for up to an aggregate maximum of 25 million
shares of the Company's Common Stock to employees of the Company. As options
lapse or terminate without exercise, any unpurchased shares previously subject
to such lapsed or terminated options may be available for further options under
the 1996 Stock Option Plan.
Administration. The 1996 Stock Option Plan is administered by the
Compensation Committee, which as of the date of this prospectus is comprised of
Mr. Thomas R. Wall, Mr. Bynum and Mr. Greene. The Compensation Committee may
delegate administrative functions to individuals who are officers or employees
of the Company.
64
<PAGE>
The Compensation Committee has the authority to construe and interpret
the 1996 Stock Option Plan and any agreements defining the rights and
obligations of the Company and Eligible Employees (as defined below) who
receive options awards under the 1996 Stock Option Plan, to further define the
terms used in the 1996 Stock Option Plan, to prescribe, amend and rescind rules
and regulations relating to administration of the 1996 Stock Option Plan, to
determine the duration and purposes of leaves of absence which may be granted
to Participants without constituting a termination of their employment for
purposes of the 1996 Stock Option Plan and to make all other determinations
necessary or advisable for the administration of the 1996 Stock Option Plan.
Determinations of the Compensation Committee on the foregoing matters are
conclusive.
Grant of Options. Awards of options to purchase Common Stock under the
1996 Stock Option Plan may be granted only to employees of the Company
("Eligible Employees"). Members of the Board who are not employees of the
Company are not eligible to receive Awards. Options may be granted to Eligible
Employees by action of the Compensation Committee. The Compensation Committee
determines the terms of each option (which need not be identical) and the
number of shares of Common Stock subject to each option. Each option is subject
to the terms and conditions set forth in the 1996 Stock Option Plan and such
other terms and conditions established by the Compensation Committee as are not
inconsistent with the purpose and provisions of the 1996 Stock Option Plan.
Each option granted is designated as either a Nonqualified Stock Option or an
Incentive Stock Option (as defined in the 1996 Stock Option Plan).
The Company expects that most options granted pursuant to the 1996 Stock
Option Plan will be subject to vesting (with respect to the exercise thereof)
over a period of years, such as 20% increments each year over a period of five
years, during which the optionholder must continue to be an employee of the
Company or one of its subsidiaries. The Compensation Committee, however, may
choose to impose different vesting requirements or none at all. An optionholder
has no rights as a stockholder of the Company with respect to any shares
covered by his or her option until the date a stock certificate is issued for
such shares following his or her exercise of such option.
Exercise of Options. Except as otherwise provided in the 1996 Stock
Option Plan, an option may be exercised, in whole or in part, on the date or
dates specified in the Award Agreement executed by and between the Company and
an Eligible Employee and thereafter shall remain exercisable until the
expiration or earlier termination of the such option. Not less than 10 shares
of Common Stock may be purchased at one time unless the number purchased is the
total number at the time available for purchase under the terms of the option.
No option granted pursuant to the 1996 Stock Option Plan is transferable by an
optionholder other than by will or by the applicable laws of descent and
distribution, and such option is exercisable during the Eligible Employee's
lifetime only by the Eligible Employee.
1998 Non-Employee Stock Option Plan
The Company's 1998 Non-Employee Stock Option Plan (the "1998 Stock Option
Plan") contains essentially the same terms as the 1996 Stock Option Plan,
except that the 1998 Stock Option Plan was established for grants to persons
who are not employees of the Company. The 1998 Stock Option Plan authorizes the
granting of options for up to an aggregate maximum of 1 million shares of the
Company's Common Stock.
1999 Employee Stock Option Plan
Prior to the consummation of the offering, the Board of Directors will
adopt and the stockholders of the Company will approve the 1999 iXL
Enterprises, Inc. Stock Option Plan (the "1999 Stock Option Plan"). The 1999
Stock Option Plan provides for the grant of stock options, including incentive
stock options.
65
<PAGE>
Stock options may be granted to key employees, including executive
officers of the Company, its subsidiaries and affiliates. The number of
employees participating in the 1999 Stock Option Plan will vary from year to
year. The shares to be granted with respect to options under the 1999 Stock
Option Plan shall be shares of Common Stock, may consist, in whole or in part,
of treasury stock or authorized but unissued stock not reserved for any other
purpose and may not exceed 5 million, as such number may be adjusted to reflect
changes in the Company's capitalization.
If shares subject to an option under the 1999 Stock Option Plan cease to
be subject to such option, such shares will again be available for future grant
under the 1999 Stock Option Plan. In the event of certain changes in the
Company's capital structure affecting the Common Stock, the Compensation
Committee may make appropriate adjustments in the number and kinds of shares
that may be awarded and in the number and kinds of shares covered by options
then outstanding under the 1999 Stock Option Plan, and, where applicable,
exercise price of outstanding options under the 1999 Stock Option Plan. The
1999 Stock Option Plan will be administered by the Compensation Committee.
The Compensation Committee may grant options to purchase shares of Common
Stock that are either "qualified," which includes those awards that satisfy the
requirements of Section 422 of the Code for incentive stock options, or
"nonqualified," which includes those awards that are not intended to satisfy
the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended. Under the terms of the 1999 Stock Option Plan, the exercise price of
the options will, unless the Compensation Committee determines otherwise, not
be less than such Common Stock's fair market value at the time of grant. The
exercise price of the options is payable in cash or its equivalent or by
exchanging shares of Common Stock owned by the participant, through an
arrangement with a broker approved by the Company whereby payment of the
exercise price is accomplished with the proceeds of the sale of Common Stock,
or by a combination of the foregoing.
The options will generally have a term of ten years, unless the
Compensation Committee specifies a shorter term, and will become exercisable
following the performance of a minimum period of service or the satisfaction of
performance goals, as determined by the Compensation Committee. If an option
holder ceases employment with the Company as a result of the holder's (a)
death, (b) disability, or (c) retirement, the holder (or his or her beneficiary
or legal representative) may exercise any then exercisable option for a period
of one year (or such greater or lesser period as determined by the Compensation
Committee at grant), but in no event after the date the option otherwise
expires. If an option holder's employment is terminated for any other reason,
the holder may exercise any then exercisable option for a period of 30 days (or
such greater period not exceeding 90 days as determined by the Compensation
Committee), but in no event after the date the option otherwise expires;
provided that if the holder's employment is terminated for cause (as defined in
the 1999 Stock Option Plan) all of his or her options will immediately
terminate, regardless of whether then exercisable.
If there is a "change in control," all options that are not then vested
will become vested unless the options are either assumed or substituted for
equivalent options by the new controlling entity following the change in
control.
66
<PAGE>
CERTAIN TRANSACTIONS
EQUITY INVESTMENTS
The following table sets forth the number of shares of Common Stock,
warrants to purchase Common Stock and shares of Class D Nonvoting Preferred
Stock, purchased by the Company's executive officers, directors, five percent
stockholders and their respective affiliates and certain related parties:
<TABLE>
<CAPTION>
CLASS D
INVESTOR COMMON STOCK WARRANTS(9) PREFERRED STOCK(10)
- -------- ------------ ----------- -------------------
<S> <C> <C> <C>
CB............................. 5,538,500(1) 639,000 9,000
GECC........................... 2,038,400(2) 177,500 2,500
Greystone Capital Partners I,
L.P........................... 1,000,000(3) -- --
Kelso.......................... 13,837,000(4) -- 10,000(11)
U. Bertram Ellis, Jr. ......... 1,400,000(5) -- 1,000
William C. Nussey.............. 10,000(6) -- --
David Clauson.................. 100,000(7) -- --
John Rocco..................... 61,500(8) -- --
</TABLE>
- --------
(1) All shares purchased for $3.25 per share.
(2) 1,538,400 shares purchased for $3.25 per share and 500,000 shares purchased
for $10.00 per share. Includes 500,000 shares purchased for $10.00 per
share by General Electric Capital Assurance Company, an indirect wholly-
owned subsidiary of GECC.
(3) All shares purchased for $10.00 per share. Greystone Capital Partners I,
L.P. is an affiliate of Thomas G. Rosencrants, a director of the Company.
(4) 9,925,000 shares purchased for $1.00 per share and 3,912,000 shares
purchased for $2.50 per share. Includes 12,911,300 shares held by Kelso
Investment Associates V, L.P. and 925,700 shares held by Kelso Equity
Partners V, L.P. Excludes shares issuable as payment of advisory fee
to an affiliate of Kelso in connection with the closing of this offering.
(5) 1,000,000 shares purchased for $1.00 per share and 400,000 shares purchased
for $2.50 per share.
(6) All shares purchased for $10.00 per share.
(7) All shares purchased for $10.00 per share. As payment of a portion of the
purchase price for the 100,000 shares of Common Stock which Mr. Clauson
purchased from the Company, Mr. Clauson executed in favor of the Company a
promissory note in the original principal amount of $900,000. This note is
a non-recourse note secured by a pledge of the 100,000 shares of Common
Stock held by Mr. Clauson.
(8) All shares purchased for $3.25 per share. John Rocco is James Rocco's
brother.
(9) All Warrants exercisable for $4.58 per share.
(10) All shares purchased for $1,000 per share.
(11) Includes 9,000 shares held by Kelso Investment Associates V, L.P. and
1,000 shares held by Kelso Equity Partners V, L.P.
ACQUISITIONS
In April 1996, the Company acquired Creative Video, Inc., Creative Video
Library, Inc., and Entrepreneur Television, Inc. In connection with that
transaction, Mr. Rocco received 1,055,300 shares of Common Stock, valued at
$1.00 per share for the purpose of such acquisition, in exchange for his
capital stock holdings in such acquired entities, and Mr. Sikes received
221,100 shares of Common Stock, valued at $1.00 per share for the purpose of
such acquisition, in exchange for his capital stock holdings in such acquired
entities. In May 1997, the Company acquired BoxTop Interactive, Inc. In
connection with that transaction, Mr. Kevin Wall received 1,773,600 shares of
Common Stock, valued at $2.50 per share for the purpose of such acquisition, in
exchange for his capital stock holdings in BoxTop Interactive, Inc.
67
<PAGE>
Loans
From February 1997 to August 1998, Mr. Ellis and/or his wife made nine
separate loans to the Company in an aggregate principal amount of $12 million.
The maximum principal balance of these loans at any one time was $6 million.
All such loans accrued interest at a rate of either 10% or 12% per annum. All
such loans have been repaid in full with accrued interest. From September 1997
to December 1997, Mr. James R. Rocco loaned the Company $300,000. These loans
accrued interest at a rate of 12% per annum, and have been repaid in full with
accrued interest. From May 30, 1997 to March 30, 1998, Mr. Kevin Wall borrowed
a maximum aggregate amount of $268,753 from the Company, at an interest rate of
8% per annum; this loan was repaid on March 30, 1998 from the proceeds of the
sale by Mr. Kevin Wall to the Company of 184,616 shares of Common Stock for a
purchase price of $3.25 per share.
Chase Bank is the Administrative Agent and sole lender under the Credit
Facility. Chase Bank is a limited partner of CB.
Other Transactions
In April 1996, the Company paid Kelso & Company a fee of $150,000 for
financial advisory services and reimbursed Kelso & Company for out-of-pocket
expenses incurred in connection with rendering such services. In addition, the
Company agreed to pay Kelso & Company an annual fee of $15,000 for financial
advisory services and to reimburse Kelso for out-of-pocket expenses incurred,
which in 1998 totaled approximately $85,000. The Company has also agreed to
indemnify Kelso & Company against certain claims, losses, damages, liabilities
and expenses which may arise in connection with rendering such financial
advisory services. Kelso has agreed, other than with respect to such
indemnification and expenses provisions, to terminate its annual financial
services agreement. In connection with the offering, the Company has agreed to
pay Kelso & Company a fee (the "Kelso Fee") equal to $750,000, payable in
shares of Common Stock, valued at the offering price.
The Company has issued to General Electric Capital Corporation warrants
to purchase 500,000 shares of Common Stock at an exercise price of $10.00 per
share in exchange for certain marketing services.
The stockholders of iXL Interactive Excellence, Inc. were parties to a
Stock Option Agreement, dated October 24, 1994 (the "Option Agreement"),
pursuant to which Ellis Communications, Inc. ("ECI") had an option to acquire
100% of the capital stock of iXL Interactive Excellence, Inc. from such
stockholders. ECI and such iXL Interactive Excellence, Inc. stockholders
desired to terminate the Option Agreement, and pursuant to a Termination
Agreement dated March 26, 1996 and a fairness opinion from an investment
banking firm, such iXL Interactive Excellence, Inc. stockholders paid ECI
$100,000 as consideration for termination of the Option Agreement. ECI, at such
time, was controlled by affiliates of Kelso, and Mr. Ellis was the President,
Chief Executive Officer and Chairman of the Board of Directors of ECI.
Mr. Ellis is a limited partner in the partnership that owns the building
in which the Company began leasing space in May 1997. Pursuant to the terms of
the lease, the Company pays rent of approximately $93,000 per month, and the
lease expires December 31, 2008. The Company believes its lease of such space
is at fair market value and was negotiated on an arm's length basis. Mr. Ellis
is a director and shareholder of WebMD, Inc., which is a significant customer
of the Company.
In June 1998, iXL, Inc. created a new wholly-owned subsidiary,
Permit.Com, Inc., a Delaware corporation. In exchange for additional stock of
Permit.Com, Inc., iXL, Inc. then transferred all of the assets related to the
Permit.Com division and operations of iXL, Inc. to Permit.Com, Inc.
Subsequently, the sole director of iXL, Inc. approved and declared a dividend
of all of the outstanding common stock (100,000 shares) of Permit.Com, Inc. to
the Company as the sole shareholder of iXL, Inc. On June 26, 1998, the Board of
Directors of the Company approved and declared a dividend of the common stock
of Permit.Com, Inc. payable to stockholders of the Company of record as of June
1, 1998. The aggregate value of this dividend was approximately $420,000, or
$4.20 per share.
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Each of the Company and CFN provide services in the ordinary course of
business to CB, GECC, and Kelso, or their respective affiliates. In 1998 the
Company recognized revenues of approximately $1.5 million, $300,000 and
$200,000, respectively, from CB, Kelso and GECC or their respective affiliates.
The Company has entered into a Stockholders' Agreement with certain of
its stockholders. The Company has also entered into a Registration Rights
Agreement with its stockholders. See "Management--Amended Stockholders
Agreement" and "Description of Capital Stock--Registration Rights Agreement."
GECC has the right to exchange its shares of preferred stock in CFN for
shares of the Company's Common Stock upon certain events effecting a change of
control of CFN or upon certain circumstances after November 3, 2001. The
exchange ratio is based on the market value of Common Stock and the appraised
value of the CFN common stock into which the CFN preferred stock is convertible
(or, in certain circumstances, the liquidation value of the CFN preferred
stock). See "Description of Capital Stock--CFN's Series A Convertible Preferred
Stock."
At the closing of this offering, the Company expects to exchange
shares of Common Stock for all outstanding shares of Class D Nonvoting
Preferred Stock. The exchange ratio is based on the redemption value of such
Class D Nonvoting Preferred Stock and the offering price of Common Stock.
Pursuant to such exchange, Kelso, CB, and GECC will receive , , and
shares of Common Stock, respectively.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Common Stock as of February 5,
1999 and as adjusted to reflect the sale of Common Stock offered by the Company
hereby for (a) each stockholder who is known by the Company to beneficially own
more than 5% of the Common Stock (b) each of the Company's directors, (c) each
Named Executive Officer and (d) all directors and executive officers of the
Company as a group:
<TABLE>
<CAPTION>
Shares of Percentage Ownership
Named Executive Common Stock ----------------------
Officers, Directors Beneficially Prior to the After the
and 5% Stockholders Owned(1)(2) Offering Offering
------------------- ------------ ------------ ---------
<S> <C> <C> <C>
Kelso Investment Associates V, L.P. and
Kelso Equity Partners V, L.P.(3)......... 13,635,900 29.1% %
Joseph S. Schuchert(3).................. -- --
Frank T. Nickell(3)(4).................. -- --
Thomas R. Wall, IV(3)(5)................ -- --
George E. Matelich(3)................... -- --
Michael B. Goldberg(3).................. -- --
David I. Wahrhaftig(3).................. -- --
Frank K. Bynum, Jr.(3).................. -- --
Philip E. Berney(3)..................... 10,000 *
c/o Kelso & Company
320 Park Avenue
24th Floor
New York, NY 10022
CB Capital Investors, L.P.(6)............. 6,177,500 13.0%
I. Robert Greene(7)..................... -- --
380 Madison Avenue
12th Floor
New York, NY 10017-2591
General Electric Capital Corporation and
General Electric Capital Assurance
Company(8)............................... 2,715,900 5.7%
120 Long Ridge Road
Stamford, CT
U. Bertram Ellis, Jr.(9).................. 2,734,100 5.7%
Kevin M. Wall(10)......................... 2,292,884 4.8%
James R. Rocco(11)........................ 1,207,040 2.6%
William C. Nussey(12)..................... 627,834 1.3%
Barry T. Sikes(13)........................ 473,100 1.0%
Thomas G. Rosencrants(14)................. 1,000,000 2.1%
All Directors and Executive Officers as a
Group (11 persons)....................... 28,467,292 56%
</TABLE>
- --------
* Less than 1% of the outstanding shares of the class of securities.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock.
(2) Number of shares beneficially owned includes shares of Common Stock
issuable upon the exercise of options or warrants that are currently
exercisable or exercisable within 60 days of February 5, 1999. Percentage
of beneficial ownership is based on 46,893,989 shares of Common Stock
outstanding as of February 5, 1999, shares of Common Stock outstanding
after completion of this offering.
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<PAGE>
(3) Messrs. Schuchert, Nickell, Wall, Matelich, Goldberg, Wahrhaftig, Bynum and
Berney may be deemed to share beneficial ownership of shares of Common
Stock owned of record by Kelso Investment Associates V, L.P. and Kelso
Equity Partners V, L.P., by virtue of their status as general partners of
the general partner of Kelso Investment Associates V, L.P. and as general
partners of Kelso Equity Partners V, L.P. Messrs. Schuchert, Nickell, Wall,
Matelich, Goldberg, Wahrhaftig, Bynum and Berney share investment and
voting power with respect to securities owned by Kelso Investment
Associates V, L.P. and Kelso Equity Partners V, L.P., but disclaim
beneficial ownership of such securities. Number of shares of Common Stock
(a) includes 12,911,300 shares held by Kelso Investment Associates V, L.P.
and 724,600 shares held by Kelso Equity Partners V, L.P, and (b) excludes
(i) shares and shares issuable to Kelso Investment Associates V,
L.P. and Kelso Equity Partners V, L.P, respectively, upon the Class D
Preferred Stock Exchange, and (ii) shares Kelso Equity Partners V, L.P.
will acquire from Kelso & Company immediately after payment of the Kelso
fee. Kelso Investment Associates V, L.P. and Kelso Equity Partners V, L.P.,
due to their common control, could be deemed to beneficially own each of
the other's shares, but disclaim such beneficial ownership.
(4) Mr. Nickell could be deemed to beneficially own 800 shares of Common Stock
owned by trusts of which Mr. Nickell is the trustee; however, Mr. Nickell
disclaims such beneficial ownership.
(5) Mr. Thomas Wall could be deemed to beneficially own 200,300 shares of
Common Stock owned by trusts of which Mr. Wall is the trustee; however, Mr.
Wall disclaims such beneficial ownership.
(6) Number of shares excludes shares issuable upon the Class D Preferred
Stock Exchange.
(7) Mr. Greene is a general partner of Chase Capital Partners, a New York
general partnership ("Chase Capital Partners") which is the general partner
of CB. Accordingly, Mr. Greene could be deemed to beneficially own the
shares beneficially owned by CB. However, Mr. Greene disclaims beneficial
ownership of all Common Stock owned by CB, except an indeterminate number
thereof in which he has a pecuniary interest as a general partner of Chase
Capital Partners.
(8) Number of shares (a) includes 2,215,900 shares held by General Electric
Capital Corporation and 500,000 shares held by General Electric Capital
Assurance Corporation, and (b) excludes shares issuable upon the Class D
Preferred Stock Exchange.
(9) Includes 1,330,000 shares of Common Stock issuable upon exercise of options
exercisable within 60 days from the date hereof. Excludes (a) 558,889
shares of Common Stock issuable upon exercise of options which are not
exercisable within 60 days from the date hereof and (b) shares issuable
upon the Class D Preferred Stock Exchange.
(10) Includes 703,900 shares of Common Stock issuable upon exercise of options
exercisable within 60 days from the date hereof. Excludes 102,000 shares
of Common Stock issuable upon exercise of options which are not
exercisable within 60 days from the date hereof.
(11) Includes 178,740 shares of Common Stock issuable upon exercise of options
exercisable within 60 days from the date hereof. Excludes 225,116 shares
of Common Stock issuable upon exercise of options which are not
exercisable within 60 days from the date hereof.
(12) Includes 617,834 shares of Common Stock issuable upon exercise of options
exercisable within 60 days from the date hereof. Excludes 1,226,442 shares
of Common Stock issuable upon exercise of options which are not
exercisable within 60 days from the date hereof.
(13) Includes 252,000 shares of Common Stock issuable upon exercise of options
exercisable within 60 days from the date hereof. Excludes 308,500 shares
of Common Stock issuable upon exercise of options which are not
exercisable within 60 days from the date hereof.
(14) Mr. Rosencrants is a general partner of Greystone Capital Partners I,
L.P., which holds 1,000,000 shares of Common Stock. Mr. Rosencrants
disclaims beneficial ownership of such shares.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and certain
provisions of the Company's Certificate of Incorporation and Bylaws is a
summary and is qualified in its entirety by the provisions of the Certificate
of Incorporation and Bylaws, which have been filed as exhibits to the Company's
Registration Statement of which this prospectus is a part.
Upon the closing of this offering, the authorized capital stock of the
Company will be 205,000,000 shares, consisting of 200,000,000 shares of Common
Stock, par value $0.01 per share, and 5,000,000 shares of undesignated
Preferred Stock, par value $0.01 per share.
Common Stock
As of February 5, 1999 there were 46,893,989 shares of Common Stock
outstanding held of record by 256 stockholders.
Common Stock is entitled to one vote per share on all matters on which
stockholders are entitled to vote. The Common Stock does not have cumulative
voting rights or other preemptive or subscription rights, and is not redeemable
by the Company. Holders of shares of Common Stock are entitled to any dividends
as may be declared by the Board of Directors out of legally available funds.
Upon liquidation, dissolution or winding up of the Company, after required
payments to creditors, the assets of the Company will be divided pro rata on a
per share basis among the holders of the Common Stock.
CFN's Series A Convertible Preferred Stock
Until November 3, 1998, CFN was owned 100% by the Company. On November 3,
1998 CFN issued shares of Series A Exchangeable Convertible Preferred Stock
(the "CFN Preferred Stock") representing approximately 12% of its equity to
GECC, on an as-converted basis. Each share of CFN Preferred Stock is
convertible into one share of CFN's common stock at the option of the holder,
based on the current conversion rate. CFN Preferred Stock, which is mandatorily
redeemable, may also be exchanged for Common Stock of the Company under two
separate exchange rights. First, an exchange may be made upon a change of
control of CFN, unless (a) the change of control transaction triggers certain
co-sale rights and obligations set forth in the CFN stockholders' agreement,
(b) the change of control transaction involves the issuance of securities of
CFN and the holders of CFN Preferred Stock choose to exercise their preemptive
rights with respect to such issuance, or (c) the transaction effecting the
change of control is a qualified public offering. Second, an exchange may be
made after November 3, 2001, unless the Company is no longer a stockholder of
CFN or a qualified public offering of the common stock of CFN has occurred. In
either case, the exchange rate will be based on the relative value of CFN and
the Company. The value of CFN Preferred Stock upon a change of control
transaction shall be the price per share paid in connection with such
transaction. The value of CFN Preferred Stock under the exchange right
available after November 3, 2001 will be the greater of the liquidation value
of such stock or the appraised fair market value of such stock assuming a
conversion of such stock into the Common Stock of CFN. CFN Preferred Stock will
then be converted into an equivalent value of the Company's Common Stock based
on a trailing average of closing price of the Company's Common Stock if such
stock is publicly traded, or the most recent appraisal of the Company if such
stock is not publicly traded.
Blank Check Preferred Stock
Effective upon the closing of this offering, the Board of Directors will
have the authority, without further action by the stockholders, to issue up to
5,000,000 shares of Preferred Stock in one or more series, and to fix the
rights, designations, preferences, privileges, qualifications and restrictions
of the Preferred Stock, including dividend rights, conversion rights, voting
rights, rights and terms of redemption, liquidation preferences and sinking
fund terms, any or all of which may be greater than the rights of the Common
Stock.
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<PAGE>
No shares of Preferred Stock will be outstanding upon the closing of this
offering. The issuance of Preferred Stock could adversely affect the voting
power of holders of Common Stock and the likelihood that such holders will
receive dividend payments and payments upon liquidation. Such issuance could
have the effect of decreasing the market price of the Common Stock. The
issuance of Preferred Stock may have the effect of delaying, deterring or
preventing a change in control of the Company without any further action by the
stockholders. The Company has no present plans to issue any shares of Preferred
Stock.
Registration Rights Agreement
The Company, Kelso and certain other stockholders of the Company are
parties to a Registration Rights Agreement, dated as of April 30, 1996 (the
"Registration Agreement"). All shares of Common Stock outstanding prior to this
offering, as well as (a) all shares of Common Stock issuable upon exercise of
certain warrants outstanding prior to this offering, (b) all shares of Common
Stock issuable upon the exchange of the Class D Nonvoting Preferred Stock upon
the closing of this offering, and (c) all shares of Common Stock to be held by
Kelso Equity Partners V, L.P. that are issuable in connection with the Kelso
Fee, are subject to the Registration Agreement. Pursuant to the Registration
Agreement, at any time and from time to time after May 1, 1997, the holder or
holders of 50% or more (the "Majority Stockholder") of the Registrable
Securities (as defined in the Registration Agreement) may request that the
Company effect a registration (a "Demand Registration") under the Securities
Act of the Registrable Securities held by the Majority Stockholder. After such
request, the Company must use its best efforts to effect such a registration of
all Registrable Securities held by the Majority Stockholder and all other
holders of Registrable Securities. In addition to the Demand Registration, if
the Company at any time proposes to effect a registration of its equity
securities and the type of registration so permits, all holders of Registrable
Securities may include their shares in such registration (a "Piggyback
Registration"). In certain circumstances, the number of shares to be registered
pursuant to a Demand Registration or a Piggyback Registration may be reduced on
a pro rata basis if the managing underwriter (in an underwritten offering) or
the investment banker (in a non-underwritten offering) advises the Company that
the number of shares requested to be so included exceeds the number which can
be sold in such offering. The Registration Agreement provides for cross-
indemnification by the Company and the sellers of Registrable Securities for
losses, claims and damages incurred by the other resulting from untrue
statements or omissions contained in the registration statement. All expenses
incurred in connection with each registration under the Registration Agreement
will be paid by the Company. Additionally, pursuant to the Registration
Agreement, all stockholders who have purchased iXL's capital stock prior to
this offering have agreed not to effect any public sale or distribution of
their stock during the 180 days after the closing of this offering. For a
description of the Kelso Fee described above, see "Certain Transactions."
Certain Antitakeover Effects of Provisions of the Certificate of Incorporation,
Bylaws and Delaware Law
General. Certain provisions of the Delaware General Corporation Law and
the Company's Certificate of Incorporation and Bylaws could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party to acquire, control of the Company. Such provisions could limit the
price that certain investors might be willing to pay in the future for shares
of the Company's Common Stock. These provisions of Delaware law and the
Company's Certificate of Incorporation and Bylaws may also have the effect of
discouraging or preventing certain types of transactions involving an actual or
threatened change of control of the Company (including unsolicited takeover
attempts), even though such a transaction may offer the Company's stockholders
the opportunity to sell their stock at a price above the prevailing market
price. The Certificate of Incorporation allows the Company to issue Preferred
Stock with rights senior to those of the Common Stock and other rights that
could adversely affect the interests of holders of Common Stock, which could
decrease the amount of earnings or assets available for distribution to the
holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common
73
<PAGE>
Stock, as well as having the anti-takeover effect discussed above. See "Risk
Factors--Provisions of Our Certificate of Incorporation, Bylaws and Delaware
Law Could Deter Takeover Attempts."
Delaware Takeover Statute. The Company is subject to Section 203 of the
Delaware General Corporation Law ("Section 203"), which prohibits a Delaware
corporation from engaging in a "business combination" with certain persons
("Interested Stockholders") for three years following the date any such person
becomes an Interested Stockholder. Interested Stockholders generally include
(a) persons who are the beneficial owners of 15% or more of the outstanding
voting stock of the corporation and (b) persons who are affiliates or
associates of the corporation and who hold 15% or more of the corporation's
outstanding voting stock at any time within three years before the date on
which such person's status as an Interested Stockholder is determined. Subject
to certain exceptions, a business combination includes, among other things, (a)
a merger or consolidation, (b) the sale, lease, exchange, mortgage, pledge,
transfer or other disposition of assets having an aggregate market value equal
to 10% or more of either the aggregate market value of all assets of the
corporation determined on a consolidated basis or the aggregate market value of
all the outstanding stock of the corporation, (c) any transaction that results
in the issuance or transfer by the corporation of any stock of the corporation
to the Interested Stockholder, except pursuant to a transaction that effects a
pro rata distribution to all stockholders of the corporation, (d) any
transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation that is
owned directly or indirectly by the Interested Stockholder, or (e) any receipt
by the Interested Stockholder of the benefit (except proportionately as a
stockholder) of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation.
Section 203 does not apply to a business corporation if (a) before a
person becomes an Interested Stockholder, the board of directors of the
corporation approved the transaction in which the Interested Stockholder became
an Interested Stockholder or approved the business combination, or (b) upon
consummation of the transaction that resulted in the Interested Stockholder
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, other than the affirmative vote of the holders of at
least two-thirds of the outstanding voting stock of the corporation not owned
by the Interested Stockholder.
Certificate of Incorporation and Bylaws. The Company's Bylaws also
require that special meetings of the stockholders of the Company may be called
only by the Board of Directors, the Chief Executive Officer of the Company or
by any person or persons holding shares representing at least 20% of the
outstanding capital stock. The Company's Bylaws also require advance written
notice, which must be received by the Secretary of the Company not less than 90
days prior to the meeting, by a stockholder of a proposal or directors
nomination which such stockholder desires to present at an annual or special
meeting of stockholders. The Company's Certificate of Incorporation does not
include a provision for cumulative voting in the election of directors. Under
cumulative voting, a minority stockholder holding a sufficient number of shares
may be able to ensure the election of one or more directors. The absence of
cumulative voting may have the effect of limiting the ability of minority
stockholders to effect changes in the Board of Directors and, as a result, may
have the effect of deterring a hostile takeover or delaying or preventing
changes in control or management of the Company.
The Company's Bylaws provide that the authorized number of directors may
be changed by an amendment to the Bylaws adopted by the Board of Directors or
by the stockholders. Vacancies in the Board of Directors may be filled either
by holders of a majority of the Company's voting stock or by a majority of
directors in office, although less than a quorum. See "Risk Factors--Provisions
of Our Certificate of Incorporation, Bylaws and Delaware Law Could Deter
Takeover Attempts."
No Shareholder Action by Written Consent. The Restated Certificate of
Incorporation will prohibit stockholders from taking action by written consent
in lieu of an annual or special meeting, and thus stockholders will only be
able to take action at an annual or special meeting called in accordance with
the Amended By-Laws.
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<PAGE>
Transfer Agent and Registrar
SunTrust Bank, Atlanta has been appointed as transfer agent and
registrar for the Common Stock.
Listing
Application will be made to list the Common Stock for quotation on the
Nasdaq National Market under the trading symbol "IIXL."
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, the Company will have outstanding an
aggregate of shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options. Of
these shares, all of the shares sold in this offering will be freely tradeable,
unless such shares are purchased by affiliates of the Company, as that term is
defined in Rule 144 under the Securities Act . The remaining shares of
Common Stock held by stockholders are "restricted securities" as that term is
defined in Rule 144 under the Securities Act of 1933. Restricted securities may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144 or 701 promulgated under the
Securities Act. As a result of contractual restrictions, the 180 day lock-ups
described below and the provisions of Rules 144 and 701, additional shares will
be available for sale in the public market as follows: (a) no restricted
securities will be eligible for immediate sale on the date of this prospectus;
(b) restricted securities issuable pursuant to stock options will be
eligible for sale 90 days after the date of this prospectus; (c) restricted
Securities (plus shares of Common Stock issuable pursuant to stock options)
will be eligible for sale upon expiration of the lock-up agreements described
below 180 days after the date of this prospectus; and (d) the remainder of the
restricted securities will be eligible for sale from time to time thereafter
upon expiration of their respective one-year holding periods.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially
owned Restricted Shares for at least one year from the later of the date such
restricted securities were acquired from the Company or (if applicable) from an
affiliate on the date on which they were fully paid, is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of (a) 1% of the then-outstanding shares of Common Stock or (b) the
average weekly trading volume of the Common Stock in the public market as
reported through the Nasdaq National Market during the four calendar weeks
preceding such sale. Sales under Rule 144 are also subject to certain
requirements as to the manner and notice of sale and the availability of public
information about the Company.
Restricted securities held by affiliates of the Company are subject to
the foregoing volume limitations, holding period and other restrictions under
Rule 144. Affiliates may sell shares other than restricted securities in
accordance with the foregoing volume limitations and other restrictions, but
without regard to any holding period.
Further, under Rule 144(k), if a period of at least two years has elapsed
since the later of the date restricted securities were acquired from the
Company or from an affiliate of the Company or the date on which they were
fully paid, a holder of such restricted securities who is not an affiliate of
the Company at the time of sale, and has not been an affiliate of the Company
for at least three months prior to the sale, would be entitled to sell the
shares immediately without regard to volume limitations and the other
conditions described above.
Prior to this offering, there has been no market for the Common Stock and
no prediction can be made as to the effect, if any, that the market sales of
shares or the availability of such shares for sale will have on the market
price of the Common Stock from time to time. Nevertheless, sales of substantial
amounts of Common Stock in the public market could have an adverse impact on
such market price and the Company's ability to raise additional capital.
In general, under Rule 701 of the Securities Act as currently in effect,
any employee, officer, director, consultant or advisor of the Company who
purchased shares from the Company in connection with a compensatory stock or
option plan or written employment agreement is eligible to resell such shares
90 days after the effective date of this offering in reliance on Rule 144, but
without compliance with certain restrictions, including the holding period,
contained in Rule 144.
The Company may file a registration statement under the Securities Act to
register shares of Common Stock reserved for issuance under its Stock Option
Plans after 180 days from the date of this prospectus, thus permitting the
resale of such shares by non-affiliates in the public market without
restriction under the Securities Act. See "Management--Stock Option Plans."
Such registration statement would become effective immediately upon filing. As
of February 5, 1999, options to purchase approximately 23,489,725 shares of
Common Stock were outstanding under the Company's Stock Option Plans.
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<PAGE>
The Company intends to register 4,000,000 shares of Common Stock pursuant
to a "shelf" Registration Statement on Form S-4 for use in future acquisitions.
After issuance, such shares could be sold in the public markets, although it is
anticipated that any such shares acquired within 180 days of the date of this
prospectus would be subject to lock-up agreements that would limit their
ability to sell shares of Common Stock for that 180-day period.
After the closing of this offering, the holders of approximately
shares of Common Stock, including approximately 1,986,006 shares of Common
Stock issuable upon exercise of outstanding warrants, will be entitled to
certain rights with respect to the registration of such shares under the
Securities Act. See "Description of Capital Stock--Registration Rights
Agreement."
The holders of substantially all of the shares of Common Stock, options
and warrants currently outstanding and all executive officers and directors of
the Company have agreed that for a period of 180 days after the date of this
prospectus they will not offer, sell or otherwise dispose of, any shares of
Common Stock, options or warrants to acquire shares of Common Stock or
securities exchangeable for or convertible into Common Stock. However, Merrill
Lynch, in its sole discretion, may release such persons from these lock-up
agreements, in whole or in part, at any time without notice. Stockholders
holding a majority of the Common Stock outstanding prior to this offering have
the right to demand the registration of their shares for sale to the public
market at any time after the expiration of the 180-day lock-up described above.
In addition, substantially all of the holders of shares of Common Stock and
warrants to purchase shares of Common Stock are entitled to certain rights to
participate with respect to registration of such shares for sale to the public
market. There could also be shares of Common Stock issuable upon the exercise
of certain contingent rights of minority stockholders of CFN to exchange their
CFN capital stock for a currently undeterminable number of shares of Common
Stock. The Company may also file a Registration Statement on Form S-8 after 180
days of the date of this prospectus to register shares of Common Stock reserved
for issuance under its Stock Option Plans, thus permitting the resale of shares
of Common Stock received upon exercise of stock options by non-affiliates in
the public market without restriction under the Securities Act.
UNITED STATES FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following is a summary of certain United States federal income and
estate tax consequences of the ownership and disposition of Common Stock by
non-U.S. holders. As used herein, "non-U.S. holder" means any person or entity
that holds Common Stock, other than (a) a citizen or resident of the United
States, (b) a corporation, partnership or other entity created or organized in
the United States or under the laws of the United States or of any state of the
United States, (c) an estate whose income is includable in gross income for
U.S. federal income tax purposes regardless of its source or (d) a trust if (1)
a court within the United States is able to exercise primary supervision over
the administration of the trust and (2) at least one U.S. person has authority
to control all substantial decisions of the trust. Recently enacted legislation
authorizes the issuance of Treasury Regulations that, under certain
circumstances, could reclassify as a non-U.S. partnership a partnership that
would otherwise be treated as a U.S. partnership, or could reclassify as a U.S.
partnership a partnership that would otherwise be treated as a non-U.S.
partnership. Such regulations would apply only to partnerships created or
organized after the date that proposed Treasury Regulations are filed with the
Federal Register (or, if earlier, the date of issuance of a notice
substantially describing the expected contents of the regulations).
This summary is based on provisions of the U.S. Internal Revenue Code of
1986, as amended (the "Code"), existing, temporary and proposed Treasury
regulations promulgated thereunder (the "Treasury Regulations") and
administrative and judicial interpretations thereof, all as of the date hereof
and all of which are subject to change, possibly on a retroactive basis.
This summary is for general information only. The tax treatment of a
particular non-U.S. holder may vary depending on the holder's particular
situation. In addition, this summary does not include any description of the
tax laws of any state, local or non-U.S. government that may be applicable to a
particular non-U.S. holder.
77
<PAGE>
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE PARTICULAR U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO
THEM OF THE OWNERSHIP AND DISPOSITION OF COMMON STOCK, AS WELL AS THE TAX
CONSEQUENCES UNDER STATE, LOCAL, NON-U.S. AND OTHER U.S. FEDERAL TAX LAWS AND
THE POSSIBLE EFFECTS OF CHANGES IN TAX LAWS.
Income Tax
Dividends
Generally, dividends paid on Common Stock to a non-U.S. holder will be
subject to U.S. federal income tax. Except for dividends that are effectively
connected with a non-U.S. holder's conduct of a trade or business within the
United States, this tax is imposed and collected by withholding at the rate of
30% of the amount of the dividend, unless reduced by an applicable income tax
treaty. Currently, dividends paid to an address in a country other than the
United States are presumed to be paid to a resident of such country in
determining the applicability of a treaty for such purposes.
However, under recently finalized Treasury Regulations relating to
withholding of tax on non-U.S. persons, which by their terms apply to dividend
and other payments made after December 31, 1999 (the "Final Withholding
Regulations"), a non-U.S. holder who is the beneficial owner (within the
meaning of the Final Withholding Regulations) of dividends paid on Common Stock
and who wishes to claim the benefit of an applicable treaty is generally
required to satisfy certain certification and documentation requirements,
including (in certain cases) the need to make certain recertifications for
periods after December 31, 2000. Certain special rules apply to claims for
treaty benefits made by non-U.S. persons that are entities rather than
individuals and to beneficial owners (within the meaning of the Final
Withholding Regulations) of dividends paid to entities in which such beneficial
owners are interest holders.
Except as may be otherwise provided in an applicable income tax treaty,
dividends paid on Common Stock to a non-U.S. holder that are effectively
connected with the holder's conduct of a trade or business within the United
States are subject to tax at ordinary U.S. federal income tax rates, which tax
is not collected by withholding (except as described below under "Backup
Withholding and Information Reporting"). All or part of any effectively
connected dividends received by a non-U.S. corporation may also, under certain
circumstances, be subject to an additional "branch profits" tax at a 30% rate,
or such lower rate as may be specified by an applicable income tax treaty. A
non-U.S. holder who wishes to claim an exemption from withholding for
effectively connected dividends is generally required to satisfy certain
certification and documentation requirements.
A non-U.S. holder that is eligible for a reduced rate of U.S. withholding
tax pursuant to a tax treaty may obtain a refund of any excess amounts withheld
by filing an appropriate claim for refund with the U.S. Internal Revenue
Service (the "I.R.S.").
Disposition of Common Stock
Generally, non-U.S. holders will not be subject to U.S. federal income
tax (or withholding thereof) in respect of gain recognized on a disposition of
Common Stock unless (a) the gain is effectively connected with the holder's
conduct of a trade or business within the United States (in which case the
"branch profits~" tax described above may also apply if the holder is a non-
U.S. corporation); (b) in the case of a holder who is a nonresident alien
individual and holds Common Stock as a capital asset, such holder is present in
the United States for 183 or more days in the taxable year of the sale and
certain other conditions are met; (c) the Company is or has been a "United
States real property holding corporation" for U.S. federal income tax purposes
(which the Company does not believe it has been or is currently and does not
expect to become in the future) and the holder has held directly or
constructively more than 5% of the outstanding Common Stock within the five-
year period ending on the date of the disposition, unless an exemption is
provided under an applicable treaty; or (d) the holder is an individual who
lost U.S. citizenship within the 10-year period immediately preceding the close
of the taxable year of such disposition, unless such loss of citizenship did
not have a U.S. tax avoidance purpose.
78
<PAGE>
Estate Tax
If an individual non-U.S. holder owns, or is treated as owning, Common
Stock at the time of his or her death, such stock would be includable in the
individual's gross estate for U.S. federal estate tax purposes and may be
subject to U.S. federal estate tax imposed on the estates of nonresident
aliens, in the absence of a contrary provision contained in an applicable tax
treaty.
Backup Withholding and Information Reporting
Dividends
Under current law, dividends paid on Common Stock to a non-U.S. holder at
an address outside the United States are generally exempt from backup
withholding tax and U.S. information reporting requirements (but not from
regular withholding tax as discussed above). Under the Final Withholding
Regulations, for dividends paid after December 31, 1999, a non-U.S. person must
generally provide proper documentation indicating non-U.S. status to a
withholding agent in order to avoid backup withholding tax; however, dividends
paid to certain exempt recipients (not including individuals) will not be
subject to backup withholding even if such documentation is not provided if the
withholding agent is allowed to rely on certain regulatory presumptions
concerning the recipient's non-U.S. status (including payment to an address
outside the United States).
Broker Sales
Payments of proceeds from the sale of Common Stock by a non-U.S. holder
made to or through a U.S. office of a broker are generally subject to both
information reporting and backup withholding at a rate of 31% unless the holder
certifies its non-U.S. status under penalties of perjury or otherwise
establishes entitlement to an exemption. Payments of proceeds from the sale of
Common Stock by a non-U.S. holder made to or through a non-U.S. office of a
broker generally will not be subject to information reporting or backup
withholding. However, payments made to or through certain non-U.S. offices,
including the non-U.S. offices of a U.S. broker, are generally subject to
information reporting (but not backup withholding) unless the holder certifies
its non-U.S. status under penalties of perjury or otherwise establishes
entitlement to an exemption.
A non-U.S. holder may obtain a refund of any excess amounts withheld
under the backup withholding rules by filing an appropriate claim for refund
with the I.R.S.
79
<PAGE>
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Donaldson, Lufkin & Jenrette Securities Corporation ("Donaldson, Lufkin &
Jenrette"), BancBoston Robertson Stephens Inc. and NationsBanc Montgomery
Securities LLC are acting as representatives (the "Representatives") of each of
the underwriters named below (the "U.S. Underwriters"). Subject to the terms
and conditions set forth in a U.S. purchase agreement (the "U.S. Purchase
Agreement") among the Company and the U.S. Underwriters, and concurrently with
the sale of shares of Common Stock to the International Managers (as
defined below), the Company has agreed to sell to the U.S. Underwriters, and
each of the U.S. Underwriters severally and not jointly has agreed to purchase
from the Company the number of shares of Common Stock set forth opposite its
name below.
<TABLE>
<CAPTION>
Underwriter Number of
----------- Shares
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................
Donaldson, Lufkin & Jenrette Securities Corporation...................
BancBoston Robertson Stephens Inc.....................................
NationsBanc Montgomery Securities LLC.................................
----
Total............................................................
====
</TABLE>
The Company has also entered into an international purchase agreement
(the "International Purchase Agreement") with certain underwriters outside the
United States and Canada (the "International Managers " and, together with the
U.S. Underwriters, the "Underwriters") for whom Merrill Lynch International,
Donaldson, Lufkin & Jenrette International, BancBoston Robertson Stephens Inc.
and NationsBanc Montgomery Securities LLC are acting as lead managers (the
"Lead Managers"). Subject to the terms and conditions set forth in the
International Purchase Agreement, and concurrently with the sale of shares
of Common Stock to the U.S. Underwriters pursuant to the U.S. Purchase
Agreement, the Company has agreed to sell to the International Managers, and
the International Managers severally have agreed to purchase from the Company,
an aggregate of shares of Common Stock. The initial public offering price
per share and the total underwriting discount, per share of Common Stock are
identical under the U.S. Purchase Agreement and the International Purchase
Agreement.
In the U.S. Purchase Agreement and the International Purchase Agreement,
the several U.S. Underwriters and the several International Managers,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant to
such agreement are purchased. In the event of a default by an Underwriter, the
U.S. Purchase Agreement and the International Purchase Agreement provide that,
in certain circumstances, the purchase commitments of non-defaulting
Underwriters may be increased or the Purchase Agreements may be terminated. The
closings with respect to the sale of shares of Common Stock to be purchased by
the U.S. Underwriters and the International Managers are conditioned upon one
another.
The Representatives have advised the Company that the U.S. Underwriters
propose initially to offer the shares of Common Stock to the public at the
initial public offering price set forth on the cover page of this prospectus
and to certain dealers at such price less a concession not in excess of $
per share of Common Stock. The U.S. Underwriters may allow, and such dealers
may reallow, a discount not in excess of $ per share of Common Stock to
certain other dealers. After the initial public offering, the public offering
price, concession and discount may change.
The Company has granted options to the U.S. Underwriters, exercisable for
30 days after the date of this prospectus, to purchase up to an aggregate of
additional shares of Common Stock at the initial public offering price set
forth on the cover page of this prospectus, less the underwriting discount. The
U.S. Underwriters may exercise these options solely to cover over-allotments,
if any, made on the sale of the
80
<PAGE>
Common Stock offered hereby. To the extent that the U.S. Underwriters exercise
these options, each U.S. Underwriter will be obligated, subject to certain
conditions, to purchase a number of additional shares of Common Stock
proportionate to such U.S. Underwriter's initial amount reflected in the
foregoing table. The Company has granted options to the International Managers,
exercisable for 30 days after the date of this prospectus, to purchase up to an
aggregate of additional shares of Common Stock to cover over-allotments,
if any, on terms similar to those granted to the U.S. Underwriters.
The following table shows the per share and total underwriting discounts
and commissions to be paid by the Company to the Underwriters and the proceeds
before expenses to the Company. This information is presented assuming either
no exercise or full exercise by the Underwriters of their over-allotment
options.
<TABLE>
<CAPTION>
Per Share Without Option With Option
--------- -------------- -----------
<S> <C> <C> <C>
Public Offering Price.................... $ $ $
Underwriting Discount.................... $ $ $
Proceeds, before expenses, to the
Company................................. $ $ $
</TABLE>
The expenses of the offering (exclusive of the underwriting discount) are
estimated at $ and are payable by the Company.
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part.
At the Company's request, the Underwriters have reserved for sale, at the
initial public offering price, up to 10% of the shares offered hereby for
employees, directors and other persons with relationships with the Company who
have expressed an interest in purchasing shares of Common Stock in the
offering. The number of shares of Common Stock available for sale to the
general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares not so purchased will be offered by the
Underwriters to the general public on the same basis as the other shares
offered hereby.
The Company and the Company's executive officers and directors and most
existing stockholders have agreed, subject to certain exceptions, not to
directly or indirectly (a) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option (other than options granted by the Company pursuant its Stock
Options Plans) right or warrant for the sale of or otherwise dispose of or
transfer any shares of Common Stock or securities convertible into exchangeable
or exercisable for Common Stock, whether now owned or thereafter acquired by
the person executing the agreement or with respect to which the person
executing the agreement thereafter acquires the power of disposition, or file a
registration statement under the Securities Act with respect to the foregoing
(other than a registration statement on Form S-4 covering up to 4,000,000
shares of Common Stock to be issued in connection with acquisitions) or (b)
enter into any swap or other agreement that transfers, in whole or in part, the
economic consequences of ownership of the Common Stock whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities,
in cash or otherwise, without the prior written consent of Merrill Lynch on
behalf of the Underwriters for a period of 180 days after the date of this
Prospectus. See "Shares Eligible for Future Sale."
Prior to the offering, there has been no public market for the Common
Stock of the Company. The initial public offering price will be determined
through negotiations between the Company and the Representatives and the Lead
Managers. The factors considered in determining the initial public offering
price, in addition to prevailing market conditions, are price-earnings ratio of
publicly traded companies that the Representatives and the Lead Managers
believe to be comparable to the Company, certain financial information
81
<PAGE>
of the Company, the history of, and the prospects for, the Company and the
industry in which it competes, and an assessment of the Company's management,
its past and present operations, the prospects for, and timing of, future
revenues of the Company, the present state of the Company's developments, and
the above factors in relation to market values and various valuation measures
of other companies engaged in activities similar to the Company. There can be
no assurance that an active trading market will develop for the Common Stock or
that the Common Stock will trade in the public market subsequent to the
offering at or above the initial public offering price.
The Underwriters do not expect sales of the Common Stock to any accounts
over which they exercise discretionary authority to exceed 5% of the number of
shares being offered hereby.
The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the Intersyndicate Agreement, the
U.S. Underwriters and the International Managers are permitted to sell shares
of Common Stock to each other for purposes of resale at the initial public
offering price, less an amount not greater than the selling concession. Under
the terms of the Intersyndicate Agreement, the U.S. Underwriters and any dealer
to whom they sell shares of common stock will not offer to sell or sell shares
of common stock to persons who are non-U.S. or non-Canadian persons or to
persons they believe intend to resell to persons who are non-U.S. or non-
Canadian persons, and the International Managers and any dealer to whom they
sell shares of common stock will not offer to sell or sell shares of common
stock to U.S. persons or to Canadian persons or to persons they believe intend
to resell to U.S. or Canadian persons, except in the case of transactions
pursuant to the Intersyndicate Agreement.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the Securities Act, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Common Stock. As
an exception to these rules, the Representatives are permitted to engage in
certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this prospectus, the Representatives
may reduce that short position by purchasing Common Stock in the open market.
The Representatives may also elect to reduce any short position by exercising
all or part of the over-allotment option described above.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group
members who sold those shares.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of the Common Stock to the extent
that it discourages resales of the Common Stock.
Neither the Company nor any of the Underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Stock. In
addition, neither the Company nor any of the Underwriters makes any
representation that the Representatives will engage in such transactions or
that such transactions, once commenced, will not be discontinued without
notice.
The Company provides services to Merrill Lynch and certain of its
affiliates in the ordinary course of business. Donaldson, Lufkin & Jenrette
from time to time provides investment banking services to Kelso & Company and
its affiliates.
82
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
shares of Common Stock offered hereby will be passed upon for the Company by
Minkin & Snyder, a Professional Corporation, Atlanta, Georgia. Attorneys
employed by Minkin & Snyder hold 120,427 shares of Common Stock and options to
purchase 11,449 shares of Common Stock. From September 1997 to December 17,
1997, Mr. James S. Altenbach, a member of Minkin & Snyder, loaned $100,000 to
the Company at an interest rate of 12% per annum. Mr. Altenbach currently
serves as Secretary of the Company and its subsidiaries including CFN. Certain
other legal matters will be passed upon for the Company by Debevoise &
Plimpton, New York, New York. Certain legal matters in connection with this
offering will be passed upon for the Underwriters by Skadden, Arps, Slate,
Meagher & Flom LLP, Palo Alto, California.
EXPERTS
The financial statements included in this prospectus have been audited by
PricewaterhouseCoopers LLP, independent accountants. The companies and periods
covered by these audits are indicated in the individual reports of
PricewaterhouseCoopers LLP. Such financial statements have been so included in
reliance on the reports of PricewaterhouseCoopers LLP given on the authority of
said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 under the Securities Act,
and the rules and regulations promulgated thereunder, with respect to the
Common Stock offered hereby. This prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules to the Registration
Statement. For further information with respect to the Company and the Common
Stock, reference is hereby made to such Registration Statement and the exhibits
and schedules to the Registration Statement, which may be inspected and copied
at the principal office of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Commission located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and copies of all
or any part thereof may be obtained at prescribed rates from the Commission's
Public Reference Section at such addresses. Also, the Commission maintains a
World Wide Web site on the Internet at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. Upon approval of the
Common Stock for quotation on the Nasdaq National Market, such reports, proxy
and information statements and other information also can be inspected at the
office of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
Statements contained in the prospectus as to the contents of any contract or
other document that is filed as an exhibit to the Registration Statement are
not necessarily complete and each such statement is qualified in all respects
by reference to the full text of such contract or document.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by an independent public accounting
firm and make available to its stockholders quarterly reports for the first
three quarters of each fiscal year containing interim unaudited financial
information.
83
<PAGE>
iXL ENTERPRISES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
iXL ENTERPRISES, INC.
Report of Independent Accountants.......................................... F-3
Consolidated Balance Sheet................................................. F-4
Consolidated Statement of Operations....................................... F-5
Consolidated Statement of changes in Stockholders' Equity.................. F-6
Consolidated Statement of Cash Flows....................................... F-7
Notes to Consolidated Financial Statements................................. F-8
BOXTOP INTERACTIVE, INC.
Report of Independent Accountants.......................................... F-30
Balance Sheet.............................................................. F-31
Statement of Operations.................................................... F-32
Statement of Stockholders' Deficit......................................... F-33
Statement of Cash Flows.................................................... F-34
Notes to Financial Statements.............................................. F-35
GREEN ROOM PRODUCTIONS, L.L.C.
Report of Independent Accountants.......................................... F-42
Balance Sheet.............................................................. F-43
Statement of Operations and Change in Members' Deficit..................... F-44
Statement of Cash Flows.................................................... F-45
Notes to Financial Statements.............................................. F-46
DIGITAL PLANET
Report of Independent Accountants.......................................... F-50
Balance Sheet.............................................................. F-51
Statement of Operations.................................................... F-52
Statement of changes in Stockholders' Deficit.............................. F-53
Statement of Cash Flows.................................................... F-54
Notes to Financial Statements.............................................. F-55
MICRO INTERACTIVE, INC.
Report of Independent Accountants.......................................... F-62
Balance Sheet.............................................................. F-63
Statement of Operations.................................................... F-64
Statement of changes in Stockholders' Deficit.............................. F-65
Statement of Cash Flows.................................................... F-66
Notes to Financial Statements.............................................. F-67
COMMERCEWAVE, INC.
Report of Independent Accountants.......................................... F-72
Balance Sheet.............................................................. F-73
Statement of Operations.................................................... F-74
Statement of changes in Stockholders' Equity (Deficit)..................... F-75
Statement of Cash Flows.................................................... F-76
Notes to Financial Statements.............................................. F-77
</TABLE>
F-1
<PAGE>
iXL ENTERPRISES, INC.
INDEX TO FINANCIAL STATEMENTS
(Continued)
<TABLE>
<S> <C>
SPINNERS INCORPORATED
Report of Independent Accountants......................................... F-84
Balance Sheet............................................................. F-85
Statement of Operations................................................... F-86
Statement of changes in Stockholders' Equity.............................. F-87
Statement of Cash Flows................................................... F-88
Notes to Financial Statements............................................. F-89
TEKNA, INC.
Report of Independent Accountants......................................... F-95
Balance Sheet............................................................. F-96
Statement of Operations................................................... F-97
Statement of changes in Stockholders' Equity.............................. F-98
Statement of Cash Flows................................................... F-99
Notes to Financial Statements............................................. F-100
LARRY MILLER PRODUCTIONS, INC.
Report of Independent Accountants......................................... F-104
Balance Sheets............................................................ F-105
Statements of Operations.................................................. F-106
Statements of changes in Stockholders' Equity (Deficit)................... F-107
Statements of Cash Flows.................................................. F-108
Notes to Financial Statements............................................. F-110
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
iXL Enterprises, Inc.
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, of changes in stockholders'
equity and of cash flows present fairly, in all material respects, the
financial position of iXL Enterprises, Inc. and its subsidiaries at December
31, 1997 and 1998, and the results of their operations and their cash flows for
the period from May 1, 1996 (commencement of operations) through December 31,
1996 and the years ended December 31, 1997 and 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Atlanta, Georgia
February 5, 1999
F-3
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Pro Forma
December 31, (Note 1)
----------------- December 31,
1997 1998 1998
------- -------- ------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.................... $23,038 $ 19,259 $ 31,984
Accounts receivable less allowance for
doubtful accounts of $138 and $796.......... 3,259 17,737 17,737
Unbilled revenues............................ 1,858 8,089 8,089
Prepaid expenses and other assets............ 616 3,355 3,355
------- -------- --------
Total current assets....................... 28,771 48,440 61,165
Property and equipment, net.................. 9,178 27,975 27,975
Intangible assets, net....................... 16,233 56,481 56,481
Equity investment in affiliate, net.......... 1,115 -- --
Other non-current assets..................... 343 2,319 2,319
------- -------- --------
Total assets............................... $55,640 $135,215 $147,940
======= ======== ========
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable............................. $ 2,242 $ 6,438 $ 6,438
Deferred revenues............................ 471 6,072 6,072
Accrued liabilities.......................... 1,746 7,943 7,943
Current portion of long-term debt............ 433 868 868
------- -------- --------
Total current liabilities.................. 4,892 21,321 21,321
Long-term debt................................. 840 20,552 10,552
------- -------- --------
Total liabilities............................ 5,732 41,873 31,873
------- -------- --------
Mandatorily redeemable preferred stock......... 29,930 65,679 --
Mandatorily redeemable preferred stock of
subsidiary.................................... -- 9,839 9,839
------- -------- --------
29,930 75,518 9,839
------- -------- --------
Commitments and contingencies (Note 13)
Stockholders' equity
Class A Convertible Preferred Stock, par
value $.01, 250,000 shares authorized;
issued and outstanding 169,260, 177,291 and
0; aggregate liquidation preference of
$25,590 and $31,103......................... 2 2 --
Class A Common Stock, par value $.01,
75,000,000 shares authorized; issued and
outstanding 0, 0 and 0......................
Class B Common Stock, par value $.01,
200,000,000 shares authorized; issued and
outstanding 8,229,800, 16,334,905 and
50,868,907 (including 0, 252,416 and 252,416
shares held in treasury).................... 82 163 509
Additional paid-in capital................... 38,360 94,420 182,480
Accumulated deficit.......................... (18,466) (73,096) (73,096)
Accumulated other comprehensive income....... -- (10) (10)
Note receivable from stockholder............. -- (900) (900)
Unearned compensation........................ -- (1,867) (1,867)
Treasury stock at cost; 0, 252,416 and
252,416 shares.............................. -- (888) (888)
------- -------- --------
Total stockholders' equity................. 19,978 17,824 106,228
------- -------- --------
Total liabilities, mandatorily redeemable
preferred stock and
stockholders' equity...................... $55,640 $135,215 $147,940
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the period
May 1, 1996 Years ended
through December 31,
December 31, ------------------
1996 1997 1998
-------------- -------- --------
<S> <C> <C> <C>
Revenues................................... $ 5,379 $ 18,986 $ 64,767
Cost of revenues........................... 3,577 11,343 44,109
------- -------- --------
Gross profit............................. 1,802 7,643 20,658
Sales and marketing expenses............... 812 3,903 16,397
General and administrative expenses........ 1,247 9,114 28,770
Research and development expenses.......... -- 4,820 4,408
Stock option and warrant expenses.......... -- -- 2,454
Depreciation............................... 372 1,408 5,217
Amortization............................... 928 5,531 16,354
------- -------- --------
Loss from operations..................... (1,557) (17,133) (52,942)
Other income (expense), net................ 48 116 (28)
Loss on equity investment.................. (249) (1,443) (1,640)
Interest income............................ 32 136 750
Interest expense........................... (30) (238) (770)
------- -------- --------
Loss before income taxes................. (1,756) (18,562) (54,630)
Income tax benefit......................... 302 1,550 --
------- -------- --------
Net loss................................. (1,454) (17,012) (54,630)
Dividends and accretion on mandatorily
redeemable preferred stock................ -- -- (9,099)
------- -------- --------
Net loss available to common
stockholders............................ $(1,454) $(17,012) $(63,729)
======= ======== ========
Basic and diluted net loss per common
share................................... $ (0.37) $ (2.60) $ (5.41)
======= ======== ========
Weighted average common shares
outstanding............................. 3,972 6,540 11,777
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
Accumulated Note
Additional Other Receivable
Class A Class B Paid-in Accumulated Comprehensive Comprehensive from Unearned
Preferred Stock Common Stock Capital Deficit Income Income Stockholder Compensation
---------------------------------- ---------- ----------- ------------- ------------- ----------- ------------
Shares Value Shares Value
--------- ----------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial capital
contribution..... 101,500 $ 1 300 $-- $10,149 $ -- $ -- $ -- $-- $ --
Stock issuance... 10,000 -- 25,000 -- 1,025 -- -- -- -- --
Stock issuance in
connection with
acquisitions..... -- -- 4,009,500 40 3,228 -- -- -- -- --
Net loss......... -- -- -- -- -- (1,454) -- -- -- --
--------- ----- ---------- --- ------- -------- ------- ---- ------ -------
Balance, December
31, 1996......... 111,500 1 4,034,800 40 14,402 (1,454) -- -- -- --
Stock issuance... 57,760 1 13,619 -- -- -- -- --
Stock issuance in
connection with
acquisitions..... -- -- 4,195,000 42 10,339 -- -- -- -- --
Net loss......... -- -- -- -- -- (17,012) -- -- -- --
--------- ----- ---------- --- ------- -------- ------- ---- ------ -------
Balance, December
31, 1997......... 169,260 2 8,229,800 82 38,360 (18,466) -- -- -- --
--------- ----- ---------- --- ------- -------- ------- ---- ------ -------
Stock issuance... 8,031 -- -- -- 5,512 -- -- -- (900) --
Stock issuance in
connection with
acquisitions..... -- -- 8,047,305 81 41,663 -- -- -- -- --
Treasury stock
acquired......... -- -- (252,416) -- -- -- -- -- -- --
Stock options ex-
ercised.......... -- -- 57,800 -- -- -- -- -- -- --
Dividends and ac-
cretion on
mandatorily re-
deemable pre-
ferred stock..... -- -- -- -- (8,671) -- -- -- -- --
Common Stock to
be issued in con-
nection with
Class D Pre-
ferred........... -- -- -- -- 13,235 -- -- -- -- --
Issuance of stock
options and war-
rants............ -- -- -- -- 3,508 -- -- -- -- (3,508)
Stock compensa-
tion and warrant
expenses......... -- -- -- -- 813 -- -- -- -- 1,641
Comprehensive in-
come:
Net loss........ -- -- -- -- -- (54,630) (54,630) -- -- --
Foreign cur-
rently transla-
tion adjust-
ment............ -- -- -- -- -- -- (10) (10) -- --
-------
Other comprehen-
sive income..... -- -- -- -- -- -- (10) -- -- --
-------
Comprehensive in-
come............. (54,640)
--------- ----- ---------- --- ------- -------- ------- ---- ------ -------
Balance, December
31, 1998......... 177,291 $ 2 16,082,489 163 $94,420 $(73,096) $(10) $(900) $(1,867)
========= ===== ========== === ======= ======== ==== ====== =======
<CAPTION>
Total
Treasury Stockholders'
Stock Equity
-------- -------------
<S> <C> <C>
Initial capital
contribution..... $ -- $ 10,150
Stock issuance... -- 1,025
Stock issuance in
connection with
acquisitions..... -- 3,268
Net loss......... -- (1,454)
-------- -------------
Balance, December
31, 1996......... -- 12,989
Stock issuance... -- 13,620
Stock issuance in
connection with
acquisitions..... -- 10,381
Net loss......... -- (17,012)
-------- -------------
Balance, December
31, 1997......... -- 19,978
-------- -------------
Stock issuance... -- 4,612
Stock issuance in
connection with
acquisitions..... -- 41,744
Treasury stock
acquired......... (888) (888)
Stock options ex-
ercised.......... -- --
Dividends and ac-
cretion on
mandatorily re-
deemable pre-
ferred stock..... -- (8,671)
Common Stock to
be issued in con-
nection with
Class D Pre-
ferred........... -- 13,235
Issuance of stock
options and war-
rants............ -- --
Stock compensa-
tion and warrant
expenses......... -- 2,454
Comprehensive in-
come:
Net loss........ -- (54,630)
Foreign cur-
rently transla-
tion adjust-
ment............ -- (10)
Other comprehen-
sive income..... -- --
Comprehensive in-
come.............
-------- -------------
Balance, December
31, 1998......... $(888) $ 17,824
======== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
IXL ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1, 1996 YEARS ENDED
THROUGH DECEMBER 31,
DECEMBER 31, ------------------
1996 1997 1998
-------------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss.................................... $(1,454) $(17,012) $(54,630)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation ............................. 372 1,408 5,217
Amortization.............................. 928 5,531 16,354
Provision for bad debts................... 134 118 1,227
Acquired in-process technology............ -- 2,400 --
Deferred income taxes..................... (344) (1,550) --
Non-cash investment and losses in equity
affiliate and amortization............... (168) 807 1,365
Stock option and warrant expense.......... -- -- 2,454
Changes in assets and liabilities, net of
effects from purchase of
subsidiaries
Accounts receivable..................... (249) (1,538) (9,840)
Unbilled revenues....................... (112) (1,597) (5,328)
Prepaid expenses and other assets....... (5) (684) (4,669)
Accounts payable and accrued liabili-
ties................................... (332) 1,534 5,523
Deferred revenues....................... 195 (156) 4,888
------- -------- --------
Net cash used in operating activities... (1,035) (10,739) (37,439)
------- -------- --------
Cash flows from investing activities
Purchases of property and equipment....... (666) (6,704) (20,304)
Purchases of subsidiaries, net of cash ac-
quired................................... (7,833) (3,433) (16,602)
Investment in equity affiliate............ (1,129) (625) --
Loan to equity affiliate.................. -- (250) --
------- -------- --------
Net cash used in investing activities... (9,628) (11,012) (36,906)
------- -------- --------
Cash flows from financing activities
Proceeds from borrowings.................. 250 6,849 23,428
Repayment of borrowings................... (119) (6,259) (6,729)
Proceeds from issuance of mandatorily re-
deemable preferred stock................. -- 29,930 40,314
Proceeds from issuance of stock........... 10,941 13,860 4,612
Proceeds from issuance of mandatorily re-
deemable preferred stock of subsidiary... -- -- 9,839
Acquisition of treasury stock............. -- -- (888)
------- -------- --------
Net cash provided by financing activi-
ties 11,072 44,380 70,576
------- -------- --------
Effect of exchange rate changes on cash and
cash equivalents........................... -- -- (10)
Net increase (decrease) in cash and cash
equivalents............................ 409 22,629 (3,779)
Cash and cash equivalents at beginning of
period..................................... -- 409 23,038
------- -------- --------
Cash and cash equivalents at end of period.. $ 409 $ 23,038 $ 19,259
======= ======== ========
Supplemental disclosure of cash flow infor-
mation
Cash paid for interest.................... $ 29 $ 168 $ 797
======= ======== ========
Non-cash investing and financing activities
Acquisition of equipment through capital
leases................................... $ 112 $ 289 $ 569
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
iXL Enterprises, Inc. (the "Company") is an Internet services company,
which provides Internet strategy consulting and comprehensive Internet-based
solutions to Fortune 1000 companies and other corporate users of information
technology. The Company helps businesses identify how the Internet can be used
to their competitive advantage and provides expertise in creative design and
systems engineering to design, develop and deploy advanced Internet
applications and solutions.
iXL Enterprises, Inc. is a Delaware corporation formed in March 1996.
Since its inception, iXL Enterprises, Inc. has acquired 34 companies (see Note
3).
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries after the elimination of all significant
intercompany accounts and transactions. The Company accounts for its investment
in University Netcasting, Inc. ("UNI") using the equity method.
The Company owns 100% of the common stock of its subsidiary, Consumer
Financial Network, Inc. ("CFN"). In addition to its common stock, CFN has
mandatorily redeemable convertible preferred stock of which 13,333,334 shares
are issued and outstanding as of December 31, 1998 and are owned by a third
party. The Company owns 88% of CFN on an as-converted basis.
Revenue recognition
Revenues are recognized for fixed fee contracts using the percentage of
completion method based on costs incurred. Revenues are recognized as services
are performed for time and materials contracts.
Revenues related to software development contracts, including planning,
installation, implementation and training that require significant
customization or modification are recognized using the percentage of completion
method. Revenues from sales of software that do not require customization or
modification are recognized upon delivery, or when all essential elements have
been delivered, in accordance with the American Institute of Certified Public
Accountants ("AICPA") Statement of Position 97-2, "Software Revenue
Recognition".
Unbilled revenues represent revenues earned under contracts in advance of
billings. Such amounts are normally converted into accounts receivable within
90 days. Deferred revenues represent billings made or cash received in advance
of services performed or costs incurred under contracts. Any anticipated losses
on contracts are charged to earnings when identified. Revenues from post-
contract support are recorded as services are provided.
Cash and cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Property and equipment
Property and equipment is recorded at cost, less accumulated
depreciation. Expenditures for renewals and improvements that significantly add
to the productive capacity or extend the useful life of an asset are
F-8
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
capitalized. Expenditures for maintenance and repairs are charged to operations
as incurred. Depreciation expense is provided using the straight-line method
over the estimated useful lives for purchased assets. Equipment held under
capital leases is amortized using the straight-line method over the lesser of
the useful life or the lease term. Leasehold improvements are amortized over
the shorter of the useful lives of the assets or the remaining term of the
lease.
Intangible assets
Intangible assets, primarily excess of cost over fair value of net assets
acquired ("goodwill"), are stated at cost less accumulated amortization.
Intangible assets are being amortized using the straight-line method over
estimated useful lives ranging from 2 to 15 years, primarily 2 to 3 years.
The carrying value of the excess of cost over fair value of net assets
acquired and other intangible assets are reviewed if facts and circumstances
suggest that they may be impaired. If this review indicates goodwill or other
intangibles will not be recoverable, as determined based on future expected
cash flows or other fair market value determinations, the Company's carrying
value of the goodwill or other intangibles is reduced to fair value.
Software developments costs
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise
Marketed," software development costs are expensed as incurred until
technological feasibility has been established, at which time such costs are
capitalized until the product is available for general release to customers. To
date, the establishment of technological feasibility of the Company's products
and general release of such software have substantially coincided. As a result,
software development costs qualifying for capitalization have been
insignificant and therefore, have not been capitalized.
Internal use computer software
The Company adopted the AICPA Statement of Position 98-1 "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use"
effective January 1, 1998. The Company capitalizes external costs related to
software and implementation services in connection with its internal use
software systems.
Income taxes
The Company has applied the asset and liability approach of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," for
financial accounting and reporting purposes. The Company accounts for certain
items of income and expense in different time periods for financial reporting
and income tax purposes. Provisions for deferred income taxes are made in
recognition of such temporary differences, where applicable. A valuation
allowance is established against deferred tax assets unless the Company
believes it is more likely than not that the benefit will be realized.
Stock-based compensation plans
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations and elects the disclosure option of Statement of Financial
Accounting Standards No. 123,
F-9
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
"Accounting for Stock-Based Compensation" ("FAS 123"). Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
fair value of the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock.
Basic and diluted net loss per share
Basic net loss per common share is based on the weighted average number
of shares of Common Stock outstanding during the period. No potential common
shares have been included in the diluted earnings per share calculation as they
would have been antidilutive due to the net loss reported by the Company. The
convertible securities outstanding and the number of common shares into which
they are convertible are as follows:
<TABLE>
<CAPTION>
Number of Common Shares into
which they are convertible at
each year-end
--------------------------------
Security 1996 1997 1998
-------- ---------- ---------- ----------
<S> <C> <C> <C>
Stock Options.......................... 1,915,500 5,549,200 18,226,112
Warrants............................... -- 1,295,900 2,486,006
Class A Convertible Preferred Stock.... 11,150,000 16,926,000 17,729,100
Class B Mandatorily Redeemable
Convertible Preferred................. -- 8,307,500 9,876,700
Class C Mandatorily Redeemable
Convertible Preferred ................ -- 923,200 923,200
</TABLE>
The Class D Mandatorily Redeemable Nonvoting Preferred Stock is not a
convertible security, but provides for certain amounts of Common Stock to be
issued upon redemption. The minimum aggregate number of shares to be issued
upon redemption is 3,722,502.
CFN has outstanding mandatorily redeemable preferred stock that is
exchangeable into Common Stock of the Company upon the occurrence of certain
events ("CFN Mandatorily Redeemable Preferred") (see Note 8). These
contingently issuable shares have not been included in diluted earnings per
share as they would be antidilutive.
Net loss available to common stockholders used in calculating basic and
diluted earnings per share includes charges related to dividends and accretion
on mandatorily redeemable preferred stock.
Stock split
In January 1998, the Board of Directors declared a stock split of the
Class B Common Stock effected in the form of a dividend distribution of 99
shares of Class B Common Stock for each share of Class B Common Stock held as
of January 9, 1998. The accompanying consolidated financial statements give
retroactive effect for this stock dividend as if it occurred at inception of
the Company.
Foreign currency translation
The financial position and results of operations of foreign subsidiaries
are measured using the currency of the respective countries as the functional
currency. Assets and liabilities are translated into the reporting currency
(U.S. dollars) at the foreign exchange rate in effect at the balance sheet
date, while revenue and expenses for the year are translated at the average
exchange rate in effect during the year. Translation gains and losses are not
included in determining net income or loss but are accumulated and reported as
a separate component of stockholders' equity. The Company has not entered into
any hedging contracts during any of the periods presented.
F-10
<PAGE>
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Fair value of financial instruments
The carrying amounts of financial instruments, including cash, cash
equivalents, accounts receivable, accounts payable and accrued expenses,
approximate fair value. The carrying amount of long-term debt approximates fair
value based on current rates of interest available to the Company for loans of
similar maturities.
Comprehensive income
Effective January 1, 1998, the Company implemented Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income." This standard
requires that the total changes in equity resulting from revenue, expenses, and
gains and losses, including those which do not affect the accumulated deficit,
be reported. Accordingly, those amounts which are comprised solely of foreign
currency translation adjustments, are included in other comprehensive income in
the consolidated statements of stockholders' equity.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and disclosure of contingent assets and liabilities. The estimates
and assumptions used in the accompanying consolidated financial statements are
based upon management's evaluation of the relevant facts and circumstances as
of the date of the financial statements. Actual results could differ from those
estimates.
Unaudited Pro Forma Information
The pro forma consolidated balance sheet as of December 31, 1998 is
unaudited. However, in the opinion of management, such information has been
prepared on the same basis as the audited financial statements and includes
adjustments to reflect (i) the net proceeds of $22,725 from the issuance of
22,825 shares of Class A Convertible Preferred Stock ("Class A Preferred") and
the repayment of approximately $10,000 of revolving debt that occurred
subsequent to December 31, 1998; (ii) the conversion of the Class A Preferred,
the Class B Mandatorily Redeemable Convertible Preferred Stock ("Class B
Preferred"), and the Class C Mandatorily Redeemable Convertible Preferred Stock
("Class C Preferred") into Common Stock; and (iii) the issuance of Common Stock
issuable upon the exchange of the Class D Mandatorily Redeemable Preferred
Stock ("Class D Preferred"), as if such events occurred on December 31, 1998.
New accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133). This statement establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. The Company will be required to adopt FAS 133 for the quarter ended
March 31, 2000. The Company has not entered into any significant derivative
financial instrument transactions.
F-11
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
2. Property and Equipment
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
Estimated
Useful December 31,
Lives In ---------------
Years 1997 1998
--------- ------ -------
<S> <C> <C> <C>
Land.......................................... N/A $ 100 $ 100
Building...................................... 40 550 550
Improvements.................................. 5--10 1,456 4,852
Furniture and fixtures........................ 5--7 1,286 5,472
Computer equipment and software............... 3--5 5,496 19,883
Equipment..................................... 5--10 2,247 6,068
------ -------
11,135 36,925
Less: Accumulated depreciation and
amortization................................. (1,957) (8,950)
------ -------
$9,178 $27,975
====== =======
</TABLE>
At December 31, 1997 and 1998 the Company had approximately $961 and
$2,570, respectively, of vehicles and equipment under capital leases included
in property and equipment and related accumulated amortization of approximately
$335 and $889, respectively. Amortization of these assets recorded under
capital leases is included in depreciation expense.
F-12
<PAGE>
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
3. ACQUISITIONS
During the two-year period ended December 31, 1998, the Company acquired
28 companies. The companies acquired and purchase price, including the shares
of Class B Common Stock and related warrants and options issued are as follows:
<TABLE>
<CAPTION>
FAIR VALUE
OF NET EXCESS OF
SHARES OF CASH USED FOR TANGIBLE COST OVER
COMMON WARRANTS/ ACQUISITIONS, TOTAL ASSETS FAIR VALUE OF
DATE STOCK OPTIONS NET OF CASH PURCHASE (LIABILITIES) NET ASSETS
BUSINESS ACQUIRED ACQUIRED ISSUED ISSUED(1) ACQUIRED PRICE ACQUIRED ACQUIRED
- ----------------- -------------- --------- --------- ------------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BoxTop Interactive,
Inc.--
Los Angeles, CA........ May 1997 3,416,700 1,236,800 $ 1,182 $ 9,644 $(1,635) 6,958
Other Acquisitions
(aggregated 1997)...... Various 778,300 179,800 2,251 2,804 26 2,778
--------- --------- ------- ------- ------- -------
Total of 1997
Acquisitions.......... 4,195,000 1,416,600 $ 3,433 $12,448 $(1,609) $ 9,736
========= ========= ======= ======= ======= =======
Digital Planet, Inc.--
Los Angeles, CA........ May 1998 259,584 42,680 $ 1,962 $ 3,550 $ (39) $ 3,589
Micro Interactive,
Inc.--New York, NY..... May 1998 740,000 42,800 1,718 5,809 281 5,528
CommerceWAVE, Inc.--
San Diego, CA.......... July 1998 877,898 65,382 117 5,459 (1,037) 6,496
Image Communications,
Inc.--
Vienna, VA............. July 1998 378,999 125,056 753 3,324 381 2,943
Spinners Incorporated--
Boston, MA............. July 1998 674,132 66,495 1,383 5,543 499 5,044
Tekna, Inc.--Richmond,
VA..................... September 1998 712,622 125,757 611 4,383 527 4,231
Larry Miller
Productions, Inc.--
Boston, MA............. September 1998 113,823 239,029 1,812 3,490 (143) 3,633
NetResponse--Arlington,
VA..................... September 1998 701,375 73,625 1,719 5,307 1,312 3,995
Ionix Development
Corp.--Chicago, IL..... September 1998 358,551 -- 1,059 3,013 231 2,782
Pequot Systems, Inc.--
Norwalk, CT............ September 1998 378,066 -- 792 2,501 154 2,347
TwoWay Communications
LLC--Chicago, IL....... September 1998 269,421 -- 1,246 2,469 335 2,134
Other Acquisitions
(aggregated 1998)...... Various 2,295,530 87,215 3,430 14,129 795 13,334
--------- --------- ------- ------- ------- -------
Total of 1998
acquisitions.......... 7,760,001 868,039 $16,602 $58,977 $ 3,296 $56,056
========= ========= ======= ======= ======= =======
</TABLE>
- --------
(1) Amounts equal the number of Class B Common Stock shares to be issued upon
exercise of the warrants and options.
F-13
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
Individual acquisitions with a purchase price of $2,000 or less have been
aggregated in Other Acquisitions in the schedule above and consist of the
following:
<TABLE>
<CAPTION>
Date
Business Acquired Acquired
- ----------------- --------------
<S> <C>
Webbed Feet, LLC--Atlanta, GA.................................. February 1997
The Whitley Group, Inc.--Charlotte, NC......................... April 1997
Swan Interactive Media, Inc.--Atlanta, GA...................... July 1997
Small World Software, Inc.--New York, NY....................... January 1998
Green Room Productions, L.L.C.--San Francisco, CA.............. February 1998
CCG Online--Denver, CO......................................... March 1998
Spin Cycle Entertainment, Inc.--Los Angeles, CA................ May 1998
InTouch Interactive, Inc.--Charlotte, NC....................... May 1998
Campana New Media, S.L. and The Other Media, S.L.--Madrid,
Spain......................................................... July 1998
601 Design, Inc.--New York, NY................................. July 1998
Wissing & Laurence, Inc.--New York, NY......................... July 1998
LAVA--Hamburg, Germany......................................... September 1998
Denovo New Media, Ltd.--London, England........................ September 1998
Exchange Place Solutions, Inc.--Atlanta, GA.................... September 1998
Pantheon Interactive, Inc.--Santa Clara, CA.................... September 1998
</TABLE>
All acquisitions have been accounted for using the purchase method, and
accordingly, the purchase price has been allocated to the tangible and
identifiable intangible assets acquired and liabilities assumed on the basis of
their fair value on the acquisition dates. The historical carrying amounts of
tangible net assets acquired approximated their fair values. The fair value of
identifiable intangible assets acquired were based on independent appraisals or
management estimates.
The allocation of the purchase price of BoxTop Interactive, Inc. resulted
in a $2,400 charge to in-process research and development expenses in 1997
relating to an Internet-based video conferencing product under development
which had not reached technological feasibility. Certain related core
technology was valued as existing technology and not included in the value of
the acquired technology in-process. The value of the purchased in-process
technology was determined by estimating the projected net cash flows including
future revenues to be earned upon commercialization of the product and the
costs to complete the development of the technology. Strong revenue growth was
projected for this product through 1999; thereafter, revenue was expected to
increase moderately each year through 2001. The cash flows were then discounted
to present value at 35%, a rate of return that considers the relative risk of
achieving the projected cash flows and the time value of money. Finally, the
present values of the cash flows of the discrete projection period were summed
to determine the fair market value of the purchased in-process technology. In
the fourth quarter of 1998, due to the introduction of competing products
utilizing alternative technologies into the market, management decided to cease
further investment in the development of this product.
F-14
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
For acquisitions made in 1997 and 1998, the purchase price in excess of
identifiable tangible and intangible assets acquired and liabilities assumed of
$9,736 and $55,681, respectively, was allocated to goodwill and is being
amortized over estimated useful lives ranging from 2 to 3 years.
The Company discontinued the use of a brandname acquired in the purchase
of BoxTop Interactive, Inc. and charged the remaining book value of that
intangible asset, approximately $1,700, to amortization expense in 1997.
The purchase price of the acquisitions consists of the consideration
provided to the selling stockholders, which includes Common Stock, options,
warrants and cash. The fair value of the Company's Common Stock issued as
consideration for the acquisitions was determined based primarily upon
independent appraisals.
The terms of three of the Company's 1998 acquisition agreements provide
for additional consideration if the acquired entities' revenues exceed certain
levels. Such additional consideration is payable in shares of the Company's
Common Stock and will be recorded, if earned, as additional purchase price. For
one of the acquired companies, the contingency period ended December 31, 1998;
for the other entity, the contingency period ends October 31, 1999. As of
December 31, 1998, a total of 287,304 shares of the Company's Class B Common
Stock were held in escrow in relation to these agreements.
The targeted revenues were achieved at one of the acquired entities whose
contingency period ended December 31, 1998. As such, 50,000 shares of the
Company's Common Stock will be released from escrow in March 1999 and have been
accounted for as additional purchase price as of December 31, 1998.
For those acquisitions that have been structured as tax-free exchanges of
stock, the differences between the fair value of the acquired assets, including
intangible assets, and their historical tax bases is not deductible for income
tax purposes.
The following unaudited pro forma financial information reflects the
results of operations for the years ended December 31, 1997 and 1998, as if the
acquisitions had occurred on January 1, 1997. These unaudited pro forma results
have been prepared for comparative purposes only and do not purport to be
indicative of what operating results would have been had the acquisitions
actually taken place on January 1, 1997 and may not be indicative of future
operating results. The unaudited pro forma results are summarized as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
------------------
1997 1998
-------- --------
<S> <C> <C>
Revenues.............................................. $ 55,301 $ 87,160
======== ========
Net loss.............................................. $(45,389) $(72,609)
======== ========
Net loss available to common stockholders............. $(45,389) $(81,708)
======== ========
Basic and diluted net loss per common share........... $ (2.79) $ (5.08)
======== ========
</TABLE>
F-15
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
4. Intangible Assets
Intangible assets are comprised of the following:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Excess of cost over fair
value of net assets ac-
quired................. $17,067 $73,123
Other................... 3,496 3,892
------- -------
20,563 77,015
Less--accumulated amor-
tization............... (4,330) (20,534)
------- -------
$16,233 $56,481
======= =======
</TABLE>
5. Equity Investment in Affiliate
Effective August 27, 1996, the Company acquired a 22% equity interest in
the outstanding convertible preferred stock of UNI for $750 in cash. UNI
develops and manages sports information Web sites for colleges, universities
and athletic associations. Pursuant to agreements with UNI, the Company
performed Internet development and financial consulting services and payment
for these services has been made in shares of UNI convertible preferred stock
valued at $1 per share.
The Company accounts for its investment in UNI under the equity method.
The Company's investments in UNI have been accounted for as excess of cost over
fair value of net assets acquired and were being amortized over five years as a
reduction to the investment account together with the Company's share of UNI
losses. The Company's investment balance in UNI reached zero in the fourth
quarter of 1998. Because the Company has no obligation to fund UNI's operations
or deficit, the Company has discontinued recording its share of UNI's losses.
The Company will not recognize its share of any future earnings from UNI until
UNI earnings are sufficient to recover the unrecognized losses.
The following is a summary of the activity in the investment in UNI:
<TABLE>
<CAPTION>
For the
period
May 1, 1996 Years Ended
through December 31,
December 31, ----------------
1996 1997 1998
------------ ------- -------
<S> <C> <C> <C>
Net investment in UNI balance, beginning
of period............................... $ -- $ 1,298 $ 1,115
Additional investment in UNI............. 1,547 1,260 525
Equity in UNI net loss................... (174) (1,001) (1,010)
Amortization of goodwill................. (75) (442) (630)
------ ------- -------
Net investment in UNI balance, end of pe-
riod.................................... $1,298 $ 1,115 $ --
====== ======= =======
</TABLE>
F-16
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
The following is a summary of certain unaudited financial information of
UNI as of and for the years ended December 31, 1997 and 1998:
<TABLE>
<CAPTION>
December 31,
--------------
1997 1998
------ ------
<S> <C> <C>
Current assets............................................. $ 467 $2,703
Non current assets......................................... 176 333
Current liabilities........................................ 543 1,295
Non current liabilities.................................... 560 --
Stockholders' equity....................................... (460) 1,741
Net revenues............................................... 795 1,559
Net loss................................................... (2,919) (5,071)
</TABLE>
As of December 31, 1998 the Company owned a 23% interest in UNI. UNI has
certain outstanding stock options and warrants which, if exercised, would not
materially reduce the Company's investment ownership percentage in UNI.
6. Accrued Liabilities
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
------ ------
<S> <C> <C>
Accrued compensation and related costs...................... $ 709 $3,244
Other accrued liabilities................................... 1,037 4,699
------ ------
$1,746 $7,943
====== ======
</TABLE>
7. Long-Term Debt
The Company's long-term debt is comprised of the following:
<TABLE>
<CAPTION>
December 31,
--------------
1997 1998
----- -------
<S> <C> <C>
Borrowings under Credit Agreement........................ $ -- $19,328
8.25% note payable to bank in monthly installments
through January 2002, collateralized by land and
building................................................ 484 465
Notes payable to banks and a former shareholder at
interest rates from 8.9% to 10.4%; all repaid in 1998... 183 --
Capital lease obligations, at interest rates from 4% to
24% expiring from 1998 to 2003.......................... 606 1,627
----- -------
Total debt............................................. 1,273 21,420
Less current portion of long-term debt................... (433) (868)
----- -------
Long-term debt........................................... $ 840 $20,522
===== =======
</TABLE>
In July 1998, the Company entered into a credit agreement (the "Credit
Agreement") with a bank providing for borrowings of up to $20,000. The Credit
Agreement expires June 30, 2001. The Credit Agreement includes a $10,000 term
loan and a $10,000 revolving line of credit and bears interest payable
quarterly at the higher of the prime rate plus 2% or the federal funds
effective rate plus 2.5%. The Credit Agreement is secured by liens on
substantially all of the assets of the Company's domestic subsidiaries, except
F-17
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
CFN, including a pledge of the capital stock of the same subsidiary companies.
The Credit Agreement provides for borrowings based upon a borrowing base
formula. Borrowings under the term loan portion of the Credit Agreement are
payable $50 each quarter, commencing September 30, 1998, with the balance due
upon expiration. A 0.5% annual commitment fee is charged on the average unused
portion of the revolving line of credit. At December 31, 1998, the Company's
borrowing rate under the Credit Agreement was 9.75%.
Under the terms of the Credit Agreement and notes payable to banks, the
Company is required to maintain certain financial covenants related to
consolidated earnings, consolidated debt to capital and working capital, among
others. At December 31, 1998, the Company was in compliance with, or has
received a waiver of all covenants.
As of December 31, 1998, the Company had letters of credit outstanding,
totaling $1,740. Certificates of deposits in the same amount, which are
included in prepaid expenses and other assets, are pledged as collateral for
these letters of credit.
As of December 31, 1998, aggregate principal maturities of notes payable
and capital lease obligations are as follows:
<TABLE>
<CAPTION>
December 31,
Year 1998
---- ------------
<S> <C>
1999.......................................................... $ 868
2000.......................................................... 674
2001.......................................................... 19,220
2002.......................................................... 627
2003.......................................................... 31
-------
$21,420
=======
</TABLE>
8. Mandatorily Redeemable Preferred Stock; Mandatorily Redeemable Preferred
Stock of Subsidiary; and Warrants
A total of 265,000 shares of mandatorily redeemable convertible preferred
stock have been designated for issuance; 200,000, 15,000 and 50,000 of such
shares have been designated as Class B, Class C and Class D, respectively.
In December 1997, for net consideration of approximately $26,900 and
$2,990, the Company issued 83,075 shares of Class B Preferred, par value $.01,
and 9,232 shares of Class C Preferred, par value $.01. In conjunction with this
equity transaction, the Company issued warrants to purchase 10,650 shares of
Class B Preferred for $458 per share.
In February 1998, for net consideration of approximately $4,935 the
Company issued 15,692 shares of Class B Preferred and warrants to purchase
1,810 shares of Class B Preferred for $458 per share.
In August 1998, for net consideration of approximately $35,400, the
Company issued 35,700 shares of Class D Preferred, $.01 par value.
In November 1998, the Company issued warrants to purchase 500,000 shares
of Class A Common Stock at $10 per share. The warrants expire three years from
the date of grant and were issued upon the Company's approval of a marketing
plan. The fair value of the warrants was measured on the date the warrants
F-18
<PAGE>
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
were earned, using the Black-Scholes option pricing model and was recorded as
an expense of approximately $815 in the fourth quarter of 1998.
In December 1998, the Company issued warrants to purchase 500,000 shares
of Class B Common Stock at $10 per share. The warrants expire the later of
eighteen months from the date of grant or twelve months after an initial public
offering of the Company's Common Stock. The warrants were granted in
conjunction with a contract that will generate revenue for the Company
beginning in 1999 and are exercisable immediately. The fair value of the
warrants was measured at the grant date using the Black-Scholes option pricing
model and the related charge will be recorded as contra-revenue as the services
are provided to the customer.
The Company has accounted for the Class B, Class C and Class D Preferred
as mandatorily redeemable preferred stock. Accordingly, the Company is accruing
dividends and amortizing any difference between the carrying value and the
redemption value over the redemption period with a charge to additional paid-in
capital ("APIC").
The Class D Preferred provides that, upon redemption the holders will
receive $1,000 per share plus any accrued and unpaid dividends and a certain
number of shares of Class B Common Stock of the Company. The aggregate number
of shares of Class B Common Stock to be issued varies based on the timing of a
Qualified Public Offering, but at a minimum, equals 3,722,502 shares. The
proceeds from the issuance of the Class D Preferred have been allocated to
mandatorily redeemable preferred stock and additional paid-in-capital, based on
the relative fair values of components as of the date of the issuance. Of the
approximately $35,400 total proceeds from the issuance of the Class D
Preferred, $22,165 was allocated to mandatorily redeemable preferred stock and
the remaining $13,235 was allocated to APIC. As the number of shares of Class B
Common Stock to be issued upon redemption varies depending on the timing of a
Qualified Public Offering, the fair value of the potentially issuable shares of
Class B Common Stock are ratably charged to net loss available to common
stockholders, based upon the fair value of the potentially issuable shares at
the end of each reporting period. The Company is accruing the 12% dividend on
the Class D Preferred and accreting any difference between the carrying value
and the redemption value over the redemption period with a charge to APIC.
The amount charged to APIC related to the Class B and Class C Preferred
was $5,449 and $926, respectively, for the year ended December 31, 1998. The
Company has reserved 18,817 Class B Preferred shares for exercise of warrants
and conversion of 10,799,020 Class A Common Shares.
The rights, preferences and privileges with respect to the Class B, Class
C and Class D Preferred are as follows:
Voting
Class B Preferred has the same number of votes as each share of Class A
Common Stock into which such preferred stock may be converted. Class C and
Class D Preferred have no voting rights.
Dividends
The Company may make distributions to Class B and Class C Preferred;
however, there is no requirement for dividends. If a distribution is made to
common stockholders, Class A, Class B and Class C Preferred stockholders will
receive a similar per share amount based on the number of shares of Class A
Common Stock into which the Class A, Class B and Class C Preferred will
convert. The Class D Preferred accrues dividends at the rate of 12% per annum.
F-19
<PAGE>
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Conversion
Each share of Class B and Class C Preferred is convertible at the option
of the holder into 100 shares of Class A Common Stock. This conversion rate is
subject to change if certain events occur that would otherwise dilute the
conversion rights of the Class B and Class C Preferred. Such conversion is
automatic upon the effective date of an initial public offering of the
Company's Common Stock with a per share price of at least $7 and for which the
aggregate proceeds to the Company equal at least $30,000 (a "Qualified Public
Offering"). The Class D Preferred is not convertible.
Redemption
The Company has the right to redeem the Class B and Class C Preferred
prior to December 31, 2004 only upon a change in control. The Class B and Class
C Preferred stockholders have the right, at their option, to require the
Company to redeem any or all of the stock on or after December 31, 2004. The
redemption amount will be the fair value per share of the Class B and Class C
Preferred, as of the date of redemption, plus an amount equal to all declared
and unpaid dividends. The Company is accreting the carrying value of the Class
B and Class C Preferred up to the redemption price over the period from
issuance until December 31, 2004.
The Company has the right to redeem the Class D Preferred at any time
prior to its mandatory redemption date of August 2005. The Class D Preferred
stockholders have the right to require the Company to redeem the shares only
upon the occurrence of certain events. The redemption amount is equal to the
liquidation preference amount plus all accrued and unpaid dividends plus a
certain number of shares of Class B Common Stock, which varies depending on the
timing of a Qualified Public Offering, as follows:
<TABLE>
<CAPTION>
NUMBER OF CLASS B
COMMON STOCK SHARES
DATE OF QUALIFIED PUBLIC OFFERING TO BE ISSUED
--------------------------------- -------------------
<S> <C>
prior to or on August 14, 1999 3,722,502
August 15, 1999--February 14, 2000 4,647,602
after February 14, 2000 5,279,293
</TABLE>
Liquidation
The Class D Preferred has liquidation preference over the Class A, Class
B and Class C Preferred, which all have the same liquidation preference based
on their respective liquidation values. All classes of preferred stock have
liquidation preference over the Class A and Class B Common Stock. The
liquidation value equals $325 per share for the Class B and Class C Preferred
and $1,000 per share for the Class D Preferred plus any declared and unpaid
dividends, subject to adjustment.
The following is a summary of the carrying value of the mandatorily
redeemable preferred stock:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1997 1998
------------------- -------------------
REDEMPTION CARRYING REDEMPTION CARRYING
VALUE VALUE VALUE VALUE
---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Class B Preferred............... $27,000 $26,937 $93,829 $36,888
Class C Preferred............... 3,000 2,993 8,770 4,030
Class D Preferred............... -- -- 50,552 24,761
------- -------
$29,930 $65,679
======= =======
</TABLE>
F-20
<PAGE>
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The rights, preferences and privileges with respect to the mandatorily
redeemable preferred stock of subsidiary, CFN Mandatorily Redeemable Preferred,
are as follows:
Voting
Each share of CFN Mandatorily Redeemable Preferred is entitled to one
vote on issues that are subject to a vote of the CFN stockholders.
Dividends
CFN may make distributions to CFN Mandatorily Redeemable Preferred
stockholders; however, there is no requirement for dividends. If a distribution
is made to the common stockholder of CFN, CFN Mandatorily Redeemable Preferred
stockholders will receive a similar per share amount based on the number of CFN
common shares into which the CFN Mandatorily Redeemable Preferred is then
convertible.
Conversion
Each share of CFN Mandatorily Redeemable Preferred is convertible into
one share of CFN Common Stock. This conversion rate is subject to change if
certain events occur that would otherwise dilute the conversion rights of the
CFN Mandatorily Redeemable Preferred stockholders. Such conversion is automatic
upon the effective date of an initial public offering of at least 15% of CFN's
Common Stock with a per share price of at least $2 (the "CFN Qualified Public
Offering").
Liquidation
The CFN Mandatorily Redeemable Preferred has liquidation preference over
the CFN Common Stock. The Liquidation Value is equal to $0.75 per share and is
subject to adjustment if certain events occur that would otherwise dilute the
liquidation rights of the CFN Mandatorily Redeemable Preferred. The amount to
be paid to the CFN Mandatorily Redeemable Preferred stockholders equals the
liquidation value plus any declared and unpaid dividends as of the liquidation
date. CFN Mandatorily Redeemable Preferred stockholders will not participate in
any balance remaining after such amounts have been paid.
Redemption
CFN Mandatorily Redeemable Preferred stockholders have the right at their
option, to require CFN to redeem any or all of the CFN Mandatorily Redeemable
Preferred on or after December 31, 2005. Such redemption will be a redemption
price per share equal to the Liquidation Value plus all declared and unpaid
dividends. As of December 31, 1998, the carrying value of the CFN Mandatorily
Redeemable Preferred equaled its redemption value.
Exchange into Common Stock of the Company
Pursuant to the terms of the CFN stockholders' agreement each of the CFN
Mandatorily Redeemable Preferred stockholders has the right to exchange all,
but not less than all, of their CFN Mandatorily Redeemable Preferred into the
Company's Common Stock under two separate exchange rights. First, an exchange
may be made upon a change in control of CFN, unless (a) the change in control
occurs in the context of a tag-along, drag-along, or sale of CFN governed by
the CFN stockholders agreement, (b) the change in control transaction involves
the issuance of securities of CFN and the holders of CFN Mandatorily Redeemable
Preferred choose to exercise their preemptive rights with respect to such
issuance, or (c) the transaction effecting the change in control is a CFN
Qualified Public Offering. Second, the CFN Mandatorily Redeemable Preferred
stockholders have a one time right to exchange on November 3, 2001, unless the
Company is no
F-21
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
longer a stockholder of CFN and no CFN Qualified Public Offering has occurred.
In either case, the exchange rate will be based on the relative fair values of
CFN and the Company. The value of CFN Mandatorily Redeemable Preferred upon a
change in control transaction will be the price per share paid in connection
with such transaction. The value of CFN Mandatorily Redeemable Preferred under
the exchange right available on November 3, 2001 will be the greater of the
Liquidation Value of such stock or the appraised fair market value of such
stock assuming a conversion of such stock into the Common Stock of CFN. CFN
Mandatorily Redeemable Preferred will then be exchanged into an equivalent
value of the Company's Common Stock based on a trailing average of closing
prices of the Company's Common Stock, if such stock is publicly traded, or the
most recent appraisal of the Company, if such stock is not publicly traded.
Commitment to Purchase CFN Mandatorily Redeemable Preferred
If as of November 3, 1999, CFN has sold fewer than 24,900,000, shares of
CFN Mandatorily Redeemable Preferred (including the 13,333,334 sold as of
December 31, 1998), the Company will purchase the number of shares of CFN
Mandatorily Redeemable Preferred equal to the difference between 24,900,000 and
the number of shares theretofore sold by CFN for $0.75 per share.
9. Stockholders' Equity
The Company's capital stock consists of $.01 par value Class A Common
Stock, $.01 par value Class B Common Stock, and $.01 par value Class A
Preferred. At December 31, 1997 and 1998, there were no outstanding shares of
Class A Common Stock.
During the year ended December 31, 1998, for consideration of
approximately $5,510, which includes a $900 note receivable, the Company issued
8,031 shares of Class A Preferred.
The rights, preferences and privileges with respect to the Common Stock
and Class A Preferred are as follows:
Voting
Holders of shares of Class A Common Stock are entitled to ten votes per
share, holders of Class B Common Stock are entitled to one vote per share and
holders of Class A Preferred are entitled to voting rights as if the stock had
been converted into Class A Common Stock.
Dividends
Holders of shares of Class A and Class B Common Stock are entitled to
share, on an as converted basis with the Class A Preferred, Class B Preferred
and Class C Preferred any dividends declared by the Board of Directors.
Conversion
Holders of shares of Class A Common Stock are entitled to convert their
shares into Class B Common Stock at any time on a share-for-share basis. Each
share of Class A Preferred is convertible into 100 shares of Class A Common
Stock. This conversion rate is subject to change if certain events occur that
would otherwise dilute the conversion rights of the Class A Preferred. Such
conversion is automatic upon the effective date of a Qualified Public Offering.
The Company has reserved 25,000,000 shares of Class B Common Stock for issuance
upon conversion of Class A Preferred.
Redemption
The Class A Preferred stockholders have no option to require the Company
to redeem their stock. The Company has the right to an early redemption, at the
liquidation value, only upon a change in control, as defined.
F-22
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
Liquidation
The Class A Preferred has liquidation preference over the Class A and
Class B Common Stock. The liquidation value for the Class A Preferred will
equal the amount invested, which ranges from $100 to $1,000 per share, plus any
declared and unpaid dividends.
Other
Under certain limited circumstances as described in the Stockholders'
Agreement ("Agreement"), management can put their preferred and/or common
shares back to the Company at fair value, as defined in the Agreement. The
Company is obligated to pay for the shares in cash, or at the option of the
Board of the Directors, with a promissory note. The Agreement terminates upon
the effective date of a Qualified Public Offering.
Treasury stock
During February and March 1998, the Company purchased a total of 242,416
shares of Class B Common Stock from two employees at a purchase price of $3.25
per share. During September 1998, the Company purchased a total of 10,000
shares of Class B Common Stock from one employee at a price of $10 per share.
10. Income Taxes
The components of the benefit (provision) for income taxes consist of the
following:
<TABLE>
<CAPTION>
For the period
May 1, 1996 Years ended
through December 31,
December 31, --------------
1996 1997 1998
-------------- ------- ------
<S> <C> <C> <C>
Current:
State....................................... $(42) $ -- $ --
---- ------- -----
Deferred:
State....................................... 101 --
Federal..................................... 243 1,550 --
---- ------- -----
344 1,550 --
---- ------- -----
$302 $ 1,550 $ --
==== ======= =====
</TABLE>
As of December 31, 1997 and 1998, the Company had net operating loss
carryforwards for federal income tax purposes of approximately $11,800 and
$46,560, respectively. The Company acquired loss carryforwards of approximately
$1,100 in 1996, $1,560 in 1997 and $3,510 in 1998. The carryforwards expire in
varying amounts through 2018. The use of acquired net operating loss
carryforwards is restricted in accordance with Internal Revenue Service
regulations.
In addition, under the Tax Reform Act of 1986, the amounts of, and the
benefits from, net operating loss carryforwards may be impaired or limited in
certain circumstances. These circumstances include, but are
F-23
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
not limited to, a cumulative stock ownership change of greater than 50% over a
three-year period. A valuation allowance has been recorded against the
Company's net deferred tax asset as management believes it is more likely than
not that they will not be realized.
A reconciliation of the federal statutory rate and the effective income
tax rate follows:
<TABLE>
<CAPTION>
For the period
May 1, 1996 Years ended
through December 31,
December 31, -----------------
1996 1997 1998
-------------- ------- --------
<S> <C> <C> <C>
Statutory federal tax rate (34%)......... $ 597 $ 6,311 $ 18,574
Nondeductible amortization............... (315) (1,800) (4,627)
State income tax......................... 24 252 743
Losses of foreign subsidiaries........... -- -- (860)
Valuation allowance...................... (312) (3,391) (13,427)
Other.................................... 308 178 (403)
----- ------- --------
$ 302 $ 1,550 $ --
===== ======= ========
</TABLE>
Deferred tax (assets) liabilities are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-----------------
1997 1998
------- --------
<S> <C> <C>
Gross deferred tax assets
Allowance for doubtful accounts...................... $ (28) $ (349)
Loss in equity investment............................ (643) (750)
Intangibles.......................................... -- (967)
Net operating loss carryforward...................... (4,330) (16,923)
Valuation allowance.................................. 3,703 17,130
------- --------
$(1,298) $ (1,859)
======= ========
Gross deferred tax liabilities
Property and equipment............................... 242 842
Intangible assets.................................... 840 840
Conversion from S Corporation to C Corporation....... 116 77
Other................................................ 100 100
------- --------
1,298 1,859
------- --------
Net deferred tax asset................................. $ -- $ --
======= ========
</TABLE>
11. Stock-Based Compensation
The Company's 1996 Stock Option Plan (the "1996 Stock Option Plan") was
established to promote the success of the Company by providing an additional
means to attract and retain key personnel. Pursuant to the terms of the 1996
Stock Option Plan, a committee of the Board of Directors is authorized to grant
options to purchase Class B Common Stock not to exceed an aggregate maximum of
25,000,000 shares to officers and employees. The committee is further
authorized to establish the exercise price and the vesting terms.
F-24
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
In December 1998, the Board of Directors of the Company adopted the 1998
Non-Employee Stock Option Plan (the "1998 Stock Option Plan"), which contains
essentially the same terms as the 1996 Stock Option Plan, except that the 1998
Stock Option Plan was established for grants to persons who are not employees
of the Company. The 1998 Stock Option Plan authorizes the granting for up to an
aggregate maximum of 1,000,000 options, of which 290,464 were outstanding as of
December 31, 1998.
The Company expects that most options granted pursuant to the plans will
be subject to vesting over a period of 4 to 5 years, such as 20% increments
each year over a period of five years, during which the optionee must continue
to be an employee of the Company. The committee, however, may choose to impose
different vesting requirements or none at all. Options outstanding under the
Plan generally have a term of ten years.
The Company applies APB 25 and related Interpretations in accounting for
the Plan. During 1997 and 1998, $0 and $1,641, respectively, of compensation
expense was recognized. Stock options issued in connection with acquisitions
were accounted for as purchase price.
Had compensation expense for the Company's Plan been determined under the
provisions of FAS 123 based on the fair value at the grant date, the Company's
net loss and loss per share would have been increased to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
For the period
May 1, 1996 For the years ended
through December 31,
December 31, --------------------
1996 1997 1998
-------------- --------- ---------
<S> <C> <C> <C>
Net loss
As reported....................... $(1,454) $ (17,012) $ (54,630)
Pro forma......................... $(1,481) $(17,073) $(56,152)
Basic and diluted net loss per
common share
As reported....................... $ (0.37) $ (2.60) $ (5.41)
Pro forma......................... $ (0.37) $ (2.61) $ (5.54)
</TABLE>
The minimum value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-
average assumptions used for grants during the 1997 and 1998 periods,
respectively; dividend yield of 0% for all periods; expected volatility of 0%
for all periods, risk free interest rate of 6.3%, 5.7% and 5.0%, expected life
of 5 years, 4 years and 4 years.
F-25
<PAGE>
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
A summary of stock options as of December 31, 1996, 1997 and 1998 and
activity during the period ending on those dates is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------------- ------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS OPTIONS
--------- -------- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. -- -- 1,915,500 $1.77 5,549,200 $2.35
Granted................. 1,920,500 $1 .77 3,847,200 $2.59 13,310,331 $7.31
Exercised............... -- -- -- -- (57,800) $0.01
Forfeited............... (5,000) $ 1.00 (213,500) $1.03 (575,619) $5.39
--------- ------ --------- ----- ---------- -----
Outstanding at the end
of period.............. 1,915,500 $ 1.77 5,549,200 $2.35 18,226,112 $5.89
--------- ------ --------- ----- ---------- -----
Options exercisable at
end of period.......... 1,183,100 $ 1.93 3,045,300 $2.03 7,833,247 $3.88
--------- ------ --------- ----- ---------- -----
Weighted average fair
value of options
granted during the
period.................
<CAPTION>
1996 1997 1998
------------------- ------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE FAIR AVERAGE FAIR AVERAGE FAIR
OPTIONS GRANTED DURING EXERCISE MARKET EXERCISE MARKET EXERCISE MARKET
THE YEAR PRICE VALUE PRICE VALUE PRICE PRICE
---------------------- --------- -------- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Option price>fair market
value $ 0.70 $ 1.77 $ 2.13 $3.45 $ 4.98 $9.91
Option price=fair market
value -- -- $ 2.50 $2.50 $ 5.00 $5.00
Option price<fair market
value -- -- $ 2.13 $0.90 $ 4.97 $3.49
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------- --------------------
NUMBER NUMBER
OUTSTANDING WEIGHTED WEIGHTED EXERCISABLE WEIGHTED
AT AVERAGE AVERAGE AT AVERAGE
DECEMBER REMAINING EXERCISE DECEMBER EXERCISE
RANGE OF 31, CONTRACTUAL PRICE 31, PRICE
EXERCISE PRICES 1998 LIFE $ 1998 $
--------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.01-$0.75 537,954 9.47 $ 0.18 531,460 $ 0.18
$0.95-$1.32 1,423,665 8.15 $ 0.97 1,217,835 $ 0.97
$1.84-$2.60 2,533,004 7.91 $ 2.18 1,866,974 $ 2.12
$3.00-$4.50 4,575,339 9.05 $ 3.97 2,102,997 $ 3.87
$5.00-$6.00 1,904,351 9.18 $ 5.08 818,487 $ 5.06
$8.00-$10.00 7,251,799 9.78 $10.00 1,295,494 $10.00
---------- ---------
18,226,112 7,833,247
========== =========
</TABLE>
F-26
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
12. Employee Benefit Plans
Employees of the Company can elect to participate in the iXL Enterprises,
Inc. Savings Plan (the "Plan") which is intended to be qualified and exempt
from tax under Section 401(k) of the Internal Revenue Code. Employees are
eligible to participate in the Plan after one month of service and can elect to
invest 1% to 16% of their pre-tax earnings. All employee contributions are
fully vested and there have not been material contributions to the Plan by the
Company.
13. Commitments and Contingencies
Certain operating facilities and equipment are leased under non-
cancelable agreements. Operating lease expense charged to operations was
approximately $184 in 1996, $956 in 1997 and $3,844 in 1998. As of December 31,
1998, the approximate future minimum lease payments for noncancelable operating
leases are as follows:
<TABLE>
<S> <C>
1999............................................................... $ 6,586
2000............................................................... 5,862
2001............................................................... 5,485
2002............................................................... 5,264
2003............................................................... 4,112
Thereafter......................................................... 15,832
-------
$43,141
=======
</TABLE>
As of December 31, 1998, the Company has commitments for capital
expenditures of approximately $5,400, primarily in connection with expansion
and improvement of its Atlanta, New York and Denver offices.
The Company is subject to legal proceedings and claims that arise in the
ordinary course of its business. In the opinion of the management, the amount
of the ultimate outcome of these actions will not materially affect the
Company's financial position, results of operations or cash flows.
14. Business Segments
The Company operates in two business segments: strategic Internet
services, which includes Internet strategy consulting, Internet-based business
solutions and solution sets; and CFN, an e-commerce platform for marketing
financial services and employee benefits.
F-27
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
A summary of the Company's two business segments for the two years ended
December 31, 1998 is set forth below. For the year ended December 31, 1997,
CFN's information includes the period from December 20, 1996 (date of
acquisition) through December 31, 1997:
<TABLE>
<CAPTION>
Strategic
Internet
1998 Services CFN Total
---- --------- ------- -------
<S> <C> <C> <C>
Revenues....................................... $64,516 $ 251 $64,767
Loss from operations........................... (41,901) (12,729) (54,630)
Loss on equity investment...................... (1,640) -- (1,640)
Interest income................................ 713 37 750
Interest expense............................... 750 20 770
Amortization................................... 16,298 56 16,354
Depreciation................................... 4,542 675 5,217
Identifiable assets............................ 125,519 9,696 135,215
Capital expenditures........................... 18,142 2,162 20,304
</TABLE>
<TABLE>
<CAPTION>
1997
----
<S> <C> <C> <C>
Revenues......................................... $18,986 $ -- $18,986
Loss from operations............................. (12,466) (4,667) (17,133)
Loss on equity investment........................ (1,443) -- (1,443)
Interest income.................................. 136 -- 136
Interest expense................................. 238 -- 238
Amortization..................................... 5,475 56 5,531
Depreciation..................................... 1,328 80 1,408
Identifiable assets.............................. 54,186 1,454 55,640
Capital expenditures............................. 5,795 909 6,704
</TABLE>
15. Related Party Transactions
In January 1997, the Company entered into an agreement to lease its
headquarters office space from Park Place Emery, L.L.C. ("PPE") commencing
April 1, 1997 for a term of eleven years. The Chief Executive Officer and
Chairman of the Board of Directors (the "Chairman") of the Company is a limited
partner in PPE. The Company paid $441 and $628 under this lease in 1997 and
1998, respectively.
During 1997, certain executive officers of the Company loaned the Company
a total of $6,600. The loans bore interest at 12% and were repaid during the
year. Interest expense recognized in 1997 related to these borrowings was
approximately $88. In June 1998, the Chairman's spouse loaned the Company
$4,000 at an interest rate of 10%. The principal and interest on this note were
repaid in July 1998.
In April 1996, the Company paid Kelso & Company a fee of $150 for
financial advisory services. In addition, the Company agreed to pay Kelso &
Company an annual fee of $15 for financial advisory services. The Company has
also agreed to indemnify Kelso & Company against certain claims, losses,
damages, liabilities and expenses which may arise in connection with rendering
such financial advisory services.
In June 1998, the Company created a wholly-owned subsidiary, Permit.Com,
Inc. On June 26, 1998, the Board of Directors of the Company approved and
declared a dividend of the common stock of Permit.Com, Inc. payable to
stockholders of the Company of record as of June 1, 1998. The carrying value of
the assets of Permit.Com, Inc. were $0.
F-28
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
The Company recognized revenues in 1996, 1997 and 1998 from providing
services to certain of its investors, and entities related to its investors, of
$0, $100 and $2,574, respectively.
16. Subsequent Event
In January 1999, for net consideration of approximately $22,725, the
Company issued 22,825 shares of Class A Preferred. A portion of the proceeds
were used to repay approximately $10,000 of the borrowings under the revolving
line of credit portion of the Credit Agreement.
The Company's Board of Directors authorized the Company to file a Form S-
1 with the Securities and Exchange Commission under the Securities Act of 1933
with respect to an initial public offering of the Company's Common Stock. In
connection with the offering, the Company has agreed to pay Kelso & Company a
fee equal to $750 payable in shares of Common Stock, valued at the offering
price.
In February, 1999, the Class D Preferred Stockholders and the Company
entered into an Exchange Agreement under which the stockholders will exchange,
upon the closing of an initial public offering, the shares of Class D stock
(which include their rights to the liquidation value of $35,700 plus accrued
dividends and their rights upon redemption to 3,722,502 shares of Class B
Common Stock) into shares of the Company's Common Stock. The number of such
shares will be based upon the offering price of the Company's Common Stock in
the initial public offering. This exchange will result in a charge to net loss
available to common shareholders equal to the difference between $35,700 plus
accrued dividends and the carrying value of the Class D Preferred Stock.
In February 1999, the Company's Board of Directors adopted the 1999
Employee Stock Option Plan (the "1999 Stock Option Plan"). The 1999 Stock
Option Plan authorizes the granting of options to purchase up to an aggregate
maximum of 5,000,000 shares of Class B Common Stock.
F-29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
BoxTop Interactive, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in shareholders' deficit and of cash flows present
fairly, in all material respects, the financial position of BoxTop Interactive,
Inc. (the "Company") at September 30, 1996 and May 31, 1997, and the results of
its operations and its cash flows for the period November 6, 1995 (inception)
through September 30, 1996 and the period October 1, 1996 through May 31, 1997,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Atlanta, Georgia
October 3, 1997
F-30
<PAGE>
BOXTOP INTERACTIVE, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
September 30, May 31,
1996 1997
------------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash.............................................. $ 2,288 $ --
Accounts receivable............................... 241,007 319,869
Prepaid expenses and other assets................. 2,255 81,139
---------- -----------
Total current assets............................ 245,550 401,008
---------- -----------
Property and equipment, net......................... 313,876 391,454
Advances to shareholder............................. 18,945 79,565
Intangible asset, net of accumulated amortization of
$10,415 at May 31, 1997............................ -- 239,585
Other noncurrent assets............................. 25,751 27,373
---------- -----------
Total assets.................................... $ 604,122 $ 1,138,985
========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable.................................. $ 502,476 $ 604,007
Accrued expenses.................................. 606,663 319,861
Current portion of long term debt................. 223,718 1,493,836
Current portion of capital lease obligations...... 37,024 41,351
Due to affiliate.................................. 60,052 208,835
---------- -----------
Total current liabilities....................... 1,429,933 2,667,890
---------- -----------
Long-term debt...................................... 36,620 24,413
Capital lease obligations........................... 81,844 50,854
---------- -----------
Total liabilities............................... 1,548,397 2,743,157
---------- -----------
Shareholders' deficit
Common stock, $.01 par value; Authorized
50,000,000 shares; issued and outstanding
3,200,000 and 3,350,000 shares, respectively..... 32,000 33,500
Additional paid-in capital........................ 2,490 89,490
Accumulated deficit............................... (978,765) (1,727,162)
---------- -----------
Total shareholders' deficit..................... (944,275) (1,604,172)
---------- -----------
Total liabilities and shareholders' deficit..... $ 604,122 $ 1,138,985
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
BOXTOP INTERACTIVE, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the period
November 6, 1995 For the period
(inception) October 1, 1996
through through
September 30, 1996 May 31, 1997
------------------ ---------------
<S> <C> <C>
Revenues..................................... $1,746,022 $2,759,993
---------- ----------
Costs and expenses
Direct cost of revenues.................... 684,013 1,075,615
Selling, general and administrative........ 1,903,215 2,181,395
Depreciation and amortization.............. 74,234 114,467
Stock compensation expense................. 31,990 88,500
---------- ----------
Total operating expenses................. 2,693,452 3,459,977
---------- ----------
Loss from operations..................... (947,430) (699,984)
---------- ----------
Interest expense............................. (30,535) (56,338)
Other income................................. -- 8,725
---------- ----------
Loss before income taxes................. (977,965) (747,597)
Income taxes................................. (800) (800)
---------- ----------
Net loss................................. $ (978,765) $ (748,397)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
BOXTOP INTERACTIVE, INC.
STATEMENT OF SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Common stock Additional Total
----------------- Paid-in Accumulated Shareholders'
Shares Amount Capital Deficit Deficit
--------- ------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Initial capital
contribution........... 1,000 $ 10 $ 2,490 $ -- $ 2,500
Issuance of common
stock................ 3,199,000 31,990 -- -- 31,990
Net loss.............. -- -- -- (978,765) (978,765)
--------- ------- ------- ----------- -----------
Balance, September 30,
1996................... 3,200,000 32,000 2,490 (978,765) (944,275)
Issuance of common
stock................ 150,000 1,500 17,000 -- 18,500
Issuance of stock
options and
warrants............. -- -- 70,000 -- 70,000
Net loss.............. -- -- -- (748,397) (748,397)
--------- ------- ------- ----------- -----------
Balance, May 31, 1997... 3,350,000 $33,500 $89,490 $(1,727,162) $(1,604,172)
========= ======= ======= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
BOXTOP INTERACTIVE, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the period
November 6, 1995 For the period
(inception) October 1, 1996
through through
September 30, 1996 May 31, 1997
------------------ ---------------
<S> <C> <C>
Cash flows from operating activities
Net loss................................... $(978,765) $ (748,397)
Adjustments to reconcile net loss to net
cash used for operating activities
Stock compensation expense................ 31,990 88,500
Depreciation and amortization............. 74,234 114,467
Changes in assets and liabilities
Accounts receivable...................... (241,007) (78,862)
Prepaid expenses and other assets........ 13,745 (78,884)
Advances to shareholder.................. (18,945) (60,620)
Other noncurrent assets.................. (25,751) (1,622)
Accounts payable......................... 502,476 101,531
Accrued expenses......................... 606,663 (286,802)
Due to affiliate......................... (5,854) (101,217)
--------- ----------
Net cash used for operating activities.. (41,214) (1,051,906)
--------- ----------
Cash flows from investing activities
Purchase of property and equipment......... (135,409) (181,630)
--------- ----------
Net cash used for investing activities.. (135,409) (181,630)
--------- ----------
Cash flows from financing activities
Borrowings from long-term debt............. 200,000 1,375,000
Repayments of long-term debt............... (15,770) (117,089)
Repayments of capital lease obligations.... (7,819) (26,663)
--------- ----------
Net cash provided by financing
activities............................. 176,411 1,231,248
--------- ----------
Net decrease in cash.................... (212) (2,288)
Cash, beginning of period................... 2,500 2,288
--------- ----------
Cash, end of period......................... $ 2,288 $ --
========= ==========
Supplemental disclosure of cash flow
information
Cash paid during the period for interest... $ 16,655 $ 17,334
========= ==========
Cash paid during the period for income
taxes..................................... $ 800 $ --
========= ==========
Non-cash activities
Cost of licensing agreement................ $ -- $ 250,000
Assets acquired under capital lease........ $ 126,686 $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
BOXTOP INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
1. Business
BoxTop Interactive, Inc. (the "Company") develops, maintains and hosts
interactive web sites for clients in a variety of industries. The Company also
develops interactive audio and visual communication applications for use with
personal and business computers. The Company is a California corporation and
was incorporated on November 6, 1995.
2. Summary of Significant Accounting Policies
Revenue recognition
Revenues from website development, hosting and maintenance services are
recognized as the services are performed. Sales to four separate customers were
approximately $853,000 for the eleven months ended September 30, 1996; sales to
two separate customers were approximately $1,351,000 for the eight months ended
May 31, 1997.
Property and equipment
Property and equipment are recorded at cost, less accumulated
depreciation and amortization. Expenditures for renewals and improvements that
significantly add to the productive capacity or extend the useful life of an
asset are capitalized. Expenditures for maintenance and repairs are charged to
operations as incurred. Depreciation expense is provided using the straight-
line method over the estimated useful lives of the assets, which ranges from
three to five years. Leasehold improvements are amortized using the straight-
line method over the lesser of the lease term or the estimated useful life.
Equipment held under capital lease is recorded at the lower of the fair market
value of the lease or the present value of future minimum lease payments. These
leased assets are amortized using the straight-line method over the lesser of
the lease term or the estimated useful life.
Intangible asset
The intangible asset balance represents the cost of a licensing agreement
between BoxTop Entertainment, Inc. (an affiliate company) and the Company. The
licensing agreement is for the indefinite use of the BoxTop tradename and logo.
The intangible asset is stated at cost less accumulated amortization.
Amortization expense is provided using the straight-line method over ten years.
The carrying value of the intangible asset is reviewed periodically for
impairment based on future expected cash flows. Based on its review, the
Company does not believe that an impairment has occurred.
Software development costs
Software development costs incurred in connection with the Company's
licensed software products are accounted for in accordance with the provisions
of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed" (FAS 86). Capitalization of
such costs begins only upon establishment of technological feasibility as
defined in FAS 86 and ends when the resulting product is available for sale.
All costs incurred to establish the technological feasibility of software
products are classified as research and development and are expensed as
incurred. No products had reached technological feasibility during the period
from November 6, 1995 (inception) through May 31, 1997. Research and
development costs included in selling, general and administrative expense
approximated $78,000 and
F-35
<PAGE>
BOXTOP INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
$224,000 for the period November 6, 1995 (inception) through September 30,
1996, and the period October 1, 1996 through May 31, 1997, respectively.
Income taxes
The Company has applied the asset and liability approach of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS
109), for financial accounting and reporting purposes. The Company accounts for
certain items of income and expense in different time periods for financial
reporting and income tax purposes. Provisions for deferred income taxes are
made in recognition of such temporary differences, where applicable. A
valuation allowance is established against deferred tax assets unless the
Company believes it is more likely than not that the benefit will be realized.
Stock-based compensation
The Company has elected to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25), and related Interpretations and to elect the disclosure option of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (FAS 123). Accordingly, compensation cost for stock options
is measured as the excess, if any, of the fair market value of the Company's
stock at the date of the grant over the amount an employee must pay to acquire
the stock.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Fair value of financial instruments
The carrying amounts of financial instruments including cash, accounts
receivable, accounts payable and accrued expenses approximate fair value. The
carrying amount of long-term debt approximates fair value based on current
rates of interest available to the Company for loans of similar maturities.
3. Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
September 30, May 31,
1996 1997
------------- ---------
<S> <C> <C>
Furniture and fixtures............................. $ 16,394 $ 31,388
Computer equipment................................. 376,017 502,826
Leasehold improvements............................. 1,438 21,260
Computer software.................................. -- 20,005
-------- ---------
393,849 575,479
Less accumulated depreciation and amortization..... (79,973) (184,025)
-------- ---------
Property and equipment, net...................... $313,876 $ 391,454
======== =========
</TABLE>
F-36
<PAGE>
BOXTOP INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
At September 30, 1996 and May 31, 1997, the Company had approximately
$127,000 of equipment under capital lease included in property and equipment in
the accompanying financial statements.
4. Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
September 30, May 31,
1996 1997
------------- --------
<S> <C> <C>
Payroll taxes payable................................ $402,972 $ --
Customer advances.................................... 165,419 180,994
Accrued vacation..................................... 28,000 40,952
Deferred rent........................................ -- 31,603
Accrued interest..................................... -- 36,016
Other................................................ 10,272 30,296
-------- --------
$606,663 $319,861
======== ========
</TABLE>
5. Long-term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30, May 31,
1996 1997
------------- -----------
<S> <C> <C>
Notes payable to shareholders (see Note 11),
accruing monthly interest based on an annual rate
of 8%. Outstanding principal and accrued interest
are due 120 days after demand. These notes are
secured by substantially all of the assets of the
Company and are guaranteed by the principal
shareholder of the Company. These notes require a
late payment penalty of 5.0% of the outstanding
principal and accrued interest should payment not
be received within 120 days after demand........... $200,000 $ 100,000
Notes payable accruing monthly interest based on an
annual rate of 8%. Outstanding principal and
accrued interest are due on the earlier of demand
or July 1, 1997. These notes are secured by
substantially all of the assets of the Company and
are guaranteed by the principal shareholders of the
Company............................................ -- 750,000
Notes payable accruing monthly interest based on an
annual rate of 15%. Outstanding principal and
accrued interest are due on July 1, 1997. These
notes are secured by substantially all of the
assets of the Company and are guaranteed by the
principal shareholder of the Company. In connection
with these borrowings the Company issued warrants
to acquire 375,000 shares of the Company's common
stock at $1.00 per share exercisable on demand..... -- 375,000
Note payable to IXL Holdings, Inc. (see note 12),
accruing monthly interest based on an annual rate
of 8%. Outstanding principal and accrued interest
are due on June 17, 1997. The note is guaranteed by
the principal shareholder of the Company........... -- 250,000
Bank equipment note payable bearing interest at the
Bank's prime rate plus 2%. This note requires
monthly principal payments of $1,526 plus interest
through September 1999............................. 54,930 42,723
Other............................................... 5,408 526
-------- -----------
Total debt...................................... 260,338 1,518,249
Less current portion of long-term debt............ (223,718) (1,493,836)
-------- -----------
Long-term debt.................................... $ 36,620 $ 24,413
======== ===========
</TABLE>
F-37
<PAGE>
BOXTOP INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Future maturities of principal payments under long-term debt are as
follows:
<TABLE>
<CAPTION>
Year ending
May 31,
-----------
<S> <C>
1998............................................................ $1,493,836
1999............................................................ 24,413
----------
$1,518,249
==========
</TABLE>
See Note 12 for description of extinguishment of debt subsequent to May
31, 1997.
6. Shareholders deficit
Stock
The Company is authorized to issue two classes of stock designated
respectively as "common stock" and "preferred stock". The number of shares of
common stock and preferred stock authorized for issuance is 50,000,000 and
5,000,000, respectively.
Any liquidation preferences, dividends, voting rights and convertible
features of the preferred stock are to be determined by the Company's Board of
Directors at the time of issuance. From November 6, 1995 (inception) through
May 31, 1997, there was no preferred stock issued or outstanding.
During the period November 6, 1995 (inception) through September 30, 1996
and the period October 1, 1996 through May 31, 1997, the Company recognized
stock compensation expense of approximately $32,000 and $19,000, respectively,
related to the issuance of its common stock to employees and consultants.
Warrants
In connection with borrowings made by the Company during the period
October 1, 1996 through May 31, 1997, the Company issued warrants to acquire
375,000 shares of the Company's common stock at $1.00 per share exercisable on
demand.
In December 1996 and May 1997, the Company issued warrants to consultants
to acquire 30,000 shares of the Company's common stock at an exercise price of
$1.10 per share and 40,000 shares of the Company's common stock at an exercise
price of $1.50 per share, respectively. Such warrants were exercisable
immediately. The Company recognized expense of approximately $38,000 in
connection with the issuance of warrants in May 1997. These warrants remained
outstanding as of May 31, 1997.
In connection with a customer making a $500,000 cash deposit with the
Company in October 1996 for future services, the Company issued warrants to
acquire 712,500 shares of the Company's common stock at $.90 per share
exercisable on demand. As of May 31, 1997, the Company has customer advances of
approximately $180,000 related to remaining services to be performed under the
agreement. These warrants remained outstanding as of May 31, 1997.
7. Income Taxes
The Company's income tax expense for the period November 6, 1995
(inception) through September 30, 1996 and the period October 1, 1996 through
May 31, 1997, consists entirely of the California State minimum income tax of
$800.
F-38
<PAGE>
BOXTOP INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company had net deferred tax assets consisting primarily of federal
and state net operating loss carryforwards. The Company has no items which give
rise to significant deferred tax liabilities. At September 30, 1996 and May 31,
1997, the Company has recorded a full valuation allowance offsetting the net
deferred tax assets as management believes it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
At May 31, 1997, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $1,560,000 expiring in 2012. The
Internal Revenue Code can impose certain limitations on the future availability
of net operating loss carryforwards, including annual limitations on the amount
of the carryforwards which could be utilized following substantial changes in a
company's ownership.
The difference between the Company's effective income tax rate and
multiplying the Company's loss before income taxes by the Federal statutory
income tax rate for each of the periods presented in the financial statements
is due primarily to the recording of a valuation allowance to offset the
Company's net deferred tax asset.
8. Stock Option Plan
The Board of Directors has adopted a stock option plan (the Plan).
Pursuant to the terms of the Plan, the Board of Directors is authorized to
grant options to purchase common stock not to exceed 3,000,000 shares to
officers, employees and nonemployees. The Board of Directors is further
authorized to establish the exercise price and the vesting terms.
Pro forma information regarding net loss is required by FAS 123, and has
been determined as if the Company had accounted for its employee stock options
under the fair value method. Had compensation cost for the Company's Plan been
determined based on the fair value at the grant date consistent with the
provisions of FAS 123, the Company's net loss would have been increased to the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
September 30, May 31,
1996 1997
------------- ---------
<S> <C> <C>
Net loss
As reported....................................... $(978,765) $(748,397)
Pro forma......................................... (978,865) (810,397)
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-
average assumptions used for grants during the 1996 and 1997 periods,
respectively: dividend yield of 0% for both periods; expected volatility of 0%
for both periods; risk free interest rate of 6.3% for both periods; expected
life of 3.2 years and 3.0 years.
F-39
<PAGE>
BOXTOP INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
A summary of stock options as of September 30, 1996 and May 31, 1997,
and changes during the periods ending on those dates is as follows:
<TABLE>
<CAPTION>
September 30, 1996 May 31, 1997
-------------------- ----------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
---------- --------- ------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of period.. -- $ -- 405,000 $0.97
Granted............................. 405,000 $ 0.97 465,000 $1.10
---------- -------
Outstanding at end of period........ 405,000 $ 0.97 870,000 $1.04
========== =======
Weighted average fair value of
options granted during the period:
Exercise price exceeds fair value
of stock......................... $ -- $0.13
Exercise price equals fair value
of stock......................... $ -- $ --
Exercise price is less than fair
value of stock................... $ -- $0.99
</TABLE>
No options were exercised or forfeited during the period from November
6, 1995 (inception) through May 31, 1997.
The following table summarizes information about stock options
outstanding at May 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------- --------------------
Weighted
Weighted Average Weighted
Number Average Remaining Number Average
Exercise Outstanding Exercise Contractual Exercisable Exercise
Prices at 5/31/97 Price Life at 5/31/97 Price
-------- ----------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
$1.10 550,000 $1.10 9.60 250,000 $1.10
$1.10 270,000 $1.10 4.50 145,000 $1.10
$0.01 50,000 $0.01 4.20 16,668 $0.01
</TABLE>
In May 1997, the Company granted certain employees options to acquire
40,000 shares of the Company's common stock at $1.10 per share. These options
vested immediately. The Company recognized approximately $32,000 of stock
compensation expense related to the issuance of these options.
9. Commitments
The Company is obligated under various capital leases for computer
equipment that expire at various dates through 1999. The gross amount of
computer equipment and related accumulated amortization included in property
and equipment and recorded under capital lease is as follows:
<TABLE>
<CAPTION>
September 31, May 31,
1996 1997
------------- --------
<S> <C> <C>
Computer Equipment................................. $126,686 $126,686
Less accumulated amortization.................... (23,226) (40,117)
-------- --------
$103,460 $ 86,569
======== ========
</TABLE>
Amortization of assets held under capital lease for the period November
6, 1995 (inception) through September 30, 1996 and the period October 1, 1996
through May 31, 1997 of approximately $23,000 and $17,000, respectively, is
included with depreciation expense.
F-40
<PAGE>
BOXTOP INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Future minimum lease payments under non-cancelable operating leases and
future minimum capital lease payments as of May 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year Ending Capital Operating
May 31, Leases Leases
----------- -------- ---------
<S> <C> <C>
1998.................................................. $ 52,500 $212,208
1999.................................................. 52,500 212,208
2000.................................................. 4,015 212,208
2001.................................................. -- 123,788
-------- --------
Total minimum lease payments............................ $109,015 $760,412
======== ========
</TABLE>
Rental expense under operating leases, primarily the Company's office
facility, for the period November 6, 1995 (inception) through September 30,
1996 and the period October 1, 1996 through May 31, 1997 totaled approximately
$96,000 and $154,000, respectively.
10. Employee Benefit Plan
During the period October 1, 1996 through May 31, 1997, the Company
established a 401(k) plan (the Plan) under Section 401(k) of the Internal
Revenue Code. The Plan permitted the Company to make discretionary
contributions to employees' 401(k) accounts, subject to IRS limitations on
maximum contributions. During the period from October 1, 1996 through May 31,
1997, the Company made no contributions to this plan.
11. Related Party Transactions
The amounts due to affiliate represent monies owed to BoxTop
Entertainment, Inc., an affiliated company who provided non-interest bearing
advances to the Company. During the period November 6, 1995 through September
30, 1996, certain shared operating expenses including payroll, rent and other
costs were allocated between BoxTop Entertainment, Inc. and the Company. Costs
allocated to the Company were approximately $280,000, and are reflected in
general and administrative expenses in the accompanying financial statements.
The Company made non-interest bearing advances to its principal
shareholder. Amounts outstanding at September 30, 1996 and May 31, 1997 were
$18,945 and $79,565, respectively.
At September 30, 1996 and May 31, 1997, the Company had outstanding loans
of $200,000 and $100,000, respectively, due to certain of its shareholders. The
loans bear interest at 8% per annum.
12. Subsequent Events
On May 30, 1997, the Company was acquired by iXL Enterprises, Inc.
F-41
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of iXL Enterprises, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations and change in members' deficit and of cash flows present fairly,
in all material respects, the financial position of Green Room Productions
L.L.C. at December 31, 1997, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Atlanta, Georgia
September 3, 1998
F-42
<PAGE>
GREEN ROOM PRODUCTIONS L.L.C.
BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
ASSETS
Current assets
Cash............................................................ $ 37,532
Accounts receivable............................................. 282,573
Cost and estimated earnings in excess of billings on uncompleted
contracts...................................................... 39,660
Due from bank for factored accounts receivable.................. 10,878
----------
Total current assets.......................................... 370,643
Equipment, net.................................................... 123,388
Other assets...................................................... 3,000
----------
Total assets.................................................. $ 497,031
==========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities
Accounts payable................................................ $ 82,888
Accrued expenses................................................ 77,727
Short-term borrowings........................................... 118,170
Current portion of capital lease obligations.................... 55,367
Billings in excess of costs and estimated earnings on
uncompleted contracts.......................................... 43,073
----------
Total current liabilities..................................... 377,225
Capital lease obligations......................................... 20,583
----------
Total liabilities............................................. 397,808
----------
Members' equity
Members' Units, no par value; 1,000,000 units issued and
outstanding....................................................
Unallocated capital............................................. 1,093,411
Members' deficit................................................ (994,188)
----------
Total members' equity......................................... 99,223
----------
Commitments.......................................................
----------
Total liabilities and members' equity......................... $ 497,031
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-43
<PAGE>
GREEN ROOM PRODUCTIONS L.L.C.
STATEMENT OF OPERATIONS AND CHANGE IN MEMBERS' DEFICIT
<TABLE>
<CAPTION>
For the year
ended
December 31,
1997
------------
<S> <C>
Revenues.......................................................... $1,483,003
Cost of revenues.................................................. 948,011
----------
Gross profit.................................................... 534,992
Selling, general and administrative expenses...................... 970,143
Depreciation and amortization..................................... 58,894
----------
Loss from operations............................................ (494,045)
Interest expense and other, net................................... (16,672)
----------
Net loss........................................................ (510,717)
Members' deficit, beginning of year............................... (483,471)
----------
Members' deficit, end of year..................................... $ (994,188)
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE>
GREEN ROOM PRODUCTIONS L.L.C.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the year
ended
December 31,
1997
------------
<S> <C>
Cash flows from operating activities
Net loss......................................................... $(510,717)
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities
Depreciation and amortization................................... 58,894
Changes in operating assets and liabilities
Accounts receivable............................................ (215,909)
Costs and estimated earnings in excess of billings on
uncompleted contracts......................................... (21,912)
Other assets................................................... 23,164
Accounts payable and accrued expenses.......................... 95,723
Billings in excess of costs and estimated earnings on
uncompleted contracts......................................... 43,073
---------
Net cash used in operating activities......................... (527,684)
---------
Cash flows from investing activities
Capital expenditures............................................. (9,182)
---------
Net cash used in investing activities......................... (9,182)
---------
Cash flows from financing activities
Net proceeds from factored account receivables................... 54,391
Payments on capital leases....................................... (42,752)
---------
Net cash provided by financing activities..................... 11,639
---------
Net decrease in cash.......................................... (525,227)
Cash, beginning of year........................................... 562,759
---------
Cash, end of year................................................. $ 37,532
=========
Supplemental disclosure of cash flow information
Cash paid during the period for interest......................... $ 29,662
=========
Non-cash investing and financing activities
Acquisition of equipment through capital leases.................. $ 65,503
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-45
<PAGE>
GREEN ROOM PRODUCTIONS L.L.C.
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business and Summary of Significant Accounting Policies
Nature of business
Green Room Productions L.L.C. (the "Company") creates consumer-oriented
content for the World Wide Web (the "Web"). The content developed for the Web
consists of informative and promotional web sites with a focus on the travel
industry. The Company's customers are located throughout the United States.
Significant accounting policies
Revenue recognition
Revenue from service contracts is recognized over the contractual period
using the percentage-of-completion method based on when services are performed.
Advance billings in excess of costs represent deferred revenue and are recorded
as billings in excess of costs and estimated earnings on uncompleted contracts.
Unbilled receivables in excess of billings represent earned revenues and are
recorded as costs and estimated earnings in excess of billings on uncompleted
contracts. Operating expenses, including indirect costs and administrative
expenses, are charged to income as incurred and are not allocated to contract
costs. At the time a loss on a contract becomes known, the entire amount of the
estimated loss is accrued.
Equipment
Equipment is recorded at cost, less accumulated depreciation.
Expenditures for renewals and improvements that significantly add to the
productive capacity or extend the useful life of an asset are capitalized.
Expenditures for maintenance and repairs are charged to operations as incurred.
Depreciation expense is provided on the straight-line method over the estimated
useful lives for purchased assets, which range from 3 to 7 years. Equipment
held under capital lease is amortized on the straight-line method over the
lesser of the useful life or the lease term.
Income taxes
The Company is organized as a limited liability corporation (L.L.C.). As
such, the Company's income, or losses, are passed-through directly to the
shareholders of the Company. As a result, no provision for income taxes has
been made in the accompanying financial statements.
Stock-based compensation
The Company has elected to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25) and related Interpretations and has elected the disclosure option of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (FAS 123). Accordingly, compensation cost for stock options
is measured as the excess, if any, of the fair value of the Company's stock at
the date of the grant over the amount an employee must pay to acquire the
stock.
Fair value of financial instruments
The carrying amounts of financial instruments including cash, accounts
receivable, accounts payable and accrued expenses approximate fair value. The
carrying amounts of borrowings approximate fair value based on current rates of
interest available to the Company for loans of similar maturities.
F-46
<PAGE>
GREEN ROOM PRODUCTIONS L.L.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Comprehensive income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" requires entities to report comprehensive income, which
represents the change in equity during a period from non-owner sources. The
Company has not incurred any such activity other than the net loss for all
periods presented.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses during the reporting period. Actual results could differ from
those estimates and could materially affect the reported amounts of assets,
liabilities and future operating results.
2. Equipment
Equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Computer equipment.............................................. $147,279
Computer software............................................... 21,577
Furniture and fixtures.......................................... 35,058
--------
203,914
Less accumulated depreciation and amortization.................. (80,526)
--------
Equipment, net.................................................. $123,388
========
</TABLE>
At December 31, 1997, the Company had equipment under capital lease, net
of amortization, of $75,486.
3. Borrowings
Borrowings consist of the following:
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Capital lease obligations, payable in monthly installments of
$137 to $1,738 expiring from 1998 to 2000, collateralized by
equipment with a net book value of $75,486 as of December
31, 1997.................................................... $ 75,950
Borrowing, secured by factored accounts receivable........... 54,391
Note payable to a member, unsecured, which provides for
quarterly interest only payments at 11%..................... 9,423
Note payable to a member, unsecured, which provides for
quarterly interest only payments at 11%..................... 27,416
Note payable to a member, unsecured, which provides for
quarterly interest only payments at 11%..................... 26,940
---------
194,120
Less current maturities...................................... (173,537)
---------
Long-term portion............................................ $ 20,583
=========
</TABLE>
F-47
<PAGE>
GREEN ROOM PRODUCTIONS L.L.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Total interest expense recognized for the year ended December 31, 1997
was $18,785, including $8,048 owed to related parties.
During 1996 the Company entered into an agreement with a bank whereby
the Company sold certain qualified accounts receivable to the bank, with
recourse, for the amount of the accounts receivable less fees and interest.
Fees were calculated at 1% of the amount of the receivable at the date of
sale. Interest is calculated as 0.2% of the amount of the outstanding balance
for each day the receivable is outstanding. As of December 31, 1997, the
Company had an outstanding factored balance of $54,391.
The aggregate maturities required on notes payable and capital lease
obligations are as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1998........................................................... $173,537
1999........................................................... 26,761
2000........................................................... 1,637
Less amounts representing interest on capital leases........... (7,815)
--------
$194,120
========
</TABLE>
4. Employee Benefits
Unit plan
During 1996, the Company adopted an employee unit plan which provides
for the granting of member units to officers and other key employees of the
Company. These awards vest over a three year period. The plan terminates on
December 31, 2007. All new awards of units are withdrawn from the three
original members.
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for the plan. During the years ended December 31, 1997, no
compensation cost was recognized for issuance of 15,750 units under the
Company's plan.
401(k) savings plan
Effective April 1, 1997, the Company established a 401(k) plan for
substantially all employees over the age of 21 and with more than six months
of services as defined by the plan. The plan allows for discretionary employer
matching contributions up to 15% of the employees' compensation, subject to
limitations. The matching contributions made during the year ended December
31, 1997 were not significant.
F-48
<PAGE>
GREEN ROOM PRODUCTIONS L.L.C.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Concentrations of Credit Risk
Net sales for the year ended December 31, 1997 for several major
customers, together with the receivable due from each customer, are presented
below. The Company does not obtain, nor require, any collateral or other
security instruments related to these balances.
<TABLE>
<CAPTION>
December 31,
1997
---------------------
Accounts
Amount of Receivable
Customer Net Sales Balance
-------- ---------- ----------
<S> <C> <C>
A.................................................. $ 506,557 $ 39,998
B.................................................. 201,637 30,682
C.................................................. 177,245 12,529
D.................................................. 139,500 59,433
E.................................................. 127,901 45,009
---------- --------
$1,152,840 $187,651
========== ========
</TABLE>
6. Commitments
Future minimum lease payments under non-cancelable operating leases as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1998............................................................. $64,000
1999............................................................. 2,000
-------
Total minimum lease payments..................................... $66,000
=======
</TABLE>
The Company's operating leases are primarily for office equipment and the
Company's office facility. Rental expense under operating leases for the year
ended December 31, 1997 totaled approximately $139,000.
7. Subsequent Event
On February 5, 1998, the Company was acquired by iXL Enterprises, Inc.
F-49
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
iXL Enterprises, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in shareholders' deficit, and of cash flows present
fairly, in all material respects, the financial position of Digital Planet at
September 30, 1997, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Atlanta, Georgia
July 13, 1998
F-50
<PAGE>
DIGITAL PLANET
BALANCE SHEET
<TABLE>
<CAPTION>
September 30, March 31,
1997 1998
------------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash.............................................. $ 87,355 $ 98,302
Accounts receivable............................... 482,997 651,770
Cost and estimated earnings in excess of billings
on uncompleted contracts......................... 92,091 --
Other current assets.............................. 48,162 21,977
----------- -----------
Total current assets............................ 710,605 772,049
Equipment, net...................................... 188,559 450,776
Other assets........................................ 19,632 26,474
----------- -----------
Total assets.................................... $ 918,796 $ 1,249,299
=========== ===========
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable.................................. $ 227,597 $ 258,779
Accrued expenses.................................. 228,218 173,530
Short-term borrowings............................. 762,225 1,096,502
Current portion of capital lease obligations...... 9,936 26,179
Billings in excess of costs and estimated earnings
on uncompleted contracts......................... 32,874 83,912
----------- -----------
Total current liabilities....................... 1,260,850 1,638,902
Deferred rent....................................... -- 28,131
Capital lease obligations........................... 8,006 100,506
----------- -----------
Total liabilities............................... 1,268,856 1,767,539
----------- -----------
Series A mandatorily redeemable convertible
preferred stock, 1,966,163 shares designated;
811,597 shares issued and outstanding.............. 613,567 613,567
----------- -----------
Series A preferred stock warrants, 1,154,566
outstanding........................................ 161,639 161,639
----------- -----------
Shareholders' deficit
Common stock, no par value; 40,000,000 shares
authorized; 9,579,500 and 9,580,000 shares issued
and outstanding at September 30, 1997 and March
31, 1998, respectively........................... 9,580 9,830
Additional paid-in capital.......................... 48,838 48,838
Accumulated deficit................................. (1,183,684) (1,352,114)
----------- -----------
Total shareholders' deficit..................... (1,125,266) (1,293,446)
----------- -----------
Commitments
----------- -----------
Total liabilities and shareholders' deficit..... $ 918,796 $ 1,249,299
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-51
<PAGE>
DIGITAL PLANET
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the
Year For the Six Months
Ended Ended
September March 31,
30, ---------------------- --- ---
1997 1997 1998
---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues.......................... $3,745,947 $1,921,302 $1,598,868
Cost of revenues.................. 2,031,531 1,037,503 1,006,664
---------- ---------- ----------
Gross profit.................... 1,714,416 883,799 592,204
Selling, general and
administrative expenses.......... 1,209,550 513,647 625,766
Depreciation and amortization..... 45,277 11,319 36,658
---------- ---------- ----------
Income (loss) from operations... 459,589 358,833 (70,220)
Interest expense, net............. (56,824) (11,867) (97,410)
---------- ---------- ----------
Income (loss) before income
taxes.......................... 402,765 346,966 (167,630)
Income tax provision.............. 800 800 800
---------- ---------- ----------
Net income (loss)............... 401,965 346,166 (168,430)
Accretion on Series A mandatorily
redeemable convertible preferred
stock.......................... (149,646) (149,646) --
---------- ---------- ----------
Net income (loss) available to
common shareholders.............. $ 252,319 $ 196,520 $ (168,430)
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-52
<PAGE>
DIGITAL PLANET
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Common Stock
------------------ Additional
Shares Paid-in Accumulated
Outstanding Amount Capital Deficit Total
----------- ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, September 30,
1996................... 9,579,500 $9,580 $48,838 $(1,436,003) $(1,377,585)
Accretion on Series A
mandatorily redeemable
convertible preferred
stock.................. -- -- -- (149,646) (149,646)
Net income............ -- -- -- 401,965 401,965
--------- ------ ------- ----------- -----------
Balance, September 30,
1997................... 9,579,500 9,580 48,838 (1,183,684) (1,125,266)
Exercise of stock
options (unaudited).... 500 250 -- -- 250
Net loss (unaudited).. -- -- -- (168,430) (168,430)
--------- ------ ------- ----------- -----------
Balance, March 31, 1998
(unaudited)............ 9,580,000 $9,830 $48,838 $(1,352,114) $(1,293,446)
========= ====== ======= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-53
<PAGE>
DIGITAL PLANET
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months
For the year ended
ended March 31,
September 30, --------------------
1997 1997 1998
------------- --------- ---------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss)......................... $ 401,965 $ 346,166 $(168,430)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities
Depreciation and amortization............ 45,277 11,319 36,658
Changes in operating assets and
liabilities
Accounts receivable..................... (194,908) (81,190) (168,773)
Costs and estimated earnings in excess
of billings on uncompleted contracts... (92,091) -- 92,091
Other assets............................ (44,429) (2,537) 19,222
Accounts payable and accrued expenses... 263,579 (12,357) (23,506)
Billings in excess of costs and
estimated earnings on uncompleted
contracts.............................. (819,073) (239,143) 51,038
Deferred rent........................... -- -- 28,131
--------- --------- ---------
Net cash (used in) provided by
operating activities.................. (439,680) 22,258 (133,569)
--------- --------- ---------
Cash flows from investing activities
Capital expenditures...................... (97,679) (10,855) (185,810)
Other..................................... (8,060) -- --
--------- --------- ---------
Net cash used in investing activities.. (105,739) (10,855) (185,810)
--------- --------- ---------
Cash flows from financing activities
Proceeds from factored accounts
receivable............................... 167,081 -- 87,250
Payments on revolving line of credit...... (50,000) -- --
Payments on capital leases................ (10,353) (2,588) (4,202)
Payments on short term borrowings......... (85,846) (24,711) (2,972)
Proceeds from short term borrowings....... 500,000 -- 250,000
Proceeds from exercise of stock options... -- -- 250
--------- --------- ---------
Net cash provided by (used in)
financing activities.................. 520,882 (27,299) 330,326
--------- --------- ---------
Net (decrease) increase in cash........ (24,537) (15,896) 10,947
Cash, beginning of period.................. 111,892 111,892 87,355
--------- --------- ---------
Cash, end of period........................ $ 87,355 $ 95,996 $ 98,302
========= ========= =========
Supplemental disclosures of cash flow
information
Cash paid during the period for interest.. $ 38,898 $ 11,867 $ 65,023
========= ========= =========
Cash paid during the period for income
taxes.................................... $ 800 $ -- $ --
========= ========= =========
Non-cash investing and financing activities
Accretion on Series A mandatorily
redeemable convertible preferred stock... $ 149,646 $ 149,646 $ --
========= ========= =========
Acquisition of equipment through capital
leases.................................... $ -- $ -- $ 112,944
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-54
<PAGE>
DIGITAL PLANET
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business and Summary of Significant Accounting Policies
Nature of business
Digital Planet (the "Company") was incorporated on October 26, 1994 in
California and is engaged in the development of consumer-oriented content for
the World Wide Web and other media. The Company's customers are located
throughout the United States.
Significant accounting policies
Revenue recognition
Revenue from service contracts is recognized over the contractual period
using the percentage-of-completion method based on when services are performed.
Advance billings in excess of costs represent deferred revenue and are recorded
as billings in excess of costs and estimated earnings on uncompleted contracts.
Unbilled receivables in excess of billings represent earned revenues and are
recorded as costs and estimated earnings in excess of billings on uncompleted
contracts. Revenue for services in which reasonable estimates to complete could
not be made is recognized upon completion and when all remaining obligations
are not significant. Operating expenses, including indirect costs and
administrative expenses, are charged to income as incurred and are not
allocated to contract costs. Any anticipated losses on contracts are charged to
earnings when identified.
Equipment
Equipment is recorded at cost, less accumulated depreciation.
Expenditures for renewals and improvements that significantly add to the
productive capacity or extend the useful life of an asset are capitalized.
Expenditures for maintenance and repairs are charged to operations as incurred.
Depreciation expense is provided on the straight-line method over the estimated
useful lives for purchased assets, which range from 3 to 7 years. Equipment
held under capital lease is amortized on the straight-line method over the
lesser of the useful life or the lease term. Leasehold improvements are
amortized using the straight-line method over the lesser of the useful life or
the lease term.
Income taxes
The Company has applied the asset and liability approach of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", for
financial accounting and reporting purposes. The Company accounts for certain
items of income and expense in different time periods for financial reporting
and income tax purposes. Provisions for deferred income taxes are made in
recognition of such temporary differences, where applicable. A valuation
allowance is established against deferred tax assets unless the Company
believes it is more likely than not that the benefit will be realized.
Stock-based compensation
The Company has elected to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25) and related Interpretations and has elected the disclosure option of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (FAS 123).
F-55
<PAGE>
DIGITAL PLANET
NOTES TO FINANCIAL STATEMENTS--(Continued)
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the fair value of the Company's stock at the date of the grant over the
amount an employee must pay to acquire the stock.
Fair value of financial instruments
The carrying amounts of financial instruments including cash, accounts
receivable, accounts payable, accrued expenses and mandatorily redeemable
convertible preferred stock approximate fair value. The carrying amount of
borrowings approximate fair value based on current rates of interest available
to the Company for loans of similar maturities.
Comprehensive income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" requires entities to report comprehensive income, which
represents the change in equity during a period from non-owner sources. The
Company has not incurred any such activity other than the net income (loss) for
all periods presented.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses during the reporting period. Actual results could differ from
those estimates and could materially affect the reported amounts of assets,
liabilities and future operating results.
Interim financial information
The accompanying financial statements and related notes as of March 31,
1998 and for the six months ended March 31, 1997 and 1998 are unaudited. In the
opinion of management, the unaudited interim financial statements have been
prepared on the same basis as the audited financial statements and include all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the Company's financial position as of March 31, 1998 and the
results of the Company's operations and its cash flows for the six months ended
March 31, 1997 and 1998. The results for the six months ended March 31, 1998
are not necessarily indicative of the results to be expected for the year
ending September 30, 1998.
2. Equipment
Equipment consists of the following:
<TABLE>
<CAPTION>
September 30, March 31,
1997 1998
------------- -----------
(unaudited)
<S> <C> <C>
Computer equipment................................ $253,608 $468,297
Computer software................................. 20,483 24,982
Leasehold improvements............................ 12,361 91,926
-------- --------
286,452 585,205
Less accumulated depreciation and amortization.... (97,893) (134,429)
-------- --------
Equipment, net.................................... $188,559 $450,776
======== ========
</TABLE>
F-56
<PAGE>
DIGITAL PLANET
NOTES TO FINANCIAL STATEMENTS--(Continued)
At September 30, 1997 and March 31, 1998, the Company had equipment under
capital lease, net of amortization, of $25,066 and $131,518, respectively.
3. Borrowings
Borrowings consist of the following:
<TABLE>
<CAPTION>
September 30, March 31,
1997 1998
------------- -----------
(unaudited)
<S> <C> <C>
Note payable, unsecured, due March 1, 1998 which
provides for payment of the principal balance,
plus interest accrued at prime plus 2%......... $ 500,000 $ 500,000
Note payable, unsecured, due April 15, 1998
which provides for payment of the principal
balance plus interest accrued at 12%........... -- 250,000
Capital lease obligations, payable in monthly
instalments of $156 to $1,083 expiring from
1998 to 2003, collateralized by equipment with
a net book value of $25,066 and $131,518 at
September 30, 1997 and March 31, 1998,
respectively................................... 17,942 126,685
Borrowing, secured by factored accounts
receivable..................................... 167,081 254,331
Note payable to shareholder, unsecured, which
provides for periodic principal payments of
$500 to $1,500 plus interest at 10%. The note
was repaid in May 1998......................... 55,659 56,014
Note payable to an officer, unsecured, which
provides for monthly interest only payments at
10%. The note was repaid in May 1998........... 10,786 8,339
Note payable to shareholder, unsecured, which
provides for monthly interest only payments at
10%. The note was repaid in May 1998........... 28,699 27,818
--------- -----------
780,167 1,223,187
Less current maturities......................... (772,161) (1,122,681)
--------- -----------
Long-term portion............................... $ 8,006 $ 100,506
========= ===========
</TABLE>
Total interest expense recognized by the Company for the year ended
September 30, 1997 and the six months ended March 31, 1998 was $60,639 and
$97,902, respectively, including $34,905 and $38,381, respectively, recognized
with respect to related party borrowings. The Company maintained a $50,000 line
of credit which expired and was repaid on July 1, 1997.
The $500,000 note payable was issued pursuant to an agreement with a
private investor and included a detachable warrant to purchase up to 166,667
shares of the Company's common stock for $3 per share through April 2000 (see
Note 6). The value of the warrants was not material. The note was repaid with
proceeds from the sale of the Company to iXL Enterprises, Inc. (see Note 11).
The warrant was not exercised. On July 25, 1997, the Company entered into an
agreement with a bank whereby the Company sold certain qualified accounts
receivable to the bank, with recourse, for the amount of the accounts
receivable less fees and interest. Fees are calculated at 1% of the amount of
the accounts receivable at the date of sale. Interest is calculated as 0.1% of
the amount of the outstanding balance for each day the accounts receivable are
outstanding. As of May 12, 1998, all of the factored accounts receivable had
been collected from the customer.
On January 14, 1998, the Company entered into an agreement with iXL
Enterprises, Inc. to borrow $250,000 pursuant to a note which accrues interest
at 12% per year.
F-57
<PAGE>
DIGITAL PLANET
NOTES TO FINANCIAL STATEMENTS--(Continued)
The aggregate maturities required on borrowings including capital lease
obligations are as follows:
<TABLE>
<CAPTION>
Year ending September 30,
-------------------------
<S> <C>
1998............................................................. $774,500
1999............................................................. 7,625
2000............................................................. 1,271
--------
783,396
Less amounts representing interest on capital leases............... (3,229)
--------
$780,167
========
</TABLE>
4. Income Taxes
At September 30, 1997 the Company had net operating loss carryforwards
for federal income tax purposes of approximately $204,000. The carryforwards
expire in varying amounts in 2003 through 2013. A valuation allowance has been
established against the benefit of the net operating loss carryforwards and
other deferred tax assets which the Company does not believe are more likely
than not to be realized. Under the Tax Reform Act of 1986, the amount of and
the benefit from federal net operating losses that can be carried forward may
be limited in certain circumstances. Events which may cause changes in the
Company's tax carryovers include, but are not limited to, a cumulative
ownership change of more than 50% over a three-year period.
The income tax provision differs from the amount of income tax
determined by applying the U.S. federal income tax rate to pretax income for
the year ended September 30, 1997 due to the utilization of net operating loss
carryforwards which had been previously reserved for.
5. Series A Mandatorily Redeemable Convertible Preferred Stock
In June 1996, the Company entered into an agreement to issue 811,597
shares of Series A 8% Mandatorily Redeemable Convertible Preferred Stock and
1,154,566 Preferred Stock Warrants in return for the termination of a loan,
advances and the cancellation of previously issued warrants with a combined
carrying value totaling $511,306. The aggregate authorized number of preferred
shares is 10,000,000 of which 1,966,163 are designated as Series A Mandatorily
Redeemable Convertible Preferred Stock ("Series A Preferred Stock") with
811,597 shares issued and outstanding at September 30, 1997 and March 31,
1998.
Each share of Series A Preferred Stock outstanding is convertible at the
option of the holder into one share of common stock, subject to certain
adjustments, and automatically converts upon the completion of an underwritten
public offering of common stock with gross proceeds of at least $7.5 million
and a public offering price of not less than $2.52 per share.
The holders of the Series A Preferred Stock are entitled to receive
their original issuance price of $0.63 per share in liquidation, plus an
amount equal to all declared but unpaid dividends, prior and in preference to
any distribution to the holders of common stock. At September 30, 1997 and
March 31, 1998, the aggregate liquidation value of the Series A Preferred
Stock is $511,306. Each share of preferred stock is redeemable at the option
of the holder for $613,567 (120% of its original issuance price) any time
after January 1, 1997.
F-58
<PAGE>
DIGITAL PLANET
NOTES TO FINANCIAL STATEMENTS--(Continued)
The holders of the preferred stock are entitled to elect two members to
the Board of Directors and have voting rights equal to common stock on an if-
converted basis. Preferred stockholders also are entitled to receive
noncumulative dividends in preference to any dividends on common stock at a
rate per share equal to 8% of the original per share value. No dividends have
been declared as of September 30, 1997 or March 31, 1998. The Company is
restricted from authorizing or creating any new class or series of stock which
has a preference over or is equal to the preferred stock.
The 1,154,566 Preferred Stock Warrants allow the holders to purchase
1,154,566 shares of the Company's Series A Preferred Stock at $0.63 per share
subject to adjustment upon the occurrence of certain events as defined in the
agreement. The warrants are exercisable through the earlier of July 10, 1999 or
a public offering, as defined, and provide for certain registration rights.
In May 1998, the Company purchased all of the outstanding Series A
Preferred Stock and Preferred Stock Warrants from the holders (see Note 11).
The combined carrying value of $511,306 was allocated between the Series
A Preferred Stock and the Preferred Stock Warrants based upon the relative fair
value of each instrument. The value allocated to the warrants was $161,639 and
the amount allocated to the stock was $349,667. The Series A Preferred Stock
carrying value was increased such that at January 1, 1997, when the stock can
be redeemed, it is stated at its redemption value. The Company has recorded
this accretion using the effective interest method by increasing the value of
the Series A Preferred Stock and increasing the accumulated deficit.
Mandatorily redeemable preferred stock activity consists of the following
for the year ended September 30, 1997:
<TABLE>
<S> <C>
Balance at September 30, 1996...................................... $463,921
Accretion to redemption value.................................... 149,646
--------
Balance at September 30, 1997...................................... $613,567
========
</TABLE>
6. Common Stock Warrants
As of both September 30, 1997 and March 31, 1998, the Company had
warrants outstanding held by a customer and a private lender (see Note 3) which
allowed the holders to purchase 348,842 and 166,667 shares of the Company's
common stock, respectively, at a weighted-average price of $1.18 and $3.00 per
share, respectively. The customer warrants were issued in May 1996 and were
allocated a value of approximately $49,000.
7. Employee Benefits
Stock option plan
In June 1996, the Company adopted a stock option plan which provides for
the grant of incentive and nonqualified options to officers, other key
employees of the Company and certain directors and consultants to purchase up
to 421,500 shares of the Company's common stock. On January 1, 1998, the number
of authorized shares was increased to 1,000,000. Options are granted at prices
equal to at least 100% of the fair market value of the stock at the date of
grant, expire no later than ten years from the date of grant and become
exercisable as the Board of Directors determines. At September 30, 1997 and
March 31, 1998, respectively, 387,457 and 990,700 stock options were
outstanding with exercise prices ranging from $0.50 to $6.00 per share.
F-59
<PAGE>
DIGITAL PLANET
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table summarizes stock option activity for the year ended
September 30, 1997:
<TABLE>
<CAPTION>
September 30,
1997
-----------------
Weighted
Average
Exercise
Options Price
------- --------
<S> <C> <C>
Outstanding, beginning of year............................. 290,457 $0.55
Granted.................................................... 145,000 $2.00
Exercised.................................................. -- --
Forfeited.................................................. (48,000) $1.24
Outstanding, end of year................................... 387,457 $1.01
------- -----
Options exercisable at end of year......................... 58,091 $0.55
======= =====
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------- ----------------------
Number Weighted Number
Outstanding Average Weighted Exercisable Weighted
at Remaining Average at Average
September 30, Contractual Exercise September 30, Exercise
Range of Exercise Prices 1997 Life Price 1997 Price
------------------------ ------------- ----------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
$0.50................... 175,000 3.66 $0.50 35,000 $0.50
$0.63................... 115,457 3.92 $0.63 23,091 $0.63
$1.24................... 55,000 2.16 $1.24 -- --
$3.00................... 30,000 4.54 $3.00 -- --
$6.00................... 12,000 4.58 $6.00 -- --
------- ------
387,457 58,091
======= ======
</TABLE>
The Company granted 729,200 options during the six months ended March 31,
1998. The Company applies APB Opinion No. 25 and related Interpretations in
accounting for the plan. During the year ended September 30, 1997 and the six
months ended March 31, 1998, no compensation cost was recognized for the
issuance of stock options under the Company's plan. Had compensation cost for
the Company's stock option plan been determined based on the fair value method
as described in Financial Accounting StandardsNo. 123, "Accounting for Stock-
Based Compensation", there would not be a material difference from the
Company's reported results of operations.
401(k) savings plan
Effective January 1, 1996, the Company established a 401(k) plan for
substantially all employees over the age of 21 with more than six months of
service as defined by the plan. The plan allows for discretionary employer
matching contribution up to 4% of the employees' compensation, subject to
limitations. The matching contributions made during the year ended September
30, 1997 and the six months ended March 31, 1998 were not material.
F-60
<PAGE>
DIGITAL PLANET
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. Related Party Transactions
During the year ended September 30, 1997 and the six months ended March
31, 1998, the Company performed services for one of its Series A Preferred
Stock investors and recognized revenue in the amount of $615,640 and $40,000,
respectively.
9. Concentrations of Credit Risk
Net sales for the year ended September 30, 1997 for several major
customers, together with the receivable due from each customer, are presented
below. The Company does not obtain, nor require, any collateral or other
security instruments related to these balances.
<TABLE>
<CAPTION>
September 30, 1997
---------------------
Accounts
Amount of Receivable
Customer Net Sales Balance
-------- ---------- ----------
<S> <C> <C>
A.................................................... $ 458,400 $ --
B (related party, see Note 8)........................ 615,640 5,000
C.................................................... 1,082,537 139,323
D.................................................... 1,143,973 315,899
---------- --------
$3,300,550 $460,222
========== ========
</TABLE>
10. Commitments
Future minimum lease payments under non-cancelable operating leases as of
September 30, 1997 are as follows:
<TABLE>
<CAPTION>
Year ending September 30,
-------------------------
<S> <C>
1998.............................................................. $118,806
1999.............................................................. 183,450
2000.............................................................. 195,483
2001.............................................................. 207,510
2002.............................................................. 219,543
Thereafter........................................................ 55,638
--------
Total minimum lease payments...................................... $980,430
========
</TABLE>
The Company's operating leases are primarily for office equipment and the
Company's office facility. Rental expense under operating leases for the year
ended September 30, 1997 and the six months ended March 31, 1998 totaled
approximately $223,000 and $127,000, respectively.
11. Subsequent Events
On May 12, 1998, the Company was acquired by iXL Enterprises, Inc.
F-61
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
iXL Enterprises, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in shareholders' deficit, and of cash flows present
fairly, in all material respects, the financial position of Micro Interactive,
Inc. at December 31, 1997, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Atlanta, Georgia
June 26, 1998
F-62
<PAGE>
MICRO INTERACTIVE, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash................................................ $ 203,414 $ 91,994
Accounts receivable................................. 651,239 521,407
Costs and estimated earnings in excess of billings
on uncompleted contracts........................... 371,300 300,133
Prepaid expenses.................................... 56,944 69,569
---------- ----------
Total current assets.............................. 1,282,897 983,103
Property and equipment, net........................... 113,936 106,248
Other assets.......................................... 49,617 49,617
---------- ----------
Total assets...................................... $1,446,450 $1,138,968
========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable.................................... $ 139,399 $ 94,954
Accrued expenses.................................... 79,758 40,450
Accrued payroll..................................... 80,900 80,900
Borrowings under line of credit..................... -- 25,000
Current portion of long-term debt................... 244,444 215,277
Billings in excess of costs and estimated earnings
on uncompleted contracts........................... 675,000 441,372
Current portion of capital lease obligations........ 29,000 31,000
---------- ----------
Total current liabilities......................... 1,248,501 928,953
Due to related parties................................ 250,000 250,000
Deferred rent......................................... 89,713 89,713
Capital lease obligations............................. 16,000 14,000
---------- ----------
Total liabilities................................. 1,604,214 1,282,666
---------- ----------
Shareholders' deficit
Common stock, $.01 par value; 3,000,000 shares
authorized; 796,000 shares issued and outstanding.. 7,960 7,960
Additional paid-in capital.......................... 350,240 350,240
Accumulated deficit................................. (515,964) (501,898)
---------- ----------
Total shareholders' deficit....................... (157,764) (143,698)
---------- ----------
Commitments
---------- ----------
Total liabilities and shareholders' deficit....... $1,446,450 $1,138,968
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-63
<PAGE>
MICRO INTERACTIVE, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the three
For the year months ended March
ended 31,
December 31, -------------------
1997 1997 1998
------------ ---------- --------
(unaudited)
<S> <C> <C> <C>
Revenues..................................... $3,220,300 $1,116,206 $870,837
Cost of revenues............................. 1,788,706 679,279 506,968
---------- ---------- --------
Gross profit............................... 1,431,594 436,927 363,869
Selling, general and administrative
expenses.................................... 1,466,786 297,090 291,431
Depreciation and amortization................ 88,455 40,700 45,357
---------- ---------- --------
(Loss) income from operations.............. (123,647) 99,137 27,081
Interest expense, net........................ 37,549 2,751 10,648
---------- ---------- --------
(Loss) income before income taxes.......... (161,196) 96,386 16,433
Income tax provision......................... 3,900 855 2,367
---------- ---------- --------
Net (loss) income.......................... $ (165,096) $ 95,531 $ 14,066
========== ========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-64
<PAGE>
MICRO INTERACTIVE, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Common Stock
------------------ Additional
Shares Paid-in Accumulated
Outstanding Amount Capital Deficit Total
----------- ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1996.................... 750,000 $7,500 $ 17,500 $(288,268) $(263,268)
Distributions to
shareholders............ -- -- -- (62,600) (62,600)
Issuance of common stock,
net of stock issuance
costs................... 46,000 460 332,740 -- 333,200
Net loss............... -- -- -- (165,096) (165,096)
------- ------ -------- --------- ---------
Balance, December 31,
1997.................... 796,000 7,960 350,240 (515,964) (157,764)
Net income
(unaudited)........... -- -- -- 14,066 14,066
------- ------ -------- --------- ---------
Balance, March 31, 1998
(unaudited)............. 796,000 $7,960 $350,240 $(501,898) $(143,698)
======= ====== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-65
<PAGE>
MICRO INTERACTIVE, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the
three months
For the ended
year ended March 31,
December 31, ------------------
1997 1997 1998
------------ -------- --------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net (loss) income............................ $(165,096) $ 95,531 $ 14,066
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities
Depreciation and amortization............... 88,655 40,700 45,357
Non cash charge to operations............... 33,280 -- --
Changes in operating assets and liabilities
Accounts receivable........................ (105,604) 253,849 129,832
Costs and estimated earnings in excess of
billings on uncompleted contracts......... (125,300) 215,604 71,167
Accounts payable and accrued expenses...... (66,557) (137,908) (83,753)
Deferred rent.............................. 42,113 -- --
Billings in excess of costs and estimated
earnings on uncompleted contracts......... 235,700 (385,022) (233,628)
Other assets............................... (41,705) 51 (12,625)
--------- -------- --------
Net cash provided by (used in) operating
activities............................... (104,514) 82,805 (69,584)
--------- -------- --------
Cash flows from investing activities
Capital expenditures......................... (46,060) (13,431) (27,319)
--------- -------- --------
Net cash used in investing activities..... (46,060) (13,431) (27,319)
--------- -------- --------
Cash flows from financing activities
Proceeds (payments) on revolving line of
credit, net................................. (128,000) -- 25,000
Payments on long-term debt................... (75,000) (8,333) (29,167)
Proceeds from issuance of debt............... 250,000 -- --
Proceeds from issuance of common stock....... 299,920 -- --
Payments on capital leases................... (54,375) (10,200) (10,350)
Distributions to shareholders................ (62,600) (43,600) --
--------- -------- --------
Net cash provided by (used in) financing
activities............................... 229,945 (62,133) (14,517)
--------- -------- --------
Net increase (decrease) in cash........... 79,371 7,241 (111,420)
Cash, beginning of period..................... 124,043 124,043 203,414
Cash, end of period .......................... $ 203,414 $131,284 $ 91,994
========= ======== ========
Supplemental disclosures of cash flow
information
Cash paid during the period for interest..... $ 44,763 $ 4,931 $ 5,075
========= ======== ========
Non-cash investing and financing activities
Acquisition of equipment through capital
leases...................................... $ 18,175 $ 5,400 $ 9,500
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-66
<PAGE>
MICRO INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business and Summary of Significant Accounting Policies
Nature of business
Micro Interactive, Inc. (the Company) designs and produces interactive
multimedia software applications, primarily on CD-ROM, for use by worldwide
companies in connection with corporate communications, marketing, sales
publicity and training.
Significant accounting policies
Revenue recognition
The Company records revenues based on the completed contract method.
Accordingly, revenue is recognized only when all remaining obligations are not
significant. All related billings and costs for uncompleted contracts have been
deferred as billings on uncompleted contracts and costs on uncompleted
contracts.
Cash and cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Equipment
Equipment is recorded at cost, less accumulated depreciation.
Expenditures for renewals and improvements that significantly add to the
productive capacity or extend the useful life of an asset are capitalized.
Expenditures for maintenance and repairs are charged to operations as incurred.
Depreciation expense is provided on the straight-line method over the estimated
useful lives for purchased assets, which range from 5 to 7 years. Equipment
held under capital leases is amortized on the straight-line method over the
lesser of the useful life or the lease term.
Income taxes
The Company has elected to be taxed as an S Corporation for Federal and
State tax purposes, whereby the Company's taxable income accrues directly to
the shareholders. The Company remains subject to New York City and New York
State S Corporation taxes.
Stock-based compensation
The Company has elected to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations and has elected to elect the disclosure option of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123). Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair value of the Company's stock at the
date of the grant over the amount an employee must pay to acquire the stock.
F-67
<PAGE>
MICRO INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Fair value of financial instruments
The carrying amounts of financial instruments including cash, cash
equivalents, accounts receivable, accounts payable and accrued expenses
approximate fair value. The carrying amount of long-term debt approximates fair
value based on current rates of interest available to the Company for loans of
similar maturities.
Comprehensive income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" requires entities to report comprehensive income which
represents the change in equity during a period from non-owner sources. The
Company has not incurred any such activity other than its net income (loss) for
all periods presented.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses during the reporting period. Actual results could differ from
those estimates and could materially affect the reported amounts of assets,
liabilities and future operating results.
Interim Financial Information
The accompanying financial statements and related notes as of March 31,
1998 and for the three months ended March 31, 1997 and 1998 are unaudited. In
the opinion of management, the unaudited interim financial statements have been
prepared on the same basis as the audited financial statements and reflect all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the financial position as of March 31, 1998, and the results of
the Company's operations and its cash flows for the three months ended March
31, 1997 and 1998. The results for the three months ended March 31, 1998 are
not necessarily indicative of the results to be expected for the year ending
December 31, 1998.
2. Equipment
Equipment consists of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Furniture and fixtures............................. $ 76,668 $ 77,229
Computers and related equipment.................... 349,545 363,778
Leasehold improvements............................. 21,815 21,815
--------- ---------
448,028 462,822
Less accumulated depreciation and amortization..... (334,092) (356,574)
--------- ---------
Equipment, net..................................... $ 113,936 $ 106,248
========= =========
</TABLE>
At December 31, 1997, the Company had equipment under capital lease, net
of related amortization, of $27,300.
F-68
<PAGE>
MICRO INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. Concentrations of Credit Risk
For the year ended December 31, 1997, two customers (one through multiple
operating divisions located in various countries worldwide) accounted for
approximately 37.5% and 10.5% of total revenues, respectively.
4. Borrowings
Borrowings consist of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Term loans due to bank payable in monthly
principal instalments of $9,722 through January
1999, thereafter $6,944 through June 2000...... $244,444 $215,277
Notes payable to related parties due March 22,
2000........................................... 250,000 250,000
-------- --------
$494,444 $465,277
======== ========
</TABLE>
Revolving line of credit
The Company had a line of credit with the Bank of New York as of December
31, 1996 which allowed for advances up to $250,000 and expired on May 30, 1997.
On May 30, 1997 the Company entered into a new agreement with the same bank
which increased the line of credit to $500,000 allowing for advances in
increments of $25,000 and expiring on May 30, 1998. The line of credit is
payable on demand and bears interest at the bank's prime rate plus 1 3/4% (10
1/4% at December 31, 1997). The line of credit is secured by the Company's
assets. Amounts outstanding under the agreement at December 31, 1997 and March
31, 1998 were $0 and $25,000, respectively.
Term loans
On January 25, 1996, the Company entered into an agreement with the bank
of New York to borrow $100,000. The note is secured by the Company's assets and
bears interest at the bank's prime rate plus 1 3/4% and is payable in monthly
instalments of $2,778 through January 1999.
On May 30, 1997, the Company entered into an agreement with the Bank of
New York to increase its borrowings to $250,000. The note is secured by the
Company's assets and bears interest at the bank's prime rate plus 1 3/4%. The
loan is payable in monthly instalments of $6,944 through June 2000. The Company
is subject to certain covenants under the bank debt agreement, including
maintaining working capital and tangible net worth requirements, among others.
As of December 31, 1997, the Company had violated certain of these covenants.
The Company did not obtain waivers for these violations; however, the Company
repaid these borrowings subsequent to year end. As a result of the covenant
violation, the amount of the term loans outstanding as of December 31, 1997 is
classified as current.
Related party debt
In 1995, the Company entered into loan agreements with two related
parties. These loans in the amounts of $137,500 and $112,500 bear interest at
rates of 6 1/8% and 8 3/4%, respectively, and are due March 22, 2000. These
loans are subordinate to the term loans and line of credit with Bank of New
York.
F-69
<PAGE>
MICRO INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Interest expense recognized with respect to these borrowings for the year
ended December 31, 1997 was $21,098.
The aggregate maturities required on borrowings and capital lease
obligations as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
------------------------
<S> <C>
1998........................................................... $276,237
1999........................................................... 11,694
2000........................................................... 254,385
2001........................................................... 1,461
Less amounts representing interest on capital leases........... (4,333)
--------
$539,444
========
</TABLE>
5. Private Placement Offering
In June 1997, the Company sold 46,000 shares of common stock for
$299,920. Five of the six investors purchased shares of stock at $8.33 per
share with the remaining investor (a related party) purchasing 16,000 shares at
$6.25 per share pursuant to a warrant issued contemporaneously with the
offering. The Company has recorded a charge to operations of $33,280 to reflect
the lower share price paid by this investor. The Company issued 6,000 of the
46,000 shares to its legal counsel as payment for legal services rendered in
connection with the offering. Such costs have been netted against the proceeds
raised.
6. 1996 Stock Option Plan
The Company's 1996 Stock Option Plan provides for the granting to certain
employees as incentive stock options the purchase of up to 50,000 shares of the
Company's common stock. Options are exercisable over the exercise period (which
shall not exceed ten years from the date of grant) at such times and upon such
conditions as the stock option committee may determine. Options are granted at
fair market value as determined by the stock option committee except for stock
options to 10% or more shareholders, for whom the option price must be at least
110% of the fair market value.
Had compensation cost for the Company's plan been determined based on the
fair value at the grant date consistent with the provisions of FAS 123, the
Company's net loss would have been increased to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Net loss
As reported................................................. $(131,816)
Pro forma................................................... $(162,187)
</TABLE>
The minimum value of each option is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants during 1997; dividend yield of 0% for the period;
expected volatility of 60% for the period; average risk free interest rate
6.4%; expected life of 4.5 years for the period.
F-70
<PAGE>
MICRO INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
A summary of stock option activity as of and for the year ended December
31, 1997, is as follows:
<TABLE>
<CAPTION>
December 31,
1997
-----------------
Weighted
Average
Exercise
Options Price
------- --------
<S> <C> <C>
Outstanding at beginning of year......................... 11,000 $10.00
Granted.................................................. 16,500 $ 8.33
Forfeited................................................ (7,000) $10.00
------
Outstanding at end of year............................... 20,500 $ 9.06
======
Options exercisable at end of year....................... 6,500 $ 8.59
------
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------- --------------------------
Weighted
Average Weighted
Number Remaining Number Average
Range of Outstanding at Contractual Exercisable at Exercise
Exercise Prices December 31, 1997 Life December 31, 1997 Price
--------------- ----------------- ----------- ----------------- --------
<S> <C> <C> <C> <C>
$ 8.33 11,500 9.58 5,500 $ 8.33
$10.00 9,000 8.64 1,000 $10.00
------ -----
20,500 6,500 $ 8.59
====== =====
</TABLE>
7. Commitments
The Company leases its office under an operating lease which expires
December 2001. The lease provides for escalations for increases in real estate
taxes and operating expenses. Operating lease expense charged for the year
ended December 31, 1997 (consisting of the office lease) was $178,280. The
aggregate minimum rentals remaining through dates of expiration payable over
the next four years are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
------------------------
<S> <C>
1998........................................................... $184,900
1999........................................................... 184,900
2000........................................................... 184,900
2001........................................................... 184,900
--------
Total minimum lease payments................................... $739,600
========
</TABLE>
8. Subsequent Event
On May 8, 1998, the Company was acquired by iXL Enterprises, Inc.
F-71
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
iXL Enterprises, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in shareholders' equity (deficit), and of cash flows
present fairly, in all material respects, the financial position of
CommerceWave, Inc. at December 31, 1997, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Atlanta, Georgia
August 21, 1998
F-72
<PAGE>
COMMERCEWAVE, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash................................................ $ 277,080 $ 1,251
Accounts receivable less allowance for doubtful
accounts of $64,750 and $54,331, respectively...... 399,903 195,250
Other current assets................................ 12,131 2,400
--------- ---------
Total current assets.............................. 689,114 198,901
Equipment, net........................................ 167,086 150,614
Other assets.......................................... 22,929 14,719
--------- ---------
Total assets...................................... $ 879,129 $ 364,234
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.................................... $ 225,225 $ 188,142
Accrued expenses.................................... 122,508 143,781
Current portion of notes payable and capital lease
obligations........................................ 402,510 372,401
Advances from related parties....................... 27,770 71,276
--------- ---------
Total current liabilities......................... 778,013 775,600
Notes payable and capital lease obligations........... 24,659 25,454
--------- ---------
Total liabilities................................. 802,672 801,054
--------- ---------
Shareholders' equity (deficit)
Preferred stock, Series A, no par value; 4,050,405
shares authorized, issued and outstanding.......... 861,000 861,000
Common stock, no par value; 24,000,000 shares
authorized; 8,000,000 shares issued and
outstanding........................................ 20,000 20,000
Additional paid-in capital.......................... (613,663) (554,663)
Accumulated deficit................................. (190,880) (763,157)
--------- ---------
Total shareholders' equity (deficit).............. 76,457 (436,820)
--------- ---------
Commitments
--------- ---------
Total liabilities and shareholders' equity
(deficit)........................................ $ 879,129 $ 364,234
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-73
<PAGE>
COMMERCEWAVE, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the six months ended
For the year ended June 30,
December 31, 1997 1997 1998
------------------ ------------ ------------
(unaudited)
<S> <C> <C> <C>
Revenues....................... $1,636,614 $ 669,644 $ 563,438
Cost of revenues............... 760,673 335,300 438,866
---------- ------------ ------------
Gross profit................. 875,941 334,344 124,572
Selling, general and
administrative expenses....... 1,093,551 510,251 635,111
Depreciation and amortization.. 65,294 28,129 33,971
Research and development
expenses...................... 151,568 118,380 5,147
---------- ------------ ------------
Loss from operations......... (434,472) (322,416) (549,657)
Interest expense, net.......... (55,044) (32,303) (21,820)
Other income................... 32,204 12,451 --
---------- ------------ ------------
Loss before income taxes..... (457,312) (342,268) (571,477)
Income tax provision........... 800 800 800
---------- ------------ ------------
Net loss..................... $ (458,112) $ (343,068) $ (572,277)
========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-74
<PAGE>
COMMERCEWAVE, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------------- -------------------- Additional
Shares Shares Paid-in Accumulated
Outstanding Amount Outstanding Amount Capital Deficit Total
----------- ------- ----------- -------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996................... 8,000,000 $20,000 -- -- -- $(346,431) $(326,431)
Sale of preferred stock,
net of issuance costs.. -- -- 4,050,405 $861,000 -- -- 861,000
Net loss under S
Corporation tax status
(January 1, 1997
through July 31,
1997).................. -- -- -- -- -- (267,232) (267,232)
S Corporation to C
Corporation conversion
effective August 1,
1997................... -- -- -- -- $(613,663) 613,663 --
Net loss under C
Corporation tax status
(August 1, 1997 through
December 31, 1997)..... -- -- -- -- -- (190,880) (190,880)
--------- ------- --------- -------- --------- --------- ---------
Balance, December 31,
1997................... 8,000,000 20,000 4,050,405 861,000 (613,663) (190,880) 76,457
Stock compensation
(unaudited)............ -- -- -- -- 59,000 -- 59,000
Net loss (unaudited).... -- -- -- -- -- (572,277) (572,277)
--------- ------- --------- -------- --------- --------- ---------
Balance, June 30 1998
(unaudited)............ 8,000,000 $20,000 4,050,405 $861,000 $(554,663) $(763,157) $(436,820)
========= ======= ========= ======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-75
<PAGE>
COMMERCEWAVE, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months
For the year ended
ended June 30,
December 31, --------------------
1997 1997 1998
------------ --------- ---------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net loss................................... $(458,112) $(343,068) $(572,277)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities
Depreciation and amortization............. 65,294 28,129 33,971
Stock compensation expense................ -- -- 59,000
Change in operating assets and liabilities
Accounts receivable...................... (174,711) 105,197 204,653
Other assets............................. (7,304) (4,821) 9,209
Accounts payable and accrued expenses.... 76,830 22,832 (15,809)
--------- --------- ---------
Net cash used in operating activities... (498,003) (191,731) (281,253)
--------- --------- ---------
Cash flows from investing activities
Capital expenditures....................... (19,072) (3,469)
--------- --------- ---------
Net cash used in investing activities... (19,072) -- (3,469)
--------- --------- ---------
Cash flows from financing activities
Payments on notes payable and capital
leases.................................... (114,973) (43,784) (34,614)
Proceeds from sale of preferred stock...... 861,000 -- --
Proceeds from advances from related
parties................................... 17,770 222,609 43,506
--------- --------- ---------
Net cash provided by financing
activities............................. 763,797 178,825 8,892
--------- --------- ---------
Net increase (decrease) in cash......... 246,722 (12,906) (275,830)
Cash, beginning of period................... 30,358 30,358 277,081
--------- --------- ---------
Cash, end of period......................... $ 277,080 $ 17,452 $ 1,251
========= ========= =========
Supplemental disclosures of cash flow
information
Cash paid during the period for interest... $ 17,733 $ 8,867 $ 7,975
========= ========= =========
Cash paid during the period for income
taxes..................................... $ 800 $ -- $ --
========= ========= =========
Non-cash investing and financing activities
Acquisition of equipment through capital
leases.................................... $ 34,366 $ 12,553 $ 5,299
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-76
<PAGE>
COMMERCEWAVE, INC.
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business and Summary of Significant Accounting Policies
Nature of business
CommerceWave, Inc. (the "Company") offers products and consulting
services related to electronic commerce. The Company markets a suite of
commerce solutions ranging from an Internet-based interactive commerce software
for merchants to transaction processing systems. The Company provides
consulting services in transaction processing, point-of-sale terminal
applications and Internet commerce solutions. Effective September 30, 1996, the
Board of Directors of the Company elected to change the Company's name
(formerly Professional Business Solutions, Inc.) to CommerceWave, Inc.
Significant accounting policies
Revenue recognition
Revenue from consulting services is recognized based on time incurred.
Revenue from product sales is recognized upon shipment of the product when the
Company has no significant obligations remaining. Revenue from software
customizations is recorded as services are provided. Maintenance revenue is
recognized on a pro rata basis over the terms of the maintenance agreements.
Equipment
Equipment is recorded at cost, less accumulated depreciation.
Expenditures for renewals and improvements that significantly add to the
productive capacity or extend the useful life of an asset are capitalized.
Expenditures for maintenance and repairs are charged to operations as incurred.
Depreciation expense is provided on the straight-line method over the estimated
useful lives for purchased assets, which range from 3 to 5 years. Equipment
held under capital lease is amortized on the straight-line method over the
lesser of the useful life or the lease term.
Software development costs
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or otherwise
Marketed," software development costs are expensed as incurred until
technological feasibility has been established, at which time such costs are
capitalized until the product is available for general release to customers. To
date, the establishment of technological feasibility of the Company's products
and general release of such software have substantially coincided. As a result,
software development costs qualifying for capitalization have been
insignificant, and therefore, the Company has not capitalized any software
development costs.
Income taxes
The Company has applied the asset and liability approach of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" for
financial accounting and reporting purposes. The Company accounts for certain
items of income and expense in different time periods for financial reporting
and income tax purposes. Provisions for deferred income taxes are made in
recognition of such temporary differences, where applicable. A valuation
allowance is established against deferred tax assets unless the Company
believes it is more likely than not that the benefit will be realized.
F-77
<PAGE>
COMMERCEWAVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Stock-based compensation
The Company has elected to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25) and related Interpretations and has elected the disclosure option of
Statement of Financial Accounting Standards No 123, "Accounting for Stock-Based
Compensation" (FAS 123). Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair value of the Company's stock at the
date of the grant over the amount an employee must pay to acquire the stock.
Fair value of financial instruments
The carrying amounts of financial instruments including cash, accounts
receivable, accounts payable and accrued expenses approximate fair value. The
carrying amounts of convertible notes payable and other borrowings approximate
fair value based on current rates of interest available to the Company for
loans of similar maturities.
Comprehensive income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" requires entities to report comprehensive income, which
represents the change in equity during a period from non-owner sources. The
Company has not incurred any such activity other than the net loss for all
periods presented.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses during the reporting period. Actual results could differ from
those estimates and could materially affect the reported amounts of assets,
liabilities and future operating results.
Interim financial information
The accompanying financial statements and related notes as of June 30,
1998 and for the six months ended June 30, 1997 and 1998 are unaudited. In the
opinion of management, these statements have been prepared on the same basis as
the audited financial statements and reflect all adjustments, which include
only normal recurring adjustments, necessary to present fairly the Company's
financial position as of June 30, 1998 and the results of the Company's
operations and its cash flows for the six months ended June 30, 1997 and 1998.
The results for the six months ended June 30, 1998 are not necessarily
indicative of the results to be expected for the year ending December 31, 1998.
F-78
<PAGE>
COMMERCEWAVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. Equipment
Equipment consists of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Office furniture and equipment................... $ 45,103 $ 46,427
Computer equipment............................... 196,512 203,956
Computer software................................ 47,784 47,784
--------- ---------
289,399 298,167
Less accumulated depreciation and amortization... (122,313) (147,553)
--------- ---------
Equipment, net................................... $ 167,086 $ 150,614
========= =========
</TABLE>
Equipment held under capital lease is as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Office furniture and equipment.................... $ 23,228 $ 23,228
Computer equipment................................ 119,324 124,623
Computer software................................. 25,117 25,117
-------- --------
167,669 172,968
Less accumulated amortization..................... (67,008) (77,788)
-------- --------
Equipment, net.................................... $100,661 $ 95,180
======== ========
<CAPTION>
Several of the Company's capital leases contain purchase options by which
the Company can purchase the equipment at the end of the lease term for $1.00.
3. Accrued Expenses
Accrued expenses consists of the following:
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Accrued vacation.................................. $ 43,936 $ 36,168
Accrued salaries.................................. 27,662 27,662
Accrued interest.................................. 37,825 53,688
Other............................................. 13,085 26,263
-------- --------
$122,508 $143,781
======== ========
</TABLE>
F-79
<PAGE>
COMMERCEWAVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
4. Borrowings
Borrowings consist of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Convertible note payable, unsecured, which
accrues interest at 8%.......................... $ 150,000 $ 150,000
Convertible note payable, unsecured, which
accrues interest at 8%.......................... 150,000 150,000
Convertible note payable, unsecured, which
accrues interest at 8%.......................... 50,000 50,000
Note payable to bank, which accrues interest at
prime plus 2% (10.5% at December 31, 1997) and
matures on February 15, 1998.................... 8,558 --
Capital leases, payable in monthly instalments of
$178 to $783 expiring from 1998 to 2000
collateralized by equipment with a net book
value of $100,661 and $95,180 at December 31,
1997 and June 30, 1998, respectively............ 68,611 47,855
--------- ---------
427,169 397,855
Less current maturities.......................... (402,510) (372,401)
--------- ---------
Long-term portion................................ $ 24,659 $ 25,454
========= =========
</TABLE>
In 1996 the Company issued three notes payable, as indicated in the table
above, for total proceeds to the Company of $350,000. The notes are convertible
into common stock upon the closing of an equity transaction in which the
consideration received by the Company is greater than $1,000,000 (the Equity
Transaction). The conversion rate is calculated as 80%, 83%, and 90%,
respectively, of the per share price paid by the investors in the Equity
Transaction but shall be no less than $8.45 per share. The notes payable were
repaid in conjunction with the Company's acquisition by iXL Enterprises, Inc.
(see Note 12).
The Company recognized interest expense of $64,250 and $28,148 for the
year ended December 31, 1997 and for the six months ended June 30, 1998,
respectively.
The aggregate maturities required on notes payable and capital leases as
of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Notes Capital
Year ending December 31, Payable Leases Total
------------------------ -------- ------- --------
<S> <C> <C> <C>
1998......................................... $358,558 $53,898 $412,456
1999......................................... -- 22,901 22,901
2000......................................... -- 4,472 4,472
-------- ------- --------
358,558 81,271 439,829
Less amounts representing interest........... -- (12,660) (12,660)
-------- ------- --------
$358,558 $68,611 $427,169
======== ======= ========
</TABLE>
F-80
<PAGE>
COMMERCEWAVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Concentrations of Credit Risk
Net sales for the year ended December 31, 1997 for several major
customers, together with the receivable due from each customer, are presented
below. The Company does not obtain, nor require, any collateral or other
security instruments related to these balances.
<TABLE>
<CAPTION>
December 31, 1997
---------------------
Accounts
Amount of Receivable
Customer Net Sales Balance
-------- ---------- ----------
<S> <C> <C>
A.................................................. $ 176,387 $100,019
B.................................................. 470,887 137,682
C.................................................. 266,719 116,083
D.................................................. 239,184 23,554
E.................................................. -- --
---------- --------
$1,153,177 $377,338
========== ========
</TABLE>
6. 1997 Stock Option Plan
The Company's stock option plan provides for the granting of options to
acquire up to 1,000,000 shares of the Company's common stock. The options may
either be incentive stock options or non-qualified stock options as defined in
the Internal Revenue Code. The Board of Directors will govern the terms of each
option grant and will determine the exercise price, the vesting period and the
exercise period of each option. The exercise period may not exceed ten years
from the date of grant.
For the year ended December 31, 1997, no compensation costs were
recognized in connection with option grants. In June 1998, the Company granted
308,600 options to certain employees with exercise prices below the estimated
fair value of the Company's common stock. These options vested immediately. As
a result, the Company recorded compensation costs of $59,000.
Had compensation cost for the Company's option plan been determined based
on the fair value method as described in Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation," the Company's net loss would
have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Net loss
As reported..................................... $(458,112) $(572,277)
Pro forma....................................... $(480,195) $(596,439)
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants during the December 31, 1997 and June 30,
1998 periods, respectively: dividend yield of 0% for all periods; expected
volatility of 60% for all periods; risk free interest rate of 5.71% and 5.52%;
expected life of five years and two years. The weighted average fair value of
the options granted for the year ended December 31, 1997 and the six months
ended June 30, 1998 is $0.53 and $0.13, respectively.
F-81
<PAGE>
COMMERCEWAVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table summarizes stock option activity for the year ended
December 31, 1997:
<TABLE>
<CAPTION>
December 31, 1997
--------------------
Weighted
Average
Exercise
Options Price
--------- ---------
<S> <C> <C>
Outstanding, beginning of year.......................... -- $ 0.00
Granted................................................. 718,500 0.22
Exercised............................................... -- 0.00
Forfeited............................................... (9,900) 0.22
---------
Outstanding, end of year................................ 708,600 0.22
---------
Options exercisable at end of year...................... 176,660 $ 0.22
=========
</TABLE>
The stock options outstanding at December 31, 1997 have a weighted
average remaining contractual life of 4 years.
7. Shareholders' Equity (Deficit)
Preferred stock
In August 1997, the Company issued 4,050,405 of Series A convertible
preferred stock at $0.22 per share for total proceeds of $861,000, net of
issuance cost of $39,000. Two preferred stock investors advanced the Company a
total of $200,000 in June and April of 1997, respectively, prior to the
issuance of the shares and final settlement of the price in August 1997. The
holders of the preferred stock are entitled to elect two members to the Board
of Directors and have voting rights equal to common stock on an if-converted
basis. Preferred stockholders also are entitled to receive noncumulative
dividends in preference to any dividends on common stock at a rate of $0.01 per
share. No dividends have been declared for the year ended December 31, 1997 nor
for the six months ended June 30, 1998.
The holders of the preferred stock are entitled to receive their original
issuance price of $0.22 per share in liquidation, plus an amount equal to all
declared but unpaid dividends, prior and in preference to any distribution to
the holders of common stock. Each share of preferred stock is convertible into
one share of common stock.
Stock split
In 1997, the Company approved a 10 for 1 split of its common stock. The
Company restated the share data for this transaction as if it occurred at
inception of the Company.
8. 401(k) Savings Plan
Effective October 1, 1996, the Company established a 401(k) plan for
substantially all of its employees over the age of 21 with an employment date
prior to the effective date of the plan or with more than one year of service,
as defined in the plan. The plan allows for discretionary employer matching
contributions, subject to limitations. The matching contributions made during
the year ended December 31, 1997 and the six months ended June 30, 1998 were
not material.
F-82
<PAGE>
COMMERCEWAVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
9. Commitments
Future minimum lease payments under non-cancelable operating leases as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
------------------------
<S> <C>
1998........................................................... $ 78,948
1999........................................................... 52,835
--------
Total minimum lease payments................................... $131,783
========
</TABLE>
The Company's operating leases are primarily for office equipment and the
Company's office facility. Rental expense under operating leases for the year
ended December 31, 1997 and for the six months ended June 30, 1998 totaled
approximately $102,000 and $43,000, respectively.
10. Income Taxes
From inception through July 31, 1997 the Company elected to be taxed as
an S Corporation for federal and state tax purposes, whereby the Company's
taxable income accrues directly to the shareholders. The Company elected to be
taxed as a C Corporation for federal and state tax purposes effective August 1,
1997. Due to the change in tax status, the Company has transferred its
accumulated deficit as of July 31, 1997 of $613,663 to additional paid in
capital.
The provision for income taxes results from a minimum state tax
liability. No other current provision for income tax expense or benefit has
been provided by the Company for the year ended December 31, 1997 or for the
six months ended June 30, 1998 due to a net loss being recognized for income
tax purposes. Further, no deferred income tax expense or benefit has been
provided as changes in net deferred tax assets, consisting primarily of net
operating loss carryforwards, and liabilities have been fully offset by a
valuation allowance.
11. Related Party Transactions
On June 29, 1998, the Company received an advance from iXL Enterprises,
Inc. (iXL) in the amount of $50,000. The advance was used for working capital.
The advance was considered as part of the purchase price when the Company was
acquired by iXL (see Note 12). The Company also recognized $22,913 of revenues
for the six months ended June 30, 1998 in connection with providing
professional services to iXL prior to the acquisition. The amount was included
in accounts receivable at June 30, 1998.
12. Subsequent Event
On July 2, 1998, the Company was acquired by iXL Enterprises, Inc.
F-83
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
iXL Enterprises, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in shareholders' equity, and of cash flows present
fairly, in all material respects, the financial position of Spinners
Incorporated at December 31, 1997, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Atlanta, Georgia
September 4, 1998
F-84
<PAGE>
SPINNERS INCORPORATED
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash................................................ $107,361 $176,317
Accounts receivable................................. 333,300 281,420
Costs and estimated earnings in excess of billings
on uncompleted contracts........................... 51,000 67,264
Investment--held-to-maturity........................ 81,413 --
Other current assets................................ 46,436 1,115
-------- --------
Total current assets.............................. 619,510 526,116
Property and equipment, net........................... 231,447 403,817
Other assets.......................................... 27,489 49,898
-------- --------
Total assets...................................... $878,446 $979,831
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.................................... $ 3,543 $ 52,266
Accrued expenses.................................... 45,934 73,029
Billings in excess of costs and estimated earnings
on uncompleted contracts........................... 106,750 52,975
Current portion of capital lease obligations........ 49,540 85,532
-------- --------
Total current liabilities......................... 205,767 263,802
Capital lease obligations............................. 41,576 146,761
-------- --------
Total liabilities................................. 247,343 410,563
-------- --------
Shareholders' equity
Common stock, $.01 par value; 10,000,000 shares
authorized; 7,000,000 shares issued and
outstanding........................................ 70,000 70,000
Additional paid-in capital.......................... 161,000 161,000
Unearned compensation............................... (144,000) (124,000)
Retained earnings................................... 544,103 462,268
-------- --------
Total shareholders' equity........................ 631,103 569,268
-------- --------
Commitments
-------- --------
Total liabilities and shareholders' equity........ $878,446 $979,831
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-85
<PAGE>
SPINNERS INCORPORATED
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year For the Six Months
Ended Ended June 30,
December 31, -------------------
1997 1997 1998
------------ -------- ----------
(unaudited)
<S> <C> <C> <C>
Revenues.................................... $1,742,439 $747,138 $1,104,261
Cost of revenues............................ 798,942 316,467 727,238
---------- -------- ----------
Gross profit.............................. 943,497 430,671 377,023
Selling, general and administrative
expenses................................... 489,028 139,526 343,956
Depreciation and amortization............... 38,182 12,193 36,814
---------- -------- ----------
Income (loss) from operations............. 416,287 278,952 (3,747)
Interest income (expense), net.............. (8,684) 1,912 (6,088)
---------- -------- ----------
Net income (loss)......................... $ 407,603 $280,864 $ (9,835)
========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-86
<PAGE>
SPINNERS INCORPORATED
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------------- Additional Unearned
Shares Paid-in Compensation Retained
Outstanding Amount Capital Expense Earnings Total
----------- ------- ---------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996................... 7,000,000 $70,000 -- -- $173,100 $243,100
Distributions......... -- -- -- -- (36,600) (36,600)
Issuance of stock
options.............. -- -- $161,000 $(161,000) -- --
Stock compensation.... -- -- -- 17,000 -- 17,000
Net income............ -- -- -- -- 407,603 407,603
--------- ------- -------- --------- -------- --------
Balance, December 31,
1997................... 7,000,000 70,000 161,000 (144,000) 544,103 631,103
Distributions
(unaudited).......... -- -- -- -- (72,000) (72,000)
Stock compensation
(unaudited).......... -- -- -- 20,000 -- 20,000
Net loss (unaudited).. -- -- -- -- (9,835) (9,835)
--------- ------- -------- --------- -------- --------
Balance, June 30, 1998
(unaudited)............ 7,000,000 $70,000 $161,000 $(124,000) $462,268 $569,268
========= ======= ======== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-87
<PAGE>
SPINNERS INCORPORATED
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Year For the Six Months Ended
Ended June 30,
December 31, --------------------------
1997 1997 1998
------------ ------------ ------------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss).................... $ 407,603 $ 280,864 $ (9,835)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities
Depreciation and amortization....... 38,182 12,193 36,814
Stock compensation expense.......... 17,000 -- 20,000
Changes in operating assets and
liabilities
Accounts receivable................ (216,505) (10,579) 51,880
Costs and estimated earnings in
excess of billings on uncompleted
contracts......................... (51,000) (63,000) (16,264)
Other assets....................... (57,677) (1,850) 22,912
Accounts payable and accrued
expenses.......................... 35,030 26,057 75,818
Billings in excess of costs and
estimated earnings on uncompleted
contracts......................... 106,750 2,000 (53,775)
--------- ------------ ------------
Net cash provided by operating
activities....................... 279,383 245,685 127,550
--------- ------------ ------------
Cash flows from investing activities
Capital expenditures................. (84,945) (54,539) (28,142)
Proceeds from (purchase of)
investment securities............... (81,413) (81,413) 81,413
--------- ------------ ------------
Net cash provided by (used in)
investing activities............. (166,358) (135,952) 53,271
--------- ------------ ------------
Cash flows from financing activities
Payments on capital leases........... (22,230) (4,900) (39,865)
Distributions to shareholders........ (36,600) (36,600) (72,000)
--------- ------------ ------------
Net cash used in financing
activities....................... (58,830) (41,500) (111,865)
--------- ------------ ------------
Net increase in cash.............. 54,195 68,233 68,956
Cash, beginning of period............. 53,166 53,166 107,361
--------- ------------ ------------
Cash, end of period................... $ 107,361 $ 121,399 $ 176,317
========= ============ ============
Supplemental disclosures of cash flow
information
Cash paid during the period for
interest............................ $ 12,894 $ 365 $ 10,271
========= ============ ============
Non-cash investing and financing
activities
Acquisition of property and equipment
through capital leases.............. $ 100,896 $ 32,706 $ 181,042
========= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-88
<PAGE>
SPINNERS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business and Summary of Significant Accounting Policies
Nature of business
Spinners Incorporated (the "Company" or "Spinners") specializes in
providing integrated technology and design services that allow organizations to
successfully incorporate internet technology as a core component of their
business. Spinners' clients are located in the northeast United States.
Significant accounting policies
Revenue recognition
Revenue from service contracts is recognized over the contractual period
using the percentage-of-completion method based on when services are performed.
Advance billings for services in excess of costs represent deferred revenue and
are recorded as billings in excess of costs and estimated earnings on
uncompleted contracts. Unbilled receivables in excess of billings represent
earned revenues and are recorded as costs and estimated earnings in excess of
billings. Operating expenses, including indirect costs and administrative
expenses, are charged to operations as incurred and are not allocated to
contract costs. Any anticipated losses on contracts are charged to earnings
when identified. There were no loss contracts at December 31, 1997.
Cash and cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Investment securities
The Company's investment securities consist of a U.S. treasury bill with
the face amount of $85,000 that is classified as a held-to-maturity security.
Held-to-maturity securities are stated at amortized cost with gains recognized
in earnings as required by FAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". The maturity date for the U.S. treasury bill is
January 8, 1998.
Property and equipment
Property and equipment are recorded at cost, less accumulated
depreciation. Depreciation and amortization are provided using the straight-
line method over the estimated useful life. Equipment is depreciated over five
years. Equipment held under capital lease is recorded at the lower of the fair
market value of the lease or the present value of future minimum lease
payments. The leased assets are depreciated over the lesser of the lease term
or the estimated useful life. Leasehold improvements are amortized over the
lesser of the lease term or the estimated useful life.
Income taxes
The Company has elected to be taxed as an S Corporation for federal and
state tax purposes, whereby the Company's taxable income accrues directly to
the shareholders. As a result, no provision for income taxes has been made in
the accompanying financial statements.
F-89
<PAGE>
SPINNERS INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
Stock-based compensation
The Company has elected to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations and has elected the disclosure option of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (FAS
123). Accordingly, compensation cost for stock options is measured as the
excess, if any, of the fair value of the Company's stock at the date of the
grant over the amount an employee must pay to acquire the stock.
Fair value of financial instruments
The carrying amounts of financial instruments including cash, accounts
receivable, accounts payable, held-to-maturity securities, and accrued expenses
approximate fair value. The carrying amounts of borrowings approximate fair
value based on current rates of interest available to the Company for loans of
similar maturities.
Comprehensive income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" requires entities to report comprehensive income, which
represents the change in equity during a period from non-owner sources. The
Company has not incurred any comprehensive income components other than the net
income (loss) for all periods presented.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses during the reporting period. Actual results could differ from
those estimates and could materially affect the reported amounts of assets,
liabilities and future operating results.
Interim financial information
The accompanying financial statements and related notes as of June 30,
1998 and for the six months ended June 30, 1997 and 1998 are unaudited. In the
opinion of management these statements have been prepared on the same basis as
the audited financial statements and reflect all adjustments, consisting of
only normal recurring adjustments, necessary to present fairly the Company's
financial position as of June 30, 1998 and the results of the Company's
operations and its cash flows for the six months ended June 30, 1997 and 1998.
The results for the six months ended June 30, 1998 are not necessarily
indicative of the results to be expected for the year ending December 31, 1998.
F-90
<PAGE>
SPINNERS INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. Equipment
Equipment consists of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Equipment........................................ $273,829 $353,000
Furniture and fixtures........................... 12,250 124,163
Leasehold improvements........................... -- 18,100
-------- --------
286,079 495,263
Less accumulated depreciation and amortization... (54,632) (91,446)
-------- --------
Equipment, net................................... $231,447 $403,817
======== ========
<CAPTION>
At December 31, 1997 and June 30, 1998, the Company had property and
equipment under capital lease as follows:
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Property and equipment under capital lease....... $120,951 $281,859
Less accumulated amortization.................... (11,863) (29,579)
-------- --------
$109,088 $252,280
======== ========
<CAPTION>
3. Borrowings
Borrowings consist of the following:
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Capital lease obligations payable in monthly
installments of $5,792 to $10,459 expiring from
1998 to 2003, collateralized by equipment with a
net book value of $124,011 and $305,053,
respectively.................................... $ 91,116 $232,293
Less current maturities.......................... (49,540) (85,532)
-------- --------
Long-term portion................................ $ 41,576 $146,761
======== ========
</TABLE>
Total interest expense for the year ended December 31, 1997 and the six
months ended June 30, 1997 and 1998 was $12,894, $365 and $10,271,
respectively.
F-91
<PAGE>
SPINNERS INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
The aggregate maturities required on capital lease obligations as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
------------------------
<S> <C>
1998........................................................... $ 65,319
1999........................................................... 39,298
2000........................................................... 7,549
2001........................................................... 926
Less amounts representing interest............................. (21,976)
--------
$ 91,116
========
</TABLE>
4. Shareholders' Equity
From inception until June 10, 1997, the Company had 1,054 shares of no
par value common stock outstanding. On June 10, 1997, the Company canceled the
1,054 shares of no par value common stock and in its place issued 7,000,000
shares of $0.01 par value common stock (10,000,000 shares authorized) to
existing shareholders based on their proportionate interest. The Company has
accounted for this transaction as a stock split and, accordingly, has restated
share data in the accompanying financial statements as if it occurred at
inception of the Company.
5. Employee Benefits
1997 stock option plan
In June 1997, the Company adopted a stock option plan (the "Plan") which
provides for the grant of incentive and nonqualified stock options to
directors, officers, employees of the Company and certain consultants to
purchase up to 1,000,000 shares of the Company's common stock. Options expire
not later than ten years from the date of grant and other terms are determined
by the Board of Directors. At December 31, 1997 and June 30, 1998 outstanding
stock options totaled 696,500 and 690,500, respectively, with exercise prices
at $.25 per share.
The following table summarizes stock option activity for the year ended
December 31, 1997:
<TABLE>
<CAPTION>
December 31,
1997
-----------------
Weighted
Average
Exercise
Options Price
------- --------
<S> <C> <C>
Outstanding beginning of year............................ -- --
Granted.................................................. 706,500 $.25
Exercised................................................ -- --
Forfeited................................................ (20,000) .25
------- ----
Outstanding end of year.................................. 686,500 $.25
======= ====
</TABLE>
During the year ended December 31, 1997, the Company recorded
compensation expense of $17,000 related to the granting of stock options to
employees with exercise prices below the estimated fair market value of the
common stock at the date of grant. There were no options exercisable at
December 31, 1997.
F-92
<PAGE>
SPINNERS INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
In addition, during the year ended December 31, 1997 the Company granted
10,000 stock options to a non-employee consultant for services. The fair value
of the options issued has been determined to be insignificant.
The Company has adopted the disclosure only provision of FAS 123. Had
compensation cost for the Company's stock option grants described above been
determined based on the fair value at the grant date for awards in 1997
consistent with the provision of FAS 123, the Company's net income would have
been decreased to the pro forma amounts indicated below.
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
Net income
As reported................................................... $407,603
Pro forma..................................................... $397,942
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 1997: dividend yield of 0%, weighted
average risk free interest rate of 6.41%, volatility of 60% and expected life
of 4 years.
The following table summarizes information about stock options
outstanding at December 31,1997.
<TABLE>
<CAPTION>
Options Outstanding
-------------------------------------------------------------------------------
Weighted
Average Weighted
Number Remaining Average
Outstanding Contractual Exercise
at 12/31/97 Life Price
----------- ----------- --------
<S> <C> <C>
686,500 10 years $.25
</TABLE>
401(k) profit sharing plan
Effective January 1, 1996, the Company established a 401(k) plan for
substantially all employees over the age of 21 with no requirement of minimum
services. The plan allows for discretionary employer qualified contributions.
For the year ended December 31, 1997, the Company made no contribution to the
plan.
6. Concentrations of Credit Risk
Net sales for the year ended December 31, 1997, of three major
customers, together with the receivable due from each customer, are presented
below. The Company does not obtain, nor require, any collateral or other
security instruments related to these balances.
<TABLE>
<CAPTION>
December 31, 1997
---------------------
Accounts
Amount of Receivable
Customer Net Sales Balance
-------- ---------- ----------
<S> <C> <C>
A...................................................... $ 702,040 $ 76,838
B...................................................... 280,834 185,400
C...................................................... 183,096 --
---------- --------
$1,165,970 $262,238
========== ========
</TABLE>
F-93
<PAGE>
SPINNERS INCORPORATED
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. Commitments
The Company leases its office facility under a noncancelable operating
lease expiring in May 1998 with monthly payments of $12,923. Rental expense
charged for the year ended December 31, 1997 and for the six month period ended
June 30, 1998 was $137,802 and $107,192, respectively.
As of December 31, 1997, future minimum lease payments under non-
cancelable operating leases due over the next year total $64,614.
8. Subsequent Events
On July 30, 1998, the Company was acquired by iXL Enterprises, Inc.
F-94
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
iXL Enterprises, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in shareholders' equity, and of cash flows present
fairly, in all material respects, the financial position of Tekna, Inc. at
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Atlanta, Georgia
September 24, 1998
F-95
<PAGE>
TEKNA, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash................................................ $ 175,420 $ 45,919
Accounts receivable................................. 274,793 654,960
Related party receivables........................... 7,675 5,063
--------- ----------
Total current assets.............................. 457,888 705,942
Equipment, net........................................ 268,313 295,708
Other assets.......................................... 103 9,345
--------- ----------
Total assets...................................... $ 726,304 $1,010,995
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.................................... $ 46,501 $ 124,672
Accrued expenses.................................... 54,736 42,887
Accrued interest.................................... 4,913 26,637
Notes payable to shareholder........................ 424,203 424,203
--------- ----------
Total current liabilities......................... 530,353 618,399
Shareholders' equity
Common stock, $1.00 par value; 1,000,000 shares
authorized; 850,000 shares issued and outstanding.. 850,000 850,000
Additional paid-in capital.......................... -- 664,000
Unearned compensation............................... -- (398,380)
Accumulated deficit................................. (654,049) (723,024)
--------- ----------
Total shareholders' equity........................ 195,951 392,596
--------- ----------
Commitments.........................................
--------- ----------
Total liabilities and shareholders' equity........ $ 726,304 $1,010,995
========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-96
<PAGE>
TEKNA, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the six
For the year months
ended ended
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Revenues.............................................. $239,776 $1,183,663
Cost of revenues...................................... 129,375 609,223
-------- ----------
Gross profit........................................ 110,401 574,440
Selling, general and administrative expenses.......... 111,723 618,217
Depreciation and amortization......................... 17,397 29,513
-------- ----------
Loss from operations................................ (18,719) (73,290)
Interest income, net.................................. 2,167 4,315
-------- ----------
Net loss............................................ $(16,552) $ (68,975)
======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-97
<PAGE>
TEKNA, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
-------------------- Additional
Shares Paid-in Unearned Accumulated
Outstanding Amount Capital Compensation Deficit Total
----------- -------- ---------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996................... 1,000 $ 1,000 $ 24,000 $ -- $ (23,497) $ 1,503
Issuance of common
stock.................. 587 587 74,413 -- 75,000
Capital contributions... -- -- 136,000 -- -- 136,000
Net income............ -- -- -- -- (16,552) (16,552)
Common stock split...... 848,413 848,413 (234,413) -- (614,000) --
------- -------- --------- --------- --------- --------
Balance, December 31,
1997................... 850,000 850,000 -- -- (654,049) 195,951
Issuance of options
(unaudited)............ -- -- 664,000 (664,000) -- --
Stock compensation
(unaudited)............ -- -- -- 265,620 -- 265,620
Net loss (unaudited).. -- -- -- -- (68,975) (68,975)
------- -------- --------- --------- --------- --------
Balance, June 30, 1998
(unaudited)............ 850,000 $850,000 $ 664,000 $(398,380) $(723,024) $392,596
======= ======== ========= ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-98
<PAGE>
TEKNA, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the
For the year six months
ended ended
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Cash flows from operating activities
Net loss............................................. $ (16,552) $ (68,975)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization....................... 17,397 29,513
Stock compensation.................................. -- 265,620
Changes in operating assets and liabilities
Accounts receivable................................ (213,793) (380,167)
Other assets....................................... (7,675) (6,630)
Accounts payable and accrued expenses.............. 106,150 88,046
--------- ---------
Net cash used in operating activities............. (114,473) (72,593)
--------- ---------
Cash flows from investing activities
Capital expenditures................................. (60,107) (56,908)
--------- ---------
Net cash used in investing activities............. (60,107) (56,908)
--------- ---------
Cash flows from financing activities
Proceeds from capital contribution................... 75,000 --
Proceeds from note payable to shareholder............ 200,000 --
Proceeds from issuance of common stock............... 75,000 --
--------- ---------
Net cash provided by financing activities......... 350,000 --
--------- ---------
Net increase (decrease) in cash................... 175,420 (129,501)
Cash, beginning of period............................. -- 175,420
--------- ---------
Cash, end of period................................... $ 175,420 $ 45,919
========= =========
Non-cash investing and financing activities
Acquisition of equipment through note payable to
shareholder......................................... $ 224,203 $ --
========= =========
Receivable contributed by shareholder for acquired
service contract.................................... $ 61,000 $ --
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-99
<PAGE>
TEKNA, INC.
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business and Summary of Significant Accounting Policies
Nature of business
Tekna, Inc. (the "Company") is a provider of internet related development
services. Its primary service lines are web-enabled business applications,
object-oriented development, multimedia and internet-based training for varied
clientele ranging from small entities to major fortune 500 corporations. The
Company's customers are located throughout the United States.
Tekna, Inc. (formerly Booth Technologies, Inc.) was formed in 1994 as a
subchapter S corporation. Effective November 1, 1997, the Company acquired
certain assets and assumed certain liabilities through issuance of a note
payable of $224,203 to its sole shareholder at the time based on the carrying
amount of the assets acquired.
Significant accounting policies
Revenue recognition
Revenue from service contracts is recognized over the contractual period
using the percentage-of-completion method based on when services are performed.
Advance billings for services in excess of costs, represent deferred revenue
and are recorded as billings in excess of costs and estimated earnings on
uncompleted contracts. Unbilled receivables in excess of billings represent
earned revenues and are recorded as costs and estimated earnings in excess of
billings. Operating expenses, including indirect costs and administrative
expenses, are charged to income as incurred and are not allocated to contract
costs. At the time a loss on a contract becomes known, the entire amount of the
estimated loss is accrued. As of December 31, 1997 there are no unbilled
receivables or deferred revenue amounts.
Equipment
Equipment is recorded at cost, less accumulated depreciation.
Expenditures for renewals and improvements that significantly add to the
productive capacity or extend the useful life of an asset are capitalized.
Expenditures for maintenance and repairs are charged to operations as incurred.
Depreciation expense is provided on the straight-line method over the estimated
useful lives for purchased assets, which range from 5 to 7 years.
Income taxes
The Company has elected to be taxed as an S corporation for federal and
state tax purposes, whereby the Company's taxable income accrues directly to
the shareholders. As a result, no provision for income taxes has been made in
the accompanying statements.
Stock split
On December 15, 1997, the shareholders of the Company approved an
increase in the number of authorized shares of common stock from 5,000 to
1,000,000. On January 1, 1998, the Company issued 848,413 shares to its two
existing shareholders in proportion to their then existing common stock
ownership interests. Because the Company elected to retain the $1.00 par value
of its common stock, the transaction resulted in a
F-100
<PAGE>
TEKNA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
transfer of $234,413 and $614,000 from additional paid-in capital and
accumulated deficit, respectively, to common stock in the December 31, 1997
balance sheet.
Stock-based compensation
The Company has elected to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25) and related interpretations and has elected the disclosure option of
Statement of Financial Accounting Standards No 123, "Accounting for Stock-Based
Compensation" (FAS 123). Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair value of the Company's stock at the
date of the grant over the amount an employee must pay to acquire the stock.
Fair value of financial instruments
The carrying amounts of financial instruments including cash, accounts
receivable, accounts payable and accrued expenses approximate fair value. The
carrying amounts of borrowings approximate fair value based on current rates of
interest available to the Company for loans of similar maturities.
Comprehensive income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" requires entities to report comprehensive income, which
represents the change in equity during a period from non-owner sources. The
Company has not incurred any such activity other than the net loss for all
periods presented.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses during the reporting period. Actual results could differ from
those estimates and could materially affect the reported amounts of assets,
liabilities and future operating results.
Interim financial information
The accompanying financial statements and related notes as of June 30,
1998 and for the six months ended June 30, 1998 are unaudited. In the opinion
of management, the unaudited interim financial statements have been prepared on
the same basis as the annual financial statements and reflect all adjustments,
consisting of only normal recurring adjustments, necessary to present fairly
the Company's financial position as of June 30, 1998, and the results of the
Company's operations and its cash flows for the six months then ended. Results
of operations for the six months ended June 30, 1997 were not material. The
results for the six months ending June 30, 1998 are not necessarily indicative
of the results to be expected for the year ending December 31, 1998.
F-101
<PAGE>
TEKNA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. Equipment
Equipment consists of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Furniture and fixtures............................. $ 64,445 $ 73,160
Computer equipment................................. 217,316 241,670
Computer software.................................. 6,490 11,620
Leasehold improvements............................. -- 18,709
-------- --------
288,251 345,159
Less accumulated depreciation and amortization..... (19,938) (49,451)
-------- --------
Equipment, net..................................... $268,313 $295,708
======== ========
</TABLE>
3. Notes Payable to Shareholder
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Note payable to a shareholder, secured by all
equipment and a second priority interest in
accounts receivable, which provides for payment
of the principal balance on demand plus
interest accrued at 10%........................ $224,203 $224,203
Note payable to a shareholder, secured by all
equipment and a second priority interest in
accounts receivable, which provides for payment
of the principal balance on demand plus
interest accrued at 10%........................ 200,000 200,000
-------- --------
$424,203 $424,203
======== ========
</TABLE>
Total interest expense incurred with respect to these borrowings was
$4,913 for the year ended December 31, 1997.
4. 401(k) Savings Plan
Effective January 1, 1998, the Company established a 401(k) savings plan
for substantially all of its employees with more than three months of service
as defined by the plan. The employer has no obligation under the plan to make a
contribution.
F-102
<PAGE>
TEKNA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Concentrations of Credit Risk
Net sales for the year ended December 31, 1997 for several major
customers, together with the receivable due from each customer, are presented
below. The Company does not obtain, nor require, any collateral or other
security instruments related to these balances.
<TABLE>
<CAPTION>
December 31, 1997
-------------------
Amount Accounts
of Net Receivable
Customer Sales Balance
-------- -------- ----------
<S> <C> <C>
A...................................................... $ 60,742 $121,742
B...................................................... 52,739 37,073
C...................................................... 50,260 50,260
D...................................................... 35,000 35,000
-------- --------
$198,741 $244,075
======== ========
</TABLE>
6. Commitments
Future minimum lease payments under non-cancelable operating leases as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
------------------------
<S> <C>
1998............................................................. $144,416
1999............................................................. 154,185
2000............................................................. 151,976
2001............................................................. 31,223
--------
Total minimum lease payments..................................... $481,800
========
</TABLE>
The Company's operating leases are primarily for office equipment and the
Company's office facility. Rental expense under operating leases for the year
ended December 31, 1997 totaled $7,809.
7. Subsequent Events
In April 1998, the Company entered into a line of credit agreement with a
bank. The line of credit allows for borrowings of up to $500,000 at the bank's
prime rate plus 2% and any borrowings are payable to the bank on demand. No
borrowings have been made on the line as of June 30, 1998.
In June 1998 the Company granted stock options to certain of its
employees. The Company recorded a charge to compensation expense of $265,620
for the six months ended June 30, 1998 related to these options.
On September 4, 1998, the Company was acquired by iXL Enterprises, Inc.
F-103
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
iXL Enterprises, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in shareholders' deficit, and of cash flows present
fairly, in all material respects, the financial position of Larry Miller
Productions, Inc. at December 31, 1997, and the results of its operations and
its cash flows for the year ended December 31, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Atlanta, Georgia
November 10, 1998
F-104
<PAGE>
LARRY MILLER PRODUCTIONS, INC.
Balance Sheets
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash................................................ $ 435,442 $ 274,956
Accounts receivable................................. 571,806 476,856
Costs and estimated earnings in excess of billings
on uncompleted contracts........................... 72,800 33,389
Refundable income taxes............................. 96,454 --
Other current assets................................ 26,793 15,093
---------- -----------
Total current assets............................. 1,203,295 800,294
Furniture, fixtures and equipment, net............... 158,220 129,213
Other assets......................................... -- 89,764
---------- -----------
Total assets..................................... $1,361,515 $ 1,019,271
========== ===========
Liabilities, and Shareholders' Deficit
Current liabilities:
Accounts payable.................................... $ 522,158 $ 273,611
Accrued expenses and other liabilities.............. 170,925 197,729
Prebillings......................................... 248,777 295,630
Line of credit...................................... 250,000 250,000
Stock repurchase obligation......................... 61,561 61,561
Current portion of capital lease obligations........ 49,745 46,259
Current portion on notes payable.................... -- 100,000
---------- -----------
Total current liabilities........................ 1,303,166 1,224,790
Capital lease obligations........................... 62,568 55,265
Notes payable....................................... -- 200,000
---------- -----------
Total liabilities................................ 1,365,734 1,480,055
---------- -----------
Shareholders' deficit
Common stock
Class A voting stock, $.01 par value, 1,000 shares
authorized; 1,000 shares issued................... 10 10
Class B non-voting stock, $.01 par value, 1,000 and
2,000 shares authorized, respectively; 350 shares
issued............................................ 3 3
Treasury stock
Class A voting stock, 550 shares (Note 6).......... (61,561) (61,561)
Class B non-voting stock, 100 shares at cost....... (5,000) (5,000)
Additional paid-in capital.......................... 14,298 105,356
Retained earnings (accumulated deficit)............. 48,031 (499,592)
---------- -----------
Total shareholders' deficit...................... (4,219) (460,784)
---------- -----------
Total liabilities and shareholders' deficit...... $1,361,515 $ 1,019,271
---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-105
<PAGE>
LARRY MILLER PRODUCTIONS, INC.
Statements of Operations
<TABLE>
<CAPTION>
For the year ended For six months ended
December 31, June 30,
------------------ ----------------------
1997 1997 1998
------------------ ---------- ----------
(unaudited)
<S> <C> <C> <C>
Gross sales........................ $4,195,024 $1,837,634 $1,678,015
Cost of sales...................... 2,964,601 1,235,540 1,470,792
---------- ---------- ----------
Gross profit..................... 1,230,423 602,094 207,223
Selling, general and administrative
expenses.......................... 1,637,026 692,611 684,824
Depreciation and amortization
expenses.......................... 104,100 46,455 47,871
---------- ---------- ----------
Loss from operations............. (510,703) (136,972) (525,472)
Interest income (expense), net..... (28,225) (8,846) (22,151)
Miscellaneous income............... 6,521 -- --
---------- ---------- ----------
Loss before income tax benefit... (532,407) (145,818) (547,623)
Income tax benefit from loss
carryback......................... 75,359 20,640 --
---------- ---------- ----------
Net loss......................... $ (457,048) $ (125,178) $ (547,623)
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-106
<PAGE>
LARRY MILLER PRODUCTIONS, INC.
Statements of Changes in Shareholders' Equity (Deficit)
<TABLE>
<CAPTION>
Class A Class B Class A Class B Retained
Common Stock Common Stock Treasury Stock Treasury Stock Earnings
------------- ------------- Paid-in --------------- -------------- (Accumulated
Shares Amount Shares Amount Capital Shares Amount Shares Amount Deficit) Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1996........... 1,000 $ 10 350 $ 3 $ 14,298 550 $(61,561) 50 $(2,500) $ 505,079 $ 455,329
Purchase of
treasury stock
at cost........ -- -- -- -- -- -- -- 50 (2,500) -- (2,500)
Net loss........ -- -- -- -- -- -- -- -- -- (457,048) (457,048)
----- ---- --- ---- -------- --- -------- --- ------- --------- ---------
Balance at
December 31,
1997........... 1,000 10 350 3 14,298 550 (61,561) 100 (5,000) 48,031 (4,219)
Issuance of
warrants in
connection with
debt
(unaudited).... -- -- -- -- 91,058 -- -- -- -- -- 91,058
Net loss
(unaudited).... -- -- -- -- -- -- -- -- -- (547,623) (547,623)
----- ---- --- ---- -------- --- -------- --- ------- --------- ---------
Balance at June
30, 1998
(unaudited).... 1,000 $ 10 350 $ 3 $105,356 550 $(61,561) 100 $(5,000) $(499,592) $(460,784)
===== ==== === ==== ======== === ======== === ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-107
<PAGE>
LARRY MILLER PRODUCTIONS, INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
For the year For six months
ended ended June 30,
December 31, --------------------
1997 1997 1998
------------ --------- ---------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net loss............................... $(457,048) $(125,178) $(547,623)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Depreciation and amortization......... 104,100 46,455 47,871
Changes in assets and liabilities
Accounts receivable.................. (200,705) (204,615) 94,950
Costs and estimated earnings in
excess of billings on uncompleted
contracts........................... 13,503 (52,297) 39,411
Other assets......................... (106,127) (31,560) 108,154
Accounts payable .................... 362,714 135,497 (248,547)
Accrued expenses and other
liabilities......................... 54,600 (97,310) 26,804
Prebillings.......................... 4,270 (105,282) 46,853
--------- --------- ---------
Net cash used in operating
activities......................... (224,693) (434,290) (432,127)
--------- --------- ---------
Cash flows from financing activities
Borrowings on line of credit........... 303,880 303,880 --
Proceeds from issuance of notes
payable............................... -- -- 300,000
Payments on line of credit and capital
lease obligations..................... (103,439) (75,249) (28,359)
Purchase of treasury stock............. (2,500) -- --
--------- --------- ---------
Net cash provided by financing
activities......................... 197,941 228,631 271,641
--------- --------- ---------
Net decrease in cash................ (26,752) (205,659) (160,486)
Cash, beginning of period............... 462,194 462,194 435,442
--------- --------- ---------
Cash, end of period..................... $ 435,442 $ 256,535 $ 274,956
--------- --------- ---------
Supplemental Disclosures of Cash Flow
Information
Cash paid during the period for
interest.............................. $ 35,365 $ 10,824 $ 25,735
--------- --------- ---------
Non-cash financing and investing
activities
Acquisition of property and equipment
through capital leases................ $ 91,174 $ 79,248 $ 17,570
--------- --------- ---------
Warrants issued in connection with
debt.................................. $ -- $ -- $ 91,058
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-108
<PAGE>
LARRY MILLER PRODUCTIONS, INC.
Statements of Cash Flows
1.Nature of Business and Summary of Significant Accounting Policies
Nature of business
Larry Miller Productions, Inc. (the "Company") provides marketing
strategy and planning, consulting, multi-media presentation design,
evaluation, management, and web site development. The Company services
clients in the northeastern United States.
Significant accounting policies
Revenue recognition
For program design, multimedia creation and web development contracts,
revenues are recognized using the percentage of completion method over
the period of contracts based on costs incurred. For event management
contracts, revenues are recognized as the services are performed or on a
percentage of completion basis for fixed fee arrangements. Web site
maintenance revenues are billed and recognized monthly over the term of
agreements. Billings for services in excess of costs represent deferred
revenue and are recorded as prebillings and earned revenue in excess of
billings are recorded as costs and estimated earnings in excess of
billings on uncompleted contracts in the balance sheet. Operating
expenses, including indirect costs and administrative expenses, are
charged to operations as incurred and are not allocated to contract
costs. Any anticipated losses on contracts are charged to earnings when
identified.
Cash and cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Furniture, fixtures and equipment
Furniture, fixtures and equipment are stated at cost less accumulated
depreciation, which is computed using an accelerated method over the
estimated useful lives of the related assets; generally five to seven
years. Equipment held under capital lease is recorded at the lower of
the fair market value of the leased property or the present value of
future minimum lease payments. Leasehold improvements are amortized over
the lesser of the remaining lease term or the estimated useful life of
the assets. Upon sale, retirement or other disposition of these assets,
the cost and the related accumulated depreciation are removed from the
respective accounts and any gain or loss on the disposition is included
in operations.
Income taxes
The Company has applied the asset and liability approach of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" for
financial accounting and reporting purposes. The Company accounts for
certain items of income and expense in different time periods for
financial reporting and income tax purposes.
F-109
<PAGE>
LARRY MILLER PRODUCTIONS, INC.
Notes to Financial Statements
A reconciliation of the federal statutory rate and the effective income
tax rate follows:
<TABLE>
<CAPTION>
Year ended
December 31,
1997
------------
<S> <C>
Statutory federal income tax rate (34%)...................... $(181,019)
Permanent differences........................................ 2,705
Benefit of state income taxes................................ (24,750)
Increase in valuation allowance.............................. 127,706
---------
Income tax (benefit) provision.............................. $ (75,359)
=========
The significant components of the Company's net deferred tax assets were
as follows:
<CAPTION>
December 31,
1997
------------
<S> <C>
Deferred tax assets..........................................
Deferred revenue............................................ $ 94,436
Loss contract accrual....................................... 11,008
Net operating loss carryforwards............................ 22,261
---------
Net deferred tax assets...................................... 127,705
Valuation allowance.......................................... (127,705)
---------
$ --
=========
</TABLE>
At December 31, 1997, the Company had net operating loss carryforwards
for income tax purposes of approximately $58,643, expiring in the year 2012.
Realization of these assets is contingent on having future taxable earnings.
Based on the loss incurred in 1997 and the fundamental change in the strategic
direction of the Company, management believes that a full valuation allowance
should be recorded against the deferred tax assets.
In addition, under the Tax Reform Act of 1986, the amounts of, and the
benefits from, net operating loss carryforwards may be impaired or limited in
certain circumstances. The company experienced an ownership change as defined
under Section 368(a) of the Internal Revenue Code in September 1998. As a
result of the ownership change, net operating loss carryforwards, which were
incurred prior to the date of change, are subject to annual limitation on their
future use.
Fair value of financial instruments
The carrying amounts of financial instruments including cash, accounts
receivable, accounts payable, accrued expenses, line of credit and notes
payable approximate fair value. The carrying amounts of capital lease
obligations approximate fair value based on monthly lease payments, lease term,
interest available to the Company for similar leases and cost of leased assets.
F-110
<PAGE>
LARRY MILLER PRODUCTIONS, INC.
Notes to Financial Statements
Comprehensive income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" requires entities to report comprehensive income,
which represents the change in equity during a period from non-owner
sources. The Company has not incurred any comprehensive income
components other than the net income for all periods presented.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates and could materially affect the reported amount of assets,
liabilities and future operating results.
2.Unaudited Interim Financial Information
The accompanying balance sheet as of June 30, 1998, the statement of
changes in shareholders' equity (deficit) for the six-month period ended
June 30, 1998 and the statements of operations and of cash flows for the
six-month periods ended June 30, 1997 and 1998 are unaudited. In the
opinion of management these statements have been prepared on the same
basis as the audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for the fair
presentation of the results of the interim periods. The financial data
and other information disclosed in these notes to financial statements
related to these periods are unaudited. The results for the six months
ended June 30, 1998 are not necessarily indicative of the results to be
expected for the year ending December 31, 1998.
3.Concentration of Credit Risk
As of December 31, 1997, three customers accounted for 47% of accounts
receivable. As of June 30, 1997 and 1998, three customers accounted for
52% of accounts receivable and two customers accounted for 43% of
accounts receivable, respectively. The company did not obtain or require
any collateral or other security instruments related to the balances.
For the year ended December 31, 1997, net sales from one customer were
$474,730, which accounted for 11% of the Company's total net sales.
F-111
<PAGE>
LARRY MILLER PRODUCTIONS, INC.
Notes to Financial Statements
4.Furniture, Fixtures and Equipment
Furniture, fixtures and equipment consists of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Equipment........................................ $390,844 $390,844
Equipment under capital leases................... 186,757 204,326
Furniture and fixtures........................... 57,515 57,515
Leasehold improvements........................... 20,406 20,406
-------- --------
655,522 673,091
Less accumulated depreciation and amortization... (497,302) (543,878)
-------- --------
Furniture, fixtures and equipment, net........... $158,220 $129,213
======== ========
</TABLE>
5.Revolving Line of Credit, Notes Payable and Capital Lease Obligations
Revolving line of credit
On April 11, 1997, the Company obtained a line of credit allowing
borrowings up to $250,000. Borrowings bear interest at the prime rate
(8.5% at December 31, 1997) plus 1.0% per annum. The amounts borrowed
are due on demand and collateralized by substantially all of the
Company's assets and the shareholder's personal guarantee. The Company
has borrowed $250,000 under the line of credit at December 31, 1997 and
June 30, 1998, respectively.
Notes payable and capital lease obligations
Notes payable and capital lease obligations consist of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
(unaudited)
<S> <C> <C>
Capital leases payable in monthly instalments of
$6,468 to $6,031 expiring from 1998 to 2002,
collateralized by equipment with a net book
value of $177,231 and $174,601, respectively.... $112,313 $101,524
Notes payable to an individual creditor with an
interest rate at 12% per annum, due August 1,
1998, collateralized by pledge of stocks owned
by Class A Common stockholders and a
shareholder's personal guarantee................ -- 100,000
Notes payable to individual creditors in
quarterly interest only installments until May
1, 2000, and subsequently in monthly instalments
of $4,250 through May 1, 2005, with an interest
rate of 10% per annum, subordinated to the line
of credit....................................... -- 200,000
-------- --------
112,313 401,524
Less current portion............................. 49,745 148,259
-------- --------
Long-term portion................................ $ 62,568 $255,265
======== ========
</TABLE>
F-112
<PAGE>
LARRY MILLER PRODUCTIONS, INC.
Notes to Financial Statements
Total interest expense for the year ended December 31,1997 and the six
months ended June 30, 1997 and 1998 was $35,365, $10,824 and, $25,735,
respectively.
The aggregate maturities required over the next five years on capital
lease obligations are as follows:
<TABLE>
<CAPTION>
Year ending December 31, Total
------------------------ --------
<S> <C>
1998........................................................... $ 67,405
1999........................................................... 41,445
2000........................................................... 24,010
2001........................................................... 3,384
2002........................................................... 2,820
Less amounts representing interest............................. (26,751)
--------
$112,313
--------
</TABLE>
6.Stock Repurchase Agreement
On January 1, 1994, the Company entered into an agreement with its major
shareholder to repurchase all of the Company's stock held by the said
shareholder for a purchase price of $61,561. The total price will be
paid by monthly installments of $1,710 for a period of 36 months
starting on January 1, 1998. The repurchase price may be prepaid by the
Company only upon the unanimous agreement of the voting Trustees of the
said shareholder's Voting Trust. Until all these payments are made in
full on December 1, 2000, the said shareholder shall retain all rights
of ownership with respect to shares owned by him. On July 13, 1998, the
Company obtained the approval from the voting Trustees of the said
shareholder's Voting Trust and repurchased all of 550 shares of Class A
Common Stock held by the said shareholder for a lump sum payment of
$100,000.
7.Treasury Stock
During the year ended December 31, 1997, the Company acquired 50 shares
of its Class B Non-Voting Common Stock at a cost of $50 per share for an
aggregate amount of $2,500.
8.401(k) Retirement Plan
Effective January 1, 1996, the Company established a 401(k) plan for
substantially all employees over the age of 21 with no requirement of
minimum services. The plan allows the Company to make discretionary
contributions to the Plan. For the year ended December 31, 1997 and for
the six-month periods ended June 30, 1997 and 1998, the Company made no
contributions to the plan.
9.Commitments
The Company leases its office facility and vehicles under noncancelable
operating leases expiring through January 2001 with aggregate monthly
payments of $12,598. Rental expense charged for the year ended December
31, 1997 and for the six-month periods ended June 30, 1997 and 1998 was
$163,037, $78,891 and $104,477 respectively.
F-113
<PAGE>
LARRY MILLER PRODUCTIONS, INC.
Notes to Financial Statements
As of December 31, 1997, future minimum lease payments under the non-
cancelable operating leases over the next four years are as follows:
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------
<S> <C>
1998........................................................... $ 147,984
1999........................................................... 140,004
2000........................................................... 140,004
2001........................................................... 23,334
---------
Total minimum lease payments................................... $ 451,326
---------
</TABLE>
10.Subsequent Events
Stock purchase warrants
On May 13, 1998, the Company issued stock purchase warrants to two
individual creditors in connection with the issuance of $200,000 in the
form of Promissory Notes. The stock purchase warrants allow the
creditors to purchase up to 40 shares of Class B Non-Voting Common
Stock, par value $.01 per share of the Company at the price of $.01 per
share at any time through May 1, 2005. The Company has recorded deferred
debt issuance cost of $91,058 for the estimated fair value at the grant
date of these warrants.
Settlement agreement
On June 15, 1998, the Company entered into an agreement with another
party to settle a dispute between the two parties with respect to
consulting services. The Company has agreed to pay an aggregate amount
of $51,500 on an installment basis over a five-month period beginning in
June 1998.
Non-qualified stock options
In August 1998, the board of directors granted fully vested stock
options to certain employees and directors to purchase up to 1,300
shares of Class B Non-Voting Common Stock, $.01 par value, at an
exercise price of $25 per share. The options expire ten years from the
date of grant.
Merger
On September 10, 1998, the Company was acquired by iXL Enterprises, Inc.
F-114
<PAGE>
Listing of the following client logos:
America Online
Delta
Bell South
Eli Lilly
GE
Chase
WebMD
Lucent
First USA
Mayo Clinic
Budget
Virgin Atlantic
Frito Lay
Universal Studios
Cox
HBOC
AutoConnect
Time Warner
Gateway
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
Shares
[LOGO]
iXL ENTERPRISES, INC.
Common Stock
----------------
PROSPECTUS
----------------
Merrill Lynch & Co.
Donaldson, Lufkin & Jenrette
----------------
BancBoston Robertson Stephens
NationsBanc Montgomery Securities LLC
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[Alternative Page for International Prospectus]
Subject to Completion
Preliminary Prospectus dated February 5, 1999
PROSPECTUS
Shares
[LOGO]
iXL ENTERPRISES, INC.
Common Stock
------------
This is iXL Enterprises, Inc.'s initial public offering of Common Stock.
The international managers will offer shares outside the United States and
Canada and the U.S. underwriters will offer shares in the United States
and Canada.
We expect the public offering price to be between $ and $ per share.
Currently, no public market exists for the shares. After pricing of the
offering, we expect that the Common Stock will trade on the Nasdaq National
Market under the symbol "IIXL."
Investing in the Common Stock involves risks which are described in the
"Risk Factors" section beginning on page 10 of this prospectus.
------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price.................................. $ $
Underwriting Discount.................................. $ $
Proceeds, before expenses, to iXL Enterprises, Inc. ... $ $
</TABLE>
The international managers may also purchase up to an additional
shares at the public offering price, less the underwriting discount, within 30
days from the date of this prospectus to cover over-allotments. The U.S.
underwriters may similarly purchase up to an aggregate of an additional
shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
We expect that the shares of Common Stock will be ready for delivery in New
York, New York on or about , 1999.
------------
Merrill Lynch International Donaldson, Lufkin & Jenrette
------------
BancBoston Robertson Stephens
NationsBanc Montgomery Securities LLC
------------
The date of this prospectus is , 1999
<PAGE>
[Alternate Page for International Prospectus]
UNDERWRITING
Merrill Lynch International ("Merrill Lynch"), Donaldson, Lufkin &
Jenrette International ("Donaldson, Lufkin & Jenrette"), BancBoston Robertson
Stephens Inc. and NationsBanc Montgomery Securities LLC are acting as lead
managers (the "Lead Managers" ) for each of the international managers named
below (the "Lead Managers"). Subject to the terms and conditions set forth in
an international purchase agreement (the "International Purchase Agreement")
among the Company and the International Managers, and concurrently with the
sale of shares of Common Stock to the U.S. Underwriters (as defined
below), the Company has agreed to sell to the International Managers, and each
of the International Managers severally and not jointly has agreed to purchase
from the Company the number of shares of Common Stock set forth opposite its
name below.
<TABLE>
<CAPTION>
Number of
International Managers Shares
---------------------- ---------
<S> <C>
Merrill Lynch International..........................................
Donaldson, Lufkin, & Jenrette International..........................
BancBoston Robertson Stephens Inc. ..................................
NationsBanc Montgomery Securities LLC................................
----
Total............................................................
====
</TABLE>
The Company has also entered into a U.S. purchase agreement (the "U.S.
Purchase Agreement") with certain underwriters in the United States and Canada
(the "U.S. Underwriters" and, together with the International Managers, the
"Underwriters") for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, BancBoston Robertson
Stephens Inc. and NationsBanc Montgomery Securities LLC are acting as
representatives (the "Representatives"). Subject to the terms and conditions
set forth in the U.S. Purchase Agreement, and concurrently with the sale of
shares of Common Stock to the International Managers pursuant to the
International Purchase Agreement, the Company has agreed to sell to the U.S.
Underwriters, and the U.S. Underwriters severally have agreed to purchase from
the Company, an aggregate of shares of Common Stock. The initial public
offering price, and the total underwriting discount, per share of Common Stock
are identical under the International Purchase Agreement and the U.S. Purchase
Agreement.
In the International Purchase Agreement and the U.S. Purchase Agreement,
the several International Managers and the several U.S. Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant to
such agreement are purchased. In the event of a default by an Underwriter, the
International Purchase Agreement and the U.S. Purchase Agreement provide that,
in certain circumstances, the purchase commitments of non-defaulting
Underwriters may be increased or the Purchase Agreements may be terminated. The
closings with respect to the sale of shares of Common Stock to be purchased by
the International Managers and the U.S. Underwriters are conditioned upon one
another.
The Lead Managers have advised the Company that the International
Managers propose initially to offer the shares of Common Stock to the public at
the initial public offering price set forth on the cover page of this
prospectus and to certain dealers at such price less a concession not in excess
of $ per share of Common Stock. The International Managers may allow, and
such dealers may reallow, a discount not in excess of $xxx per share of Common
Stock to certain other dealers. After the initial public offering, the public
offering price, concession and discount may change.
The Company has granted options to the International Managers,
exercisable for 30 days after the date of this prospectus, to purchase up to an
aggregate of additional shares of Common Stock at the initial public
offering price set forth on the cover page of this prospectus, less the
underwriting discount. The International Managers may exercise these options
solely to cover over-allotments, if any, made on the sale of the Common Stock
offered hereby. To the extent that the International Managers exercise these
options, each International Managers will be obligated, subject to certain
conditions, to purchase a number of additional
<PAGE>
[Alternate Page for International Prospectus]
shares of Common Stock proportionate to such International Manager's initial
amount reflected in the foregoing table. The Company has granted options to the
U.S. Underwriters, exercisable for 30 days after the date of this prospectus,
to purchase up to an aggregate of additional shares of Common Stock to
cover over-allotments, if any, on terms similar to those granted to the
International Managers.
The following table shows the per share and total underwriting discounts
and commissions to be paid by the Company to the Underwriters and the proceeds
before expenses to the Company. This information is presented assuming either
no exercise or full exercise by the Underwriters of their over-allotment
options.
<TABLE>
<CAPTION>
Per Share Without Option With Option
--------- -------------- -----------
<S> <C> <C> <C>
Public Offering Price.................... $ $ $
Underwriting Discount.................... $ $ $
Proceeds, before expenses, to the
Company................................. $ $ $
</TABLE>
The expenses of the offering (exclusive of the Underwriting discount) are
estimated at $ and are payable by the Company.
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part.
At the Company's request, the Underwriters have reserved for sale, at the
initial public offering price, up to 10% of the shares offered hereby for
employees, directors and other persons with relationships with the Company who
have expressed an interest in purchasing shares of Common Stock in the
offering. The number of shares of Common Stock available for sale to the
general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares not so purchased will be offered by the
Underwriters to the general public on the same basis as the other shares
offered hereby.
The Company and the Company's executive officers and directors and most
existing stockholders have agreed, subject to certain exceptions, not to
directly or indirectly (a) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option (other than options granted by the Company pursuant its Stock
Options Plans) right or warrant for the sale of or otherwise dispose of or
transfer any shares of Common Stock or securities convertible into exchangeable
or exercisable for Common Stock, whether now owned or thereafter acquired by
the person executing the agreement or with respect to which the person
executing the agreement thereafter acquires the power of disposition, or file a
registration statement under the Securities Act with respect to the foregoing
(other than a registration statement on Form S-4 covering up to 4,000,000
shares of Common Stock to be issued in connection with acquisitions) or (b)
enter into any swap or other agreement that transfers, in whole or in part, the
economic consequences of ownership of the Common Stock whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities,
in cash or otherwise, without the prior written consent of Merrill Lynch on
behalf of the Underwriters for a period of 180 days after the date of this
Prospectus. See "Shares Eligible for Future Sale."
Prior to the offering, there has been no public market for the Common
Stock of the Company. The initial public offering price will be determined
through negotiations between the Company and the Lead Managers and the
Representatives. The factors considered in determining the initial public
offering price, in addition to prevailing market conditions, are price-earnings
ratio of publicly traded companies that the Lead Managers and the
Representatives believe to be comparable to the Company, certain financial
information of the Company, the history of, and the prospects for, the Company
and the industry in which it competes, and an assessment of the Company's
management, its past and present operations, the prospects for, and timing of,
future revenues of the Company, the present state of the Company's
developments, and the above factors in relation to market values and various
valuation measures of other companies engaged in activities similar to the
Company. There can be no assurance that an active trading market will develop
for the Common Stock or
<PAGE>
[Alternate Page for International Prospectus]
that the Common Stock will trade in the public market subsequent to the
offering at or above the initial public offering price.
The Underwriters do not expect sales of the Common Stock to any accounts
over which they exercise discretionary authority to exceed 5% of the number of
shares being offered hereby.
The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the Intersyndicate Agreement, the
U.S. Underwriters and the International Managers are permitted to sell shares
of Common Stock to each other for purposes of resale at the initial public
offering price, less an amount not greater than the selling concession. Under
the terms of the Intersyndicate Agreement, the U.S. Underwriters and any dealer
to whom they sell shares of Common Stock will not offer to sell or sell shares
of Common Stock to persons who are non-U.S. or non-Canadian persons or to
persons they believe intend to resell to persons who are non-U.S. or non-
Canadian persons, and the International Managers and any dealer to whom they
sell shares of Common Stock will not offer to sell or sell shares of Common
Stock to U.S. persons or to Canadian persons or to persons they believe intend
to resell to U.S. or Canadian persons, except in the case of transactions
pursuant to the Intersyndicate Agreement.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the Securities Act, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Common Stock. As
an exception to these rules, the Lead Managers are permitted to engage in
certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Representatives
and Lead Managers, respectively, may reduce that short position by purchasing
Common Stock in the open market. The Representatives and Lead Managers,
respectively, may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.
The Representatives and Lead Managers, respectively, may also impose a
penalty bid on certain Underwriters and selling group members. This means that
if the Representatives or Lead Managers, respectively, purchase shares of
Common Stock in the open market to reduce the Underwriters' short position or
to stabilize the price of the Common Stock, they may reclaim the amount of the
selling concession from the Underwriters and selling group members who sold
those shares.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of the Common Stock to the extent
that it discourages resales of the Common Stock.
Neither the Company nor any of the Underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Stock. In
addition, neither the Company nor any of the Underwriters makes any
representation that the Representatives or Lead Managers will engage in such
transactions or that such transactions, once commenced, will not be
discontinued without notice.
Each International Manager has agreed that: (a) it has not offered or
sold and, prior to the expiration of the period of six months from the Closing
Date, will not offer or sell any shares of Common Stock to persons in the
United Kingdom, except to persons whose ordinary activities involve them in
acquiring, holding, managing or
<PAGE>
[Alternate Page for International Prospectus]
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which do not constitute an offer to
the public in the United Kingdom for the purposes of the Public Offers of
Securities Regulations 1995; (b) it has complied and will comply with all
applicable provisions of the Public Offers of Securities Regulations 1995 and
of the Financial Services Act 1986 with respect to anything done by it in
relation to the shares of Common Stock in, from or otherwise involving the
United Kingdom; and (c) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in connection with
the issue or sale of shares of Common Stock to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 (as amended) or is a person to whom
such document may otherwise lawfully be issued or passed on.
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of Common
Stock, or the possession, circulation or distribution of this Prospectus or any
other material relating to the Company or shares of Common Stock in any
jurisdiction where action for that purpose is required. Accordingly, the shares
of Common Stock may not be offered or sold, directly or indirectly, and neither
this Prospectus nor any other offering material or advertisements in connection
with the shares of Common Stock may be distributed or published, in or from any
country or jurisdiction except in compliance with any applicable rules and
regulations of any such country or jurisdiction.
Purchasers of the shares offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the
country of purchase in addition to the offering price set forth on the cover
page hereof.
The Company provides services to Merrill Lynch and certain of its
affiliates in the ordinary course of business. Donaldson, Lufkin & Jenrette
from time to time provides investment banking services to Kelso & Company and
its affiliates.
<PAGE>
[Alternative Page for International Prospectus]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
Shares
[LOGO]
iXL ENTERPRISES, INC.
Common Stock
----------------
PROSPECTUS
----------------
Merrill Lynch International
Donaldson, Lufkin & Jenrette
----------------
BancBoston Robertson Stephens
NationsBanc Montgomery Securities LLC
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
Item 13. Other Expenses of Issuance and Distribution.
The following table indicates the expenses to be incurred in connection
with the offering described in this Registration Statement, all of which will
be paid by the Company. All amounts are estimates, other than the registration
fee, the NASD fee, and the NASDAQ listing fee.
<TABLE>
<S> <C>
Registration fee.................................................... $23,978
NASD fee............................................................ 9,125
NASDAQ listing fee.................................................. *
Accounting fees and expenses........................................ *
Legal fees and expenses............................................. *
Director and officer insurance expenses............................. *
Printing and engraving.............................................. *
Transfer Agent fees and expenses.................................... *
Blue sky fees and expenses.......................................... *
Miscellaneous expenses.............................................. *
-------
Total............................................................. $
=======
</TABLE>
- --------
* To be completed by amendment.
Item 14. Indemnification of Directors and Officers.
The Company's Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws provide that officers and directors who are made a
party to or are threatened to be made a party to or is otherwise involved in
any action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was an
officer or a director of the Company or is or was serving at the request of the
Company as a director or an officer of another corporation or of a partnership,
joint venture, trust, or other enterprise, including service with respect to an
employee benefit plan (an "indemnitee"), whether the basis of such proceeding
is alleged action in an official capacity as a director or officer or in any
other capacity while serving as a director or officer, shall be indemnified and
held harmless by the Company to the fullest extent authorized by the Delaware
General Corporation Law ("DGCL"), as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights than
permitted prior thereto), against all expense, liability, and loss (including,
without limitation, attorneys' fees, judgments, fines, excise taxes or
penalties, and amounts paid or to be paid in settlement) incurred or suffered
by such indemnitee in connection therewith and such indemnification shall
continue with respect to an indemnitee who has ceased to be a director or
officer and shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that the Company shall indemnify any such
indemnitee in connection with a proceeding initiated by such indemnitee only if
such proceeding was authorized by the Board of Directors. The right to
indemnification includes the right to be paid by the Company for expenses
incurred in defending any such proceeding in advance of its final disposition.
Officers and directors are not entitled to indemnification if such persons did
not meet the applicable standard of conduct set forth in the DGCL for officers
and directors.
DGCL Section 145 provides, among other things, that the Company may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (other than
an action by or in the right of the Company) by reason of the fact that the
person is or was a director, officer, agent or employee of the Company or is or
was serving at the Company's request as a director, officer, agent, or employee
of another corporation, partnership, joint venture, trust or other enterprise,
II-1
<PAGE>
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding. The power to indemnify applies (a) if such
person is successful on the merits or otherwise in defense of any action, suit
or proceeding, or (b) if such person acted in good faith and in a manner he
reasonably believed to be in the best interest, or not opposed to the best
interest, of the Company, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
power to indemnify applies to actions brought by or in the right of the Company
as well, but only to the extent of defense expenses (including attorneys' fees
but excluding amounts paid in settlement) actually and reasonably incurred and
not to any satisfaction of a judgment or settlement of the claim itself, and
with the further limitation that in such actions no indemni- fication shall be
made in the event of any adjudication of negligence or misconduct in the
performance of his duties to the Company, unless the court believes that in
light of all the circumstances indemnification should apply.
The indemnification provisions contained in the Company's Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws are not
exclusive of any other rights to which a person may be entitled by law,
agreement, vote of stockholders or disinterested directors or otherwise. In
addition, the Company maintains insurance on behalf of its directors and
executive officers insuring them against any liability asserted against them in
their capacities as directors or officers or arising out of such status.
Item 15. Recent Sales of Unregistered Securities.
1. On April 12, 1996, the Registrant issued and sold 300 shares of Common
Stock in a private placement to the founders of the Registrant for an aggregate
of $300 in reliance on the exemption from registration provided by Section 4(2)
of the Securities Act.
2. On April 30, 1996, the Registrant issued and sold 101,500 shares of
its Class A Preferred Stock, in a private placement to eight investors for an
aggregate of $10,150,000 in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act.
3. On April 30, 1996, the Registrant issued and sold 3,959,500 shares of
Common Stock in a private placement to ten investors in connection with the
acquisition of iXL Interactive Excellence, Inc., Creative Video Library, Inc.,
Creative Video, Inc. and Entrepreneur Television, Inc. The issuance of Common
Stock was made in reliance on Section 4(2) of the Securities Act.
4. During the period from April 30, 1996 through February 5, 1999, the
Registrant granted options to purchase an aggregate of 23,049,261 shares of
Common Stock to 1,423 employees pursuant to the IXL Holdings, Inc. 1996 Stock
Option Plan in reliance on Rule 701 promulgated under the Securities Act and
under Section 4(2) of the Securities Act. Options issued for 14,874,533 shares
of Common Stock cannot be exercised prior to the earlier of the registration of
the underlying Common Stock under the Securities Act or six years from the date
of issuance.
5. On September 30, 1996, the Registrant issued and sold 10,000 shares of
its Class A Preferred Stock for $1,000,000 in a private placement to three
investors and 25,000 shares of Common Stock for $25,000 in a private placement
to one investor, each in reliance on the exemption from registration provided
by Section 4(2) of the Securities Act.
6. On December 16, 1996, the Registrant issued and sold 50,000 shares of
Common Stock in a private placement to one investor in connection with the
acquisition of Consumer Financial Network, Inc. This issuance of Common Stock
was made in reliance on Section 4(2) of the Securities Act.
7. On February 14, 1997, the Registrant issued and sold 40,000 shares of
Common Stock in a private placement to two investors in connection with the
acquisition of Webbed Feet, LLC. This issuance of Common Stock was made in
reliance on Section 4(2) of the Securities Act.
II-2
<PAGE>
8. On April 4, 1997, the Registrant issued and sold 454,400 shares of its
Common Stock and options to purchase 153,600 shares of Common Stock in a
private placement to one investor in connection with the acquisition of The
Whitley Group, Inc. This issuance of Common Stock was made in reliance on
Section 4(2) of the Securities Act.
9. From April 4, 1997 through August 29, 1997, the Registrant issued and
sold an aggregate of 57,760 shares of its Class A Preferred Stock for an
aggregate of $14,440,000 to 38 investors in reliance on Section 4(2) of the
Securities Act.
10. On May 31, 1997, the Registrant issued and sold 3,416,700 shares of
Common Stock, and warrants to purchase 230,900 shares of Common Stock in a
private placement to ten investors in connection with the acquisition of BoxTop
Interactive, Inc. This issuance of Common Stock was made in reliance on Section
4(2) of the Securities Act.
11. On July 28, 1997, the Registrant issued and sold 283,900 shares of
Common Stock in a private placement to five investors in connection with the
acquisition of Swan Interactive Media, Inc. This issuance of Common Stock was
made in reliance on Section 4(2) of the Securities Act.
12. From December 17, 1997 through December 23, 1997, the Registrant
issued and sold in a private placement to four investors (i) 83,075 shares of
its Class B Preferred Stock, and warrants to purchase 10,650 shares of Class B
Preferred Stock for $26,999,375 and (ii) 9,232 shares of its Class C Preferred
Stock, for an aggregate of $3,000,400 in reliance on Section 4(2) of the
Securities Act.
13. On January 23, 1998, the Registrant issued and sold 271,356 shares of
Common Stock in a private placement to two investors in connection with the
acquisition of Small World Software, Inc. This issuance of Common Stock was
made in reliance on Section 4(2) of the Securities Act.
14. On February 5, 1998, the Registrant issued and sold 344,270 shares of
Common Stock in a private placement to 18 investors in connection with the
acquisition of substantially all of the assets of Green Room Productions,
L.L.C. This issuance of Common Stock was made in reliance on Section 4(2) of
the Securities Act.
15. From February 20, 1998 through February 27, 1998, the Registrant
issued and sold in a private placement an aggregate of (a) 3,192 shares of its
Class A Preferred Stock and (b) 15,692 shares of its Class B Preferred Stock
plus warrants to purchase 1,810 shares of Class B Preferred Stock for an
aggregate of $6,137,300 to 12 investors in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act.
16. On March 27, 1998, the Registrant issued and sold 266,000 shares of
Common Stock in a private placement to one investor in connection with its
acquisition of certain assets of Continental Communications Group, Inc. This
issuance of Common Stock was made in reliance on Section 4(2) of the Securities
Act.
17. On May 8, 1998, the Registrant issued and sold 155,200 shares of
Common Stock in a private placement to five investors in connection with its
acquisition of Spin Cycle Entertainment. This issuance of Common Stock was made
in reliance on Section 4(2) of the Securities Act.
18. On May 12, 1998, the Registrant issued and sold 195,834 shares of
Common Stock in a private placement to three investors in connection with the
acquisition of InTouch Interactive, Inc. This issuance of Common Stock was made
in reliance on Section 4(2) of the Securities Act.
19. On May 12, 1998, the Registrant issued and sold 359,584 shares of
Common Stock in a private placement to four investors in connection with the
acquisition of Digital Planet. This issuance of Common Stock was made in
reliance on Section 4(2) of the Securities Act.
II-3
<PAGE>
20. On May 14, 1998, the Registrant issued and sold 740,000 shares of
Common Stock in a private placement to two investors in connection with the
acquisition of Micro Interactive, Inc. This issuance of Common Stock was made
in reliance on Section 4(2) of the Securities Act.
21. On May 20, 1998, the Registrant issued and sold an aggregate of 539
shares of Class A Preferred Stock in a private placement to four investors for
an aggregate consideration of $175,175. This issuance of Common Stock was made
in reliance on Section 4(2) of the Securities Act.
22. From June 29, 1998 through September 18, 1998, the Registrant issued
and sold an aggregate of 4,300 shares of Class A Preferred Stock in a private
placement to 53 investors for an aggregate consideration of $4,300,000. This
issuance was made in reliance on Section 4(2) of the Securities Act.
23. On July 2, 1998, the Registrant issued and sold 877,898 shares of
Common Stock in a private placement to six investors in connection with the
acquisition of CommerceWAVE, Inc. This issuance of Common Stock was made in
reliance on Section 4(2) of the Securities Act.
24. On July 8, 1998, the Registrant issued and sold 50,000 shares of
Common Stock in a private placement to two investors in connection with the
acquisition of Wissing & Laurence, Inc. This issuance of Common Stock was made
in reliance on Section 4(2) of the Securities Act.
25. On July 16, 1998, the Registrant issued and sold 200,000 shares of
Common Stock in a private placement to two investors in connection with the
acquisition of 601 Design, Inc. This issuance of Common Stock was made in
reliance on Section 4(2) of the Securities Act.
26. On July 22, 1998, the Registrant issued and sold 378,999 shares of
Common Stock in a private placement to six investors in connection with the
acquisition of Image Communications, Inc. This issuance of Common Stock was
made in reliance on Section 4(2) of the Securities Act.
27. On July 28, 1998, the Registrant issued and sold 37,107 shares of
Common Stock in a private placement to two foreign investors in connection with
the acquisition of Campana New Media, S.L. and The Other Media, S.L. This
issuance of Common Stock was made in reliance on Section 4(2) of the Securities
Act.
28. On July 30, 1998, the Registrant issued and sold 674,132 shares of
Common Stock in a private placement to two investors in connection with the
acquisition of Spinners Incorporated. This issuance of Common Stock was made in
reliance on Section 4(2) of the Securities Act.
29. On August 14, 1998, the Registrant issued and sold an aggregate of
35,700 shares of Class D Preferred Stock, par value $.01 per share, in a
private placement to 10 investors for an aggregate consideration of $35,700,000
in reliance on Section 4(2) of the Securities Act.
30. On September 4, 1998, the Registrant issued and sold 762,622 shares
of Common Stock in a private placement to two investors in connection with the
acquisition of Tekna, Inc. This issuance of Common Stock was made in reliance
on Section 4(2) of the Securities Act.
31. On September 7, 1998, the Registrant issued and sold 321,428 shares
of Common Stock in a private placement to four foreign investors in connection
with the acquisition of LAVA Gesellschaft fur Digitale Medien GmbH. This
issuance of Common Stock was made in reliance on Section 4(2) of the Securities
Act.
32. On September 9, 1998, the Registrant issued and sold 113,823 shares
of Common Stock and warrants to purchase 9,106 shares of Common Stock in a
private placement to four investors in connection with the acquisition of Larry
Miller Productions, Inc. This issuance of Common Stock was made in reliance on
Section 4(2) of the Securities Act.
II-4
<PAGE>
33. On September 10, 1998, the Registrant issued and sold 42,852 shares
of Common Stock in a private placement to one foreign investor in connection
with the acquisition of Denovo New Media Limited. This issuance of Common Stock
was made in reliance on Section 4(2) of the Securities Act.
34. On September 10, 1998, the Registrant issued and sold 275,000 shares
of Common Stock in a private placement to one investor in connection with the
acquisition of Exchange Place Solutions, Inc. This issuance of Common Stock was
made in reliance on Section 4(2) of the Securities Act.
35. On September 18, 1998, the Registrant issued and sold 271,787 shares
of Common Stock in a private placement to three investors in connection with
the acquisition of Pantheon Interactive, Inc. This issuance of Common Stock was
made in reliance on Section 4(2) of the Securities Act.
36. On September 18, 1998, the Registrant issued and sold 269,421 shares
of Common Stock in a private placement to six investors in connection with the
acquisition of Two-Way Communications, L.L.C. This issuance of Common Stock was
made in reliance on Section 4(2) of the Securities Act.
37. On September 22, 1998, the Registrant issued and sold 701,375 shares
of Common Stock in a private placement to one investor in connection with the
acquisition of NetResponse, L.L.C. This issuance of Common Stock was made in
reliance on Section 4(2) of the Securities Act.
38. On September 23, 1998, the Registrant issued and sold 358,551 shares
of Common Stock in a private placement to one investor in connection with the
acquisition of Ionix Development Corporation. This issuance of Common Stock was
made in reliance on Section 4(2) of the Securities Act.
39. On September 24, 1998, the Registrant issued and sold 378,066 shares
of Common Stock in a private placement to three investors in connection with
the acquisition of Pequot Systems, Inc. This issuance of Common Stock was made
in reliance on Section 4(2) of the Securities Act.
40. On October 15, 1998, the Registrant issued and sold 2,000 shares of
Common Stock in a private placement to one investor for an aggregate
consideration of $20,000. This issuance of Common Stock was made in reliance on
Section 4(2) of the Securities Act.
41. On December 14, 1998, the Registrant issued warrants to purchase
500,000 shares of Common Stock in a private placement to one investor in
reliance on Section 4(2) of the Securities Act.
42. During the period from December 10, 1998 through February 5, 1999,
the Registrant granted options to purchase an aggregate of 440,464 shares of
Common Stock to 29 persons pursuant to the iXL Enterprises, Inc. 1998 Non-
Employee Stock Option Plan in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act. Options issued for 293,064
shares of Common Stock cannot be exercised prior to the earlier of the
registration of the underlying Common Stock under the Securities Act or six
years from the date of issuance.
43. On December 31, 1998, the Registrant issued warrants to purchase
500,000 shares of Common Stock in a private placement to one investor in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act.
44. From January 15, 1999 through January 19, 1999, the Registrant issued
and sold 22,825 shares of Class A Preferred Stock in a private placement to 27
investors for an aggregate consideration of $22,825,000 in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act.
II-5
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
a. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of U.S. Purchase Agreement*
1.2 Form of International Purchase Agreement*
2.1 Exchange Agreement, dated April 30, 1996, between the Registrant,
Creative Video Library, Inc. and its stockholders for the purchase of
all of the issued and outstanding capital stock of Creative Video
Library, Inc.
2.2 Exchange Agreement, dated April 30, 1996, between the Registrant,
Creative Video, Inc. and its stockholders for the purchase of all of
the issued and outstanding capital stock of Creative Video, Inc.
2.3 Exchange Agreement, dated April 30, 1996, between the Registrant, IXL
Interactive Excellence, Inc. and its stockholders for the purchase of
all of the issued and outstanding Stock of IXL Interactive Excellence,
Inc.
2.4 Exchange Agreement, dated April 30, 1996, between the Registrant,
Entrepreneur Television, Inc. and its stockholders for the purchase of
all of the issued and outstanding capital stock of Entrepreneur
Television, Inc.
2.5 Purchase and Sale Agreement, dated as of June 5, 1996, by and among
IXL Acquisition Corp., Memphis On Line, Inc. Southern On Line Systems,
Inc., and Southern Tel Supply, Inc.
2.6 Agreement and Plan of Merger, dated as of December 13, 1996, by and
among IXL Merger Corp., the Registrant, Consumer Financial Network,
Inc., Mellett, Reene & Smith, LLC, Derek V. Smith, Michael W. Reene
and Edwin R. Mellett.
2.7 Asset Purchase Agreement, dated as of February 14, 1997, by and
between the Registrant, iXL, Inc., Webbed Feet, LLC, F. Blair Schmidt-
Fellner and Michael Brendon Dowdle.
2.8 Agreement and Plan of Merger, dated as of April 4, 1997, by and
between the Registrant, IXL Merger Corp. II, Inc., The Whitley Group,
Inc. and William C. Whitley.
2.9 Agreement of Plan of Merger, dated as of May 30, 1997, by and between
the Registrant, IXL Merger Corp. III, Inc., BoxTop Interactive, Inc.,
and the Shareholders of Boxtop Interactive, Inc.
2.10 Agreement and Plan of Merger, dated as of July 28, 1997, by and
between the Registrant, IXL Merger Corp. IV, Inc., Mark Swanson, N.
Blake Patton, Marc Sirkin, Edwin Davis, Estate of Robert H. Kriebel
and Swan Interactive Media, Inc.
2.11 Agreement and Plan of Merger, dated as of January 23, 1998, by and
between the Registrant, iXL-New York, Inc., Small World Software,
Inc., and the Shareholders of Small World
2.12 Asset Purchase Agreement, dated as of February 5, 1998, by and between
the Registrant, iXL-San Francisco, Inc., Green Room Productions,
L.L.C. and the Controlling Members.
2.13 Asset Purchase Agreement, dated as of March 27, 1998, by and between
the Registrant, iXL-Denver, Inc., Continental Communications Group,
Inc., d/b/a Customer Communications Group, Inc. and John R. Klug.
2.14 Agreement and Plan of Merger, dated as of May 4, 1998, by and between
the Registrant, iXL-New York, Inc., Micro Interactive, Inc. and the
Micro Shareholders.
2.15 Agreement and Plan of Merger, dated as of May 8, 1998, by and between
the Registrant, iXL-Los Angeles, Inc., Spin Cycle Entertainment, Inc.,
and the SCE Shareholders.
2.16 Agreement and Plan of Merger, dated as of May 12, 1998, by and between
the Registrant, iXL-Los Angeles, Inc., Digital Planet and the Digital
Shareholders.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
2.17 Agreement and Plan of Merger, dated as of May 12, 1998, by and between
InTouch Interactive, Inc., the Registrant, iXL-Charlotte, Inc., and
the InTouch Shareholders.
2.18 Share Sale and Purchase Agreement dated as of 11 May, 1998 between,
iXL London Limited, and Derek Scanlon.
2.19 Agreement and Plan of Merger, dated as of July 2, 1998, by and between
CommerceWAVE, Inc., the Registrant, iXL-San Diego, Inc., and the
CommerceWAVE shareholders.
2.20 Agreement and Plan of Merger, dated as of July 8, 1998, by and between
the Registrant, iXL-New York, Inc., Wissing & Laurence, Inc. and the
W&L Shareholders.
2.21 Asset Purchase Agreement, dated as of July 16, 1998, by and among
Robert Ortiz and John Tierney, the Registrant and iXL-New York, Inc.
2.22 Agreement and Plan of Merger, dated as of July 22, 1998, by and
between Image Communications, Inc., the Registrant, iXL-DC, Inc., and
the Image Shareholders
2.23 Share Purchase Agreement, dated as of July 28, 1998, by and among the
Registrant, iXL-Madrid, S.A., Campana New Media, S.L, The Other Media,
S.L., the Campana Companies Beneficial Owners and the Campana
Companies Shareholders.
2.24 Agreement and Plan of Merger, dated as of July 30, 1998, by and among
Spinners Incorporated, the Registrant, iXL-Boston, Inc. and the
Spinners Shareholders.
2.25 Agreement and Plan of Merger, dated as of September 4, 1998, by and
among the Registrant, iXL-Richmond, Inc., Tekna, Inc., and the Tekna
Shareholders.
2.26 Share Sale and Purchase Agreement, dated as of September 7, 1998, by
and between the Registrant, Jens Bley, Manfred Otterbreit, Stephan
Balzerand Matthias Oelmann.*
2.27 Agreement and Plan of Merger dated as of September 9, 1998 by and
among the Registrant, iXL-Boston, Inc., Larry Miller Productions,
Inc., and the LMP Principals.
2.28 Agreement and Plan of Merger, dated as of September 10, 1998, by and
between the Registrant, iXL, Inc., Exchange Place Solutions, Inc., and
the Exchange Place Shareholder.
2.29 Agreement and Plan of Merger, dated as of September 18, 1998, by and
among the Registrant, iXL-San Francisco, Inc., Pantheon Interactive,
Inc., and the Pantheon Shareholders.
2.30 Agreement and Plan of Merger, dated as of September 18, 1998, by and
among the Registrant, iXL-Chicago, Inc., Two-Way Communications,
L.L.C., and the TWC Members.
2.31 Agreement and Plan of Merger, dated as of September 22, 1998, by and
between the Registrant, iXL-DC, Inc., NetResponse, L.L.C., and Next
Century Communications Corp.
2.32 Agreement and Plan of Merger, dated as of September 23, 1998, by and
among the Registrant, iXL-Chicago, Inc., Ionix Development,
Corporation, and the Ionix Shareholder.
2.33 Agreement and Plan of Merger, dated as of September 24, 1998, by and
between the Registrant, iXL-Connecticut, Inc., Pequot Systems, Inc.
and the Pequot Shareholders.
3.1 Form of Amended and Restated Certificate of Incorporation*
3.2 Form of Amended and Restated Bylaws.*
4.1 Form of Common Stock Certificate.*
4.2 Form of Common Stock Warrant.*
4.3 Form of Class B Convertible Preferred Stock Warrant.*
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.4 Form of Class A Common Stock Warrant.*
4.5 Form of Class B Common Stock Warrant.*
4.6 Investor Stockholders Agreement, dated as of April 30, 1996, as
amended.
4.7 Form of Amended Stockholders' Agreement.*
5.1 Opinion of Minkin & Snyder, a Professional Corporation.*
10.1 Employment Agreement between Boxtop Interactive, Inc. and Kevin Wall,
dated as of August 1, 1996, as amended, together with related
agreements.
10.2 Employment Agreement dated as of May 1, 1998 between iXL, Inc. and
William C. Nussey.
10.3 Employment Agreement dated August 17, 1998 between iXL, Inc. and David
Clauson.
10.4 Form of Employment Agreement between Consumer Financial Network, Inc.
and C. Cathleen Raffaeli.*
10.5 iXL Enterprises, Inc. 1996 Stock Option Plan, together with related
agreements.*
10.6 iXL Enterprises, Inc. 1998 Non-Employee Stock Option Plan, together
with related agreements.*
10.7 iXL Enterprises, Inc. 1999 Employee Stock Option Plan, together with
related agreements.*
10.8 Amended and Restated Advisory Agreement dated as of April 30, 1996 by
and between IXL Holdings, Inc. and Kelso & Company.*
10.9 Consulting Agreement by and between iXL Enterprises, Inc. and Kelso &
Company.*
10.10 Promissory Note, dated as of January 14, 1997, made by IXL-Memphis,
Inc. in favor of First Tennessee Bank National Association, in the
original principal amount of $499,000 and agreements related thereto.*
10.11 Promissory Note, dated as of May 30, 1997, in the principal aggregate
amount of $50,000 in favor of the Registrant from Kevin Wall.
10.12 Promissory Note, dated as of September 15, 1997, in the principal
aggregate amount of $500,000 in favor of U. Bertram Ellis from the
Registrant.
10.13 Promissory Note, dated as of September 18, 1997, in the principal
aggregate amount of $300,000 in favor of James Rocco from the
Registrant.
10.14 Promissory Note, dated as of September 29, 1997, in the principal
aggregate amount of $100,000 in favor of James S. Altenbach from the
Registrant.
10.15 Promissory Note, dated as of October 10, 1997, in the principal
aggregate amount of $1,000,000 in favor of U. Bertram Ellis, Jr. from
the Registrant.
10.16 Promissory Note, dated as of October 30, 1997, in the principal
aggregate amount of $1,000,000 in favor of U. Bertram Ellis, Jr. from
the Registrant.
10.17 Promissory Note, dated as of November 25, 1997, in the principal
aggregate amount of $1,000,000 in favor of U. Bertram Ellis, Jr. from
the Registrant.
10.18 Promissory Note, dated as of December 3, 1997, in the principal
aggregate amount of $1,300,000 in favor of U. Bertram Ellis, Jr. from
the Registrant.
10.19 Promissory Note, dated as of June 19, 1998, in the principal aggregate
amount of $4,000,000 in favor of Deborah Hicks Ellis from the
Registrant and certain of its subsidiaries and related agreements.
10.20 Promissory Note, dated as of July 20, 1998, in the principal aggregate
amount of $2,000,000 in favor of U. Bertram Ellis, Jr. from the
Registrant.
10.21 Credit Agreement, dated as of July 29, 1998, as amended and restated
as of November 30, 1998, among the Registrant, the Lenders party
thereto and The Chase Manhattan Bank as Administrative Agent and
related agreements.
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.22 Promissory Note, dated as of September 18, 1998, between David Clauson
(as Maker) and the Registrant together with Stock Pledge Agreement.
10.23 Subscription Agreement for Common Stock dated April 12, 1996 between
the Registrant and U. Bertram Ellis, Jr.
10.24 Subscription Agreement for Common Stock dated April 12, 1996 between
the Registrant and James S. Altenbach.
10.25 Subscription Agreement for Class A Convertible Preferred Stock dated
April 30, 1996 between the Registrant and U. Bertram Ellis, Jr.
10.26 Subscription Agreement for Class A Convertible Preferred Stock dated
April 30, 1996 between the Registrant and U. Bertram Ellis, Jr., James
V. Sandry and James S. Altenbach.
10.27 Subscription Agreement for Class A Convertible Preferred Stock dated
June 3, 1996 between the Registrant and James S. Altenbach.
10.28 Subscription Agreement for Class A Convertible Preferred Stock dated
April 4, 1997 between the Registrant and Kelso Investment Associates
V, L.P.
10.29 Subscription Agreement for Class A Convertible Preferred Stock dated
April 4, 1997 between the Registrant and Kelso Equity Partners V, L.P.
10.30 Subscription Agreement for Class A Convertible Preferred Stock dated
April 4, 1997 between the Registrant and U. Bertram Ellis, Jr.
10.31 Subscription Agreement for Class A Convertible Preferred Stock dated
April 4, 1997 between the Registrant and James S. Altenbach.
10.32 Subscription Agreement for Class A Convertible Preferred Stock dated
February 20, 1998 between the Registrant and U. Bertram Ellis, Jr.*
10.33 Subscription Agreement for Class A Convertible Preferred Stock dated
August 25, 1998 between the Registrant and William C. Nussey.
10.34 Subscription Agreement for Class A Convertible Preferred Stock dated
September 18, 1998 between the Registrant and David Clauson.
10.35 Exchange Agreement, dated April 30, 1996, between the Registrant,
Creative Video Library, Inc. and its stockholders for the purchase of
all of the issued and outstanding capital stock of Creative Video
Library, Inc. (contained in Exhibit 2.1).
10.36 Exchange Agreement, dated April 30, 1996, between the Registrant,
Creative Video, Inc. and its stockholders for the purchase of all of
the issued and outstanding capital stock of Creative Video, Inc.
(contained in Exhibit 2.2).
10.37 Exchange Agreement, dated April 30, 1996, between the Registrant,
Entrepreneur Television, Inc. and its stockholders for the purchase of
all of the issued and outstanding capital stock of, Entrepreneur
Television, Inc. (contained in Exhibit 2.3).
10.38 Agreement and Plan of Merger, dated May 30, 1997, by and among iXL
Enterprises, Inc., iXL Merger Corp. III, Inc., Boxtop Interactive,
Inc., and the Stockholders of Boxtop Interactive, Inc. (contained in
Exhibit 2.9).
10.39 Securities Purchase Agreement, dated December 17, 1997, among iXL
Enterprises, Inc. and Chase Venture Capital Associates, L.P., Flatiron
Partners, LLC and Greylock IX Limited Partnership and related
agreement.
10.40 Warrant Agreement, dated as of December 17, 1997, by and among the
Registrant, Chase Venture Capital Associates, L.P., Flatiron Partners,
L.L.C., and Greylock IX Limited partnership.
10.41 Securities Purchase Agreement, dated December 23, 1997, among the
Registrant and General Electric Capital Corporation.*
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.42 Warrant Award Agreement dated as of December 23, 1997 by and between
the Registrant and General Electric Capital Corporation.
10.43 Warrant Agreement, dated as of December 23, 1997, by and between the
Registrant and General Electric Capital Corporation.
10.44 Warrant Award Agreement dated as of March 12, 1998 by and between the
Registrant and Chase Venture Capital Associates, L.P., and related
agreement.*
10.45 Securities Purchase Agreement, dated March 30, 1998, between the
Registrant and Kevin Wall for the purchase of shares of the
Registrant's Common Stock.
10.46 Securities Purchase Agreement, dated August 14, 1998, among the
Registrant and CB Capital Investors, L.P., The Flatiron Fund 1998/99,
LLC, Friends of Flatiron, LLC, and Mellon Ventures II, L.P.
10.47 Securities Purchase Agreement, dated January 15, 1999, among the
Registrant and the Purchasers listed therein for the purchase of
shares of the Registrant's Class A Preferred Stock.
10.48 Stock Purchase Agreement dated November 3, 1998, between Consumer
Financial Network, Inc. and General Electric Capital Corporation for
the purchase of shares of Series A Convertible Preferred Stock, $.01
par value per share, of Consumer Financial Network, Inc.*
10.49 Warrant Agreement, dated as of November 3, 1998, among the Registrant
and General Electric Capital Corporation.
10.50 Stockholders' Agreement, dated November 3, 1998, among Consumer
Financial Network, Inc., iXL Enterprises, Inc. and General Electric
Capital Corporation.*
10.51 Guaranty of License Agreement dated April 27, 1998 between Consumer
Financial Network, Inc. and Charter Federal Savings & Loan Association
of West Point, Georgia.
10.52 Lease Agreement dated January 8, 1997 between Park Place Emery, L.L.C.
and iXL, Inc., as amended.*
10.53 Registration Rights Agreement dated as of April 30, 1996 among the
Registrant and Kelso Investment Associates V, L.P., Kelso Equity
Partners V, L.P., Kelso Equity Partners V, L.P., and certain other
stockholders of the Registrant.*
21.1 Subsidiaries of the Company.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Minkin & Snyder, a Professional Corporation (contained in
Exhibit 5.1).*
24.1 Power of Attorney.**
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be provided by amendment.
**Included on signature pages hereto.
II-10
<PAGE>
b. Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts
Item 17. Undertakings.
The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the provisions described in Item 14, or otherwise,
the registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable. In the event that a claim
for indemnification by the registrant against such liabilities (other than the
payment by the registrant of express incurred or paid by a director, officer,
or controlling person of the registrant in the successful defense of any
action, suit, or proceeding) is asserted by such director, or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes determining any liability under the Securities Act of
1933, the information omitted from the form of Prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the registrant pursuant to Rule 424(b) (1) or
(4) or 497 (h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia, on February 5, 1999.
iXL Enterprises Inc.,
a Delaware corporation
/s/ U. Bertram Ellis, Jr.
By: _________________________________
Name:U. Bertram Ellis, Jr.
Title:Chief Executive Officer
Each person whose signature appears below hereby constitutes and appoints
U. Bertram Ellis, Jr. and M. Wayne Boylston, and each of them, his true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign any and all (i) amendments (including post-effective
amendments) and additions to this Registration Statement and (ii) Registration
Statements, and any and all amendments thereto (including post-effective
amendments), relating to the offering contemplated pursuant to Rule 462(b)
under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact and agents
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ U. Bertram Ellis, Jr. Chief Executive Officer February 5, 1999
______________________________________ (Principal Executive
U. Bertram Ellis, Jr. Officer)
/s/ M. Wayne Boylston Chief Financial Officer February 5, 1999
______________________________________ (Principal Financial
M. Wayne Boylston Officer)
/s/ Frank K. Bynum, Jr. Director February 5, 1999
______________________________________
Frank K. Bynum, Jr.
/s/ Jerome D. Colonna Director February 5, 1999
______________________________________
Jerome D. Colonna
/s/ I. Robert Greene Director February 5, 1999
______________________________________
I. Robert Greene
/s/ William C. Nussey Director February 5, 1999
______________________________________
William C. Nussey
</TABLE>
II-12
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James R. Rocco Director February 5, 1999
______________________________________
James R. Rocco
/s/ Thomas G. Rosencrants Director February 5, 1999
______________________________________
Thomas G. Rosencrants
/s/ Kevin M. Wall Director February 5, 1999
______________________________________
Kevin M. Wall
/s/ Thomas R. Wall, IV Director February 5, 1999
______________________________________
Thomas R. Wall, IV
</TABLE>
II-13
<PAGE>
Schedule II--Valuation and Qualifying Accounts
(in thousands)
<TABLE>
<CAPTION>
Balance at Charges to Deductions Balance
beginning costs and and at end
Description of period expenses Reclassifications (1) Other (2) of period
----------- ---------- ---------- --------------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts
For the year ended
December 31,
- ------------------
1998.................. $138 $1,227 $(765) $196 $796
1997.................. 150 118 (130) -- 138
1996.................. -- 134 (14) 30 150
</TABLE>
- --------
(1)Amounts represent write-offs.
(2) Amounts represent the beginning balances of the allowance for doubtful
accounts for the companies acquired during the respective periods.
S-1
<PAGE>
EXHIBIT 2.1
EXCHANGE AGREEMENT
AMONG
IXL HOLDINGS, INC.
AND
JAMES R. ROCCO,
R. GUY DAVIDSON, III,
BARRY T. SIKES
AND
ARMISTEAD WHITNEY
____________________
Dated as of April 30, 1996
____________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
ARTICLE I
DEFINITIONS
<S> <C>
1.1 Definition........................................................... 2
1.2 Singular/Plural; Gender.............................................. 5
ARTICLE II
THE EXCHANGE
2.1 Exchange............................................................. 5
2.2 Payment on Closing................................................... 5
2.3 Closing Date Deliveries.............................................. 5
2.4 Risk of Loss......................................................... 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
3.1 Corporate Organization............................................... 6
3.2 CVL Stock............................................................ 6
3.3 Subsidiaries......................................................... 6
3.4 Title to Stock....................................................... 6
3.5 Seller Investment Representations.................................... 6
3.6 Absence of Conflicting Agreements.................................... 9
3.7 Title to CVL Assets; Liens and Encumbrances.......................... 9
3.8 CVL Assets........................................................... 10
3.9 Equipment............................................................ 10
3.10 Contracts............................................................ 10
3.11 Intangible Property.................................................. 11
3.12 Video Library........................................................ 11
3.13 Financial Statements................................................. 12
3.14 Absence of Undisclosed Liabilities................................... 12
3.15 No Adverse Change.................................................... 13
3.16 No Litigation; Labor Disputes; Compliance with Law................... 14
3.17 Tax Returns and Tax Reports.......................................... 14
3.18 Governmental Authorizations.......................................... 15
3.19 Compliance with Governmental Requirements............................ 15
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.20 Banks; Powers of Attorney............................................ 15
3.21 Employees............................................................ 15
3.22 Employee Welfare Plans............................................... 15
3.23 Environmental Compliance............................................. 16
3.24 Customer Relations................................................... 17
3.25 Representation as of the Closing Date................................ 17
3.26 Affiliate Transactions............................................... 17
3.27 Disclosure........................................................... 17
3.28 Reliance on Representations and Warranties of Buyer.................. 17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization........................................................ 18
4.2 Authorization; Enforceability....................................... 18
4.3 Absence of Conflicting Agreements................................... 18
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
5.1 Compliance with Agreement............................................ 19
5.2 Proceedings and Instruments Satisfactory............................. 19
5.3 Representations and Warranties....................................... 19
5.4 Deliveries at Closing................................................ 19
5.5 Other Documents...................................................... 19
5.6 Absence of Investigations and Proceedings............................ 19
5.7 Governmental Contents................................................ 19
5.8 Absence of Liens..................................................... 20
5.9 No Material Adverse Change........................................... 20
5.10 Approvals and Consents............................................... 20
5.11 Stock Purchase and Exchanges......................................... 20
5.12 Amendment to Articles of Incorporation............................... 20
5.13 Termination of Voting Trust Agreement................................ 20
5.14 Bylaws............................................................... 20
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
6.1 Compliance with Agreement............................................. 20
6.2 Proceedings and Instruments Satisfactory.............................. 21
6.3 Representations and Warranties........................................ 21
6.4 Deliveries at Closing................................................. 21
6.5 Other Documents....................................................... 21
6.6 Absence of Investigations and Proceedings............................. 21
6.7 Governmental Consents................................................. 21
ARTICLE VII
MISCELLANEOUS
7.1 Further Assurances.................................................... 21
7.2 Entire Agreement; Amendment; and Waivers.............................. 22
7.3 Expenses.............................................................. 22
7.4 Benefit; Assignment................................................... 22
7.5 Notices............................................................... 22
7.6 Counterparts; Headings................................................ 23
7.7 Severability.......................................................... 23
7.8 Investigations; Non-Survival of Warranties............................ 23
7.9 Governing Law......................................................... 23
</TABLE>
-iii-
<PAGE>
LIST OF EXHIBITS
Exhibit A Exchange Consideration
Exhibit B Registration Rights Agreement
Exhibit C Stockholders' Agreement
Exhibit D Sellers' Certificate
Exhibit E Amended and Restated Articles of Incorporation
Exhibit E Amended and Restated Bylaws
-iv-
<PAGE>
LIST OF SCHEDULES
Schedule 3.1 Corporate Organization
Schedule 3.2 CVL Stock
Schedule 3.6 Absence of Conflicting Agreements
Schedule 3.7 Title to CVL Assets; Liens and
Encumbrances
Schedule 3.9 Equipment
Schedule 3.10 Contracts
Schedule 3.11 Intangible Property
Schedule 3.13(a) Financial Statements
Schedule 3.13(b) Interim Financial Statements
Schedule 3.14 Indebtedness of CVL to Sellers
Schedule 3.14(a) Absence of Undisclosed Liabilities
Schedule 3.14(b) Permitted Liens
Schedule 3.15 Adverse Change
Schedule 3.16 Litigation; Labor Disputes;
Compliance with Law
Schedule 3.17 Tax Return and Tax Reports
Schedule 3.18 Governmental Authorizations
Schedule 3.19 Compliance with Governmental Requirements
Schedule 3.20 Bank; Powers of Attorney
Schedule 3.21 Employees
Schedule 3.22 Employee Welfare Plans
Schedule 3.26 Affiliate Transactions
Schedule 4.3 Absence of Conflicting Agreements
Schedule 5.10 Approvals and Consents
<PAGE>
EXCHANGE AGREEMENT
------------------
THIS EXCHANGE AGREEMENT ("Agreement") dated as of April 30, 1996, by and
among James R. Rocco, R. Guy Davidson, III, Barry T. Sikes and Armistead Whitney
(individually a "Seller" and collectively, "Sellers") and IXL Holdings, Inc.,
a Delaware corporation ("Buyer").
RECITALS
--------
A. Buyer desires to acquire all of the outstanding shares of Common Stock,
par value $1.00 per share (the "Stock"), of Creative Video Library, Inc., a
Georgia corporation ("CVL").
B. Sellers own all of the issued and outstanding Stock of CVL.
C. Each Seller desires to exchange the Stock owned by such Seller for
shares of Class B Common Stock, par value $.01 per share ("Class B Common
Stock"), of Buyer and cash in the respective amounts as set forth herein.
D. Contemporaneously with the closing of the exchange contemplated hereby
(the "Exchange"), (i) certain of the existing stockholders of Buyer and certain
other investors, including without limitation, Kelso Investment Associates V,
L.P. ("KIA V") and Kelso Equity Partners V, L.P. ("KEP"), will purchase certain
additional capital stock of Buyer (the "Stock Purchase") and (ii) Buyer will
exchange certain of its capital stock in return for (x) all of the issued and
outstanding capital stock of iXL Interactive Excellence, Inc., a Georgia
corporation ("IXL") (the "IXL Exchange"); (y) all of the issued and outstanding
capital stock of Creative Video, Inc., a Georgia corporation ("CVI") (the "CVI
Exchange"); and (z) all of the issued and outstanding capital stock of
Entrepreneur Television, Inc., a Georgia corporation ("ETV") (the "ETV
Exchange").
E. The parties hereto intend that the Exchange, the Stock Purchase, the
IXL Exchange, the ETV Exchange and the CVI Exchange will take place
simultaneously and the stock transferred and cash provided to Buyer in
connection with such transactions will qualify under Section 351 of the Internal
Revenue Code.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants, agreements and conditions set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
<PAGE>
ARTICLE I
DEFINITIONS
-----------
1.1 Definitions. Except as specified otherwise, when used in this
-----------
Agreement and any Exhibits or Schedules, the following terms shall have the
meanings specified:
"ACCOUNTS RECEIVABLE" shall mean all accounts receivable, loans
receivable and other receivables of CVL existing as of the close of business
on the Closing Date, as determined in accordance with generally accepted
accounting principles, consistently applied.
"ACT" shall mean the Securities Act of 1933, as amended, and the rules
and regulation thereunder.
"AGREEMENT" shall mean this Exchange Agreement, together with the
Schedules and Exhibits attached hereto, as the same shall be amended from
time to time in accordance with the terms hereof.
"BUSINESS" shall mean CVL's business of video production and editing
and the marketing and performance of services in connection with such
activities.
"BUYER" shall mean IXL Holdings, Inc., a Delaware corporation.
"CASH CONSIDERATION" shall mean the excess, if any, of FOUR HUNDRED
TWENTY THOUSAND DOLLARS ($420,000) over the Outstanding Liabilities of CVL.
"CASH" shall mean all cash and cash equivalents of CVL as of the
Closing.
"CLASS B COMMON STOCK" shall mean the Class B Common Stock, par value
$.01 per share, of Buyer, which shall be fully paid and non-assessable upon
issuance.
"CLOSING DATE" shall mean: (i) April 30, 1996, or (ii) such other date
as Buyer and Sellers may agree upon in writing. The Closing shall be deemed
effective as of 12:01 A.M. on the Closing Date.
"CLOSING" shall mean the conference to be held at 10:00 a.m., Atlanta,
Georgia time on the Closing Date at the offices of Minkin & Snyder, a
Professional corporation, One Buckhead Plaza, 3060 Peachtree Road, Suite
1100, Atlanta, Georgia 30305, or at such other time and place as the parties
may mutually agree to in writing, at which the transactions contemplated by
this Agreement shall be consummated.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CONTRACTS" shall mean those agreements under which CVL conducts the
Business or by which its properties are bound, whether written or oral as
listed in Schedule 3.10.
-------------
2
<PAGE>
"CVL ASSETS" shall mean the right, title and interest of CVL in and to
all assets used or useful in, or material to, the operation of the
Business, including, without limitation, the Accounts Receivable, the Cash,
the Equipment, the Intangible Property, the Video Library, the Licenses,
and the Contracts.
"CVL" shall mean Creative Video Library, Inc., a Georgia corporation.
"EQUIPMENT" shall mean all items of equipment, computers, furniture
and other machinery of CVL.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ENVIRONMENTAL LAWS" shall mean shall mean all applicable rules and
regulations of federal, state and local laws, including statutes,
regulations, ordinances, codes, rules, as amended, relating to the
discharge of air pollutants, water pollutants or process waste water or
otherwise relating to the environment or Hazardous Materials or toxic
substances including, but not limited to, the Federal Solid Waste Disposal
Act, the Federal Clean Air Act, the Federal Clean Water Act, the Federal
Resource Conservation and Recovery Act of 1976, the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, regulations
of the Environmental Protection Agency, the Toxic Substance Control Act,
regulations of the Nuclear Regulatory Agency, and regulations of any state
department of natural resources or state environmental protection agency
now or at any time hereafter in effect.
"EVENT OF LOSS" shall mean any loss, taking, condemnation, damage or
destruction of or to any of the CVL Assets.
"EXCHANGE CONSIDERATION" shall mean the aggregate consideration to be
received by the Sellers as set forth on Exhibit A, consisting of a total of
---------
1,800 shares of Class B Common Stock and the Cash Consideration.
"EXHIBITS" shall mean those Exhibits referred to in this Section 1.1
and attached to this Agreement and which are hereby incorporated herein and
made a part hereof.
"FINANCIAL STATEMENTS" shall mean the financial statements of CVL
described in Section 3.14.
"INTANGIBLE PROPERTY" shall mean all the copyrights, trademarks,
patents, trade secrets and all other intellectual property of every type,
whether registered with any governmental agency or not so registered, owned
or applied for by CVL or any Seller on behalf of CVL.
"KNOWLEDGE OF SELLERS" shall mean the actual knowledge of James R.
Rocco, R. Guy Davidson, III, Barry T. Sikes and Armistead Whitney, or such
knowledge as would have been acquired by such person upon a reasonable
investigation of CVL and its Business.
3
<PAGE>
"LICENSES" shall mean those licenses, permits and authorizations
issued by any federal, state or local governmental or regulatory authority
or agency for the operation of CVL and its Business.
"LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation,
security interest, encumbrance, claim, lien, lease or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
affecting any assets or property, including any agreement to give or grant
any of the foregoing, any conditional sale or other title retention
agreement and the filing of or agreement to give any financing statement
with respect to any assets or property under the Uniform Commercial Code or
comparable law of any jurisdiction.
"OUTSTANDING LIABILITIES" shall mean all liabilities of CVL as shown
on the balance sheets as of March 31, 1996, determined in accordance with
generally accepted accounting principles.
"PERMITTED LIENS" shall mean the following Lien: (a) Liens existing on
the Closing Date to remain on the CVL Assets as listed on Schedule 3.15(a);
----------------
(b) Liens for taxes, assessments or other governmental charges or levies
not yet due; (c) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law created
in the ordinary course of business of CVL consistent with past practices
for amounts not yet due; (d) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business of CVL
consistent with past practices in connection with worker's compensation,
unemployment insurance or other types of social security; and (e) minor
defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the CVL
Assets or interfering with the ordinary conduct of the Business.
"PERSON" shall mean any natural person, general or limited
partnership, corporation, limited liability company, association or other
entity.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement to be entered into by Sellers, Buyer and the other stockholders
of Buyer at Closing substantially in the form attached hereto as Exhibit B.
---------
"SCHEDULES" shall mean those schedules referred to in this Agreement
which have been delivered concurrently with the execution of this
Agreement, which are hereby incorporated herein and made a part hereof.
"SECTION" OR "SECTIONS" shall mean any or all sections of this
Agreement.
"SELLER AND SELLERS" shall mean, individually or collectively, as the
context may require, James R. Rocco, R. Guy Davidson, III, Barry T. Sikes
and Armistead Whitney.
"SELLERS' CERTIFICATE" shall mean the certificate of the Sellers in
the form of Exhibit D attached hereto.
---------
4
<PAGE>
"STOCK" shall mean the issued and outstanding shares of Common Stock,
par value $1.00 per share of CVL held by the Sellers.
"STOCKHOLDERS' AGREEMENT" shall mean the Stockholders' Agreement to be
entered into by Sellers and Buyer at the Closing substantially in the form
attached hereto as Exhibit C.
---------
"VIDEO LIBRARY" shall mean the video footage, video compositions and
stock images comprising the video library maintained by CVL for use in
connection with the provision of production services and video products for
third parties.
1.2 Singular/Plural; Gender. Where the context so requires or
-----------------------
permits, the use of the singular form includes the plural, and the use of
the plural form includes the singular, and the use of any gender includes
any and all genders.
ARTICLE II
THE EXCHANGE
------------
2.1 Exchange. At the Closing on the Closing Date, on the terms and
--------
subject to the conditions of this Agreement, each Seller shall sell,
transfer and deliver to Buyer, and Buyer shall purchase from such Seller,
the Stock set forth opposite such Seller's name on Exhibit A for the
---------
Exchange Consideration set forth opposite such Seller's name on Exhibit A,
---------
consisting of the aggregate number of shares of Class B Common Stock and
the amount of Cash Consideration set forth opposite such Seller's name on
Exhibit A.
---------
2.2 Payment on Closing. At the Closing on the Closing Date, Buyer
------------------
shall pay Sellers an amount equal to the Cash Consideration, by wire
transfer of immediately available funds or other form of agreed upon
payment in the amounts set forth on Exhibit A hereto.
---------
2.3 Closing Date Deliveries. At the Closing on the Closing Date:
-----------------------
(a) Each Seller shall deliver, or cause to be delivered, to
Buyer properly executed and dated as of the Closing Date, where applicable:
(i) stock certificates representing all outstanding Stock owned by such
Seller accompanied by stock powers duly endorsed to Buyer in each case in
proper form for transfer; (ii) the resignation of those members of the
Board of Directors of CVL as shall be designated by Buyer; (iii) the stock
books, stock ledgers, minute books, corporate seals and all other corporate
records of CVL; (iv) the Sellers' Certificate; (v) the Stockholders'
Agreement; (vi) the Registration Rights Agreement; and (vii) such other
documents as provided in Article VI hereof.
(b) In addition to the Cash Consideration described in Section
2.2, Buyer shall deliver, or cause to be delivered to Sellers, executed and
dated as of the Closing Date, where applicable (i) the Stockholders'
Agreement; (ii) the Registration Rights Agreement; and (iii) stock
certificates representing the Class B Common Stock to be issued to each of
the Sellers as set forth on Exhibit A.
---------
5
<PAGE>
2.4 Risk of Loss. The risk of all Events of Loss prior to the Closing
------------
shall be upon Sellers and the risk of all Events of Loss at or subsequent to
the Closing shall be upon Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
James Rocco and R. Guy Davidson, III jointly and severally represent
and warrant to Buyer and Barry T. Sikes, Larry Culbertson and Armistead
Whitney severally represent to Buyer (which representations and warranties
shall survive the Closing) as follows:
3.1 Corporate Organization. CVL is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of
Georgia. CVL has the power to own or lease its properties and to carry on
its business in the place where such properties are now owned, leased or
operated and such business is now conducted. CVL is duly qualified and
licensed and in good standing as a foreign corporation in each jurisdiction
set forth in Schedule 3.1, constituting each jurisdiction in which such
------------
qualification is required. Copies of the articles of incorporation and all
amendments thereto, the bylaws as amended and currently in force, stock
records and corporate minutes of CVL have been delivered to Buyer, and are
true, complete and correct as of the date hereof.
3.2 CVL Stock. CVL has authorized capital stock consisting of 10,000
---------
shares of Common Stock, $1.00 par value per share, of which only 1,829
shares of such Stock are issued and outstanding. All shares of Stock
issued and outstanding are owned of record and beneficially by Sellers as
set forth on Exhibit A. All of the issued and outstanding Stock is duly
---------
authorized and validly issued, fully paid and nonassessable, and there are
no preemptive rights in respect thereof. Except as set forth on Schedule
--------
3.2, there are no outstanding options, warrants or other rights to
---
subscribe for or purchase from CVL or the Sellers, no contracts or
commitments providing for the issuance of, or the granting of rights to
acquire, and no securities convertible into or exchangeable for, any Stock
or other capital stock or any other ownership interest of CVL.
3.3 Subsidiaries. CVL does not own capital stock or other ownership
------------
interests in any corporation, partnership or other entity. There are no
outstanding contractual obligations of CVL to acquire any outstanding
shares of capital stock or other ownership interests of any corporation,
partnership or other entity. CVL does not have any investment (either debt
or equity), or commitments to make any such investment, in any corporation,
joint venture, general or limited partnership, business enterprise or other
Person.
3.4 Title to Stock. Sellers have legal and beneficial title to the
--------------
Stock free and clear of any Liens (other than restrictions imposed by
applicable state and federal securities laws), and there are no claims
pending with respect to the title of Sellers in the Stock.
6
<PAGE>
3.5 Seller Investment Representations. Each Seller represents and
---------------------------------
warrants as follows:
(a) Private Offering. Neither such Seller nor anyone acting on
----------------
such Seller's behalf has issued, sold or offered any security of CVL to any
Person under circumstances that would cause the consummation of the
Exchange, as contemplated by this Agreement, to be subject to the
registration requirements of the Act. Neither such Seller nor anyone acting
on such Seller's behalf has offered or will offer the Stock or any part
thereof or any similar securities for sale to, or solicit any offer to
acquire any of the same from, any Person so as to make the consummation of
the Exchange subject to the registration requirements of the Act.
(b) Investment Intentions and Restrictions on Disposition. Such
-----------------------------------------------------
Seller is acquiring the Class B Common Stock solely for such Seller's own
account for investment and not with a view to, or for sale in connection
with, any distribution thereof. Such Seller agrees that such Seller will
not, directly or indirectly, offer, transfer, sell, pledge, hypothecate or
otherwise dispose of any of the shares of Class B Common Stock (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of any of
the Class B Common Stock) except in compliance with the Act, and
Stockholders' Agreement. Such Seller further understands, acknowledges and
agrees that none of the Class B Common Stock may be transferred, sold,
pledged, hypothecated or otherwise disposed of (i) unless the provisions of
the Stockholders' Agreement shall have been complied with and (ii) unless
such disposition is pursuant to an effective registration statement under
the Act and is exempt from (or in compliance with) applicable state
securities laws, or is exempt from the provisions of Section 5 of the Act
and is exempt from (or in compliance with) applicable state securities laws.
(c) Restrictions on Transfer. Such Seller acknowledges receipt
------------------------
of advice that (i) the shares of Class B Common Stock have not been
registered under the Act, (ii) the Class B Common Stock must be held
indefinitely and such Seller must continue to bear the economic risk of the
investment in the Class B Common Stock unless shares of such Class B Common
Stock are subsequently registered under the Act or an exemption from such
registration is available, (iii) there may not be any public market for the
Class B Common Stock in the foreseeable future, (iv) Rule 144 promulgated
under the Act is not presently available with respect to sales of any
securities of Buyer and Buyer has made no covenant to make such Rule
available and such Rule is not anticipated to be available in the
foreseeable future, (v) when and if the Class B Common Stock may be
disposed of without registration in reliance upon Rule 144, such
disposition can be made only in limited amounts and in accordance with the
terms and conditions of such Rule, (vi) if the exemption afforded by Rule
144 is not available, public sale without registration will require the
availability of an exemption under the Act, (vii) restrictive legends in
the form set forth in the Stockholders' Agreement shall be placed on the
certificates representing the Class B Common Stock and (viii) a notation
shall be made in the appropriate records of Buyer indicating that the
shares of Class B Common Stock are subject to restrictions on transfer
pursuant to the Stockholders' Agreement and, if Buyer should in the future
engage the services of a stock transfer agent, appropriate stop-transfer
instructions will be issued to such transfer agent with respect to the
Stock.
7
<PAGE>
(d) Risk of Investing in Buyer; Ability to Bear Risk. Such Seller
-----------------------------------------------
represents and warrants that (i) the financial situation of such Seller is such
that Seller can afford to bear the economic risk of holding the Class B Common
Stock for an indefinite period and (ii) such Seller can afford to suffer the
complete loss of his investment in the Class B Common Stock. Such Seller
understands and acknowledges that the shares of Class B Common Stock received by
such Seller hereunder represent an investment by Seller in Buyer and recognizes
that (w) such investment in Buyer is subject to substantial uncertainty
concerning the business prospects of Buyer and that Buyer's businesses face
rapid technological change which could result in greater competition for Buyer
or cause Buyer to lower the prices of its products or services; (x) Buyer
intends to pursue acquisition of software development businesses, software
service businesses, multimedia businesses and other businesses as a component of
its growth strategy and that the success of Buyer will depend on Buyer's ability
to identify, acquire and finance suitable acquisition candidates on acceptable
terms and to integrate such acquisitions effectively into Buyer; (y) after the
Exchange, Buyer will be controlled by KIA V as a result of KIA V's ownership of
more than 80% of the voting stock of Buyer following the Stock Purchase, and
that KIA V will be able to determine the outcome of all matters required to be
submitted to stockholders of Buyer for approval (except as otherwise provided by
law or by Buyer's Certificate of Incorporation or Bylaws or the Stockholders'
Agreement); and (z) Sellers' aggregate ownership of Buyer immediately following
the Exchange will likely be subject to dilution upon exercise of stock options
to be granted to certain officers and directors of Buyer and the possible
issuance from time to time of additional shares of capital stock of Buyer and
warrants to acquire stock of Buyer to existing and future investors of Buyer.
(e) Access to Information; Sophistication. Such Seller has been
-------------------------------------
granted the opportunity to ask questions of, and receive answers from,
representatives of Buyer concerning the terms and conditions of the purchase of
the Class B Common Stock and to obtain any additional information that Seller
deems necessary. Such Seller's knowledge and experience in financial business
matters is such that Seller is capable of evaluating the merits and risk of the
investment in the Class B Common Stock and such Seller has carefully reviewed
the terms and provisions of the Stockholders' Agreement and has evaluated the
restrictions and obligations contained therein.
(f) Knowledge Concerning IXL CVI and ETV. Such Seller is familiar
------------------------------------
with the businesses and operations of each of IXL, CVI and ETV and understands
and acknowledges that, after the IXL Exchange, CVI Exchange and ETV Exchange, a
significant portion of the business of Buyer will be comprised of the businesses
and operations of IXL, CVI and ETV. Such Seller has been granted the opportunity
to ask questions of, and receive answers from, representatives of Buyer
concerning the business, operations and financial results of each of IXL, CVI
and ETV and to obtain any additional information that Seller deems necessary.
Such Seller's knowledge and experience in financial business matters is such
that Seller is capable of evaluating the merits and risk of the investment in
the Class B Common Stock in view of the IXL Exchange, CVI Exchange and the ETV
Exchange and has evaluated the effect of such transactions on such Seller's
purchase of the Class B Common Stock of Buyer hereunder.
8
<PAGE>
(g) Due Execution and Delivery. Such Seller (i) has duly executed and
--------------------------
delivered this Agreement, (ii) this Agreement constitutes and, upon execution
thereof, the Stockholders' Agreement will constitute Seller's legal, valid and
binding obligations, enforceable against such Seller in accordance with their
respective terms, (iii) no consent, approval, authorization, order, filing,
registration or qualification of or with any court, governmental authority or
third person is required to be obtained by such Seller in connection with the
execution and delivery of this Agreement or the Stockholders' Agreement or the
performance of such Seller's obligations hereunder or thereunder and (iv) such
Seller is a resident of the state of Georgia.
(h) Accredited Investor. Such Seller is an "accredited investor" as
-------------------
such term is defined in Rule 501(a) promulgated under the Act, a copy of such
definition being attached to this Agreement.
3.6 Absence of Conflicting Agreements. Except as set forth in Schedule
--------------------------------- --------
3.6, neither the execution, delivery or performance of this Agreement by Sellers
- ---
nor the consummation of the sale and purchase of the Stock does or will, after
the giving of notice, or the lapse of time, or otherwise:
(a) conflict with, result in a breach of, or constitute a default
under, the articles of incorporation or bylaws of CVL, any federal, state or
local law, statute, ordinance, rule or regulation, or any court or
administrative order or process or any contract, agreement, arrangement,
commitment or plan to which Sellers or CVL are a party or by which Sellers or
CVL or its property are bound and which relates to the ownership or operation of
the Business, CVL Assets, or the Stock, including without limitation any
stockholders' or buy-sell agreement;
(b) result in the creation of any Lien upon the Stock or any of the
CVL Assets;
(c) terminate, amend or modify, or give any party the right to
terminate, amend, modify, abandon or refuse to perform, any contract, agreement,
arrangement, commitment or plan to which CVL is a party;
(d) accelerate or modify, or give any party the right to accelerate or
modify, the time within which, or the terms under which, any duties or
obligations are to be performed, or any rights or benefits are to be received,
under any contract, agreement, arrangement, commitment or plan to which CVL is a
party; or
(e) require the consent, waiver, approval, permit, license, clearance
or authorization of, or any declaration or filing with, any court or public
agency or other authority, or the consent of any Person under any agreement,
arrangement or commitment of any nature which Sellers or CVL are a party to or
bound or by or which the CVL Assets are bound or subject.
9
<PAGE>
3.7 Title to CVL Assets; Liens and Encumbrances. Except as set forth on
-------------------------------------------
Schedule 3.7, and except for Permitted Liens, CVL owns good and marketable title
- ------------
to or has valid and enforceable leasehold interests in all of the CVL Assets
free and clear of any and all Liens.
3.8 CVL Assets. The CVL Assets include all of the assets, properties and
----------
rights of every type and description, personal and mixed, tangible and
intangible, that are necessary for, used or useable in the conduct of the
Business in the manner in which the Business has been and is now conducted. CVL
neither owns nor holds any interests in real property, whether by lease or
otherwise.
3.9 Equipment. Except as set forth in Schedule 3.9:
--------- ------------
(a) each material item of Equipment is in good condition and repair,
ordinary wear and tear excepted and is fit for operation in its intended use;
(b) the Equipment includes all material items of tangible personal
property utilized by CVL in connection with owning and operating the Business;
(c) none of the material items of Equipment or other assets owned,
used or operated by CVL in connection with the Business, or the ownership,
leasing or operation thereof, is in violation of any law, ordinance, code, rule
or regulation, the violation of which would have a material adverse impact on
the Business, and no written notice from any governmental authority or other
Person has been served upon or given to Sellers or CVL claiming any violation of
any such law, ordinance, code, rule or regulation, or requiring or calling
attention to the need for any repair, modification, replacement, installation or
other work on or in connection with such Equipment or assets; and
(d) the list of Equipment on Schedule 3.9 is a true and correct list
------------
of all material items of tangible personal property necessary for or used in the
operation of the Business in the manner in which it has been and is now
operated.
3.10 Contracts. Except as set forth in Schedule 3.10:
--------- -------------
(a) CVL has performed each term, covenant and condition of each of the
Contracts, and no event of default, or event which with the passing of time or
giving of notice would constitute a material default, exists under any of the
Contracts;
(b) the Contracts described in Schedule 3.10 constitute all of the
-------------
agreements relating to properties, undertakings or commitments to or from third
parties in the conduct of the Business other than each contract which is
cancelable by CVL without breach or penalty on not more than thirty (30) days
notice and which involves average annual payments or receipts by CVL of less
than $500 in the case of any single contract and $2,500 in the aggregate;
10
<PAGE>
(c) each of the Contracts is in full force and effect, unimpaired by
any acts or omissions of CVL or its officers, and constitutes the legal and
binding obligation of the parties thereto in accordance with its terms;
(d) Sellers have furnished true and complete copies of all Contracts,
including all amendments, modifications and supplements thereto, and Schedule
--------
3.10 contains summaries of the provisions of all oral contracts; and
- ----
(e) No consent, approval or waiver from any Person is required in
connection with the transactions contemplated by this Agreement.
3.11 Intangible Property. Except as set forth on Schedule 3.11:
------------------- -------------
(a) none of the Intangible Property infringes any proprietary right of
any Person and there are no claims, demands or proceedings instituted, pending
or threatened by any third party pertaining to or challenging CVL's right to use
any of the Intangible Property;
(b) there are no facts which would render any of the Intangible
Property invalid or unenforceable;
(c) there is no trademark, trade name, patent or copyright owned by a
third party which CVL is using without license to do so and there is no
Intangible Property owned by a third party that CVL is using without a license
to do so;
(d) the Intangible Property constitutes all the copyrights, patents,
trade secrets, trademarks, and other intellectual property utilized by CVL in
connection with owning and operating the Business; and
(e) Schedule 3.11 contains a true and complete list of all Intangible
-------------
Property and all agreements pursuant to which CVL licensed or authorized others
to use the Intangible Property.
3.12 Video Library.
-------------
(a) CVL is the sole and exclusive owner of all right, title and
interest and to the Video Library, including without limitation, all performance
rights, and copyrights, and other rights therein and thereto. No Person other
than CVL has or may validly claim any proprietary, administrative or
participatory interest in any video footage, video composition or stock images
comprising any part of the Video Library, and CVL has good and marketable title
to the Video Library. All of the grants of rights and conveyance contained in
the agreements or other instruments of transfer between CVL and any writers or
producers of, or talent, actors, and other performers depicted in, or any other
holders of original rights to, any video footage, video composition or stock
images in the Video Library are in full force and effect and enforceable in
accordance with their terms; CVL has fully performed all of CVL's obligations
thereunder and is not in breach of or in default with respect to any such
agreements; and,
11
<PAGE>
without limitation of the generality of the foregoing, CVL has accounted to and
paid royalties to any such Person transferring rights in any video footage,
video composition or stock images to CVL in accordance with the terms of all
such agreements. CVL has not received any notice that any party to any such
agreement intends to cancel, rescind or claim a breach of any provision thereof
and no default exists or is threatened by any party to any such agreement. The
video footage, video compositions and stock images and compositions comprising
the Video Library are original and do not infringe upon any other works or
infringe or conflict with any right(s) of any Person.
(b) There are no adverse claims of any nature, kind or description is
known by Sellers to exist and no suit, action, arbitration, or legal,
administrative or other proceeding, or governmental investigation is pending,
threatened or anticipated with respect to: (i) the Video Library or any rights
or interests of CVL therein or thereto, including, but not limited to the
copyrights or other intellectual property rights therein; or (ii) any agreements
between Seller and any writers or producers of, or talent, actors and other
performers depicted in, or any other holders of original rights to, any video
footage, video compositions or stock images comprising the Video Library.
3.13 Financial Statements.
--------------------
(a) Attached as Schedule 3.13(a) are true and complete copies of the
----------------
unaudited financial statements of CVL, as of December 31, 1991, December 31,
1992, December 31, 1993, December 31, 1994, and December 31, 1995, and the
related statements of income for the fiscal years then ended (the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
preceding years and present fairly the financial condition of CVL as at the date
indicated and the results of its operations for the periods then ended, except
for the absence of footnotes.
(b) Attached as Schedule 3.13(b) are true and complete copies of the
----------------
unaudited financial statements of CVL, as of March 31, 1996 and the related
statements of income for the period then ended (the "Interim Financial
Statements"). The Interim Financial Statements have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent with
the Financial Statements and present fairly the financial condition of CVL as at
the date indicated and the results of its operations for the periods then ended;
subject, however, to year-end adjustments which, in the aggregate, are not
- ------- -------
adverse and except for the absence of footnotes.
3.14 Absence of Undisclosed Liabilities.
----------------------------------
(a) CVL has no debt, liability or obligation of any kind, whether
accrued, absolute, contingent or otherwise, including, without limitation, any
liability or obligation on account of taxes or any governmental charges or
penalty, interest or fines, required to be reflected in its financial statements
in accordance with generally accepted accounting principles which would have, or
which in the case of contingent or inchoate liabilities, would have if
12
<PAGE>
accrued or absolute, an adverse effect on the financial condition of CVL, except
(i) those liabilities reflected in the Financial Statements and Interim
Financial Statements, (ii) liabilities disclosed in Schedule 3.14(a), (iii)
----------------
liabilities incurred in the ordinary course of business (other than contingent
liabilities) since March 31, 1996, none of which has, individually or in the
aggregate, adversely affected the business, assets, results of operations or
financial condition of CVL and (iv) liabilities incurred in connection with the
transactions provided for in this Agreement.
(b) Except as set forth on Schedule 3. 14(b), CVL has not, by written
-----------------
instrument or otherwise, guaranteed the payment or collection or pledged any of
its assets to secure payment of any unsatisfied indebtedness of any Person.
Schedule 3.14 sets forth all indebtedness of CVL to Sellers.
- -------------
3.15 No Adverse Change. Except as set forth on Schedule 3.15, since March
----------------- -------------
31, 1996, there has been no:
(a) material adverse change in the financial condition or results of
operations of the Business;
(b) declaration, setting aside or payment, directly or indirectly, of
any cash or noncash dividend or other cash or noncash distribution in respect of
any of the securities of CVL or any direct or indirect redemption, purchase or
other acquisition of any securities of CVL or agreement to do so;
(c) damage, destruction or loss, whether or not covered by insurance,
adversely affecting the business or properties of CVL;
(d) increase in compensation payable or to become payable to any of
the officers, directors or employees of CVL or in any bonus payment or
arrangement made with any such person, or any change in personnel policies or
benefits except pursuant to existing compensation and fringe benefit plans,
practice and arrangements;
(e) contract, commitment or transaction entered into or consummated by
CVL except in the ordinary course of business;
(f) sale, assignment, lease or other transfer or disposition of any of
the assets or properties of CVL except in the ordinary course of business or in
connection with the acquisition of similar property or assets in the ordinary
course of business;
(g) extraordinary losses (whether or not covered by insurance) or
waiver by CVL of any extraordinary rights of value;
(h) notice from any customer as to the customer's intention not to
conduct business with CVL, the result of which loss or losses of business,
individually or in the
13
<PAGE>
aggregate, has had, or could reasonably be expected to have, a material adverse
effect on the Business; or
(i) other event or condition of any character, that has or might
reasonably have a material adverse effect on CVL's financial condition or
assets.
3.16 No Litigation; Labor Disputes; Compliance with Law. Except as set
--------------------------------------------------
forth on Schedule 3.16:
-------------
(a) there is no decree, judgment, order or litigation at law or in
equity, no arbitration proceeding, and no proceeding before or by any
commission, agency or other administrative or regulatory body or authority,
pending or, to the Knowledge of Sellers, threatened, to which CVL is a party or
to which CVL or the CVL Assets are subject;
(b) CVL is not subject to or bound by any labor agreement, there is
no labor dispute, grievance, controversy, strike or request for union
representation pending or, to the Knowledge of Sellers, threatened against CVL,
and there has been no occurrence of any event which would give rise to any such
strike, request for union representation or other labor dispute, grievance or
controversy; and
(c) To the Knowledge of Sellers, CVL owns and operates, and has
owned and operated, its properties and assets, and carried on and conducted, and
has carried on and conducted, the Business in substantial compliance with all
federal, state and local laws, statutes, ordinances, rules and regulations, and
any court or administrative order or process, including, without limitation,
Occupational Safety and Health Administration, Equal Employment Opportunity
Commission, National Labor Relations Board and Environmental Laws.
3.17 Tax Returns and Tax Reports.
---------------------------
(a) Except as set forth on Schedule 3.17, all federal, state and
-------------
local tax returns and tax reports required to be filed by CVL have been filed
with the appropriate governmental agencies in all jurisdictions in which such
returns and reports are required to be filed, and CVL has not requested any
extension of time within which to file any such returns or reports which have
not been filed within such extension of time. All federal, state and local
income, profits, franchise, withholding and sales, use, occupation, property,
excise and other taxes (including interest and penalties) due from CVL in
accordance with such returns and reports have been fully paid. Each item
reflected on each of CVL's federal tax returns is complete, accurate and correct
in all respects.
(b) Except as set forth on Schedule 3.17: (i) no issues have been
-------------
asserted by the Internal Revenue Service or any other taxing authority in
connection with an examination of any of the returns and reports referred to in
Section 3.17(a) which might, if determined adversely to CVL, materially
adversely affect the financial condition or business of CVL; and (ii) no waivers
of statutes of limitation with respect to taxes have been given with respect to
CVL. The federal income tax returns and information reports of CVL have been
examined by
14
<PAGE>
the Internal Revenue Service for the period or periods set forth in Schedule
--------
3.17, which lists all revenue agent reports issued in connection with audits of
- ----
CVL. All deficiencies asserted or assessments made as a result of examinations
by the Internal Revenue Service or by appropriate state tax authorities have
been fully paid or adequately reflected on either the Financial Statements, the
Interim Financial Statements or on Schedule 3.17.
-------------
(c) Schedule 3.17 accurately reflects all currently proposed
-------------
adjustments to the taxable income of CVL for the years ended December 31, 1991
through December 31, 1995.
(d) CVL is not a party to or bound by, and has no obligation under,
any tax sharing or similar agreement, except for obligations provided by law
arising out of the filing of a consolidated federal income tax return or any
consolidated, unitary or combined state or local tax return or report of CVL.
(e) CVL has not consented and will not consent to have the provisions
of Section 341(f)(2) of the Code (or equivalent state law provisions) apply to
it and CVL has not agreed to, and has not been requested to make, any adjustment
under Section 481(c) of the Code by reason of a change in accounting method or
otherwise.
3.18 Governmental Authorizations. Except as set forth in Schedule 3.18, no
--------------------------- -------------
qualifications, registrations, filings, privileges, franchises, licenses,
permits, approvals or authorizations other than the Licenses are required in
order for CVL to own and operate the Business in the manner operated on the date
hereof. All Licenses are currently in full force and effect. As of the date
hereof, no action or proceeding is pending or, to the Knowledge of Sellers,
threatened before any governmental authority to revoke, refuse to renew or
modify such Licenses or other authorizations of the Business.
3.19 Compliance with Governmental Requirements. The Business, its
-----------------------------------------
physical facilities and electrical and mechanical systems are being and have
been operated in all respects in accordance with the specifications of the
applicable Licenses and with each document submitted in support of such
Licenses, and the Business is in compliance with all requirements, rules and
regulations of all governmental authorities, including without limitation, the
United States Occupational Safety and Health Administration. Except as set forth
in Schedule 3.19, and to the Knowledge of Sellers all obligations, reports and
-------------
other filings required by all governmental authorities, including without
limitation, the United States Occupational Safety and Health Administration,
with respect to the Business have been duly and currently filed as of the date
hereof. There is currently pending no proceeding or complaint before any
governmental authority relating to the Business.
3.20 Banks; Powers of Attorney. Schedule 3.20 lists the names of each bank
------------------------- -------------
in which CVL has an account or safe deposit box and the names of all Persons
authorized to draw thereon or to have access thereto and the names of all
Persons holding powers of attorney from CVL, and a summary statement of the
terms thereof.
15
<PAGE>
3.21 Employees. Schedule 3.21 is a true and complete list of the names and
---------- -------------
current annual salary rates or hourly wage rates of all employees of CVL, which
list includes for each such Person the amounts paid or payable as salary or
wages and describes any other future compensation arrangements for employees.
3.22 Employee Welfare Plans.
----------------------
(a) Except as set forth on Schedule 3.22, CVL has not at any time
-------------
maintained or been a party to or made contributions to any of the following: any
"employee pension benefit plan", (as such term is defined in Section 3(2) of
ERISA); or any "employee welfare benefit plan" (as such term is defined in
Section 3(1) of ERISA), whether written or oral. All employee benefit plans
maintained by CVL or to which CVL is obligated to contribute, are, and have in
the past been, in all respects maintained, funded and administered in compliance
with ERISA, and other applicable law; no such plan subject to Title IV of ERISA
has been terminated; no proceedings to terminate any such plan have been
instituted under Subtitle C of Title IV of ERISA; no reportable event within the
meaning of Section 4043 of Subtitle C of ERISA has occurred for any such plan
maintained by CVL; CVL has not withdrawn from a multi-employer plan (as defined
in Section 4001(a) of ERISA); the consummation of the transactions contemplated
hereby will not result in any withdrawal liability on the part of CVL under a
multiemployer plan; no benefit plan established or maintained by CVL or to which
CVL is obligated to contribute, has any accumulated funding deficiency (as
defined in ERISA); and CVL has not incurred any liability to the Pension Benefit
Guaranty Corporation with respect to any such plan.
(b) CVL has no formal or informal employee severance policy. Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, bonus, unemployment compensation or golden
parachute) becoming due to any director, officer or other employee of the
Company, (ii) increase any benefits otherwise payable under any CVL benefit plan
or (iii) result in the acceleration of the time of payment or vesting of any
such benefits.
3.23 Environmental Compliance.
------------------------
(a) CVL is not a party to any litigation or administrative proceeding
or, to the Knowledge of Sellers, is any litigation or administrative proceeding
threatened against it, which in either case (i) asserts or alleges that CVL
violated any Environmental Laws, (ii) asserts or alleges that CVL is required to
clean up, remove or take remedial or other response action due to the disposal,
depositing, discharge, leaking or other release of any hazardous or toxic
substances or materials or (iii) asserts or alleges that CVL is required to pay
all or a portion of the cost of any past, present or future cleanup, removal or
remedial or other response action which arises out of or is related to the
disposal, depositing, discharge, leaking or other release of any hazardous or
toxic substances or materials by CVL.
(b) No Person has caused or permitted materials to be stored,
deposited, treated, recycled or disposed of on, under or at any real property
owned, leased, used or
16
<PAGE>
occupied by CVL which materials, if known to be present, would require cleanup,
removal or some other remedial action under any Environmental Laws.
(c) There are not now, nor have there previously been, tanks or other
facilities on, under, or at any real property owned, leased, used or occupied by
CVL which contained materials which, if known to be present in soils or ground
water, would require cleanup, removal or some other remedial action under
Environmental Laws.
(d) There are no conditions existing currently which would subject
CVL or Sellers to damages, penalties, injunctive relief or cleanup costs under
any Environmental Laws or which require or are likely to require cleanup,
removal, remedial action or other response pursuant to Environmental Laws by
CVL.
(e) CVL is not subject to any judgment, order or citation related to
or arising out of any Environmental Laws and has not been named or listed as a
potentially responsible party by any governmental body or agency in a matter
related to or arising out of any Environmental Laws.
3.24 Customer Relations. No communications have been made to CVL or
------------------
Sellers which would indicate that (a) any current customer of the Business which
accounted for more than 5% of its total net sales for the calendar year ending
December 31, 1995, or (b) any current supplier of the Business (if such
suppliers could not be replaced by the Sellers at comparable cost), will
terminate or substantially alter its business relations or the amount of
business with CVL.
3.25 Representation as of the Closing Date. Sellers' representations and
-------------------------------------
warranties set forth in this Agreement shall be true and correct on and as of
the Closing Date, as though such representations and warranties were made on and
as of such time.
3.26 Affiliate Transactions. Except as set forth on Schedule 3.26, none of
---------------------- -------------
the Sellers nor any of their respective family members or affiliates has any
agreement, contract or other arrangement with CVL. Each Seller hereby releases,
waives and discharges any and all claims such Seller may have, whether fixed or
contingent, known or unknown, against any of CVL, Buyer or Ellis Communications,
Inc., or any of their affiliates, respective officers, directors, employees,
agents or representatives arising out of any events occurring or facts existing
on or prior to the date hereof, except for rights under this Agreement and the
transaction documents contemplated hereby. Such Seller has not assigned any such
claims to any third party.
3.27 Disclosure. No statement of fact by Sellers contained in this
----------
Agreement and no written statement of fact furnished by Sellers to Buyer
pursuant to this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein contained not misleading.
3.28 Reliance on Representations and Warranties of Buyer. Sellers
---------------------------------------------------
understand and acknowledge that the representations and warranties of Buyer
contained in Article IV of this
17
<PAGE>
Agreement are the exclusive representations of Buyer with respect to the subject
matter hereof and the transactions contemplated herein. With respect to the
subject matter hereof and the transactions contemplated herein, each Seller
represents and warrants that (i) no representation or warranty, express or
implied, whether written or oral, as to the financial condition, results of
operations, prospects, properties or business of Buyer or as to the desirability
or value of an investment in Buyer has been made to such Seller by or on behalf
of Buyer other than those set forth in Article IV hereof and the Stockholders
Agreement, (ii) such Seller has relied upon such Seller's own independent
appraisal and investigation, and the advice of such Seller's own counsel, tax
advisors and other advisors, regarding the risks of an investment in Buyer, and
(iii) such Purchaser will continue to bear sole responsibility for making his or
her own independent evaluation and monitoring of the risks of its investment in
Buyer. Sellers acknowledge and agree that all transactions contemplated herein
between Sellers and Buyer, and any other stockholders of Buyer, are arms-length
transactions and that there is no special relationship of trust, fiduciary
relationship or other relationship between Sellers and Buyer or any other
stockholders of Buyer except as expressly set forth herein or the documents
executed in connection with the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 Organization. Buyer is a corporation duly incorporated, validly
------------
existing and in good standing under the laws of the State of Delaware and on the
Closing Date Buyer will be duly qualified to do business as a foreign
corporation in Georgia, and Buyer has full corporate power to purchase the Stock
pursuant to this Agreement.
4.2 Authorization; Enforceability. The execution, delivery and performance
-----------------------------
of this Agreement and all of the documents and instruments required hereby Buyer
and the consummation by Buyer of the transactions contemplated hereby and
thereby, are within the corporate power of Buyer and have been duly authorized
by all necessary corporate action by Buyer. This Agreement is, and the other
documents and instruments required hereby will be, when executed and delivered
by Buyer the valid and binding obligations of Buyer enforceable against Buyer in
accordance with their respective terms, subject only to bankruptcy, insolvency,
reorganization, moratoriums or similar laws at the time in effect affecting the
enforceability or right of creditors generally and by general equitable
principles which may limit the right to obtain equitable remedies.
4.3 Absence of Conflicting Agreements. Except as set forth on Schedule
--------------------------------- --------
4.3, neither the execution, delivery or performance of this Agreement by Buyer
- ---
nor the consummation of the sale and purchase of the Stock or any other
transaction contemplated by this Agreement, does or will, after the giving of
notice, or the lapse of time, or otherwise:
18
<PAGE>
(a) conflict with, result in a breach of, or constitute a default
under, the certificate of incorporation or bylaws of Buyer, or any material
federal, state or local law, statute, ordinance, rule or regulations applicable
to Buyer, or any court or administrative order or process, or any material
contract, agreement, arrangement, commitment or plan to which Buyer is a party
or by which Buyer or its assets is bound;
(b) require the consent, waiver, approval, permit, license, clearance
or authorization of, or any declaration or filing with, any court or
governmental or public agency; or
(c) require the consent of any Person under any material agreement,
material arrangement or material commitment of any nature which Buyer is a party
to or bound by.
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
5.1 Compliance with Agreement. Sellers shall have performed and complied
-------------------------
in all material respects with all of their respective obligations under this
Agreement which are to be performed or complied with by it prior to or at the
Closing.
5.2 Proceedings and Instruments Satisfactory. All proceedings, corporate
----------------------------------------
or other, to be taken by Sellers in connection with the performance of this
Agreement, and all documents incident thereto, shall be complete to the
reasonable satisfaction of Buyer and Buyer's counsel and Sellers shall have made
available to Buyer for examination the originals or true and correct copies of
all documents which Buyer may reasonably request in connection with the
transactions contemplated by this Agreement.
5.3 Representations and Warranties. The representations and warranties
------------------------------
made by Sellers in this Agreement shall be true and correct in the aggregate in
all material respects as of the Closing Date with the same force and effect as
though such representations and warranties had been made on the Closing Date,
except for changes permitted or contemplated by this Agreement.
5.4 Deliveries at Closing. Sellers shall have delivered or caused to be
---------------------
delivered to Buyer the documents, each properly executed and dated as of the
Closing Date as required pursuant to Section 2.3(a), and all other documents
required to vest in buyer good title to the Stock as contemplated by this
Agreement.
5.5 Other Documents. Sellers shall have delivered to Buyer such documents
---------------
and certificates of officers of CVL and public officials as shall be reasonably
requested by Buyer's counsel to establish the existence and good standing of
CVL, the due authorization of this
19
<PAGE>
Agreement and the transactions contemplated hereby, and any other aspect in
connection with this Agreement.
5.6 Absence of Investigations and Proceedings. No action or proceeding or
-----------------------------------------
formal investigation by any Person or governmental agency shall be pending with
the object of challenging or preventing the Closing and no other proceedings
shall be pending with such object or to collect material damages from Buyer on
account thereof.
5.7 Governmental Consents. All authorizations, consents or approvals of
---------------------
any and all governmental regulatory authorities necessary in connection with the
consummation of the transactions contemplated by this Agreement shall have been
obtained and be in full force and effect.
5.8 Absence of Liens. On the Closing Date and simultaneously with the
----------------
Closing, there shall not be any Liens on the CVL Assets except for Permitted
Liens.
5.9 No Material Adverse Change. Between the date of this Agreement and
--------------------------
the Closing, there shall have been no material adverse change in the financial
condition, prospects or results of operation of the Business nor any adverse
change in the condition of the CVL Assets, including without limitation a
default under the terms of any of the Contracts or Leases (unless expressly
consented to or waived in writing) which would permit the acceleration of
amounts due thereunder of termination thereof.
5.10 Approvals and Consents. There shall have been secured such
----------------------
permissions, approvals, determinations, consents and waivers to the transactions
contemplated by this Agreement for such agreements set forth on Schedule 5.10.
-------------
5.11 Stock Purchase and Exchanges. The Stock Purchase, the CVI Exchange,
----------------------------
the ETV Exchange and the IXL Exchange shall have been consummated prior to or
contemporaneously with the Exchange.
5.12 Amendment to Articles of Incorporation. The Articles of Incorporation
--------------------------------------
of CVL shall have been amended and restated in the form attached hereto as
Exhibit E.
- ---------
5.13 Termination of Voting Trust Agreement. That certain Voting Trust
-------------------------------------
Agreement between James R. Rocco, as Trustee and Armistead Whitney dated as of
January __, 1994, shall have been terminated.
5.14 Bylaws. CVL shall have adopted Amended and Restated Bylaws in the
------
form attached hereto as Exhibit F.
---------
If any of the conditions set forth in this Article V have not been
satisfied, Buyer may in its sole discretion nevertheless elect to proceed with
the consummation of the transactions contemplated hereby.
20
<PAGE>
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
Each and every obligation of Sellers to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
6.1 Compliance with Agreement. Buyer shall have performed and complied
-------------------------
with all of its obligations under this Agreement which are to be performed or
complied with by it prior to or at the Closing.
6.2 Proceedings and Instruments Satisfactory. All proceedings, corporate
----------------------------------------
or other, to be taken by Buyer in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be complete to the
reasonable satisfaction of Sellers' counsel, and Buyer shall have made available
to Sellers for examination the originals or true and correct copies of all
documents which Sellers may reasonably request in connection with the
transactions contemplated by this Agreement.
6.3 Representations and Warranties. The representations and warranties
------------------------------
made by Buyer shall be true and correct in all material respects as of the
Closing Date with the same force and effect as though such representations and
warranties had been made on the Closing Date.
6.4 Deliveries at Closing. Buyer shall have delivered or caused to be
---------------------
delivered to Sellers the documents, each properly executed and dated as of the
Closing Date required pursuant to Section 2.3(b). Buyer shall also have made the
payments described in Section 2.2.
6.5 Other Documents. Buyer shall have delivered to Sellers such documents
---------------
and certificates of officers of Buyer and of public officials as shall be
reasonably requested by Sellers' counsel to establish the existence and good
standing of Buyer and the due authorization of this Agreement and the
transactions contemplated hereby by Buyer.
6.6 Absence of Investigations and Proceedings. No action or proceeding or
-----------------------------------------
formal investigation by any Person or governmental agency shall be pending with
the object of challenging or preventing the Closing and no other proceedings
shall be pending with such object or to collect damages from CVL or Sellers on
account thereof.
6.7 Governmental Consents. All material authorizations, consents or
------------ --------
approvals of any and all governmental regulatory authorities necessary in
connection with the consummation of the transactions contemplated by this
Agreement shall have been obtained and be in full force and effect.
If any of the conditions set forth in this Article VI have not been
satisfied, all of the Sellers may in their sole discretion nevertheless
unanimously elect to proceed with the consummation of the transactions
contemplated hereby.
21
<PAGE>
ARTICLE VII
MISCELLANEOUS
7.1 Further Assurances. From time to time after the Closing Date, upon
------------------
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments of conveyance, assignment and transfer and take such further action
as the requesting party may reasonably request in order to effectuate fully the
purposes, terms and conditions of this Agreement.
7.2 Entire Agreement; Amendment; and Waivers. This Agreement and the
----------------------------------------
documents referred to herein and to be delivered pursuant hereto constitute the
entire agreement between the parties pertaining to the subject matter hereof,
and supersede all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written, and there
are no warranties, representations or other agreements between the parties in
connection with the subject matter hereof, except as specifically set forth
herein. No amendment, supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision or breach of this Agreement,
whether or not similar, unless otherwise expressly provided. Each of the Sellers
expressly agrees with Buyer that the Sellers may agree to and execute, on behalf
of the Sellers, any and all amendments, supplements, modifications, waivers or
termination of this Agreement.
7.3 Expenses. Except as otherwise specifically provided herein, whether or
--------
not the transactions contemplated by this Agreement are consummated, each of the
parties hereto shall pay the fees and expenses of its respective counsel,
accountants and other experts incident to the negotiation and preparation of
this Agreement and consummation of the transactions contemplated hereby.
7.4 Benefit; Assignment. This Agreement shall be binding upon and inure to
-------------------
the benefit of and shall be enforceable by Buyer and Sellers and their
respective successors and permitted assigns. This Agreement shall not be
assigned by any party without the prior written consent of the other party.
7.5 Notices. All communications or notices required or permitted by this
-------
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of the other party, or
when sent by telecopy or facsimile machine to the number shown below, or when
properly deposited for delivery by commercial overnight delivery service,
prepaid, or by deposit in the United States mail, certified or registered mail,
postage prepaid, return receipt requested, and addressed as follows, unless and
until either of such parties notifies the other in accordance with this Section
of a change of address or change of telecopy number:
22
<PAGE>
If to Buyer: IXL Holdings, Inc.
c/o Ellis Communications, Inc.
3060 Peachtree Road, Suite 340
Atlanta, Georgia 30305
Attention: U. Bertram Ellis, Jr.
Telephone No.: (404) 240-0424
Telecpoy No.: (404) 240-0542
With a copy to: Minkin & Snyder, a Professional Corporation
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telephone No.: (404) 261-8000
Telecopy No.: (404) 261-5064
and to: Kelso & Company
320 Park Avenue
New York, New York 10022
Attention: James J. Connors, II, Esq.
Telephone No.: (212) 751-3939
Telecopy No.: (212) 233-2379
If to Sellers: Creative Video Library, Inc.
1465 Northside Drive, Suite 110
Atlanta, Georgia 30350
Attention: James R. Rocco
Telephone No.: (404) 351-4518
Telecopy No.: (404) 350-9823
With a copy to: David Kam, Esq.
P.O. Box 95297
Atlanta, Georgia 30347
Telephone No.: (404) 370-0180
Telecopy No.: (404) 370-1722
7.6 Counterparts; Headings. This Agreement may be executed in several
----------------------
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
7.7 Severability. If any provision, clause or part of this Agreement or
------------
the application thereof under certain circumstances is held invalid, or
unenforceable, the remainder of this Agreement, or the application of such
provision, clause or part under other circumstances, shall not be affected
thereby.
23
<PAGE>
7.8 Investigations; Non-Survival of Warranties. The respective
------------------------------------------
representations and warranties of Sellers and Buyer contained herein or in any
certificate or other documents delivered prior to or at the Closing shall not be
deemed waived or otherwise affected by any investigations made by any party
hereto. Each and every such representation and warranty shall survive for two
(2) years following the Closing, except that the representations and warranties
contained in Sections 3.17 and 3.22 shall survive the Closing until the
applicable statutes of limitation time periods expire with respect to any claims
under such Sections.
7.9 Governing Law. This Agreement shall be construed and interpreted
-------------
according to the laws of the State of Georgia, without regard to the conflict of
law principles thereof. The exclusive venue of adjudication of any dispute or
proceeding arising out of the Agreement or the performance hereof shall be the
courts located in the County of Fulton, State of Georgia, and the parties hereto
hereby consent to and submit to the jurisdiction of any court located in the
County of Fulton, State of Georgia and hereby waives, to the fullest extent
permitted by applicable law, any objection which such party may have to the
laying of venue of any such proceeding brought in such court and any claim that
such proceeding brought in such court has been brought in an inconvenient forum.
EACH OF THE PARTIES WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
[Signatures commence on following page]
24
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of
the day and year first above written.
BUYER:
-----
IXL HOLDINGS, INC.
By: /s/ U. Bertram Ellis, Jr.
-------------------------------
Name: U. Bertram Ellis, Jr.
-------------------------
Title: CEO
-------------------------
SELLERS:
-------
/s/ James R. Rocco
------------------------------------
JAMES R. ROCCO
/s/ R. Guy Davidson, III
------------------------------------
R. GUY DAVIDSON, III
/s/ Barry T. Sikes
------------------------------------
BARRY T. SIKES
/s/ Armistead Whitney
------------------------------------
ARMISTEAD WHITNEY
25
<PAGE>
CVL Exhibits
------------
Ownership of Stock and Exchange Consideration (attached hereto)..... Exhibit A
Registration Rights Agreement....................................... Exhibit B
Stockholders' Agreement............................................. Exhibit C
Sellers' Certificate................................................ Exhibit D
Amendments to Articles of Incorporation............................. Exhibit E
Amended and Restated Bylaws......................................... Exhibit F
<PAGE>
EXHIBIT A
---------
OWNERSHIP OF STOCK AND EXCHANGE CONSIDERATION
---------------------------------------------
<TABLE>
<CAPTION>
EXCHANGE CONSIDERATION
-----------------------------------
CASH SHARES OF CLASS B
SELLER OWNERSHIP OF STOCK CONSIDERATION* COMMON STOCK
- ------------------- ------------------------ ---------------- -----------------
<S> <C> <C> <C>
James R. Rocco 520 Shares of Stock $ 204,120.00 875
R. Guy Davidson, III 443 Shares of Stock $ 173,880.00 745
Barry T. Sikes 70 Shares of Stock $ 27,300.00 117
Armistead Whitney 37 Shares of Stock $ 14,700.00 63
--------------- ---------------
TOTALS $ 420,000.00 1,800
--------------- ---------------
</TABLE>
___________________________
* Less pro rata share of Outstanding Liabilities and Closing expenses of
Sellers.
A-1
<PAGE>
LIST OF SCHEDULES
Schedule 3.1 Corporate Organization
Schedule 3.2 CVL Stock
Schedule 3.6 Absence of Conflicting Agreements
Schedule 3.7 Title to CVL Assets; Liens and
Encumbrances
Schedule 3.9 Equipment
Schedule 3.10 Contracts
Schedule 3.11 Intangible Property
Schedule 3.13(a) Financial Statements
Schedule 3.13(b) Interim Financial Statements
Schedule 3.14 Indebtedness of CVL to Sellers
Schedule 3.14(a) Absence of Undisclosed Liabilities
Schedule 3.14(b) Permitted Liens
Schedule 3.15 Adverse Change
Schedule 3.16 Litigation; Labor Disputes;
Compliance with Law
Schedule 3.17 Tax Return and Tax Reports
Schedule 3.18 Governmental Authorizations
Schedule 3.19 Compliance with Governmental Requirements
Schedule 3.20 Bank; Powers of Attorney
Schedule 3.21 Employees
Schedule 3.22 Employee Welfare Plans
Schedule 3.26 Affiliate Transactions
Schedule 4.3 Absence of Conflicting Agreements
Schedule 5.10 Approvals and Consents
<PAGE>
EXHIBIT 2.2
EXCHANGE AGREEMENT
AMONG
IXL HOLDINGS, INC.
AND
JAMES R. ROCCO,
R. GUY DAVIDSON, III,
BARRY T. SIKES
AND
LARRY B. CULBERTSON
____________________
Dated as of April 30, 1996
____________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS
1.1 Definitions......................................................... 2
1.2 Singular/Plural; Gender............................................. 5
ARTICLE II
THE EXCHANGE
2.1 Exchange............................................................ 5
2.2 Payment on Closing.................................................. 5
2.3 Closing Date Deliveries............................................. 5
2.4 Risk of Loss........................................................ 6
ARTICLE III
REPRESENTATIONS AND WARRNTIES OF SELLERS
3.1 Corporate Organization.............................................. 6
3.2 CVI Stock........................................................... 6
3.3 Subsidiaries........................................................ 6
3.4 Title to Stock...................................................... 7
3.5 Seller Investment Representations................................... 7
3.6 Absence of Conflicting Agreements................................... 9
3.7 Title to CVI Assets; Liens and Encumbrances......................... 10
3.8 CVI Assets.......................................................... 10
3.9 Equipment........................................................... 10
3.10 Contracts........................................................... 10
3.11 Intangible Property................................................. 11
3.12 Leases.............................................................. 11
3.13 Financial Statements................................................ 12
3.14 Absence of Undisclosed Liabilities.................................. 12
3.15 No Adverse Change................................................... 13
3.16 No Litigation; Labor Disputes; Compliance with Law.................. 14
3.17 Tax Returns and Tax Reports......................................... 14
3.18 Governmental Authorizations......................................... 15
3.19 Compliance with Governmental Requirements........................... 15
3.20 Banks; Powers of Attorney........................................... 15
3.21 Employees........................................................... 15
3.22 Employee Welfare Plans.............................................. 16
3.23 Environmental Compliance............................................ 16
3.24 Customer Relations.................................................. 17
3.25 Representation as of the Closing Date............................... 17
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.26 Affiliate Transactions.............................................. 17
3.27 Disclosure.......................................................... 17
3.28 Reliance on Representations and Warranties of Buyer................. 17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization........................................................ 18
4.2 Authorization; Enforceability....................................... 18
4.3 Absence of Conflicting Agreements................................... 18
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
5.1 Compliance with Agreement........................................... 19
5.2 Proceedings and Instruments Satisfactory............................ 19
5.3 Representations and Warranties...................................... 19
5.4 Deliveries at Closing............................................... 19
5.5 Other Documents..................................................... 19
5.6 Absence of Investigations and Proceedings........................... 19
5.7 Governmental Consents............................................... 20
5.8 Absence of Liens.................................................... 20
5.9 No Material Adverse Change.......................................... 20
5.10 Approvals and Consents.............................................. 20
5.11 Stock Purchase and Exchanges........................................ 20
5.12 Termination of Voting Trust Agreements.............................. 20
5.13 Bylaws.............................................................. 20
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
6.1 Compliance with Agreement........................................... 21
6.2 Proceedings and Instruments Satisfactory............................ 21
6.3 Representations and Warranties...................................... 21
6.4 Deliveries at Closing............................................... 21
6.5 Other Documents..................................................... 21
6.6 Absence of Investigations and Proceedings........................... 21
6.7 Governmental Consents............................................... 21
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VII
MISCELLANEOUS
7.1 Further Assurances................................................. 22
7.2 Entire Agreement; Amendment; and Waivers........................... 22
7.3 Expenses........................................................... 22
7.4 Benefit; Assignment................................................ 22
7.5 Notices............................................................ 22
7.6 Counterparts; Headings............................................. 23
7.7 Severability....................................................... 23
7.8 Investigations; Non-Survival of Warranties......................... 24
7.9 Governing Law...................................................... 24
</TABLE>
-iii-
<PAGE>
LIST OF EXHIBITS
Exhibit A Exchange Consideration
Exhibit B Registration Rights Agreement
Exhibit C Stockholders' Agreement
Exhibit D Sellers' Certificate
Exhibit E Amended and Restated Bylaws
-iv-
<PAGE>
LIST OF SCHEDULES
Schedule 3.1 Corporate Organization
Schedule 3.2 CVI Stock
Schedule 3.6 Absence of Conflicting Agreements
Schedule 3.7 Title to CVI Assets; Liens and
Encumbrances
Schedule 3.8 CVI Assets
Schedule 3.9 Equipment
Schedule 3.10 Contracts
Schedule 3.11 Intangible Property
Schedule 3.12 Leases
Schedule 3.13(a) Financial Statements
Schedule 3.13(b) Interim Financial Statements
Schedule 3.14(a) Absence of Undisclosed Liabilities
Schedule 3.14(b) Permitted Liens
Schedule 3.15 Adverse Change
Schedule 3.16 Litigation; Labor Disputes; Compliance with Law
Schedule 3.17 Tax Returns and Tax Reports
Schedule 3.18 Governmental Authorizations
Schedule 3.19 Compliance with Governmental Requirements
Schedule 3.20 Bank; Powers of Attorney
Schedule 3.21 Employees
Schedule 3.22 Employee Welfare Plans
Schedule 3.26 Affiliate Transactions
Schedule 4.3 Absence of Conflicting Agreements
Schedule 5.10 Approvals and Consents
<PAGE>
EXCHANGE AGREEMENT
------------------
THIS EXCHANGE AGREEMENT ("Agreement") dated as of April 30, 1996, by and
among James R. Rocco, R. Guy Davidson, III, Barry T. Sikes and Larry B.
Culbertson (individually a "Seller" and collectively, "Sellers") and IXL
Holdings, Inc., a Delaware corporation ("Buyer").
RECITALS
--------
A. Buyer desires to acquire all of the outstanding shares of Common Stock,
par value $1.00 per share (the "Stock"), of Creative Video, Inc., a Georgia
corporation ("CVI").
B. Sellers own all of the issued and outstanding Stock of CVI.
C. Each Seller desires to exchange the Stock owned by such Seller for
shares of Class B Common Stock, par value $.01 per share ("Class B Common
Stock"), of Buyer and cash in the respective amounts as set forth herein.
D. Contemporaneously with the closing of the exchange contemplated hereby
(the "Exchange"), (i) certain of the existing stockholders of Buyer and certain
other investors, including without limitation, Kelso Investment Associates V,
L.P. ("KIA V") and Kelso Equity Partners V, L.P. ("KEP"), will purchase certain
additional capital stock of Buyer (the "Stock Purchase") and (ii) Buyer will
exchange certain of its capital stock in return for (x) all of the issued and
outstanding capital stock of iXL Interactive Excellence, Inc., a Georgia
corporation ("IXL") (the "IXL Exchange"); (y) all of the issued and outstanding
capital stock of Creative Video Library, Inc., a Georgia corporation ("CVL")
(the "CVL Exchange"); and (z) all of the issued and outstanding capital stock of
Entrepreneur Television, Inc., a Georgia corporation ("ETV") (the "ETV
Exchange").
E. The parties hereto intend that the Exchange, the Stock Purchase, the
IXL Exchange, the CVL Exchange and the ETV Exchange will take place
simultaneously and the stock transferred and cash provided to Buyer in
connection with such transactions will qualify under Section 351 of the Internal
Revenue Code.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants, agreements and conditions set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
<PAGE>
ARTICLE I
DEFINITIONS
-----------
1.1 Definitions. Except as specified otherwise, when used in this
-----------
Agreement and any Exhibits or Schedules, the following terms shall have the
meanings specified:
"ACCOUNTS RECEIVABLE" shall mean all accounts receivable, loans receivable
and other receivables of CVI existing as of the close of business on the Closing
Date, as determined in accordance with generally accepted accounting principles,
consistently applied.
"ACT" shall mean the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
"AGREEMENT" shall mean this Exchange Agreement, together with the Schedules
and Exhibits attached hereto, as the same shall be amended from time to time in
accordance with the terms hereof.
"BUSINESS" shall mean CVI's business of video production and editing and
the marketing and performance of services in connection with such activities.
"BUYER" shall mean IXL Holdings, Inc., a Delaware corporation.
"CASH CONSIDERATION" shall mean the excess, if any, of FIVE MILLION TWO
HUNDRED TWELVE THOUSAND AND 00/100 DOLLARS ($5,012,000.00) over the Outstanding
Liabilities of CVI.
"CASH" shall mean all cash and cash equivalents of CVI as of the Closing.
"CLASS B COMMON STOCK" shall mean the Class B Common Stock, par value $.01
per share, of Buyer, which shall be fully paid and non-assessable upon issuance.
"CLOSING DATE" shall mean: (i) April 30, 1996, or (ii) such other date as
Buyer and Sellers may agree upon in writing. The Closing shall be deemed
effective as of 12:01 A.M. on the Closing Date.
"CLOSING" shall mean the conference to be held at 10:00 a.m., Atlanta,
Georgia time on the Closing Date at the offices of Minkin & Snyder, a
Professional corporation, One Buckhead Plaza, 3060 Peachtree Road, Suite 1100,
Atlanta, Georgia 30305, or at such other time and place as the parties may
mutually agree to in writing, at which the transactions contemplated by this
Agreement shall be consummated.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
2
<PAGE>
"CONTRACTS" shall mean those agreements (other than the Leases) under which
CVI conducts the Business or by which its properties are bound, whether written
or oral as listed in Schedule 3.10.
-------------
"CVI ASSETS" shall mean the right, title and interest of CVI in and to all
assets used or useful in, or material to, the operation of the Business,
including, without limitation, the Accounts Receivable, the Cash, the Equipment,
the Intangible Property, the Leases, the Licenses, and the Contracts.
"CVI" shall mean Creative Video, Inc., a Georgia corporation.
"EQUIPMENT" shall mean all items of equipment, computers, furniture and
other machinery of CVI.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ENVIRONMENTAL LAWS" shall mean shall mean all applicable rules and
regulations of federal, state and local laws, including statutes, regulations,
ordinances, codes, rules, as amended, relating to the discharge of air
pollutants, water pollutants or process waste water or otherwise relating to the
environment or Hazardous Materials or toxic substances including, but not
limited to, the Federal Solid Waste Disposal Act, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of
1976, the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, regulations of the Environmental Protection Agency, the
Toxic Substance Control Act, regulations of the Nuclear Regulatory Agency, and
regulations of any state department of natural resources or state environmental
protection agency now or at any time hereafter in effect.
"EVENT OF LOSS" shall mean any loss, taking, condemnation, damage or
destruction of or to any of the CVI Assets.
"EXCHANGE CONSIDERATION" shall mean the aggregate consideration to be
received by the Sellers as set forth on Exhibit A, consisting of a total of
---------
20,755 shares of Class B Common Stock and the Cash Consideration.
"EXHIBITS" shall mean those Exhibits referred to in this Section 1.1 and
attached to this Agreement and which are hereby incorporated herein and made a
part hereof.
"FINANCIAL STATEMENTS" shall mean the financial statements of CVI described
in Section 3.14.
"INTANGIBLE PROPERTY" shall mean all the copyrights, trademarks, patents,
trade secrets and all other intellectual property of every type, whether
registered with any governmental agency or not so registered, owned or applied
for by CVI or any Seller on behalf of CVI.
3
<PAGE>
"KNOWLEDGE OF SELLERS" shall mean the actual knowledge of James R. Rocco,
R. Guy Davidson, III, Barry T. Sikes and Larry B. Culbertson, or such knowledge
as would have been acquired by such persons upon a reasonable investigation of
CVI and its Business.
"LEASES" shall mean those leases of real and personal property to which CVI
is a party as listed on Schedule 3.13.
-------------
"LICENSES" shall mean those licenses, permits and authorizations issued by
any federal, state or local governmental or regulatory authority or agency for
the operation of CVI and its Business.
"LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation,
security interest, encumbrance, claim, lien, lease or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
affecting any assets or property, including any agreement to give or grant any
of the foregoing, any conditional sale or other title retention agreement and
the filing of or agreement to give any financing statement with respect to any
assets or property under the Uniform Commercial Code or comparable law of any
jurisdiction.
"OUTSTANDING LIABILITIES" shall mean all liabilities of CVI as shown on the
balance sheets as of March 31, 1996, determined in accordance with generally
accepted accounting principles.
"PERMITTED LIENS" shall mean the following Liens: (a) Liens existing on the
Closing Date to remain on the CVI Assets as listed on Schedule 3.15(a); (b)
----------------
Liens for taxes, assessments or other governmental charges or levies not yet
due; (c) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other Liens imposed by law created in the ordinary
course of business of CVI consistent with past practices for amounts not yet
due; (d) Liens (other than any Lien imposed by ERISA) incurred or deposits made
in the ordinary course of business of CVI consistent with past practices in
connection with worker's compensation, unemployment insurance or other types of
social security; (e) minor defects of title, easements, rights-of-way,
restrictions and other similar charges or encumbrances not materially detracting
from the value of the CVI Assets or interfering with the ordinary conduct of the
Business; and (f) Liens not created by CVI which affect the underlying fee
interest of any real property leased by CVI.
"PERSON" shall mean any natural person, general or limited partnership,
corporation, limited liability company, association or other entity.
"REAL PROPERTY" shall mean CVI's leasehold interest in its premises located
at 1465 Northside Drive, Atlanta, Georgia 30318.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement to be entered into by Sellers, Buyer and certain stockholders of Buyer
at Closing substantially in the form attached hereto as Exhibit B.
---------
4
<PAGE>
"SCHEDULES" shall mean those schedules referred to in this Agreement which
have been delivered concurrently with the execution of this Agreement, which are
hereby incorporated herein and made a part hereof.
"SECTION" or "SECTIONS" shall mean any or all sections of this Agreement.
"SELLER AND SELLERS" shall mean, individually or collectively, as the
context may require, James R. Rocco, R. Guy Davidson, III, Barry T. Sikes and
Larry B. Culbertson.
"SELLERS' CERTIFICATE" shall mean the certificate of the Sellers in the
form of Exhibit D attached hereto.
---------
"STOCK" shall mean the issued and outstanding shares of Common Stock, par
value $1.00 per share, of CVI held by the Sellers.
"STOCKHOLDERS AGREEMENT" shall mean the Stockholders Agreement to be
entered into by Sellers and Buyer at the Closing substantially in the form
attached hereto as Exhibit C.
---------
1.2 Singular/Plural Gender. Where the context so requires or permits, the
----------------------
use of the singular form includes the plural, and the use of the plural form
includes the singular, and the use of any gender includes any and all genders.
ARTICLE II
THE EXCHANGE
------------
2.1 Exchange. At the Closing on the Closing Date, on the terms and
--------
subject to the conditions of this Agreement, each Seller shall sell, transfer
and deliver to Buyer, and Buyer shall purchase from such Seller, the Stock set
forth opposite such Seller's name on Exhibit A for the Exchange Consideration
---------
set forth opposite such Seller's name on Exhibit A, consisting of the aggregate
---------
number of shares of Class B Common Stock and the amount of Cash Consideration
set forth opposite such Seller's name on Exhibit A.
---------
2.2 Payment on Closing. At the Closing on the Closing Date, Buyer shall
------------------
pay Sellers an amount equal to the Cash Consideration, by wire transfer of
immediately available funds or other form of agreed upon payment in the amounts
set forth on Exhibit A hereto.
---------
2.3 Closing Date Deliveries. At the Closing on the Closing Date:
-----------------------
(a) Each Seller shall deliver, or cause to be delivered, to Buyer
properly executed and dated as of the Closing Date, where applicable: (i) stock
certificates representing all outstanding Stock owned by such Seller accompanied
by stock powers duly endorsed to Buyer in each case in proper form for transfer;
(ii) the resignation of those members of the Board of Directors of CVI as shall
be designated by Buyer; (iii) the stock books, stock ledgers, minute books,
corporate seals and all other corporate records of CVI; (iv) the Sellers'
Certificate;
5
<PAGE>
(v) the Stockholders' Agreement; (vi) the Registration Rights Agreement; and
(vii) such other documents as provided in Article VI hereof.
(b) In addition to the Cash Consideration described in Section 2.2,
Buyer shall deliver, or cause to be delivered to Sellers, executed and dated as
of the Closing Date, where applicable (i) the Stockholders' Agreement; (ii) the
Registration Rights Agreement; and (iii) stock certificates representing the
Class B Common Stock to be issued to each of the Sellers as set forth on Exhibit
-------
A.
- -
2.4 Risk of Loss. The risk of all Events of Loss prior to the Closing
------------
shall be upon Sellers and the risk of all Events of Loss at or subsequent to the
Closing shall be upon Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
James Rocco and R. Guy Davidson, III jointly and severally represent and
warrant to Buyer and Barry T. Sikes and Larry B. Culbertson severally represent
to Buyer (which representations and warranties shall survive the Closing) as
follows:
3.1 Corporate Organization. CVI is a corporation duly organized, validly
----------------------
existing and in good standing under the laws of the State of Georgia. CVI has
the power to own or lease its properties and to carry on its business in the
place where such properties are now owned, leased or operated and such business
is now conducted. CVI is duly qualified and licensed and in good standing as a
foreign corporation in each jurisdiction set forth in Schedule 3.1, constituting
------------
each jurisdiction in which such qualification is required. Copies of the
articles of incorporation and all amendments thereto, the bylaws as amended and
currently in force, stock records and corporate minutes of CVI have been
delivered to Buyer, and are true, complete and correct as of the date hereof.
3.2 CVI Stock. CVI has authorized capital stock consisting of 10,000
---------
shares of Common Stock, $1.00 par value per share, of which only 1,216 shares of
such Stock are issued and outstanding. All shares of Stock issued and
outstanding are owned of record and beneficially by Sellers as set forth on
Exhibit A. All of the issued and outstanding Stock is duly authorized and
- ---------
validly issued, fully paid and nonassessable, and there are no preemptive rights
in respect thereof. Except as set forth on Schedule 3.2, there are no
------------
outstanding options, warrants or other rights to subscribe for or purchase from
CVI or the Sellers, no contracts or commitments providing for the issuance of,
or the granting of rights to acquire, and no securities convertible into or
exchangeable for, any Stock or other capital stock or any other ownership
interest of CVI.
3.3 Subsidiaries. CVI does not own capital stock or other ownership
------------
interests in any corporation, partnership or other entity. There are no
outstanding contractual obligations of CVI to acquire any outstanding shares of
capital stock or other ownership interests of any corporation, partnership or
other entity. CVI does not have any investment (either debt or
6
<PAGE>
equity), or commitments to make any such investment, in any corporation, joint
venture, general or limited partnership, business enterprise or other Person.
3.4 Title to Stock. Sellers have legal and beneficial title to the Stock
--------------
free and clear of any Liens (other than restrictions imposed by applicable state
and federal securities laws), and there are no claims pending with respect to
the title of Sellers in the Stock.
3.5 Seller Investment Representations. Each Seller represents and
---------------------------------
warrants as follows:
(a) Private Offering. Neither such Seller nor anyone acting on such
----------------
Seller's behalf has issued, sold or offered any security of CVI to any Person
under circumstances that would cause the consummation of the Exchange, as
contemplated by this Agreement, to be subject to the registration requirements
of the Act. Neither such Seller nor anyone acting on such Seller's behalf has
offered or will offer the Stock or any part thereof or any similar securities
for sale to, or solicit any offer to acquire any of the same from, any Person so
as to make the consummation of the Exchange subject to the registration
requirements of the Act.
(b) Investment Intentions and Restrictions on Disposition. Such
-----------------------------------------------------
Seller is acquiring the Class B Common Stock solely for such Seller's own
account for investment and not with a view to, or for sale in connection with,
any distribution thereof. Such Seller agrees that such Seller will not, directly
or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose
of any of the shares of Class B Common Stock (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of any of the Class B Common
Stock) except in compliance with the Act, and Stockholders' Agreement. Such
Seller further understands, acknowledges and agrees that none of the Class B
Common Stock may be transferred, sold, pledged, hypothecated or otherwise
disposed of (i) unless the provisions of the Stockholders' Agreement shall have
been complied with and (ii) unless such disposition is pursuant to an effective
registration statement under the Act and is exempt from (or in compliance with)
applicable state securities laws, or is exempt from the provisions of Section 5
of the Act and is exempt from (or in compliance with) applicable state
securities laws.
(c) Restrictions on Transfer. Such Seller acknowledges receipt of
------------------------
advice that (i) the shares of Class B Common Stock have not been registered
under the Act, (ii) the Class B Common Stock must be held indefinitely and such
Seller must continue to bear the economic risk of the investment in the Class B
Common Stock unless shares of such Class B Common Stock are subsequently
registered under the Act or an exemption from such registration is available,
(iii) there may not be any public market for the Class B Common Stock in the
foreseeable future, (iv) Rule 144 promulgated under the Act is not presently
available with respect to sales of any securities of Buyer and Buyer has made no
covenant to make such Rule available and such Rule is not anticipated to be
available in the foreseeable future, (v) when and if the Class B Common Stock
may be disposed of without registration in reliance upon Rule 144, such
disposition can be made only in limited amounts and in accordance with the terms
and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not
available, public sale without registration will require the availability of an
exemption under the Act, (vii) restrictive
7
<PAGE>
legends in the form set forth in the Stockholders' Agreement shall be placed on
the certificates representing the Class B Common Stock and (viii) a notation
shall be made in the appropriate records of Buyer indicating that the shares of
Class B Common Stock are subject to restrictions on transfer pursuant to the
Stockholders' Agreement and, if Buyer should in the future engage the services
of a stock transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to the Stock.
(d) Risk of Investing in Buyer; Ability to Bear Risk. Such Seller
------------------------------------------------
represents and warrants that (i) the financial situation of such Seller is such
that Seller can afford to bear the economic risk of holding the Class B Common
Stock for an indefinite period and (ii) such Seller can afford to suffer the
complete loss of his investment in the Class B Common Stock. Such Seller
understands and acknowledges that the shares of Class B Common Stock received by
such Seller hereunder represent an investment by Seller in Buyer and recognizes
that (w) such investment in Buyer is subject to substantial uncertainty
concerning the business prospects of Buyer and that Buyer's businesses face
rapid technological change which could result in greater competition for Buyer
or cause Buyer to lower the prices of its products or services; (x) Buyer
intends to pursue acquisitions of software development businesses, software
service businesses, multimedia businesses and other businesses as a component of
its growth strategy and that the success of Buyer will depend on Buyer's ability
to identify, acquire and finance suitable acquisition candidates on acceptable
terms and to integrate such acquisitions effectively into Buyer; (y) after the
Exchange, Buyer will be controlled by KIA V as a result of KIA V's ownership of
more than 80% of the voting stock of Buyer following the Stock Purchase, and
that KIA V will be able to determine the outcome of all matters required to be
submitted to stockholders of Buyer for approval (except as otherwise provided by
law or by Buyer's Certificate of Incorporation or Bylaws or the Stockholders'
Agreement); and (z) Sellers' aggregate ownership of Buyer immediately following
the Exchange will likely be subject to dilution upon exercise of stock options
to be granted to certain officers and directors of Buyer and the possible
issuance from time to time of additional shares of capital stock of Buyer and
warrants to acquire stock of Buyer to existing and future investors of Buyer.
(e) Access to Information; Sophistication. Such Seller has been
-------------------------------------
granted the opportunity to ask questions of, and receive answers from,
representatives of Buyer concerning the terms and conditions of the purchase of
the Class B Common Stock and to obtain any additional information that Seller
deems necessary. Such Seller's knowledge and experience in financial business
matters is such that Seller is capable of evaluating the merits and risk of the
investment in the Class B Common Stock and such Seller has carefully reviewed
the terms and provisions of the Stockholders' Agreement and has evaluated the
restrictions and obligations contained therein.
(f) Knowledge Concerning IXL, CVL and ETV. Such Seller is familiar
-------------------------------------
with the businesses and operations of each of IXL, CVL and ETV and understands
and acknowledges that, after the IXL Exchange, CVL Exchange and ETV Exchange, a
significant portion of the business of Buyer will be comprised of the businesses
and operations of IXL, CVL and ETV. Such Seller has been granted the opportunity
to ask questions of, and receive answers from, representatives of Buyer
concerning the business, operations and financial results of each of IXL,
8
<PAGE>
CVL and ETV and to obtain any additional information that Seller deems
necessary. Such Seller's knowledge and experience in financial business matters
is such that Seller is capable of evaluating the merits and risk of the
investment in the Class B Common Stock in view of the IXL Exchange, CVL Exchange
and the ETV Exchange and has evaluated the effect of such transactions on such
Seller's purchase of the Class B Common Stock of Buyer hereunder.
(g) Due Execution and Delivery. Such Seller (i) has duly executed
--------------------------
and delivered this Agreement, (ii) this Agreement constitutes and, upon
execution thereof, the Stockholders' Agreement will constitute Seller's legal,
valid and binding obligations, enforceable against such Seller in accordance
with their respective terms, (iii) no consent, approval, authorization, order,
filing, registration or qualification of or with any court, governmental
authority or third person is required to be obtained by such Seller in
connection with the execution and delivery of this Agreement or the
Stockholders' Agreement or the performance of such Seller's obligations
hereunder or thereunder and (iv) such Seller is a resident of the state of
Georgia.
(h) Accredited Investor. Such Seller is an "accredited investor" as
-------------------
such term is defined in Rule 501(a) promulgated under the Act, a copy of such
definition being attached to this Agreement.
3.6 Absence of Conflicting Agreements. Except as set forth in Schedule
--------------------------------- --------
3.6, neither the execution, delivery or performance of this Agreement by Sellers
- ---
nor the consummation of the sale and purchase of the Stock does or will, after
the giving of notice, or the lapse of time, or otherwise:
(a) conflict with, result in a breach of, or constitute a default
under, the articles of incorporation or bylaws of CVI, any federal, state or
local law, statute, ordinance, rule or regulation, or any court or
administrative order or process or any contract, agreement, arrangement,
commitment or plan to which Sellers or CVI are a party or by which Sellers or
CVI or its property are bound and which relates to the ownership or operation of
the Business, CVI Assets, or the Stock, including without limitation any
stockholders' or buy-sell agreement;
(b) result in the creation of any Lien upon the Stock or any of the
CVI Assets;
(c) terminate, amend or modify, or give any party the right to
terminate, amend, modify, abandon or refuse to perform, any contract, agreement,
arrangement, commitment or plan to which CVI is a party;
(d) accelerate or modify, or give any party the right to accelerate
or modify, the time within which, or the terms under which, any duties or
obligations are to be performed, or any rights or benefits are to be received,
under any contract, agreement, arrangement, commitment or plan to which CVI is a
party; or
(e) require the consent, waiver, approval, permit, license, clearance
or authorization of, or any declaration or filing with, any court or public
agency or other authority,
9
<PAGE>
or the consent of any Person under any agreement, arrangement or commitment of
any nature which Sellers or CVI are a party to or bound or by or which the CVI
Assets are bound or subject.
3.7 Title to CVI Assets: Liens and Encumbrances. Except as set forth on
-------------------------------------------
Schedule 3.7, and except for Permitted Liens, CVI owns good and marketable title
- ------------
to or has valid and enforceable leasehold interests in all of the CVI Assets
free and clear of any and all Liens.
3.8 CVI Assets. Except as listed on Schedule 3.8, the CVI Assets include
---------- ------------
all of the assets, properties and rights of every type and description, real,
personal and mixed, tangible and intangible, that are necessary for, used or
useable in the conduct of the Business in the manner in which the Business has
been and is now conducted.
3.9 Equipment. Except as set forth in Schedule 3.9:
--------- ------------
(a) each material item of Equipment is in good condition and repair,
ordinary wear and tear excepted and is fit for operation in its intended use;
(b) the Equipment includes all material items of tangible personal
property utilized by CVI in connection with owning and operating the Business;
(c) none of the material items of Equipment or other assets owned,
used or operated by CVI in connection with the Business, or the ownership,
leasing or operation thereof, is in violation of any law, ordinance, code, rule
or regulation, the violation of which would have a material adverse impact on
the Business, and no written notice from any governmental authority or other
Person has been served upon or given to Sellers or CVI claiming any violation of
any such law, ordinance, code, rule or regulation, or requiring or calling
attention to the need for any repair, modification, replacement, installation or
other work on or in connection with such Equipment or assets; and
(d) the list of Equipment on Schedule 3.9 is a true and correct list
------------
of all material items of tangible personal property necessary for or used in the
operation of the Business in the manner in which it has been and is now
operated.
3.10 Contracts. Except as set forth in Schedule 3.10:
--------- -------------
(a) CVI has performed each term, covenant and condition of each of
the Contracts, and no event of default, or event which with the passing of time
or giving of notice would constitute a material default, exists under any of the
Contracts;
(b) the Contracts described in Schedule 3.10 constitute all of the
-------------
agreements relating to properties, undertakings or commitments to or from third
parties in the conduct of the Business other than each contract which is
cancelable by CVI without breach or penalty on
10
<PAGE>
not more than thirty (30) days notice and which involves average annual payments
or receipts by CVI of less than $500 in the case of any single contract and
$2,500 in the aggregate;
(c) each of the Contracts is in full force and effect, unimpaired by
any acts or omissions of CVI or its officers, and constitutes the legal and
binding obligation of the parties thereto in accordance with its terms;
(d) Sellers have furnished true and complete copies of all Contracts,
including all amendments, modifications and supplements thereto, and Schedule
--------
3.10 contains summaries of the provisions of all oral contracts; and
- ----
(e) No consent, approval or waiver from any Person is required in
connection with the transactions contemplated by this Agreement.
3.11 Intangible Property. Except as set forth on Schedule 3.11:
------------------- -------------
(a) none of the Intangible Property infringes any proprietary right
of any Person and there are no claims, demands or proceedings instituted,
pending or threatened by any third party pertaining to or challenging CVI's
right to use any of the Intangible Property;
(b) there are no facts which would render any of the Intangible
Property invalid or unenforceable;
(c) there is no trademark, trade name, patent or copyright owned by a
third party which CVI is using without license to do so and there is no
Intangible Property owned by a third party that CVI is using without a license
to do so;
(d) the Intangible Property constitutes all the copyrights, patents,
trade secrets, trademarks, and other intellectual property utilized by CVI in
connection with owning and operating the Business; and
(e) Schedule 3.11 contains a true and complete list of all Intangible
-------------
Property and all agreements pursuant to which CVI licensed or authorized others
to use the Intangible Property.
3.12 Leases. Except as set forth on Schedule 3.12:
------ -------------
(a) CVI has performed each item, covenant and condition of each of
the Leases which is to be performed by CVI at or before the date hereof, and no
default, or event which with the passing of time or giving of notice or both
would constitute an event of default, exists under any Lease;
(b) the Leases constitute all of the lease agreements between CVI and
other Persons, and all of the Leases are described on Schedule 3.12;
-------------
11
<PAGE>
(c) each of the Leases is in full force and effect, unimpaired by any
acts or omissions of CVI or its officers, employees or agents, and constitutes
the legal and binding obligation of the parties in accordance with their terms;
(d) CVI has furnished true and complete copies of the Leases to
Buyer, including any and all amendments thereto;
(e) there are no leasing commissions or similar payments due, arising
out of, resulting from or with respect to any Lease; and
(f) no consent, approval or waiver from any Person is required with
respect to the Leases in connection with the transactions contemplated by this
Agreement.
3.13 Financial Statements.
--------------------
(a) Attached as Schedule 3.13(a) are true and complete copies of the
---------------
unaudited financial statements of CVI, as of December 31, 1991, December 31,
1992, December 31, 1993, December 31, 1994, and December 31, 1995, and the
related statements of income for the fiscal years then ended (the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
preceding years and present fairly the financial condition of CVI as at the date
indicated and the results of its operations for the periods then ended for the
absence for the absence of footnotes.
(b) Attached as Schedule 3.13(b) are true and complete copies of
---------------
the unaudited financial statements of CVI, as of March 31, 1996 and the related
statements of income for the period then ended (the "Interim Financial
Statements"). The Interim Financial Statements have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent with
the Financial Statements and present fairly the financial condition of CVI as at
the date indicated and the results of its operations for the periods then ended;
subject, however, to year-end adjust which, in aggregate, are not adverse and
- ------- -------
except for the absence of footnotes.
3.14 Absence of Undisclosed Liabilities.
----------------------------------
(a) CVI has no debt, liability or obligation of any kind, whether
accrued, absolute, contingent or otherwise, including, without limitation, any
liability or obligation on account of taxes or any governmental charges or
penalty, interest or fines, required to be reflected in its financial statements
in accordance with generally accepted accounting principles which would have, or
which in the case of contingent or inchoate liabilities, would have if accrued
or absolute, an adverse effect on the financial condition of CVI, except (i)
those liabilities reflected in the Financial Statements and Interim Financial
Statements, (ii) liabilities disclosed in Schedule 3.14(a), (iii) liabilities
----------------
incurred in the ordinary course of business (other than contingent liabilities)
since March 31, 1996 none of which has, individually or in the aggregate,
adversely affected the business, assets, results of operations or financial
condition of
12
<PAGE>
CVI and (iv) liabilities incurred in connection with the transactions provided
for in this Agreement.
(b) Except as set forth on Schedule 3.14(b), CVI has not, by written
----------------
instrument or otherwise, guaranteed the payment or collection or pledged any of
its assets to secure payment of any unsatisfied indebtedness of any Person.
Schedule 3.14 sets forth all indebtedness of CVI to Sellers.
- -------------
3.15 No Adverse Change. Except as set forth on Schedule 3.15, since March
----------------- -------------
31, 1996 there has been no:
(a) material adverse change in the financial condition or results of
operations of the Business;
(b) declaration, setting aside or payment, directly or indirectly,
of any cash or noncash dividend or other cash or noncash distribution in respect
of any of the securities of CVI or any direct or indirect redemption, purchase
or other acquisition of any securities of CVI or agreement to do so;
(c) damage, destruction or loss, whether or not covered by insurance,
adversely affecting the business or properties of CVI;
(d) increase in compensation payable or to become payable to any of
the officers, directors or employees of CVI or in any bonus payment or
arrangement made with any such person, or any change in personnel policies or
benefits except pursuant to existing compensation and fringe benefit plans,
practice and arrangements;
(e) contract, commitment or transaction entered into or consummated
by CVI except in the ordinary course of business;
(f) sale, assignment, lease or other transfer or disposition of any
of the assets or properties of CVI except in the ordinary course of business or
in connection with the acquisition of similar property or assets in the ordinary
course of business;
(g) extraordinary losses (whether or not covered by insurance) or
waiver by CVI of any extraordinary rights of value;
(h) notice from any customer as to the customer's intention not to
conduct business with CVI, the result of which loss or losses of business,
individually or in the aggregate, has had, or could reasonably be expected to
have, a material adverse effect on the Business; or
(i) other event or condition of any character, that has or might
reasonably have a material adverse effect on CVI's financial condition or
assets.
13
<PAGE>
3.16 No Litigation; Labor Disputes; Compliance with Law. Except as set
--------------------------------------------------
forth on Schedule 3.16:
-------------
(a) there is no decree, judgment, order or litigation at law or in
equity, no arbitration proceeding, and no proceeding before or by any
commission, agency or other administrative or regulatory body or authority,
pending or, to the Knowledge of Sellers, threatened, to which CVI is a party or
to which CVI or the CVI Assets are subject;
(b) CVI is not subject to or bound by any labor agreement, there is
no labor dispute, grievance, controversy, strike or request for union
representation pending or, to the Knowledge of Sellers, threatened against CVI,
and there has been no occurrence of any event which would give rise to any such
strike, request for union representation or other labor dispute, grievance or
controversy; and
(c) To the Knowledge of Sellers, CVI owns and operates, and has owned
and operated, its properties and assets, and carried on and conducted, and has
carried on and conducted, the Business in substantial compliance with all
federal, state and local laws, statutes, ordinances, rules and regulations, and
any court or administrative order or process, including, without limitation,
Occupational Safety and Health Administration, Equal Employment Opportunity
Commission, National Labor Relations Board and Environmental Laws.
3.17 Tax Returns and Tax Reports.
---------------------------
(a) Except as set forth on Schedule 3.17, all federal, state and
-------------
local tax returns and tax reports required to be filed by CVI have been filed
with the appropriate governmental agencies in all jurisdictions in which such
returns and reports are required to be filed, and CVI has not requested any
extension of time within which to file any such returns or reports which have
not been filed within such extension of time. All federal, state and local
income, profits, franchise, withholding and sales, use, occupation, property,
excise and other taxes (including interest and penalties) due from CVI in
accordance with such returns and reports have been fully paid. Each item
reflected on each of CVI's federal tax returns is complete, accurate and correct
in all respects.
(b) Except as set forth on Schedule 3.17: (i) no issues have been
-------------
asserted by the Internal Revenue Service or any other taxing authority in
connection with an examination of any of the returns and reports referred to in
Section 3.17(a) which might, if determined adversely to CVI, materially
adversely affect the financial condition or business of CVI; and (ii) no waivers
of statutes of limitation with respect to taxes have been given with respect to
CVI. The federal income tax returns and information reports of CVI have been
examined by the Internal Revenue Service for the period or periods set forth in
Schedule 3.17, which lists all revenue agent reports issued in connection with
- -------------
audits of CVI. All deficiencies asserted or assessments made as a result of
examinations by the Internal Revenue Service or by appropriate state tax
authorities have been fully paid or adequately reflected on either the Financial
Statements, the Interim Financial Statements or on Schedule 3.17.
-------------
14
<PAGE>
(c) Schedule 3.17 accurately reflects all currently proposed
-------------
adjustments to the taxable income of CVI for the years ended December 31, 1991
through December 31, 1995.
(d) CVI is not a party to or bound by, and has no obligation under,
any tax sharing or similar agreement, except for obligations provided by law
arising out of the filing of a consolidated federal income tax return or any
consolidated, unitary or combined state or local tax return or report of CVI.
(e) CVI has not consented and will not consent to have the provisions
of Section 341(f)(2) of the Code (or equivalent state law provisions) apply to
it and CVI has not agreed to, and has not been requested to make, any adjustment
under Section 481(c) of the Code by reason of a change in accounting method or
otherwise.
3.18 Governmental Authorizations. Except as set forth in Schedule 3.18,
--------------------------- -------------
no qualifications, registrations, filings, privileges, franchises, licenses,
permits, approvals or authorizations other than the Licenses are required in
order for CVI to own and operate the Business in the manner operated on the date
hereof. All Licenses are currently in full force and effect. As of the date
hereof, no action or proceeding is pending or, to the Knowledge of Sellers,
threatened before any governmental authority to revoke, refuse to renew or
modify such Licenses or other authorizations of the Business.
3.19 Compliance with Governmental Requirements. The Business, its
-----------------------------------------
physical facilities and electrical and mechanical systems are being and have
been operated in all respects in accordance with the specifications of the
applicable Licenses and with each document submitted in support of such
Licenses, and the Business is in compliance with all requirements, rules and
regulations of all governmental authorities, including without limitation, the
United States Occupational Safety and Health Administration. Except as set forth
in Schedule 3.19, and to the Knowledge of Sellers all obligations, reports and
-------------
other filings required by all governmental authorities, including without
limitation, the United States Occupational Safety and Health Administration,
with respect to the Business have been duly and currently filed as of the date
hereof. There is currently pending no proceeding or complaint before any
governmental authority relating to the Business.
3.20 Banks; Powers of Attorney. Schedule 3.20 lists the names of each bank
---------------- --------- -------------
in which CVI has an account or safe deposit box and the names of all Persons
authorized to draw thereon or to have access thereto and the names of all
Persons holding powers of attorney from CVI, and a summary statement of the
terms thereof.
3.21 Employees. Schedule 3.21 is a true and complete list of the names and
---------- -------------
current annual salary rates or hourly wage rates of all employees of CVI, which
list includes for each such Person the amounts paid or payable as salary or
wages and describes any other future compensation arrangements for employees.
15
<PAGE>
3.22 Employee Welfare Plans.
----------------------
(a) Except as set forth on Schedule 3.22, CVI has not at any time
-------------
maintained or been a party to or made contributions to any of the following: any
"employee pension benefit plan", (as such term is defined in Section 3(2) of
ERISA); or any "employee welfare benefit plan" (as such term is defined in
Section 3(1) of ERISA), whether written or oral. All employee benefit plans
maintained by CVI or to which CVI is obligated to contribute, are, and have in
the past been, in all respects maintained, funded and administered in compliance
with ERISA, and other applicable law; no such plan subject to Title IV of ERISA
has been terminated; no proceedings to terminate any such plan have been
instituted under Subtitle C of Title IV of ERISA; no reportable event within the
meaning of Section 4043 of Subtitle C of ERISA has occurred for any such plan
maintained by CVI; CVI has not withdrawn from a multi-employer plan (as defined
in Section 4001(a) of ERISA); the consummation of the transactions contemplated
hereby will not result in any withdrawal liability on the part of CVI under a
multi-employer plan; no benefit plan established or maintained by CVI or to
which CVI is obligated to contribute, has any accumulated funding deficiency (as
defined in ERISA); and CVI has not incurred any liability to the Pension Benefit
Guaranty Corporation with respect to any such plan.
(b) CVI has no formal or informal employee severance policy. Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, bonus, unemployment compensation or golden
parachute) becoming due to any director, officer or other employee of the
Company, (ii) increase any benefits otherwise payable under any CVI benefit plan
or (iii) result in the acceleration of the time of payment or vesting of any
such benefits.
3.23 Environmental Compliance.
------------------------
(a) CVI is not a party to any litigation or administrative proceeding
or, to the Knowledge of Sellers, is any litigation or administrative proceeding
threatened against it, which in either case (i) asserts or alleges that CVI
violated any Environmental Laws, (ii) asserts or alleges that CVI is required to
clean up, remove or take remedial or other response action due to the disposal,
depositing, discharge, leaking or other release of any hazardous or toxic
substances or materials or (iii) asserts or alleges that CVI is required to pay
all or a portion of the cost of any past, present or future cleanup, removal or
remedial or other response action which arises out of or is related to the
disposal, depositing, discharge, leaking or other release of any hazardous or
toxic substances or materials by CVI.
(b) No Person has caused or permitted materials to be stored,
deposited, treated, recycled or disposed of on, under or at any Real Property
owned, leased, used or occupied by CVI which materials, if known to be present,
would require cleanup, removal or some other remedial action under any
Environmental Laws.
(c) There are not now, nor have there previously been, tanks or other
facilities on, under, or at any Real Property owned, leased, used or occupied by
CVI which contained
16
<PAGE>
materials which, if known to be present in soils or ground water, would require
cleanup, removal or some other remedial action under Environmental Laws.
(d) There are no conditions existing currently which would subject
CVI or Sellers to damages, penalties, injunctive relief or cleanup costs under
any Environmental Laws or which require or are likely to require cleanup,
removal, remedial action or other response pursuant to Environmental Laws by
CVI.
(e) CVI is not subject to any judgment, order or citation related to
or arising out of any Environmental Laws and has not been named or listed as a
potentially responsible party by any governmental body or agency in a matter
related to or arising out of any Environmental Laws.
3.24 Customer Relations. No communications have been made to CVI or
-------- ---------
Sellers which would indicate that (a) any current customer of the Business which
accounted for more than 5% of its total net sales for the calendar year ending
December 31, 1995, or (b) any current supplier of the Business (if such
suppliers could not be replaced by the Sellers at comparable cost), will
terminate or substantially alter its business relations or the amount of
business with CVI.
3.25 Representation as of the Closing Date. Sellers' representations and
-------------------- ----------------
warranties set forth in this Agreement shall be true and correct on and as of
the Closing Date, as though such representations and warranties were made on and
as of such time.
3.26 Affiliate Transactions. Except as set forth on Schedule 3.26, none of
---------------------- -------------
the Sellers nor any of other respective family members or affiliates has any
agreement, contract or other arrangement with CVI. Each Seller hereby releases,
waives and discharges any and all claims such Seller may have, whether fixed or
contingent, known or unknown, against any of CVI, Buyer or Ellis Communications,
Inc., or any of their affiliates, respective officers, directors, employees,
agents or representatives arising out of any events occurring or facts existing
on or prior to the date hereof, except for rights under this Agreement and the
transaction documents contemplated hereby. Such Seller has not assigned any such
claims to any third party.
3.27 Disclosure. No statement of fact by Sellers contained in this
----------
Agreement and no written statement of fact furnished by Sellers to Buyer
pursuant to this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein contained not misleading.
3.28 Reliance on Representations and Warranties of Buyer. Sellers
---------------------------------------------------
understand and acknowledge that the representations and warranties of Buyer
contained in Article IV of this Agreement are the exclusive representations of
Buyer with respect to the subject matter hereof and the transactions
contemplated herein. With respect to the subject matter hereof and the
transactions contemplated herein, each Seller represents and warrants that (i)
no representation or warranty, express or implied, whether written or oral, as
to the financial condition, prospects results of operations, prospects,
properties or business of Buyer or as to the desirability or value of an
investment in Buyer has been made to such Seller by or on behalf of Buyer other
than
17
<PAGE>
those set forth in Article IV hereof and the Stockholders Agreement, (ii) such
Seller has relied upon such Seller's own independent appraisal and
investigation, and the advice of such Seller's own counsel, tax advisors and
other advisors, regarding the risks of an investment in Buyer, and (iii) such
Purchaser will continue to bear sole responsibility for making his or her own
independent evaluation and monitoring of the risks of its investment in Buyer.
Sellers acknowledge and agree that all transactions contemplated herein between
Sellers and Buyer, and any other stockholders of Buyer, are arms-length
transactions and that there is no special relationship of trust, fiduciary
relationship or other relationship between Sellers and Buyer or any other
stockholders of Buyer except as expressly set forth herein or the documents
executed in connection with the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 Organization. Buyer is a corporation duly incorporated, validly
------------
existing and in good standing under the laws of the State of Delaware and on the
Closing Date Buyer will be duly qualified to do business as a foreign
corporation in Georgia, and Buyer has full corporate power to purchase the Stock
pursuant to this Agreement.
4.2 Authorization; Enforceability. The execution, delivery and performance
-----------------------------
of this Agreement and all of the documents and instruments required hereby Buyer
and the consummation by Buyer of the transactions contemplated hereby and
thereby, are within the corporate power of Buyer and have been duly authorized
by all necessary corporate action by Buyer. This Agreement is, and the other
documents and instruments required hereby will be, when executed and delivered
by Buyer the valid and binding obligations of Buyer enforceable against Buyer in
accordance with their respective terms, subject only to bankruptcy, insolvency,
reorganization, moratoriums or similar laws at the time in effect affecting the
enforceability or right of creditors generally and by general equitable
principles which may limit the right to obtain equitable remedies.
4.3 Absence of Conflicting Agreements. Except as set forth on Schedule
---------- ---------------------- --------
4.3, neither the execution, delivery or performance of this Agreement by Buyer
nor the consummation of the sale and purchase of the Stock or any other
transaction contemplated by this Agreement, does or will, after the giving of
notice, or the lapse of time, or otherwise:
(a) conflict with, result in a breach of, or constitute a default
under, the certificate of incorporation or bylaws of Buyer, or any material
federal, state or local law, statute, ordinance, rule or regulations applicable
to Buyer, or any court or administrative order or process, or any material
contract, agreement, arrangement, commitment or plan to which Buyer is a party
or by which Buyer or its assets is bound;
18
<PAGE>
(b) require the consent, waiver, approval, permit, license, clearance
or authorization of, or any declaration or filing with, any court or
governmental or public agency; or
(c) require the consent of any Person under any material agreement,
material arrangement or material commitment of any nature which Buyer is a party
to or bound by.
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
5.1 Compliance with Agreement. Sellers shall have performed and complied
-------------------------
in all material respects with all of their respective obligations under this
Agreement which are to be performed or complied with by it prior to or at the
Closing.
5.2 Proceedings and Instruments Satisfactory. All proceedings, corporate
----------------------------------------
or other, to be taken by Sellers in connection with the performance of this
Agreement, and all documents incident thereto, shall be complete to the
reasonable satisfaction of Buyer and Buyer's counsel and Sellers shall have made
available to Buyer for examination the originals or true and correct copies of
all documents which Buyer may reasonably request in connection with the
transactions contemplated by this Agreement.
5.3 Representations and Warranties. The representations and warranties
------------------------------
made by Sellers in this Agreement shall be true and correct in the aggregate in
all material respects as of the Closing Date with the same force and effect as
though such representations and warranties had been made on the Closing Date,
except for changes permitted or contemplated by this Agreement.
5.4 Deliveries at Closing. Sellers shall have delivered or caused to be
---------------------
delivered to Buyer the documents, each properly executed and dated as of the
Closing Date as required pursuant to Section 2.3(a), and all other documents
required to vest in buyer good title to the Stock as contemplated by this
Agreement.
5.5 Other Documents. Sellers shall have delivered to Buyer such documents
---------------
and certificates of officers of CVI and public officials as shall be reasonably
requested by Buyer's counsel to establish the existence and good standing of
CVI, the due authorization of this Agreement and the transactions contemplated
hereby, and any other aspect in connection with this Agreement.
5.6 Absence of Investigations and Proceedings. No action or proceeding or
-----------------------------------------
formal investigation by any Person or governmental agency shall be pending with
the object of
19
<PAGE>
challenging or preventing the Closing and no other proceedings shall be pending
with such object or to collect material damages from Buyer on account thereof.
5.7 Governmental Consents. All authorizations, consents or approvals of
---------------------
any and all governmental regulatory authorities necessary in connection with the
consummation of the transactions contemplated by this Agreement shall have been
obtained and be in full force and effect.
5.8 Absence of Liens. On the Closing Date and simultaneously with the
----------------
Closing, there shall not be any Liens on the CVI Assets except for Permitted
Liens.
5.9 No Material Adverse Change. Between the date of this Agreement and the
--------------------------
Closing, there shall have been no material adverse change in the financial
condition, prospects or results of operation of the Business nor any adverse
change in the condition of the CVI Assets, including without limitation a
default under the terms of any of the Contracts or Leases (unless expressly
consented to or waived in writing) which would permit the acceleration of
amounts due thereunder of termination thereof.
5.10 Approvals and Consents. There shall have been secured such
----------------------
permissions, approvals, determinations, consents and waivers to the transactions
contemplated by this Agreement for such agreements set forth on Schedule 5.10.
-------------
5.11 Stock Purchase and Exchanges. The Stock Purchase, the CVL Exchange,
----------------------------
the ETV Exchange and the IXL Exchange shall have been consummated prior to or
contemporaneously with the Exchange.
5.12 Termination of Voting Trust Agreements. The Voting Trust Agreement
-------------- -----------------------
between James R. Rocco as trustee and Barry T. Sikes dated April 1, 1994, and
the Voting Trust Agreement between James R. Rocco as trustee and Larry B.
Culbertson dated November 16, 1992, shall each have been terminated and be of no
further force or effect.
5.13 Bylaws. CVI shall have adopted Amended and Restated Bylaws in the
------
form attached hereto as Exhibit E.
---------
If any of the conditions set forth in this Article V have not been
satisfied, Buyer may in its sole discretion nevertheless elect to proceed with
the consummation of the transactions contemplated hereby .
20
<PAGE>
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
Each and every obligation of Sellers to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
6.1 Compliance with Agreement. Buyer shall have performed and complied
-------------------------
with all of its obligations under this Agreement which are to be performed or
complied with by it prior to or at the Closing.
6.2 Proceedings and Instruments Satisfactory. All proceedings, corporate
----------------------------------------
or other, to be taken by Buyer in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be complete to the
reasonable satisfaction of Sellers' counsel, and Buyer shall have made available
to Sellers for examination the originals or true and correct copies of all
documents which Sellers may reasonably request in connection with the
transactions contemplated by this Agreement.
6.3 Representations and Warranties. The representations and warranties
------------------------------
made by Buyer shall be true and correct in all material respects as of the
Closing Date with the same force and effect as though such representations and
warranties had been made on the Closing Date.
6.4 Deliveries at Closing. Buyer shall have delivered or caused to be
---------------------
delivered to Sellers the documents, each properly executed and dated as of the
Closing Date required pursuant to Section 2.3(b). Buyer shall also have made the
payments described in Section 2.2.
6.5 Other Documents. Buyer shall have delivered to Sellers such documents
---------------
and certificates of officers of Buyer and of public officials as shall be
reasonably requested by Sellers' counsel to establish the existence and good
standing of Buyer and the due authorization of this Agreement and the
transactions contemplated hereby by Buyer.
6.6 Absence of Investigations and Proceedings. No action or proceeding or
-----------------------------------------
formal investigation by any Person or governmental agency shall be pending with
the object of challenging or preventing the Closing and no other proceedings
shall be pending with such object or to collect damages from CVI or Sellers on
account thereof.
6.7 Governmental Consents. All material authorizations, consents or
------------ --------
approvals of any and all governmental regulatory authorities necessary in
connection with the consummation of the transactions contemplated by this
Agreement shall have been obtained and be in full force and effect.
If any of the conditions set forth in this Article VI have not been
satisfied, all of the Sellers may in their sole discretion nevertheless
unanimously elect to proceed with the consummation of the transactions
contemplated hereby.
21
<PAGE>
ARTICLE VII
MISCELLANEOUS
7.1 Further Assurances. From time to time after the Closing Date, upon
------------------
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments of conveyance, assignment and transfer and take such further action
as the requesting party may reasonably request in order to effectuate fully the
purposes, terms and conditions of this Agreement.
7.2 Entire Agreement; Amendment; and Waivers. This Agreement and the
----------------------------------------
documents referred to herein and to be delivered pursuant hereto constitute the
entire agreement between the parties pertaining to the subject matter hereof,
and supersede all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written, and there
are no warranties, representations or other agreements between the parties in
connection with the subject matter hereof, except as specifically set forth
herein. No amendment, supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision or breach of this Agreement,
whether or not similar, unless otherwise expressly provided. Each of the Sellers
expressly agrees with Buyer that the Sellers may agree to and execute, on behalf
of the Sellers, any and all amendments, supplements, modifications, waivers or
termination of this Agreement.
7.3 Expenses. Except as otherwise specifically provided herein, whether or
--------
not the transactions contemplated by this Agreement are consummated, each of the
parties hereto shall pay the fees and expenses of its respective counsel,
accountants and other experts incident to the negotiation and preparation of
this Agreement and consummation of the transactions contemplated hereby.
7.4 Benefit; Assignment. This Agreement shall be binding upon and inure to
-------------------
the benefit of and shall be enforceable by Buyer and Sellers and their
respective successors and permitted assigns. This Agreement shall not be
assigned by any party without the prior written consent of the other party.
7.5 Notices. All communications or notices required or permitted by this
-------
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of the other party, or
when sent by telecopy or facsimile machine to the number shown below, or when
properly deposited for delivery by commercial overnight delivery service,
prepaid, or by deposit in the United States mail, certified or registered mail,
postage prepaid, return receipt requested, and addressed as follows, unless and
until either of such parties notifies the other in accordance with this Section
of a change of address or change of telecopy number:
22
<PAGE>
If to Buyer: IXL Holdings, Inc.
c/o Ellis Communications, Inc.
3060 Peachtree Road, Suite 340
Atlanta, Georgia 30305
Attention: U. Bertram Ellis, Jr.
Telephone No.: (404) 240-0424
Telecopy No.: (404) 240-0542
With a copy to: Minkin & Snyder, a Professional Corporation
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telephone No.: (404) 261-8000
Telecopy No.: (404) 261-5064
and to: Kelso & Company
320 Park Avenue
New York, New York 10022
Attention: James J. Connors, II, Esq.
Telephone No.: (212) 751-3939
Telecopy No.: (212) 233-2379
If to Sellers: Creative Video, Inc.
1465 Northside Drive, Suite 110
Atlanta, Georgia 30350
Attention: James R. Rocco
Telephone No.: (404) 351-4518
Telecopy No.: (404) 350-9823
With a copy to: David Kam, Esq.
P.O. Box 95297
Atlanta, Georgia 30347
Telephone No.: (404) 370-0180
Telecopy No.: (404) 370-1722
7.6 Counterparts; Headings. This Agreement may be executed in several
----------------------
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
7.7 Severability. If any provision, clause or part of this Agreement or
------------
the application thereof under certain circumstances is held invalid, or
unenforceable, the remainder of this Agreement, or the application of such
provision, clause or part under other circumstances, shall not be affected
thereby.
23
<PAGE>
7.8 Investigations; Non-Survival of Warranties. The respective
------------------------------- ----------
representations and warranties of Sellers and Buyer contained herein or in any
certificate or other documents delivered prior to or at the Closing shall not be
deemed waived or otherwise affected by any investigations made by any party
hereto. Each and every such representation and warranty shall survive for two
(2) years following the Closing, except that the representations and warranties
contained in Sections 3.17 and 3.22 shall survive the Closing until the
applicable statutes of limitation time periods expire with respect to any claims
under such Sections.
7.9 Governing Law. This Agreement shall be construed and interpreted
-------------
according to the laws of the State of Georgia, without regard to the conflict of
law principles thereof. The exclusive venue of adjudication of any dispute or
proceeding arising out of the Agreement or the performance hereof shall be the
courts located in the County of Fulton, State of Georgia, and the parties hereto
hereby consent to and submit to the jurisdiction of any court located in the
County of Fulton, State of Georgia and hereby waives, to the fullest extent
permitted by applicable law, any objection which such party may have to the
laying of venue of any such proceeding brought in such court and any claim that
such proceeding brought in such court has been brought in an inconvenient forum.
EACH OF THE PARTIES WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
[Signatures commence on following page]
24
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of
the day and year first above written.
BUYER:
-----
IXL HOLDINGS, INC.
By: /s/ U. Bertram Ellis Jr.
------------------------------
Name: U. Bertram Ellis, Jr.
-------------------------
Title: CFO
------------------------
SELLERS:
-------
/S/ James R. Rocco
----------------------------------
JAMES R. ROCCO
/S/ R. Guy Davidson, III
----------------------------------
R. GUY DAVIDSON
/S/ Barry T. Sikes
----------------------------------
BARRY T. SIKES
/s/ Larry B. Culbertson
----------------------------------
LARRY B. CULBERTSON
25
<PAGE>
CVI Exhibits
------------
A. Exchange Consideration (see Attached)........................... Exhibit A
B. Registration Rights Agreement................................... Exhibit B
C. Stockholders' Agreement......................................... Exhibit C
D. Sellers' Certificate............................................ Exhibit D
E. Amended and Restated Bylaws..................................... Exhibit E
<PAGE>
EXHIBIT A
---------
OWNERSHIP OF STOCK AND EXCHANGE CONSIDERATION
---------------------------------------------
<TABLE>
<CAPTION>
EXCHANGE CONSIDERATION
---------------------------------
CASH SHARES OF CLASS B
SELLER OWNERSHIP OF STOCK CONSIDERATION* COMMON STOCK
- -------------------- ------------------ -------------- -----------------
<S> <C> <C> <C>
James R. Rocco 561 Shares of Stock $ 2,392,700.00 9,527
R. Guy Davidson, III 478 Shares of Stock $ 2,038,700.00 8,115
Barry T. Sikes 122 Shares of Stock $ 520,400.00 2,075
Larry B. Culbertson 61 Shares of Stock $ 260,200.00 1,038
-------------- -----------------
TOTALS $ 5,212,000.00 20,755
============== =================
</TABLE>
____________________
* Less pro rata share of Outstanding Liabilities and Closing expenses of
Sellers.
A-1
<PAGE>
LIST OF SCHEDULES
Schedule 3.1 Corporate Organization
Schedule 3.2 CVI Stock
Schedule 3.6 Absence of Conflicting Agreements
Schedule 3.7 Title to CVI Assets; Liens and
Encumbrances
Schedule 3.8 CVI Assets
Schedule 3.9 Equipment
Schedule 3.10 Contracts
Schedule 3.11 Intangible Property
Schedule 3.12 Leases
Schedule 3.13(a) Financial Statements
Schedule 3.13(b) Interim Financial Statements
Schedule 3.14(a) Absence of Undisclosed Liabilities
Schedule 3.14(b) Permitted Liens
Schedule 3.15 Adverse Change
Schedule 3.16 Litigation; Labor Disputes; Compliance with Law
Schedule 3.17 Tax Returns and Tax Reports
Schedule 3.18 Governmental Authorizations
Schedule 3.19 Compliance with Governmental Requirements
Schedule 3.20 Bank; Powers of Attorney
Schedule 3.21 Employees
Schedule 3.22 Employee Welfare Plans
Schedule 3.26 Affiliate Transactions
Schedule 4.3 Absence of Conflicting Agreements
Schedule 5.10 Approvals and Consents
<PAGE>
EXHIBIT 2.3
EXCHANGE AGREEMENT
AMONG
IXL HOLDINGS, INC.
AND
WILLIAM STEPHEN FLOYD,
RICHARD NAILLING,
TERESA B. JOEL
AND
ROBERT D. BOWMAN
--------------------------
Dated as of April 30, 1996
--------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C>
1.1 Definitions................................................. 2
1.2 Singular/Plural; Gender..................................... 5
ARTICLE II
THE EXCHANGE
2.1 Exchange.................................................... 5
2.2 Payment on Closing.......................................... 5
2.3 Closing Date Deliveries..................................... 6
2.4 Risk of Loss................................................ 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
3.1 Corporate Organization...................................... 6
3.2 IXL Stock................................................... 6
3.3 Subsidiaries................................................ 7
3.4 Title to Stock.............................................. 7
3.5 Seller Investment Representations........................... 7
3.6 Absence of Conflicting Agreements........................... 9
3.7 Title to IXL Assets; Liens and Encumbrances................. 10
3.8 IXL Assets.................................................. 10
3.9 Equipment................................................... 10
3.10 Contracts................................................... 11
3.11 Intangible Property......................................... 11
3.12 Software.................................................... 12
3.13 Leases...................................................... 12
3.14 Financial Statements........................................ 13
3.15 Absence of Undisclosed Liabilities.......................... 13
3.16 No Adverse Change........................................... 14
3.17 No Litigation; Labor Disputes; Compliance with Law.......... 15
3.18 Tax Returns and Tax Reports................................. 15
3.19 Governmental Authorizations................................. 16
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.20 Compliance with Governmental Requirements.................... 16
3.21 Banks; Powers of Attorney.................................... 16
3.22 Employees.................................................... 17
3.23 Employee Welfare Plans....................................... 17
3.24 Environmental Compliance..................................... 17
3.25 Customer Relations........................................... 18
3.26 Representation as of the Closing Date........................ 18
3.27 Affiliate Transactions....................................... 18
3.28 Disclosure................................................... 18
3.29 Reliance on Representations and Warranties of Buyer.......... 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization................................................. 19
4.2 Authorization; Enforceability................................ 19
4.3 Absence of Conflicting Agreements............................ 19
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
5.1 Compliance with Agreement.................................... 20
5.2 Proceedings and Instruments Satisfactory..................... 20
5.3 Representations and Warranties............................... 20
5.4 Deliveries at Closing........................................ 20
5.5 Other Documents.............................................. 20
5.6 Absence of Investigations and Proceedings.................... 21
5.7 Governmental Consents........................................ 21
5.8 Absence of Liens............................................. 21
5.9 No Material Adverse Change................................... 21
5.10 Approvals and Consents....................................... 21
5.11 Stock Purchase and Exchanges................................. 21
5.12 Termination of Buy-Sell Agreement............................ 21
5.13 Bylaws....................................................... 21
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
<S> <C>
6.1 Compliance with Agreement........................................ 22
6.2 Proceedings and Instruments Satisfactory......................... 22
6.3 Representations and Warranties................................... 22
6.4 Deliveries at Closing............................................ 22
6.5 Other Documents.................................................. 22
6.6 Absence of Investigations and Proceedings........................ 22
6.7 Governmental Consents............................................ 22
ARTICLE VII
FURTHER AGREEMENTS
7.1 Payment of Sellers' Personal Promissory Note to Ellis Communica-
tions............................................................ 23
ARTICLE VIII
MISCELLANEOUS
8.1 Further Assurances............................................... 23
8.2 Entire Agreement; Amendment; and Waivers......................... 23
8.3 Expenses......................................................... 23
8.4 Benefit; Assignment.............................................. 23
8.5 Notices.......................................................... 24
8.6 Counterparts; Headings........................................... 25
8.7 Severability..................................................... 25
8.8 Investigations; Non-Survival of Warranties....................... 25
8.9 Governing Law.................................................... 25
</TABLE>
-iii-
<PAGE>
LIST OF EXHIBITS
Exhibit A Exchange Consideration
Exhibit B Registration Rights Agreement
Exhibit C Stockholders' Agreement
Exhibit D Sellers' Certificate
Exhibit E Amended and Restated Bylaws
-iv-
<PAGE>
LIST OF SCHEDULES
Schedule 3.1 Corporate Organization
Schedule 3.2 IXL Stock
Schedule 3.6 Absence of Conflicting Agreements
Schedule 3.7 Title to IXL Assets; Liens and
Encumbrances
Schedule 3.9 Equipment
Schedule 3.10 Contracts
Schedule 3.11 Intangible Property
Schedule 3.12 Software
Schedule 3.13 Leases
Schedule 3.14(a) Financial Statements
Schedule 3.14(b) Interim Financial Statements
Schedule 3.15 Indebtedness of IXL to Sellers
Schedule 3.15(a) Absence of Undisclosed Liabilities
Schedule 3.15(b) Guaranty of Indebtedness
Schedule 3.16 Adverse Change
Schedule 3.17 Litigation; Labor Disputes;
Compliance with Law
Schedule 3.18 Tax Returns and Tax Reports
Schedule 3.19 Governmental Authorizations
Schedule 3.20 Compliance with Governmental Requirements
Schedule 3.21 Bank; Powers of Attorney
Schedule 3.22 Employees
Schedule 3.23 Employee Welfare Plans
Schedule 3.27 Affiliate Transactions
Schedule 4.3 Absence of Conflicting Agreements
Schedule 5.10 Approvals and Consents
<PAGE>
EXCHANGE AGREEMENT
------------------
THIS EXCHANGE AGREEMENT ("Agreement") dated as of April 30, 1996, by
and among William Stephen Floyd, Richard Nailling, Teresa B. Joel and
Robert D. Bowman (individually a "Seller" and collectively, "Sellers") and
IXL Holdings, Inc., a Delaware corporation ("Buyer").
RECITALS
--------
A. Buyer desires to acquire all of the outstanding shares of Voting
Common Stock, par value $1.00 per share, and Non-Voting Stock, par value
$1.00 per share (collectively, the "Stock"), of iXL Interactive Excellence,
Inc., a Georgia corporation ("IXL").
B. Sellers own all of the issued and outstanding Stock of IXL.
C. Each Seller desires to exchange the Stock owned by such Seller
for shares of Class B Common Stock, par value $.01 per share ("Class B
Common Stock"), of Buyer and cash in the respective amounts as set forth
herein.
D. Contemporaneously with the closing of the exchange contemplated
hereby (the "Exchange"), (i) certain of the existing stockholders of Buyer
and certain other investors, including without limitation Kelso Investment
Associates V, L.P. ("KIA V") and Kelso Equity Partners V, L.P. ("KEP"),
will purchase certain additional capital stock of Buyer (the "Stock
Purchase") and (ii) Buyer will exchange certain of its capital stock in
return for (x) all of the issued and outstanding capital stock of Creative
Video, Inc., a Georgia corporation ("CVI") (the "CVI Exchange"); (y) all of
the issued and outstanding capital stock of Creative Video Library, Inc., a
Georgia corporation ("CVL") (the "CVL Exchange"); and (z) all of the issued
and outstanding capital stock of Entrepreneur Television, Inc., a Georgia
corporation ("ETV") (the "ETV Exchange").
E. The parties hereto intend that the Exchange, the Stock Purchase,
the CVI Exchange, the CVL Exchange and the ETV Exchange will take place
simultaneously and the stock transferred and cash provided to Buyer in
connection with such transactions will qualify under Section 351 of the
Internal Revenue Code.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants, agreements and conditions set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
<PAGE>
ARTICLE I
DEFINITIONS
-----------
1.1 Definitions. Except as specified otherwise, when used in this
-----------
Agreement and any Exhibits or Schedules, the following terms shall have the
meanings specified:
"ACCOUNTS RECEIVABLE" shall mean all accounts receivable, loans
receivable and other receivables of IXL existing as of the close of
business on the Closing Date, as determined in accordance with generally
accepted accounting principles, consistently applied.
"ACT" shall mean the Securities Act of 1933, as amended, and the rules
and regulations thereunder.
"AGREEMENT" shall mean this Exchange Agreement, together with the
Schedules and Exhibits attached hereto, as the same shall be amended from
time to time in accordance with the terms hereof.
"BUSINESS" shall mean IXL's business of marketing, developing and
distributing software, multimedia applications, Internet applications and
"Intranet" applications and the marketing and performance of services in
connection with such activities.
"BUYER" shall mean IXL Holdings, Inc., a Delaware corporation.
"CASH CONSIDERATION" shall mean $105,000.00.
"CASH" shall mean all cash and cash equivalents of IXL as of the
Closing.
"CLASS B COMMON STOCK" shall mean the Class B Common Stock, par value
$.01 per share, of Buyer, which shall be fully paid and non-assessable upon
issuance.
"CLOSING DATE" shall mean: (i) April 30, 1996, or (ii) such other date
as Buyer and Sellers may agree upon in writing. The Closing shall be deemed
effective as of 12:01 A.M. on the Closing Date.
"CLOSING" shall mean the conference to be held at 10:00 a.m., Atlanta,
Georgia time on the Closing Date at the offices of Minkin & Snyder, a
Professional corporation, One Buckhead Plaza, 3060 Peachtree Road, Suite
1100, Atlanta, Georgia 30305, or at such other time and place as the
parties may mutually agree to in writing, at which the transactions
contemplated by this Agreement shall be consummated.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
2
<PAGE>
"CONTRACTS" shall mean those agreements (other than the Leases) under
which IXL conducts the Business or by which its properties are bound,
whether written or oral as listed in Schedule 3.10.
-------------
"ENVIRONMENTAL LAWS" shall mean shall mean all applicable rules and
regulations of federal, state and local laws, including statutes,
regulations, ordinances, codes, rules, as amended, relating to the
discharge of air pollutants, water pollutants or process waste water or
otherwise relating to the environment or Hazardous Materials or toxic
substances including, but not limited to, the Federal Solid Waste Disposal
Act, the Federal Clean Air Act, the Federal Clean Water Act, the Federal
Resource Conservation and Recovery Act of 1976, the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, regulations
of the Environmental Protection Agency, the Toxic Substance Control Act,
regulations of the Nuclear Regulatory Agency, and regulations of any state
department of natural resources or state environmental protection agency
now or at any time hereafter in effect.
"EQUIPMENT" shall mean all items of equipment, computers, furniture
and other machinery of IXL.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EVENT OF LOSS" shall mean any loss, taking, condemnation, damage or
destruction of or to any of the IXL Assets.
"EXCHANGE CONSIDERATION" shall mean the aggregate consideration to be
received by the Sellers as set forth on Exhibit A, consisting of a total of
---------
16,740 shares of Class B Common Stock and the Cash Consideration, subject
to adjustment pursuant to Section 2.2.
"EXHIBITS" shall mean those Exhibits referred to in this Section 1.1
and attached to this Agreement and which are hereby incorporated herein and
made a part hereof.
"FINANCIAL STATEMENTS" shall mean the financial statements of IXL
described in Section 3.14.
"INTANGIBLE PROPERTY" shall mean all the copyrights, trademarks,
patents, trade secrets and all other intellectual property of every type,
whether registered with any governmental agency or not so registered, owned
or applied for by IXL or any Seller on behalf of IXL.
"IXL ASSETS" shall mean the right, title and interest of IXL in and to
all assets used or useful in, or material to, the operation of the
Business, including without limitation the Accounts Receivable, the Cash,
the Equipment, the Intangible Property, the Leases, the Licenses, the
Contracts, the Products and the Software, but excluding those items of
tangible personal property listed on Schedule 3.9 and designated on such
------------
Schedule as being owned individually by a Seller or other identified
Person.
3
<PAGE>
"KNOWLEDGE OF SELLERS" shall mean the actual knowledge of William
Stephen Floyd, Richard Nailling, Teresa B. Joel and Robert D. Bowman, or
such knowledge as would have been acquired by such persons upon a
reasonable investigation of IXL and its Business.
"LEASES" shall mean those leases of real and personal property to
which IXL is a party as listed on Schedule 3.13.
-------------
"LICENSES" shall mean those licenses, permits and authorizations
issued by any federal, state or local governmental or regulatory authority
or agency for the operation of IXL and its Business.
"LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation,
security interest, encumbrance, claim, lien, lease or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
affecting any assets or property, including any agreement to give or grant
any of the foregoing, any conditional sale or other title retention
agreement and the filing of or agreement to give any financing statement
with respect to any assets or property under the Uniform Commercial Code or
comparable law of any jurisdiction.
"OUTSTANDING LIABILITIES" shall mean all liabilities of IXL as shown
on the balance sheets as of March 31, 1996, determined in accordance with
generally accepted accounting principles.
"PERMITTED LIENS" shall mean the following Liens: (a) Liens existing
on the Closing Date to remain on the IXL Assets as listed on Schedule
--------
3.15(a); (b) Liens for taxes, assessments or other governmental charges or
-------
levies not yet due; (c) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law created
in the ordinary course of business of IXL consistent with past practices
for amounts not yet due; (d) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business of IXL
consistent with past practices in connection with worker's compensation,
unemployment insurance or other types of social security; (e) minor defects
of title, easements, rights-of-way, restrictions and other similar charges
or encumbrances not materially detracting from the value of the IXL Assets
or interfering with the ordinary conduct of the Business; and (f) Liens not
created by IXL which affect the underlying fee interest of any real
property leased by IXL.
"PERSON" shall mean any natural person, general or limited
partnership, corporation, limited liability company, association or other
entity.
"PRODUCTS" shall mean the Software and the proprietary computer
application technology known as the "Pitchman Presentation System" and all
other multimedia, Internet, "Intranet" or other computer application
products developed, owned or licensed by IXL.
"REAL PROPERTY" shall mean IXL's leasehold interest in its premises
located at 1465 Northside Drive, Atlanta, Georgia 30318.
4
<PAGE>
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement to be entered into by Sellers, Buyer and the certain stockholders
of Buyer at Closing substantially in the form attached hereto as Exhibit B.
---------
"SCHEDULES" shall mean those schedules referred to in this Agreement
which have been delivered concurrently with the execution of this
Agreement, which are hereby incorporated herein and made a part hereof.
"SECTION" OR "SECTIONS" shall mean any or all sections of this
Agreement.
"SELLER AND SELLERS" shall mean, individually or collectively, as the
context may require, William Stephen Floyd, Richard Nailling, Teresa B.
Joel and Robert D. Bowman.
"SELLERS' CERTIFICATE" shall mean the certificate of the Sellers in
the form of Exhibit D attached hereto.
---------
"SOFTWARE" shall mean (i) the proprietary computer software programs
identified on Schedule 3.12 hereto, in source and object code form, and
-------------
(ii) the associated technical and user documentation identified on Schedule
--------
3.12.
----
"STOCK" shall mean the issued and outstanding shares of Voting Common
Stock, par value $1.00 per share and shares of Non-Voting Stock, par value
$1.00 per share, of IXL held by the Sellers.
"STOCKHOLDERS AGREEMENT" shall mean the Stockholders Agreement to be
entered into by Sellers and Buyer at the Closing substantially in the form
attached hereto as Exhibit C.
---------
1.2 Singular/Plural; Gender. Where the context so requires or
-----------------------
permits, the use of the singular form includes the plural, and the use of
the plural form includes the singular, and the use of any gender includes
any and all genders.
ARTICLE II
THE EXCHANGE
------------
2.1 Exchange. At the Closing on the Closing Date, on the terms and
--------
subject to the conditions of this Agreement, each Seller shall sell,
transfer and deliver to Buyer, and Buyer shall purchase from such Seller,
the Stock set forth opposite such Seller's name on Exhibit A for the
---------
Exchange Consideration set forth opposite such Seller's name on Exhibit A,
---------
consisting of the aggregate number of shares of Class B Common Stock and
the amount of Cash Consideration set forth opposite such Seller's name on
Exhibit A.
---------
2.2 Payment on Closing. At the Closing on the Closing Date, Buyer
------------------
shall pay Sellers an amount equal to the Cash Consideration, by wire
transfer of immediately available funds or other form of agreed upon
payment in the amounts set forth on Exhibit A hereto.
---------
5
<PAGE>
2.3 Closing Date Deliveries. At the Closing on the Closing Date:
-----------------------
(a) Each Seller shall deliver, or cause to be delivered, to Buyer
properly executed and dated as of the Closing Date, where applicable: (i) stock
certificates representing all outstanding Stock owned by such Seller accompanied
by stock powers duly endorsed to Buyer in each case in proper form for transfer;
(ii) the resignation of those members of the Board of Directors of IXL as shall
be designated by Buyer; (iii) the stock books, stock ledgers, minute books,
corporate seals and all other corporate records of IXL; (iv) the Sellers'
Certificate; (v) the Stockholders' Agreement; (vi) the Registration Rights
Agreement; and (vii) such other documents as provided in Article VI hereof.
(b) In addition to the Cash Consideration described in Section 2.2,
Buyer shall deliver, or cause to be delivered to Sellers, executed and dated as
of the Closing Date, where applicable (i) the Stockholders' Agreement; (ii) the
Registration Rights Agreement; and (iii) stock certificates representing the
Class B Common Stock to be issued to each of the Sellers as set forth on Exhibit
-------
A.
- -
2.4 Risk of Loss. The risk of all Events of Loss prior to the Closing
------------
shall be upon Sellers and the risk of all Events of Loss at or subsequent to the
Closing shall be upon Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
William Stephen Floyd and Richard Nailling jointly and severally represent
and warrant to Buyer and Teresa Joel and Robert Bowman severally represent and
warrant to Buyer (which representations and warranties shall survive the
Closing) as follows:
3.1 Corporate Organization. IXL is a corporation duly organized, validly
----------------------
existing and in good standing under the laws of the State of Georgia. IXL has
the power to own or lease its properties and to carry on its business in the
place where such properties are now owned, leased or operated and such business
is now conducted. IXL is duly qualified and licensed and in good standing as a
foreign corporation in each jurisdiction set forth in Schedule 3.1, constituting
------------
each jurisdiction in which such qualification is required. Copies of the
articles of incorporation and all amendments thereto, the bylaws as amended and
currently in force, stock records and corporate minutes of IXL have been
delivered to Buyer, and are true, complete and correct as of the date hereof.
3.2 IXL Stock. IXL has authorized capital stock consisting of (i) 10,000
---------
shares of Voting Common Stock, $1.00 par value per share, of which only 3,348
shares of such Voting Common Stock are issued and outstanding and (ii) 10,000
shares of Non-Voting Stock, $1.00 par value per share, none of which Non-Voting
Stock are issued and outstanding. All shares of Stock issued and outstanding are
owned of record and beneficially by Sellers as set forth on Exhibit A. All of
---------
the issued and outstanding Stock is duly authorized and validly issued, fully
paid and nonassessable, and there are no preemptive rights in respect thereof.
Except as set
6
<PAGE>
forth on Schedule 3.2, there are no outstanding options, warrants or other
------------
rights to subscribe for or purchase from IXL or the Sellers, no contracts or
commitments providing for the issuance of, or the granting of rights to acquire,
and no securities convertible into or exchangeable for, any Stock or other
capital stock or any other ownership interest of IXL.
3.3 Subsidiaries. IXL does not own capital stock or other ownership
------------
interests in any corporation, partnership or other entity. There are no
outstanding contractual obligations of IXL to acquire any outstanding shares of
capital stock or other ownership interests of any corporation, partnership or
other entity. IXL does not have any investment (either debt or equity), or
commitments to make any such investment, in any corporation, joint venture,
general or limited partnership, business enterprise or other Person.
3.4 Title to Stock. Sellers have legal and beneficial title to the Stock
--------------
free and clear of any Liens (other than restrictions imposed by applicable state
and federal securities laws), and there are no claims pending with respect to
the title of Sellers in the Stock.
3.5 Seller Investment Representations. Each Seller represents and warrants
---------------------------------
as follows:
(a) Private Offering. Neither such Seller nor anyone acting on such
----------------
Seller's behalf has issued, sold or offered any security of IXL to any Person
under circumstances that would cause the consummation of the Exchange, as
contemplated by this Agreement, to be subject to the registration requirements
of the Act. Neither such Seller nor anyone acting on such Seller's behalf has
offered or will offer the Stock or any part thereof or any similar securities
for sale to, or solicit any offer to acquire any of the same from, any Person so
as to make the consummation of the Exchange subject to the registration
requirements of the Act.
(b) Investment Intentions and Restrictions on Disposition. Such Seller
-----------------------------------------------------
is acquiring the Class B Common Stock solely for such Seller's own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof. Such Seller agrees that such Seller will not, directly or
indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of
any of the shares of Class B Common Stock (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of any of the Class B Common
Stock) except in compliance with the Act, and Stockholders' Agreement. Such
Seller further understands, acknowledges and agrees that none of the Class B
Common Stock may be transferred, sold, pledged, hypothecated or otherwise
disposed of (i) unless the provisions of the Stockholders' Agreement shall have
been complied with and (ii) unless such disposition is pursuant to an effective
registration statement under the Act and is exempt from (or in compliance with)
applicable state securities laws, or is exempt from the provisions of Section 5
of the Act and is exempt from (or in compliance with) applicable state
securities laws.
(c) Restrictions on Transfer. Such Seller acknowledges receipt of
------------------------
advice that (i) the shares of Class B Common Stock have not been registered
under the Act, (ii) the Class B Common Stock must be held indefinitely and such
Seller must continue to bear the economic risk of the investment in the Class B
Common Stock unless shares of such Class B Common
7
<PAGE>
Stock are subsequently registered under the Act or an exemption from such
registration is available, (iii) there may not be any public market for the
Class B Common Stock in the foreseeable future, (iv) Rule 144 promulgated under
the Act is not presently available with respect to sales of any securities of
Buyer and Buyer has made no covenant to make such Rule available and such Rule
is not anticipated to be available in the foreseeable future, (v) when and if
the Class B Common Stock may be disposed of without registration in reliance
upon Rule 144, such disposition can be made only in limited amounts and in
accordance with the terms and conditions of such Rule, (vi) if the exemption
afforded by Rule 144 is not available, public sale without registration will
require the availability of an exemption under the Act, (vii) restrictive
legends in the form set forth in the Stockholders' Agreement shall be placed on
the certificates representing the Class B Common Stock and (viii) a notation
shall be made in the appropriate records of Buyer indicating that the shares of
Class B Common Stock are subject to restrictions on transfer pursuant to the
Stockholders' Agreement and, if Buyer should in the future engage the services
of a stock transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to the Stock.
(d) Risk of Investing in Buyer; Ability to Bear Risk. Such Seller
------------------------------------------------
represents and warrants that (i) the financial situation of such Seller is such
that Seller can afford to bear the economic risk of holding the Class B Common
Stock for an indefinite period and (ii) such Seller can afford to suffer the
complete loss of his investment in the Class B Common Stock. Such Seller
understands and acknowledges that the shares of Class B Common Stock received by
such Seller hereunder represent an investment by Seller in Buyer and recognizes
that (w) such investment in Buyer is subject to substantial uncertainty
concerning the business prospects of Buyer and that Buyer's businesses face
rapid technological change which could result in greater competition for Buyer
or cause Buyer to lower the prices of its products or services; (x) Buyer
intends to pursue acquisitions of software development businesses, software
service businesses, multimedia businesses and other businesses as a component of
its growth strategy and that the success of Buyer will depend on Buyer's ability
to identify, acquire and finance suitable acquisition candidates on acceptable
terms and to integrate such acquisitions effectively into Buyer; (y) after the
Exchange, Buyer will be controlled by KIA V as a result of KIA V's ownership of
more than 80% of the voting stock of Buyer following the Stock Purchase, and
that KIA V will be able to determine the outcome of all matters required to be
submitted to the stockholders of Buyer for approval (except as otherwise
provided by law or by Buyer's Certificate of Incorporation or Bylaws or the
Stockholders' Agreement); and (z) Sellers' aggregate ownership of Buyer
immediately following the Exchange will likely be subject to dilution upon
exercise of stock options to be granted to certain officers and directors of
Buyer and the possible issuance from time to time of additional shares of
capital stock of Buyer and warrants to acquire stock of Buyer to existing and
future investors of Buyer.
(e) Access to Information; Sophistication. Such Seller has been
-------------------------------------
granted the opportunity to ask questions of, and receive answers from,
representatives of Buyer concerning the terms and conditions of the purchase of
the Class B Common Stock and to obtain any additional information that Seller
deems necessary. Such Seller's knowledge and experience in financial business
matters is such that Seller is capable of evaluating the merits and risk of the
investment in the Class B Common Stock and such Seller has carefully reviewed
the terms and
8
<PAGE>
provisions of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein.
(f) Knowledge Concerning CVI, CVL and ETV. Such Seller is familiar
----------------------------- -------
with the businesses and operations of each of CVI, CVL and ETV and understands
and acknowledges that, after the CVI Exchange, CVL Exchange and ETV Exchange, a
significant portion of the business of Buyer will be comprised of the businesses
and operations of CVI, CVL and ETV. Such Seller has been granted the opportunity
to ask questions of, and receive answers from, representatives of Buyer
concerning the business, operations and financial results of each of CVI, CVL
and ETV and to obtain any additional information that Seller deems necessary.
Such Seller's knowledge and experience in financial business matters is such
that Seller is capable of evaluating the merits and risk of the investment in
the Class B Common Stock in view of the CVI Exchange, CVL Exchange and the ETV
Exchange and has evaluated the effect of such transactions on such Seller's
purchase of the Class B Common Stock of Buyer hereunder.
(g) Due Execution and Delivery. Such Seller (i) has duly executed and
--------------------------
delivered this Agreement, (ii) this Agreement constitutes and, upon execution
thereof, the Stockholders' Agreement will constitute Seller's legal, valid and
binding obligations, enforceable against such Seller in accordance with their
respective terms, (iii) no consent, approval, authorization, order, filing,
registration or qualification of or with any court, governmental authority or
third person is required to be obtained by such Seller in connection with the
execution and delivery of this Agreement or the Stockholders' Agreement or the
performance of such Seller's obligations hereunder or thereunder and (iv) such
Seller is a resident of the state of Georgia.
(h) Accredited Investor. Such Seller is an "accredited investor" as
-------------------
such term is defined in Rule 501(a) promulgated under the Act, a copy of such
definition being attached to this Agreement.
3.6 Absence of Conflicting Agreements. Except as set forth in Schedule
--------------------------------- --------
3.6, neither the execution, delivery or performance of this Agreement by Sellers
- ---
nor the consummation of the sale and purchase of the Stock does or will, after
the giving of notice, or the lapse of time, or otherwise:
(a) conflict with, result in a breach of, or constitute a default
under, the articles of incorporation or bylaws of IXL, any federal, state or
local law, statute, ordinance, rule or regulation, or any court or
administrative order or process or any contract, agreement, arrangement,
commitment or plan to which Sellers or IXL are a party or by which Sellers or
IXL or its property are bound and which relates to the ownership or operation of
the Business, IXL Assets, or the Stock, including without limitation any
stockholders' or buy-sell agreement;
(b) result in the creation of any Lien upon the Stock or any of the
IXL Assets;
9
<PAGE>
(c) terminate, amend or modify, or give any party the right to
terminate, amend, modify, abandon or refuse to perform, any contract, agreement,
arrangement, commitment or plan to which IXL is a party;
(d) accelerate or modify, or give any party the right to accelerate or
modify, the time within which, or the terms under which, any duties or
obligations are to be performed, or any rights or benefits are to be received,
under any contract, agreement, arrangement, commitment or plan to which IXL is a
party; or
(e) require the consent, waiver, approval, permit, license, clearance
or authorization of, or any declaration or filing with, any court or public
agency or other authority, or the consent of any Person under any agreement,
arrangement or commitment of any nature which Sellers or IXL are a party to or
bound or by or which the IXL Assets are bound or subject.
3.7 Title to IXL Assets; Liens and Encumbrances. Except as set forth on
-------------------------------------------
Schedule 3.7, and except for Permitted Liens, IXL owns good and marketable title
- ------------
to or has valid and enforceable leasehold interests in all of the IXL Assets
free and clear of any and all Liens.
3.8 IXL Assets. The IXL Assets include all of the assets, properties and
----------
rights of every type and description, real, personal and mixed, tangible and
intangible, that are necessary for, used or useable in the conduct of the
Business in the manner in which the Business has been and is now conducted.
3.9 Equipment. Except as set forth in Schedule 3.9:
--------- ------------
(a) each material item of Equipment is in good condition and repair,
ordinary wear and tear excepted and is fit for operation in its intended use;
(b) the Equipment includes all material items of tangible personal
property utilized by IXL in connection with owning and operating the Business;
(c) none of the material items of Equipment or other assets owned,
used or operated by IXL in connection with the Business, or the ownership,
leasing or operation thereof, is in violation of any law, ordinance, code, rule
or regulation, the violation of which would have a material adverse impact on
the Business, and no written notice from any governmental authority or other
Person has been served upon or given to Sellers or IXL claiming any violation of
any such law, ordinance, code, rule or regulation, or requiring or calling
attention to the need for any repair, modification, replacement, installation or
other work on or in connection with such Equipment or assets; and
(d) the list of Equipment on Schedule 3.9 is a true and correct list
------------
of all material items of tangible personal property necessary for or used in the
operation of the Business in the manner in which it has been and is now
operated.
10
<PAGE>
3.10 Contracts. Except as set forth in Schedule 3.10:
--------- -------------
(a) IXL has performed each term, covenant and condition of each of
the Contracts, and no event of default, or event which with the passing of time
or giving of notice would constitute a material default, exists under any of the
Contracts;
(b) the Contracts described in Schedule 3.10 constitute all of the
-------------
agreements relating to properties, undertakings or commitments to or from third
parties in the conduct of the Business other than each contract which is
cancelable by IXL without breach or penalty on not more than thirty (30) days
notice and which involves average annual payments or receipts by IXL of less
than $500 in the case of any single contract and $2,500 in the aggregate;
(c) each of the Contracts is in full force and effect, unimpaired by
any acts or omissions of IXL or its officers, and constitutes the legal and
binding obligation of the parties thereto in accordance with its terms;
(d) Sellers have furnished true and complete copies of all Contracts
listed on Schedule 3.10, including all amendments, modifications and supplements
-------------
thereto, and Schedule 3.10 contains summaries of the provisions of all oral
-------------
contracts; and
(e) No consent, approval or waiver from any Person is required in
connection with the transactions contemplated by this Agreement.
3.11 Intangible Property. Except as set forth on Schedule 3.11:
------------------- -------------
(a) none of the Intangible Property infringes any proprietary right
of any Person and there are no claims, demands or proceedings instituted,
pending or threatened by any third party pertaining to or challenging IXL's
right to use any of the Intangible Property;
(b) there are no facts which would render any of the Intangible
Property invalid or unenforceable;
(c) there is no trademark, trade name, patent or copyright owned by a
third party which IXL is using without license to do so and there is no
Intangible Property owned by a third party that IXL is using without a license
to do so;
(d) to the Knowledge of Sellers, the Intangible Property constitutes
all the copyrights, patents, trade secrets, trademarks, and other intellectual
property utilized by IXL in connection with owning and operating the Business;
and
(e) Schedule 3.11 contains a true and complete list of all Intangible
-------------
Property and all agreements pursuant to which IXL licensed or authorized others
to use the Intangible Property.
11
<PAGE>
3.12 Software.
--------
(a) To the Knowledge of Sellers, all of the Software and every
severable component thereof performs substantially in accordance with the
applicable documentation set forth on Schedule 3.12 and is free of material
-------------
defects in programming and operation. IXL has delivered (or made available) to
Buyer complete and accurate copies of all user and technical documentation
related to the Software.
(b) To the Knowledge of Sellers, no employee of IXL is, or is now
expected to be, in default under any employment contract, agreement or
arrangement relating to the Software or any noncompetition arrangement or
restrictive covenant relating to the Software or its development or
exploitation. Except as set forth on Schedule 3.12, the Software was developed
-------------
exclusively by the employees of IXL during such time as they were employed by
IXL. The Software does not include any inventions or developments of such
employees made prior to the time that they became employees of IXL and the
Software does not include any proprietary intellectual property of any previous
employer of any such employees.
(c) All right, title and interest in and to the Software is owned by
IXL and the Software is free and clear of all liens and rights of others and is
fully transferable to Buyer, and, except as set forth on Schedule 3.11, no
-------------
Person other than IXL has any right, title or interest in or to the Software,
including, without limitation, any license, contingent interest or otherwise.
The development, use, sale and exploitation of the Software by IXL does not
violate any material rights of any other Person, and IXL has not received any
written communication alleging such a violation. Except as set forth on Schedule
--------
3.11, IXL has no obligation to compensate any Person for the development, use,
- ----
sale or exploitation of the Software and IXL has not granted to any other Person
or entity any license, option or other right to develop, use, sell or exploit in
any manner the Software, whether requiring the payment of royalties or not.
(d) Except as set forth on Schedule 3.12, IXL has kept secret the
-------------
source code for, and other trade secret materials relating to, the Software and
has not disclosed any of such source code or materials to any person or entity.
To the Knowledge of Sellers, IXL has taken appropriate measures to protect the
confidential and proprietary nature of the Software, including, without
limitation, the use of confidentiality and intellectual property rights
agreements with all of its employees having access to the Software source and
object code. Except as set forth on Schedule 3.11, there have been no patents
-------------
applied for and no copyrights registered for any part of the Software. Except as
set forth in Schedule 3.11, there are no trademark rights of any person relating
-------------
to the Software.
(e) To the Knowledge of Sellers, no person is using the Software in
violation of any of the rights thereto of IXL.
3.13 Leases. Except as set forth on Schedule 3.13:
------ -------------
(a) IXL has performed each item, covenant and condition of each of
the Leases which is to be performed by IXL at or before the date hereof, and no
default, or event
12
<PAGE>
which with the passing of time or giving of notice or both would constitute an
event of default, exists under any Lease;
(b) the Leases constitute all of the lease agreements between IXL and
other Persons, and all of the Leases are described on Schedule 3.13;
-------------
(c) each of the Leases is in full force and effect, unimpaired by any
acts or omissions of IXL or its officers, employees or agents, and constitutes
the legal and binding obligation of the parties in accordance with their terms;
(d) IXL has furnished true and complete copies of the Leases to
Buyer, including any and all amendments thereto;
(e) there are no leasing commissions or similar payments due from IXL
arising out of, resulting from or with respect to any Lease; and
(f) no consent, approval or waiver from any Person is required with
respect to the Leases in connection with the transactions contemplated by this
Agreement.
3.14 Financial Statements.
--------------------
(a) Attached as Schedule 3.14(a) are true and complete copies of the
----------------
unaudited financial statements of IXL, as of December 31, 1991, December 31,
1992, December 31, 1993, December 31, 1994, and December 31, 1995, and the
related statements of income for the fiscal years then ended (the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
preceding years and present fairly the financial condition of IXL as at the date
indicated and the results of its operations for the periods then ended except
for the absence of footnotes.
(b) Attached as Schedule 3.14(b) are true and complete copies of the
----------------
unaudited financial statements of IXL, as of March 31, 1996 and the related
statements of income, for the period then ended (the "Interim Financial
Statements"). The Interim Financial Statements have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent with
the Financial Statements and present fairly the financial condition of IXL as at
the date indicated and the results of its operations for the periods then ended;
subject, however, to year-end adjustments which, in the aggregate, are not
- ------- -------
adverse and except for the absence of footnotes.
3.15 Absence of Undisclosed Liabilities.
----------------------------------
(a) IXL has no debt, liability or obligation of any kind, whether
accrued, absolute, contingent or otherwise, including, without limitation, any
liability or obligation on account of taxes or any governmental charges or
penalty, interest or fines, required to be reflected in its financial statements
in accordance with generally accepted accounting principles which would have, or
which in the case of contingent or inchoate liabilities, would have if
13
<PAGE>
accrued or absolute, an adverse effect on the financial condition of IXL, except
(i) those liabilities reflected in the Financial Statements and Interim
Financial Statements, (ii) liabilities disclosed in Schedule 3.15(a), (iii)
----------------
liabilities incurred in the ordinary course of business (other than contingent
liabilities) since March 31, 1996, none of which has, individually or in the
aggregate, adversely affected the business, assets, results of operations or
financial condition of IXL and (iv) liabilities incurred in connection with the
transactions provided for in this Agreement.
(b) Except as set forth on Schedule 3.15(b), IXL has not, by written
----------------
instrument or otherwise, guaranteed the payment or collection or pledged any of
its assets to secure payment of any unsatisfied indebtedness of any Person.
Schedule 3.15 sets forth all indebtedness of IXL to Sellers.
- -------------
3.16 No Adverse Change. Except as set forth on Schedule 3.16, since March
----------------- -------------
31, 1996, there has been no:
(a) material adverse change in the financial condition or results of
operations of the Business;
(b) declaration, setting aside or payment, directly or indirectly, of
any cash or noncash dividend or other cash or noncash distribution in respect of
any of the securities of IXL or any direct or indirect redemption, purchase or
other acquisition of any securities of IXL or agreement to do so;
(c) damage, destruction or loss, whether or not covered by insurance,
adversely affecting the business or properties of IXL;
(d) increase in compensation payable or to become payable to any of
the officers, directors or employees of IXL or in any bonus payment or
arrangement made with any such person, or any change in personnel policies or
benefits except pursuant to existing compensation and fringe benefit plans,
practice and arrangements;
(e) contract, commitment or transaction entered into or consummated
by IXL except in the ordinary course of business;
(f) sale, assignment, lease or other transfer or disposition of any
of the assets or properties of IXL except in the ordinary course of business or
in connection with the acquisition of similar property or assets in the ordinary
course of business;
(g) extraordinary losses (whether or not covered by insurance) or
waiver by IXL of any extraordinary rights of value;
(h) notice from any customer as to the customer's intention not to
conduct business with IXL, the result of which loss or losses of business,
individually or in the
14
<PAGE>
aggregate, has had, or could reasonably be expected to have, a material adverse
effect on the Business; or
(i) other event or condition of any character, that has or might
reasonably have a material adverse effect on IXL's financial condition or
assets.
3.17 No Litigation; Labor Disputes; Compliance with Law. Except as set
--------------------------------------------------
forth on Schedule 3.17:
-------------
(a) there is no decree, judgment, order or litigation at law or in
equity, no arbitration proceeding, and no proceeding before or by any
commission, agency or other administrative or regulatory body or authority,
pending or, to the Knowledge of Sellers, threatened, to which IXL is a party or
to which IXL or the IXL Assets are subject;
(b) IXL is not subject to or bound by any labor agreement, there is
no labor dispute, grievance, controversy, strike or request for union
representation pending or, to the Knowledge of Sellers, threatened against IXL,
and there has been no occurrence of any event which would give rise to any such
strike, request for union representation or other labor dispute, grievance or
controversy; and
(c) To the Knowledge of Sellers, IXL owns and operates, and has owned
and operated, its properties and assets, and carried on and conducted, and has
carried on and conducted, the Business in substantial compliance with all
federal, state and local laws, statutes, ordinances, rules and regulations; and
any court or administrative order or process, including, without limitation,
Occupational Safety and Health Administration, Equal Employment Opportunity
Commission, National Labor Relations Board and Environmental Laws.
3.18 Tax Returns and Tax Reports.
---------------------------
(a) Except as set forth on Schedule 3.18, all federal, state and
-------------
local tax returns and tax reports required to be filed by IXL have been filed
with the appropriate governmental agencies in all jurisdictions in which such
returns and reports are required to be filed, and IXL has not requested any
extension of time within which to file any such returns or reports which have
not been filed within such extension of time. All federal, state and local
income, profits, franchise, withholding and sales, use, occupation, property,
excise and other taxes (including interest and penalties) due from IXL in
accordance with such returns and reports have been fully paid. Each item
reflected on each of IXL's federal tax returns is complete, accurate and
correct in all respects.
(b) Except as set forth on Schedule 3.18: (i) no issues have been
-------------
asserted by the Internal Revenue Service or any other taxing authority in
connection with an examination of any of the returns and reports referred to in
Section 3.18(a) which might, if determined adversely to IXL, materially
adversely affect the financial condition or business of IXL; and (ii) no waivers
of statutes of limitation with respect to taxes have been given with respect to
IXL. The federal income tax returns and information reports of IXL have been
examined by
15
<PAGE>
the Internal Revenue Service for the period or periods set forth in Schedule
--------
3.18, which lists all revenue agent reports issued in connection with audits of
- ----
IXL. All deficiencies asserted or assessments made as a result of examinations
by the Internal Revenue Service or by appropriate state tax authorities have
been fully paid or adequately reflected on either the Financial Statements, the
Interim Financial Statements or on Schedule 3.18.
-------------
(c) Schedule 3.18 accurately reflects all currently proposed
-------------
adjustments to the taxable income of IXL for the years ended December 31, 1991
through December 31, 1995.
(d) IXL is not a party to or bound by, and has no obligation under,
any tax sharing or similar agreement, except for obligations provided by law
arising out of the filing of a consolidated federal income tax return or any
consolidated, unitary or combined state or local tax return or report of IXL.
(e) IXL has not consented and will not consent to have the provisions
of Section 341(f)(2) of the Code (or equivalent state law provisions) apply to
it and IXL has not agreed to, and has not been requested to make, any adjustment
under Section 481(c) of the Code by reason of a change in accounting method or
otherwise.
3.19 Governmental Authorizations. Except as set forth in Schedule 3.19,
--------------------------- -------------
no qualifications, registrations, filings, privileges, franchises, licenses,
permits, approvals or authorizations other than the Licenses are required in
order for IXL to own and operate the Business in the manner operated on the date
hereof. All Licenses are currently in full force and effect. As of the date
hereof, no action or proceeding is pending or, to the Knowledge of Sellers,
threatened before any governmental authority to revoke, refuse to renew or
modify such Licenses or other authorizations of the Business.
3.20 Compliance with Governmental Requirements. The Business, its
-----------------------------------------
physical facilities and electrical and mechanical systems are being and have
been operated in all respects in accordance with the specifications of the
applicable Licenses and with each document submitted in support of such
Licenses, and the Business is in compliance with all requirements, rules and
regulations of all governmental authorities, including without limitation, the
United States Occupational Safety and Health Administration. Except as set forth
in Schedule 3.20, and to the Knowledge of Sellers, all obligations, reports and
-------------
other filings required by all governmental authorities, including without
limitation, the United States Occupational Safety and Health Administration,
with respect to the Business have been duly and currently filed as of the date
hereof. There is currently pending no proceeding or complaint before any
governmental authority relating to the Business.
3.21 Banks; Powers of Attorney. Schedule 3.21 lists the names of each
------------------------- -------------
bank in which IXL has an account or safe deposit box and the names of all
Persons authorized to draw thereon or to have access thereto and the names of
all Persons holding powers of attorney from IXL, and a summary statement of the
terms thereof.
16
<PAGE>
3.22 Employees. Schedule 3.22 is a true and complete list of the names and
--------- -------------
current annual salary rates or hourly wage rates of all employees of IXL, which
list includes for each such Person the amounts paid or payable as salary or
wages and describes any other future compensation arrangements for employees .
3.23 Employee Welfare Plans.
----------------------
(a) Except as set forth on Schedule 3.23, IXL has not at any time
-------------
maintained or been a party to or made contributions to any of the following: any
"employee pension benefit plan", (as such term is defined in Section 3(2) of
ERISA); or any "employee welfare benefit plan" (as such term is defined in
Section 3(1) of ERISA), whether written or oral. All employee benefit plans
maintained by IXL or to which IXL is obligated to contribute, are, and have in
the past been, in all respects maintained, funded and administered in compliance
with ERISA, and other applicable law; no such plan subject to Title IV of ERISA
has been terminated; no proceedings to terminate any such plan have been
instituted under Subtitle C of Title IV of ERISA; no reportable event within the
meaning of Section 4043 of Subtitle C of ERISA has occurred for any such plan
maintained by IXL; IXL has not withdrawn from a multi-employer plan (as defined
in Section 4001(a) of ERISA); the consummation of the transactions contemplated
hereby will not result in any withdrawal liability on the part of IXL under a
multi-employer plan; no benefit plan established or maintained by IXL or to
which IXL is obligated to contribute, has any accumulated funding deficiency (as
defined in ERISA); and IXL has not incurred any liability to the Pension Benefit
Guaranty Corporation with respect to any such plan.
(b) IXL has no formal or informal employee severance policy. Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, bonus, unemployment compensation or golden
parachute) becoming due to any director, officer or other employee of the
Company, (ii) increase any benefits otherwise payable under any IXL benefit plan
or (iii) result in the acceleration of the time of payment or vesting of any
such benefits.
3.24 Environmental Compliance.
------------------------
(a) IXL is not a party to any litigation or administrative proceeding
or, to the Knowledge of Sellers, is any litigation or administrative proceeding
threatened against it, which in either case (i) asserts or alleges that IXL
violated any Environmental Laws, (ii) asserts or alleges that IXL is required to
clean up, remove or take remedial or other response action due to the disposal,
depositing, discharge, leaking or other release of any hazardous or toxic
substances or materials or (iii) asserts or alleges that IXL is required to pay
all or a portion of the cost of any past, present or future cleanup, removal or
remedial or other response action which arises out of or is related to the
disposal, depositing, discharge, leaking or other release of any hazardous or
toxic substances or materials by IXL.
(b) No Person has caused or permitted materials to be stored,
deposited, treated, recycled or disposed of on, under or at any Real Property
owned, leased, used or
17
<PAGE>
occupied by IXL which materials, if known to be present, would require cleanup,
removal or some other remedial action under any Environmental Laws.
(c) There are not now, nor have there previously been, tanks or other
facilities on, under, or at any real property owned, leased, used or occupied by
IXL which contained materials which, if known to be present in soils or ground
water, would require cleanup, removal or some other remedial action under
Environmental Laws.
(d) There are no conditions existing currently which would subject
IXL or Sellers to damages, penalties, injunctive relief or cleanup costs under
any Environmental Laws or which require or are likely to require cleanup,
removal, remedial action or other response pursuant to Environmental Laws by
IXL.
(e) IXL is not subject to any judgment, order or citation related to
or arising out of any Environmental Laws and has not been named or listed as a
potentially responsible party by any governmental body or agency in a matter
related to or arising out of any Environmental Laws.
3.25 Customer Relations. No communications have been made to IXL or
------------------
Sellers which would indicate that (a) any current customer of the Business which
accounted for more than 5% of its total net sales for the calendar year ending
December 31, 1995, or (b) any current supplier of the Business (if such
suppliers could not be replaced by the Sellers at comparable cost), will
terminate or substantially alter its business relations or the amount of
business with IXL.
3.26 Representation as of the Closing Date. Sellers' representations and
-------------------------------------
warranties set forth in this Agreement shall be true and correct on and as of
the Closing Date, as though such representations and warranties were made on and
as of such time.
3.27 Affiliate Transactions. Except as set forth on Schedule 3.27, none of
---------------------- -------------
the Sellers nor any of their respective family members or affiliates has any
agreement, contract or other arrangement with IXL. Each Seller hereby releases,
waives and discharges any and all claims such Seller may have, whether fixed or
contingent, known or unknown, against any of IXL, Buyer or Ellis Communications,
Inc., or any of their respective affiliates, officers, directors, employees,
agents or representatives arising out of any events occurring or facts existing
on or prior to the date hereof, except for rights under this Agreement and the
transaction documents contemplated hereby. Such Seller has not assigned any such
claims to any third party.
3.28 Disclosure. No statement of fact by Sellers contained in this
----------
Agreement and no written statement of fact furnished by Sellers to Buyer
pursuant to this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein contained not misleading.
3.29 Reliance on Representations and Warranties of Buyer. Sellers
---------------------------------------------------
understand and acknowledge that the representations and warranties of Buyer
contained in Article IV of this Agreement are the exclusive representations of
Buyer with respect to the subject matter hereof
18
<PAGE>
and the transactions contemplated herein. With respect to the subject matter
hereof and the transactions contemplated herein, each Seller represents and
warrants that (i) no representation or warranty, express or implied, whether
written or oral, as to the financial condition, results of operations,
prospects, properties or business of Buyer or as to the desirability or value of
an investment in Buyer has been made to such Seller by or on behalf of Buyer
other than those set forth in Article IV hereof and the Stockholders Agreement,
(ii) such Seller has relied upon such Seller's own independent appraisal and
investigation, and the advice of such Seller's own counsel, tax advisors and
other advisors, regarding the risks of an investment in Buyer, and (iii) such
Seller will continue to bear sole responsibility for making his or her own
independent evaluation and monitoring of the risks of its investment in Buyer.
Sellers acknowledge and agree that all transactions contemplated herein between
Sellers and Buyer, and any other stockholders of Buyer, are arms-length
transactions and that there is no special relationship of trust, fiduciary
relationship or other relationship between Sellers and Buyer or any other
stockholders of Buyer except as expressly set forth herein or the documents
executed in connection with the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 Organization. Buyer is a corporation duly incorporated, validly
------------
existing and in good standing under the laws of the State of Delaware and on the
Closing Date Buyer will be duly qualified to do business as a foreign
corporation in Georgia, and Buyer has full corporate power to purchase the Stock
pursuant to this Agreement.
4.2 Authorization; Enforceability. The execution, delivery and performance
-----------------------------
of this Agreement and all of the documents and instruments required hereby and
the consummation by Buyer of the transactions contemplated hereby and thereby,
are within the corporate power of Buyer and have been duly authorized by all
necessary corporate action by Buyer. This Agreement is, and the other documents
and instruments required hereby will be, when executed and delivered by Buyer
the valid and binding obligations of Buyer enforceable against Buyer in
accordance with their respective terms, subject only to bankruptcy, insolvency,
reorganization, moratoriums or similar laws at the time in effect affecting the
enforceability or right of creditors generally and by general equitable
principles which may limit the right to obtain equitable remedies.
4.3 Absence of Conflicting Agreements. Except as set forth on Schedule
--------------------------------- --------
4.3, neither the execution, delivery or performance of this Agreement by Buyer
- ---
nor the consummation of the sale and purchase of the Stock or any other
transaction contemplated by this Agreement, does or will, after the giving of
notice, or the lapse of time, or otherwise:
(a) conflict with, result in a breach of, or constitute a default
under, the certificate of incorporation or bylaws of Buyer, or any material
federal, state or local law,
19
<PAGE>
statute, ordinance, rule or regulations applicable to Buyer, or any court or
administrative order or process, or any material contract, agreement,
arrangement, commitment or plan to which Buyer is a party or by which Buyer or
its assets is bound;
(b) require the consent, waiver, approval, permit, license, clearance
or authorization of, or any declaration or filing with, any court or
governmental or public agency; or
(c) require the consent of any Person under any material agreement,
material arrangement or material commitment of any nature which Buyer is a party
to or bound by.
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
5.1 Compliance with Agreement. Sellers shall have performed and complied
-------------------------
in all material respects with all of their respective obligations under this
Agreement which are to be performed or complied with by it prior to or at the
Closing.
5.2 Proceedings and Instruments Satisfactory. All proceedings, corporate
----------------------------------------
or other, to be taken by Sellers in connection with the performance of this
Agreement, and all documents incident thereto, shall be complete to the
reasonable satisfaction of Buyer and Buyer's counsel and Sellers shall have made
available to Buyer for examination the originals or true and correct copies of
all documents which Buyer may reasonably request in connection with the
transactions contemplated by this Agreement.
5.3 Representations and Warranties. The representations and warranties
------------------------------
made by Sellers in this Agreement shall be true and correct in the aggregate in
all material respects as of the Closing Date with the same force and effect as
though such representations and warranties had been made on the Closing Date,
except for changes permitted or contemplated by this Agreement.
5.4 Deliveries at Closing. Sellers shall have delivered or caused to be
---------------------
delivered to Buyer the documents, each properly executed and dated as of the
Closing Date as required pursuant to Section 2.3(a), and all other documents
required to vest in buyer good title to the Stock as contemplated by this
Agreement.
5.5 Other Documents. Sellers shall have delivered to Buyer such documents
---------------
and certificates of officers of IXL and public officials as shall be reasonably
requested by Buyer's counsel to establish the existence and good standing of
IXL, the due authorization of this Agreement and the transactions contemplated
hereby, and any other aspect in connection with this Agreement.
20
<PAGE>
5.6 Absence of Investigations and Proceedings. No action or proceeding or
-----------------------------------------
formal investigation by any Person or governmental agency shall be pending with
the object of challenging or preventing the Closing and no other proceedings
shall be pending with such object or to collect material damages from Buyer on
account thereof.
5.7 Governmental Consents. All authorizations, consents or approvals of
---------------------
any and all governmental regulatory authorities necessary in connection with the
consummation of the transactions contemplated by this Agreement shall have been
obtained and be in full force and effect.
5.8 Absence of Liens. On the Closing Date and simultaneously with the
----------------
Closing, there shall not be any Liens on the IXL Assets except for Permitted
Liens.
5.9 No Material Adverse Change. Between the date of this Agreement and
--------------------------
the Closing, there shall have been no material adverse change in the financial
condition, prospects or results of operation of the Business nor any adverse
change in the condition of the IXL Assets, including without limitation a
default under the terms of any of the Contracts or Leases (unless expressly
consented to or waived in writing) which would permit the acceleration of
amounts due thereunder of termination thereof.
5.10 Approvals and Consents. There shall have been secured such
----------------------
permissions, approvals, determinations, consents and waivers to the transactions
contemplated by this Agreement for such agreements set forth on Schedule 5.10.
-------------
5.11 Stock Purchase and Exchanges. The Stock Purchase, the CVI Exchange,
----------------------------
the CVL Exchange and the ETV Exchange shall have been consummated prior to or
contemporaneously with the Exchange.
5.12 Termination of Buy-Sell Agreement. The Buy-Sell Agreement dated as
---------------------------------
of September 7, 1994, among certain of the Sellers and IXL, as amended, shall
have been terminated and be of no further force or effect.
5.13 Bylaws. IXL shall have adopted Amended and Restated Bylaws in the
------
form attached hereto as Exhibit E.
---------
If any of the conditions set forth in this Article V have not been
satisfied, Buyer may in its sole discretion nevertheless elect to proceed with
the consummation of the transactions contemplated hereby.
21
<PAGE>
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
Each and every obligation of Sellers to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
6.1 Compliance with Agreement. Buyer shall have performed and complied
-------------------------
with all of its obligations under this Agreement which are to be performed or
complied with by it prior to or at the Closing.
6.2 Proceedings and Instruments Satisfactory. All proceedings, corporate
----------------------------------------
or other, to be taken by Buyer in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be complete to the
reasonable satisfaction of Sellers' counsel, and Buyer shall have made available
to Sellers for examination the originals or true and correct copies of all
documents which Sellers may reasonably request in connection with the
transactions contemplated by this Agreement.
6.3 Representations and Warranties. The representations and warranties
------------------------------
made by Buyer shall be true and correct in all material respects as of the
Closing Date with the same force and effect as though such representations and
warranties had been made on the Closing Date.
6.4 Deliveries at Closing. Buyer shall have delivered or caused to be
---------------------
delivered to Sellers the documents, each properly executed and dated as of the
Closing Date required pursuant to Section 2.3(b). Buyer shall also have made the
payments described in Section 2.2.
6.5 Other Documents. Buyer shall have delivered to Sellers such documents
---------------
and certificates of officers of Buyer and of public officials as shall be
reasonably requested by Sellers' counsel to establish the existence and good
standing of Buyer and the due authorization of this Agreement and the
transactions contemplated hereby by Buyer.
6.6 Absence of Investigations and Proceedings. No action or proceeding or
-----------------------------------------
formal investigation by any Person or governmental agency shall be pending with
the object of challenging or preventing the Closing and no other proceedings
shall be pending with such object or to collect damages from IXL or Sellers on
account thereof.
6.7 Governmental Consents. All material authorizations, consents or
------------ --------
approvals of any and all governmental regulatory authorities necessary in
connection with the consummation of the transactions contemplated by this
Agreement shall have been obtained and be in full force and effect.
If any of the conditions set forth in this Article VI have not been
satisfied, all of the Sellers may in their sole discretion nevertheless
unanimously elect to proceed with the consummation of the transactions
contemplated hereby.
22
<PAGE>
ARTICLE VII
FURTHER AGREEMENTS
7.1 Payment of Sellers' Personal Promissory Note to Ellis Communications.
--------------------------------------------------------------------
Immediately following the Closing, Sellers shall use $100,000 of the Cash
Consideration to repay that certain demand promissory note of Sellers dated
April 29, 1996 in the original principal amount of $100,000 and held by Ellis
Communications, Inc. The obligations of Sellers hereunder shall be joint and
several.
ARTICLE VIII
MISCELLANEOUS
8.1 Further Assurances. From time to time after the Closing Date, upon the
------------------
reasonable request of any party hereto, the other party or parties hereto shall
execute and deliver or cause to be executed and delivered such further
instruments of conveyance, assignment and transfer and take such further action
as the requesting party may reasonably request in order to effectuate fully the
purposes, terms and conditions of this Agreement.
8.2 Entire Agreement; Amendment; and Waivers. This Agreement and the
----------------------------------------
documents referred to herein and to be delivered pursuant hereto constitute the
entire agreement between the parties pertaining to the subject matter hereof,
and supersede all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written, and there
are no warranties, representations or other agreements between the parties in
connection with the subject matter hereof, except as specifically set forth
herein. No amendment, supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision or breach of this Agreement,
whether or not similar, unless otherwise expressly provided. Each of the Sellers
expressly agrees with Buyer that the Sellers may agree to and execute, on behalf
of the Sellers, any and all amendments, supplements, modifications, waivers or
termination of this Agreement.
8.3 Expenses. Except as otherwise specifically provided herein, whether
--------
or not the transactions contemplated by this Agreement are consummated, each of
the parties hereto shall pay the fees and expenses of its respective counsel,
accountants and other experts incident to the negotiation and preparation of
this Agreement and consummation of the transactions contemplated hereby.
8.4 Benefit; Assignment. This Agreement shall be binding upon and inure to
-------------------
the benefit of and shall be enforceable by Buyer and Sellers and their
respective successors and permitted assigns. This Agreement shall not be
assigned by any party without the prior written consent of the other party.
23
<PAGE>
8.5 Notices. All communications or notices required or permitted by this
-------
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of the other party, or
when sent by telecopy or facsimile machine to the number shown below, or when
properly deposited for delivery by commercial overnight delivery service,
prepaid, or by deposit in the United States mail, certified or registered mail,
postage prepaid, return receipt requested, and addressed as follows, unless and
until either of such parties notifies the other in accordance with this Section
of a change of address or change of telecopy number:
If to Buyer: IXL Holdings, Inc.
c/o Ellis Communications, Inc.
3060 Peachtree Road, Suite 340
Atlanta, Georgia 30305
Attention: U. Bertram Ellis, Jr.
Telephone No.: (404) 240-0424
Telecopy No.: (404) 240-0542
With a copy to: Minkin & Snyder, a Professional Corporation
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telephone No.: (404) 261-8000
Telecopy No.: (404) 261-5064
and to: Kelso & Company
320 Park Avenue
New York, New York 10022
Attention: James J. Connors, II, Esq.
Telephone No.: (212) 751-3939
Telecopy No.: (212) 233-2379
If to Sellers: IXL Interactive Excellence, Inc.
1465 Northside Drive, Suite 110
Atlanta, Georgia 30350
Attention: William Stephen Floyd
Telephone No.: (404) 351-4518
Telecopy No.: (404) 350-9823
With a copy to: David Kam, Esq.
P.O. Box 95297
Atlanta, Georgia 30347
Telephone No.: (404) 370-0180
Telecopy No.: (404) 370-1722
24
<PAGE>
8.6 Counterparts; Headings. This Agreement may be executed in several
----------------------
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
8.7 Severability. If any provision, clause or part of this Agreement or
------------
the application thereof under certain circumstances is held invalid, or
unenforceable, the remainder of this Agreement, or the application of such
provision, clause or part under other circumstances, shall not be affected
thereby.
8.8 Investigations; Non-Survival of Warranties. The respective
------------------------------------------
representations and warranties of Sellers and Buyer contained herein or in any
certificate or other documents delivered prior to or at the Closing shall not be
deemed waived or otherwise affected by any investigations made by any party
hereto. Each and every such representation and warranty shall survive for two
(2) years following the Closing, except that the representations and warranties
contained in Sections 3.18 and 3.23 shall survive the Closing until the
applicable statutes of limitation time periods expire with respect to any claims
under such Sections.
8.9 Governing Law. This Agreement shall be construed and interpreted
-------------
according to the laws of the State of Georgia, without regard to the conflict of
law principles thereof. The exclusive venue of adjudication of any dispute or
proceeding arising out of the Agreement or the performance hereof shall be the
courts located in the County of Fulton, State of Georgia, and the parties hereto
hereby consent to and submit to the jurisdiction of any court located in the
County of Fulton, State of Georgia and hereby waives, to the fullest extent
permitted by applicable law, any objection which such party may have to the
laying of venue of any such proceeding brought in such court and any claim that
such proceeding brought in such court has been brought in an inconvenient forum.
EACH OF THE PARTIES WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
25
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of
the day and year first above written.
BUYER:
-----
IXL HOLDINGS, INC.
By: /s/ U. Bertram Ellis, Jr.
--------------------------------
Name: U. Bertram Ellis, Jr.
---------------------------
Title: CEO
--------------------------
SELLERS:
-------
/s/ William Stephen Floyd
-------------------------------------
WILLIAM STEPHEN FLOYD
/s/ Richard Nailling
-------------------------------------
RICHARD NAILLING
/s/ Teresa B. Joel
-------------------------------------
TERESA B. JOEL
/s/ Robert D. Bowman
-------------------------------------
ROBERT D. BOWMAN
26
<PAGE>
ETV EXHIBIT LIST
Exhibit A Exchange Consideration (see Attached)
Exhibit B Registration Rights Agreement
Exhibit C Stockholders' Agreement
Exhibit D Sellers' Certificate
Exhibit E Articles of Incorporation of ETV
Exhibit F Amended and Restated Bylaws of ETV
<PAGE>
EXHIBIT A
---------
OWNERSHIP OF STOCK AND EXCHANGE CONSIDERATION
---------------------------------------------
<TABLE>
<CAPTION>
EXCHANGE CONSIDERATION
------------------------------------
CASH SHARES OF CLASS B
SELLER OWNERSHIP OF STOCK CONSIDERATION COMMON STOCK
- ---------------------- --------------------- --------------- -------------------
<S> <C> <C> <C>
William Stephen Floyd 1698 Shares of Voting $ 53,256.00
Common Stock 8,490
Richard Nailling 1000 Shares of Voting $ 31,364.00 5,000
Common Stock
Teresa B. Joel 390 Shares of Voting $ 12,232.00 1,950
Common Stock
Robert D. Bowman 260 Shares of Voting $ 8,148.00 1,300
-------------- -------------------
Common Stock
TOTALS $ 105,000.00 16,740
============== ===================
</TABLE>
A-1
<PAGE>
LIST OF SCHEDULES
Schedule 3.1 Corporate Organization
Schedule 3.2 IXL Stock
Schedule 3.6 Absence of Conflicting Agreements
Schedule 3.7 Title to IXL Assets; Liens and
Encumbrances
Schedule 3.9 Equipment
Schedule 3.10 Contracts
Schedule 3.11 Intangible Property
Schedule 3.12 Software
Schedule 3.13 Leases
Schedule 3.14(a) Financial Statements
Schedule 3.14(b) Interim Financial Statements
Schedule 3.15 Indebtedness of IXL to Sellers
Schedule 3.15(a) Absence of Undisclosed Liabilities
Schedule 3.15(b) Guaranty of Indebtedness
Schedule 3.16 Adverse Change
Schedule 3.17 Litigation; Labor Disputes;
Compliance with Law
Schedule 3.18 Tax Returns and Tax Reports
Schedule 3.19 Governmental Authorizations
Schedule 3.20 Compliance with Governmental Requirements
Schedule 3.21 Bank; Powers of Attorney
Schedule 3.22 Employees
Schedule 3.23 Employee Welfare Plans
Schedule 3.27 Affiliate Transactions
Schedule 4.3 Absence of Conflicting Agreements
Schedule 5.10 Approvals and Consents
<PAGE>
EXHIBIT 2.4
EXCHANGE AGREEMENT
AMONG
IXL HOLDINGS, INC.
AND
JAMES R. ROCCO,
R. GUY DAVIDSON, III,
BARRY T. SIKES,
LARRY B. CULBERTSON
AND
JEFF VICK
______________________________
Dated as of April 30, 1996
______________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C>
1.1 Definitions................................................ 2
1.2 Singular/Plural; Gender.................................... 5
ARTICLE II
THE EXCHANGE
2.1 Exchange................................................... 5
2.2 Payment on Closing......................................... 5
2.3 Closing Date Deliveries.................................... 5
2.4 Risk of Loss............................................... 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
3.1 Corporate Organization..................................... 6
3.2 ETV Stock.................................................. 6
3.3 Subsidiaries............................................... 6
3.4 Title to Stock............................................. 6
3.5 Seller Investment Representations.......................... 6
3.6 Absence of Conflicting Agreements.......................... 9
3.7 Title to ETV Assets; Liens and Encumbrances................ 9
3.8 ETV Assets................................................. 9
3.9 Equipment.................................................. 10
3.10 Contracts.................................................. 10
3.11 Intangible Property........................................ 11
3.12 Financial Statements....................................... 11
3.13 Absence of Undisclosed Liabilities......................... 12
3.14 No Adverse Change.......................................... 12
3.15 No Litigation; Labor Disputes; Compliance with Law......... 13
3.16 Tax Returns and Tax Reports................................ 13
3.17 Governmental Authorizations................................ 14
3.18 Compliance with Governmental Requirements.................. 14
3.19 Banks; Powers of Attorney.................................. 15
3.20 Employees.................................................. 15
3.21 Employee Welfare Plans..................................... 15
3.22 Environmental Compliance................................... 15
3.23 Customer Relations......................................... 16
3.24 Representation as of the Closing Date...................... 16
3.25 Affiliate Transactions..................................... 16
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.26 Disclosure................................................. 16
3.27 Reliance on Representations and Warranties of Buyer........ 17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization............................................... 17
4.2 Authorization; Enforceability.............................. 17
4.3 Absence of Conflicting Agreements.......................... 18
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
5.1 Compliance with Agreement.................................. 18
5.2 Proceedings and Instruments Satisfactory................... 18
5.3 Representations and Warranties............................. 18
5.4 Deliveries at Closing...................................... 18
5.5 Other Documents............................................ 19
5.6 Absence of Investigations and Proceedings.................. 19
5.7 Governmental Consents...................................... 19
5.8 Absence of Liens........................................... 19
5.9 No Material Adverse Change................................. 19
5.10 Approvals and Consents..................................... 19
5.11 Stock Purchase and Exchanges............................... 19
5.12 Amendment to Articles of Incorporation..................... 19
5.13 Bylaws..................................................... 19
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
6.1 Compliance with Agreement................................... 20
6.2 Proceedings and Instruments Satisfactory.................... 20
6.3 Representations and Warranties.............................. 20
6.4 Deliveries at Closing....................................... 20
6.5 Other Documents............................................. 20
6.6 Absence of Investigations and Proceedings................... 20
6.7 Governmental Consents....................................... 20
ARTICLE VII
MISCELLANEOUS
7.1 Further Assurances.......................................... 21
7.2 Entire Agreement; Amendment; and Waivers.................... 21
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.3 Expenses................................................... 21
7.4 Benefit; Assignment........................................ 21
7.5 Notices.................................................... 21
7.6 Counterparts; Headings..................................... 22
7.7 Severability............................................... 23
7.8 Investigations; Non-Survival of Warranties................. 23
7.9 Governing Law.............................................. 23
</TABLE>
-iii-
<PAGE>
LIST OF EXHIBITS
Exhibit A Exchange Consideration
Exhibit B Registration Rights Agreement
Exhibit C Stockholders' Agreement
Exhibit D Sellers' Certificate
Exhibit E Amended and Restated Certificate of Incorporation
Exhibit F Amended and Restated Bylaws
-iv-
<PAGE>
LIST OF SCHEDULES
Schedule 3.1 Corporate Organization
Schedule 3.2 ETV Stock
Schedule 3.6 Absence of Conflicting Agreements
Schedule 3.7 Title to ETV Assets; Liens and
Encumbrances
Schedule 3.9 Equipment
Schedule 3.10 Contracts
Schedule 3.11 Intangible Property
Schedule 3.12(a) Financial Statements
Schedule 3.12(b) Interim Financial Statements
Schedule 3.13 Indebtedness of ETV to Sellers
Schedule 3.13(a) Absence of Undisclosed Liabilities
Schedule 3.13(b) Permitted Liens
Schedule 3.14 Adverse Change
Schedule 3.15 Litigation; Labor Disputes; Compliance with Law
Schedule 3.16 Tax Returns and Tax Reports
Schedule 3.17 Governmental Authorizations
Schedule 3.18 Compliance with Governmental Requirements
Schedule 3.19 Bank; Powers of Attorney
Schedule 3.20 Employees
Schedule 3.21 Employee Welfare Plans
Schedule 3.25 Affiliate Transactions
Schedule 4.3 Absence of Conflicting Agreements
Schedule 5.10 Approvals and Consents
<PAGE>
EXCHANGE AGREEMENT
------------------
THIS EXCHANGE AGREEMENT ("Agreement") dated as of April 30, 1996, by and
among James R. Rocco, R. Guy Davidson, III, Barry T. Sikes, Larry B. Culbertson
and Jeff Vick (individually a "Seller" and collectively, "Sellers") and IXL
Holdings, Inc., a Delaware corporation ("Buyer").
RECITALS
--------
A. Buyer desires to acquire all of the outstanding shares of Common Stock,
par value $1.00 per share (the "Stock"), of Entrepreneur Television, Inc., a
Georgia corporation ("ETV").
B. Sellers own all of the issued and outstanding Stock of ETV.
C. Each Seller desires to exchange the Stock owned by such Seller for
shares of Class B Common Stock, par value $.01 per share ("Class B Common
Stock"), of Buyer and cash in the respective amounts as set forth herein.
D. Contemporaneously with the closing of the exchange contemplated hereby
(the "Exchange"), (i) certain of the existing stockholders of Buyer and certain
other investors, including without limitation, Kelso Investment Associates V,
L.P. ("KIA V") and Kelso Equity Partners V, L.P. ("KEP"), will purchase certain
additional capital stock of Buyer (the "Stock Purchase") and (ii) Buyer will
exchange certain of its capital stock in return for (x) all of the issued and
outstanding capital stock of iXL Interactive Excellence, Inc., a Georgia
corporation ("IXL") (the "IXL Exchange"); (y) all of the issued and outstanding
capital stock of Creative Video, Inc., a Georgia corporation ("CVI") (the "CVI
Exchange"); and (z) all of the issued and outstanding capital stock of Creative
Video Library, Inc., a Georgia corporation ("CVL") (the "CVL Exchange").
E. The parties hereto intend that the Exchange, the Stock Purchase, the
IXL Exchange, the CVL Exchange and the CVI Exchange will take place
simultaneously and the stock transferred and cash provided to Buyer in
connection with such transactions will qualify under Section 351 of the Internal
Revenue Code.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants, agreements and conditions set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
<PAGE>
ARTICLE I
DEFINITIONS
-----------
1.1 Definitions. Except as specified otherwise, when used in this
-----------
Agreement and any Exhibits or Schedules, the following terms shall have the
meanings specified:
"Accounts Receivable" shall mean all accounts receivable, loans receivable
and other receivables of ETV existing as of the close of business on the Closing
Date, as determined in accordance with generally accepted accounting principles,
consistently applied.
"Act" shall mean the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
"Agreement" shall mean this Exchange Agreement, together with the Schedules
and Exhibits attached hereto, as the same shall be amended from time to time in
accordance with the terms hereof.
"Business" shall mean ETV's business of video production and editing and
the marketing and performance of services in connection with such activities.
"Buyer" shall mean IXL Holdings, Inc., a Delaware corporation.
"Cash" shall mean all cash and cash equivalents of ETV as of the Closing.
"Cash Consideration" shall mean the excess, if any, of SEVENTY THOUSAND
DOLLARS ($70,000) over the Outstanding Liabilities of ETV.
"Class B Common Stock" shall mean the Class B Common Stock, par value $.01
per share, of Buyer, which shall be fully paid and non-assessable upon issuance.
"Closing Date" shall mean: (i) April 30, 1996, or (ii) such other date as
Buyer and Sellers may agree upon in writing. The Closing shall be deemed
effective as of 12:01 A.M. on the Closing Date.
"Closing" shall mean the conference to be held at 10:00 a.m., Atlanta,
Georgia time on the Closing Date at the offices of Minkin & Snyder, a
Professional corporation, One Buckhead Plaza, 3060 Peachtree Road, Suite 1100,
Atlanta, Georgia 30305, or at such other time and place as the parties may
mutually agree to in writing, at which the transactions contemplated by this
Agreement shall be consummated.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Contracts" shall mean those agreements under which ETV conducts the
Business or by which its properties are bound, whether written or oral as listed
in Schedule 3.10.
-------------
2
<PAGE>
"ETV" shall mean Entrepreneur Television, Inc., a Georgia corporation.
"ETV Assets" shall mean the right, title and interest of ETV in and to all
assets used or useful in, or material to, the operation of the Business,
including, without limitation, the Accounts Receivable, the Cash, the Equipment,
the Intangible Property, the Licenses, and the Contracts.
"Equipment" shall mean all items of equipment, computers, furniture and
other machinery of ETV.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Environmental Laws" shall mean shall mean all applicable rules and
regulations of federal, state and local laws, including statutes, regulations,
ordinances, codes, rules, as amended, relating to the discharge of air
pollutants, water pollutants or process waste water or otherwise relating to the
environment or Hazardous Materials or toxic substances including, but not
limited to, the Federal Solid Waste Disposal Act, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of
1976, the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, regulations of the Environmental Protection Agency, the
Toxic Substance Control Act, regulations of the Nuclear Regulatory Agency, and
regulations of any state department of natural resources or state environmental
protection agency now or at any time hereafter in effect.
"Event of Loss" shall mean any loss, taking, condemnation, damage or
destruction of or to any of the ETV Assets.
"Exchange Consideration" shall mean the aggregate consideration to be
received by the Sellers as set forth on Exhibit A, consisting of a total of 300
---------
shares of Class B Common Stock and the Cash Consideration.
"Exhibits" shall mean those Exhibits referred to in this Section 1.1 and
attached to this Agreement and which are hereby incorporated herein and made a
part hereof.
"Financial Statements" shall mean the financial statements of ETV described
in Section 3.14.
"Intangible Property" shall mean all the copyrights, trademarks, patents,
trade secrets and all other intellectual property of every type, whether
registered with any governmental agency or not so registered, owned or applied
for by ETV or any Seller on behalf of ETV.
"Knowledge of Sellers" shall mean the actual knowledge of James R. Rocco,
R. Guy Davidson, III, Barry T. Sikes, Larry B. Culbertson and Jeff Vick, or such
knowledge as would have been acquired by such persons upon a reasonable
investigation of ETV and its Business.
3
<PAGE>
"Licenses" shall mean those licenses, permits and authorizations issued
by any federal, state or local governmental or regulatory authority or agency
for the operation of ETV and its Business.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
security interest, encumbrance, claim, lien, lease or charge of any kind,
whether voluntarily incurred or arising by operation of law or otherwise,
affecting any assets or property, including any agreement to give or grant any
of the foregoing, any conditional sale or other title retention agreement and
the filing of or agreement to give any financing statement with respect to any
assets or property under the Uniform Commercial Code or comparable law of any
jurisdiction.
"Outstanding Liabilities" shall mean all liabilities of ETV as shown on the
balance sheets as of March 31, 1996, determined in accordance with generally
accepted accounting principles.
"Permitted Liens" shall mean the following Liens: (a) Liens existing on the
Closing Date to remain on the ETV Assets as listed on Schedule 3.15(a); (b)
----------------
Liens for taxes, assessments or other governmental charges or levies not yet
due; (c) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other Liens imposed by law created in the ordinary
course of business of ETV consistent with past practices for amounts not yet
due; (d) Liens (other than any Lien imposed by ERISA) incurred or deposits made
in the ordinary course of business of ETV consistent with past practices in
connection with worker's compensation, unemployment insurance or other types of
social security; and (e) minor defects of title, easements, rights-of-way,
restrictions and other similar charges or encumbrances not materially detracting
from the value of the ETV Assets or interfering with the ordinary conduct of the
Business.
"Person" shall mean any natural person, general or limited partnership,
corporation, limited liability company, association or other entity.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement to be entered into by Sellers, Buyer and certain stockholders of Buyer
at Closing substantially in the form attached hereto as Exhibit B.
---------
"Schedules" shall mean those schedules referred to in this Agreement which
have been delivered concurrently with the execution of this Agreement, which are
hereby incorporated herein and made a part hereof.
"Section" or "Sections" shall mean any or all sections of this Agreement.
"Seller and Sellers" shall mean, individually or collectively, as the
context may require, James R. Rocco, R. Guy Davidson, III, Barry T. Sikes, Larry
B. Culbertson and Jeff Vick.
"Sellers' Certificate" shall mean the certificate of the Sellers in the
form of Exhibit D attached hereto.
---------
4
<PAGE>
"Stock" shall mean the issued and outstanding shares of Common Stock, par
value $1.00 per share, of ETV held by the Sellers.
"Stockholders Agreement" shall mean the Stockholders Agreement to be
entered into by Sellers and Buyer at the Closing substantially in the form
attached hereto as Exhibit C.
---------
1.2 Singular/Plural; Gender. Where the context so requires or permits, the
-----------------------
use of the singular form includes the plural, and the use of the plural form
includes the singular, and the use of any gender includes any and all genders.
ARTICLE II
THE EXCHANGE
------------
2.1 Exchange. At the Closing on the Closing Date, on the terms and
--------
subject to the conditions of this Agreement, each Seller shall sell, transfer
and deliver to Buyer, and Buyer shall purchase from such Seller, the Stock set
forth opposite such Seller's name on Exhibit A for the Exchange Consideration
---------
set forth opposite such Seller's name on Exhibit A, consisting of the aggregate
---------
number of shares of Class B Common Stock and the amount of Cash Consideration
set forth opposite such Seller's name on Exhibit A.
---------
2.2 Payment on Closing. At the Closing on the Closing Date, Buyer shall
------- -- -------
pay Sellers an amount equal to the Cash Consideration, by wire transfer of
immediately available funds or other form of agreed upon payment in the amounts
set forth on Exhibit A hereto.
---------
2.3 Closing Date Deliveries. At the Closing on the Closing Date:
-----------------------
(a) Each Seller shall deliver, or cause to be delivered, to Buyer
properly executed and dated as of the Closing Date, where applicable: (i) stock
certificates representing all outstanding Stock owned by such Seller accompanied
by stock powers duly endorsed to Buyer in each case in proper form for transfer;
(ii) the resignation of those members of the Board of Directors of ETV as shall
be designated by Buyer; (iii) the stock books, stock ledgers, minute books,
corporate seals and all other corporate records of ETV; (iv) the Sellers'
Certificate; (v) the Stockholders' Agreement; (vi) the Registration Rights
Agreement; and (vii) such other documents as provided in Article VI hereof.
(b) In addition to the Cash Consideration described in Section 2.2,
Buyer shall deliver, or cause to be delivered to Sellers, executed and dated as
of the Closing Date, where applicable (i) the Stockholders' Agreement; (ii) the
Registration Rights Agreement; and (iii) stock certificates representing the
Class B Common Stock to be issued to each of the Sellers as set forth on Exhibit
-------
A.
- -
2.4 Risk of Loss. The risk of all Events of Loss prior to the Closing
------------
shall be upon Sellers and the risk of all Events of Loss at or subsequent to the
Closing shall be upon Buyer.
5
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
James Rocco and R. Guy Davidson, III jointly and severally represent and
warrant to Buyer and Barry T. Sikes, Larry B. Culbertson and Jeff Vick severally
represent and warrant to Buyer (which representations and warranties shall
survive the Closing) as follows:
3.1 Corporate Organization. ETV is a corporation duly organized, validly
----------------------
existing and in good standing under the laws of the State of Georgia. ETV has
the power to own or lease its properties and to carry on its business in the
place where such properties are now owned, leased or operated and such business
is now conducted. ETV is duly qualified and licensed and in good standing as a
foreign corporation in each jurisdiction set forth in Schedule 3.1, constituting
------------
each jurisdiction in which such qualification is required. Copies of the
articles of incorporation and all amendments thereto, the bylaws as amended and
currently in force, stock records and corporate minutes of ETV have been
delivered to Buyer, and are true, complete and correct as of the date hereof.
3.2 ETV Stock. ETV has authorized capital stock consisting of 10,000
---------
shares of Common Stock, $1.00 par value per share, of which only 795 shares of
such Stock are issued and outstanding. All shares of Stock issued and
outstanding are owned of record and beneficially by Sellers as set forth on
Exhibit A. All of the issued and outstanding Stock is duly authorized and
- ---------
validly issued, fully paid and nonassessable, and there are no preemptive rights
in respect thereof. Except as set forth on Schedule 3.2, there are no
------------
outstanding options, warrants or other rights to subscribe for or purchase from
ETV or the Sellers, no contracts or commitments providing for the issuance of,
or the granting of rights to acquire, and no securities convertible into or
exchangeable for, any Stock or other capital stock or any other ownership
interest of ETV.
3.3 Subsidiaries. ETV does not own capital stock or other ownership
------------
interests in any corporation, partnership or other entity. There are no
outstanding contractual obligations of ETV to acquire any outstanding shares of
capital stock or other ownership interests of any corporation, partnership or
other entity. ETV does not have any investment (either debt or equity), or
commitments to make any such investment, in any corporation, joint venture,
general or limited partnership, business enterprise or other Person.
3.4 Title to Stock. Sellers have legal and beneficial title to the Stock
--------------
free and clear of any Liens (other than restrictions imposed by applicable state
and federal securities laws), and there are no claims pending with respect to
the title of Sellers in the Stock.
3.5 Seller Investment Representations. Each Seller represents and
---------------------------------
warrants as follows:
(a) Private Offering. Neither such Seller nor anyone acting on such
----------------
Seller's behalf has issued, sold or offered any security of ETV to any Person
under circumstances that
6
<PAGE>
would cause the consummation of the Exchange, as contemplated by this Agreement,
to be subject to the registration requirements of the Act. Neither such Seller
nor anyone acting on such Seller's behalf has offered or will offer the Stock or
any part thereof or any similar securities for sale to, or solicit any offer to
acquire any of the same from, any Person so as to make the consummation of the
Exchange subject to the registration requirements of the Act.
(b) Investment Intentions and Restrictions on Disposition. Such Seller
-----------------------------------------------------
is acquiring the Class B Common Stock solely for such Seller's own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof. Such Seller agrees that such Seller will not, directly or
indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of
any of the shares of Class B Common Stock (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of any of the Class B Common
Stock) except in compliance with the Act, and Stockholders' Agreement. Such
Seller further understands, acknowledges and agrees that none of the Class B
Common Stock may be transferred, sold, pledged, hypothecated or otherwise
disposed of (i) unless the provisions of the Stockholders' Agreement shall have
been complied with and (ii) unless such disposition is pursuant to an effective
registration statement under the Act and is exempt from (or in compliance with)
applicable state securities laws, or is exempt from the provisions of Section 5
of the Act and is exempt from (or in compliance with) applicable state
securities laws.
(c) Restrictions on Transfer. Such Seller acknowledges receipt of
------------------------
advice that (i) the shares of Class B Common Stock have not been registered
under the Act, (ii) the Class B Common Stock must be held indefinitely and such
Seller must continue to bear the economic risk of the investment in the Class B
Common Stock unless shares of such Class B Common Stock are subsequently
registered under the Act or an exemption from such registration is available,
(iii) there may not be any public market for the Class B Common Stock in the
foreseeable future, (iv) Rule 144 promulgated under the Act is not presently
available with respect to sales of any securities of Buyer and Buyer has made no
covenant to make such Rule available and such Rule is not anticipated to be
available in the foreseeable future, (v) when and if the Class B Common Stock
may be disposed of without registration in reliance upon Rule 144, such
disposition can be made only in limited amounts and in accordance with the terms
and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not
available, public sale without registration will require the availability of an
exemption under the Act, (vii) restrictive legends in the form set forth in the
Stockholders' Agreement shall be placed on the certificates representing the
Class B Common Stock and (viii) a notation shall be made in the appropriate
records of Buyer indicating that the shares of Class B Common Stock are subject
to restrictions on transfer pursuant to the Stockholders' Agreement and, if
Buyer should in the future engage the services of a stock transfer agent,
appropriate stop-transfer instructions will be issued to such transfer agent
with respect to the Stock.
(d) Risk of Investing in Buyer; Ability to Bear Risk. Such Seller
------------------------------------------------
represents and warrants that (i) the financial situation of such Seller is such
that Seller can afford to bear the economic risk of holding the Class B Common
Stock for an indefinite period and (ii) such Seller can afford to suffer the
complete loss of his investment in the Class B Common Stock. Such Seller
understands and acknowledges that the shares of Class B Common Stock received
7
<PAGE>
by such Seller hereunder represent an investment by Seller in Buyer and
recognizes that (w) such investment in Buyer is subject to substantial
uncertainty concerning the business prospects of Buyer and that Buyer's
businesses face rapid technological change which could result in greater
competition for Buyer or cause Buyer to lower the prices of its products or
services; (x) Buyer intends to pursue acquisitions of software development
businesses, software service businesses, multimedia businesses and other
businesses as a component of its growth strategy and that the success of Buyer
will depend on Buyer's ability to identify, acquire and finance suitable
acquisition candidates on acceptable terms and to integrate such acquisitions
effectively into Buyer; (y) after the Exchange, Buyer will be controlled by KIA
V as a result of KIA V's ownership of more than 80% of the voting stock of Buyer
following the Stock Purchase, and that KIA V will be able to determine the
outcome of all matters required to be submitted to stockholders of Buyer for
approval (except as otherwise provided by law or by Buyer's Certificate of
Incorporation or Bylaws or the Stockholders' Agreement); and (z) Sellers'
aggregate ownership of Buyer immediately following the Exchange will likely be
subject to dilution upon exercise of stock options to be granted to certain
officers and directors of Buyer and the possible issuance from time to time of
additional shares of capital stock of Buyer and warrants to acquire stock of
Buyer to existing and future investors of Buyer.
(e) Access to Information; Sophistication. Such Seller has been
-------------------------------------
granted the opportunity to ask questions of, and receive answers from,
representatives of Buyer concerning the terms and conditions of the purchase of
the Class B Common Stock and to obtain any additional information that Seller
deems necessary. Such Seller's knowledge and experience in financial business
matters is such that Seller is capable of evaluating the merits and risk of the
investment in the Class B Common Stock and such Seller has carefully reviewed
the terms and provisions of the Stockholders' Agreement and has evaluated the
restrictions and obligations contained therein.
(f) Knowledge Concerning IXL, CVI and CVL. Such Seller is familiar
-------------------------------------
with the businesses and operations of each of IXL, CVI and CVL and understands
and acknowledges that, after the IXL Exchange, CVI Exchange and CVL Exchange, a
significant portion of the business of Buyer will be comprised of the businesses
and operations of IXL, CVI and CVL. Such Seller has been granted the opportunity
to ask questions of, and receive answers from, representatives of Buyer
concerning the business, operations and financial results of each of IXL, CVI
and CVL and to obtain any additional information that Seller deems necessary.
Such Seller's knowledge and experience in financial business matters is such
that Seller is capable of evaluating the merits and risk of the investment in
the Class B Common Stock in view of the IXL Exchange, CVI Exchange and the CVL
Exchange and has evaluated the effect of such transactions on such Seller's
purchase of the Class B Common Stock of Buyer hereunder.
(g) Due Execution and Delivery. Such Seller (i) has duly executed and
--------------------------
delivered this Agreement, (ii) this Agreement constitutes and, upon execution
thereof, the Stockholders' Agreement will constitute Seller's legal, valid and
binding obligations, enforceable against such Seller in accordance with their
respective terms, (iii) no consent, approval, authorization, order, filing,
registration or qualification of or with any court, governmental authority or
third person is required to be obtained by such Seller in connection with the
8
<PAGE>
execution and delivery of this Agreement or the Stockholders' Agreement or the
performance of such Seller's obligations hereunder or thereunder and (iv) such
Seller is a resident of the state of Georgia.
(h) Accredited Investor. Such Seller is an "accredited investor" as
-------------------
such term is defined in Rule 501(a) promulgated under the Act, a copy of such
definition being attached to this Agreement.
3.6 Absence of Conflicting Agreements. Except as set forth in Schedule
--------------------------------- --------
3.6, neither the execution, delivery or performance of this Agreement by Sellers
- ---
nor the consummation of the sale and purchase of the Stock does or will, after
the giving of notice, or the lapse of time, or otherwise:
(a) conflict with, result in a breach of, or constitute a default
under, the articles of incorporation or bylaws of ETV, any federal, state or
local law, statute, ordinance, rule or regulation, or any court or
administrative order or process or any contract, agreement, arrangement,
commitment or plan to which Sellers or ETV are a party or by which Sellers or
ETV or its property are bound and which relates to the ownership or operation of
the Business, ETV Assets, or the Stock, including without limitation any
stockholders' or buy-sell agreement;
(b) result in the creation of any Lien upon the Stock or any of the
ETV Assets;
(c) terminate, amend or modify, or give any party the right to
terminate, amend, modify, abandon or refuse to perform, any contract, agreement,
arrangement, commitment or plan to which ETV is a party;
(d) accelerate or modify, or give any party the right to accelerate or
modify, the time within which, or the terms under which, any duties or
obligations are to be performed, or any rights or benefits are to be received,
under any contract, agreement, arrangement, commitment or plan to which ETV is a
party; or
(e) require the consent, waiver, approval, permit, license, clearance
or authorization of, or any declaration or filing with, any court or public
agency or other authority, or the consent of any Person under any agreement,
arrangement or commitment of any nature which Sellers or ETV are a party to or
bound or by or which the ETV Assets are bound or subject.
3.7 Title to ETV Assets; Liens and Encumbrances. Except as set forth on
-------------------------------------------
Schedule 3.7, and except for Permitted Liens, ETV owns good and marketable title
- ------------
to or has valid and enforceable leasehold interests in all of the ETV Assets
free and clear of any and all Liens.
3.8 ETV Assets. The ETV Assets include all of the assets, properties and
----------
rights of every type and description, personal and mixed, tangible and
intangible, that are necessary for, used or useable in the conduct of the
Business in the manner in which the Business has been and
9
<PAGE>
is now conducted. ETV neither owns nor holds any interest in real property,
whether by lease or otherwise.
3.9 Equipment. Except as set forth in Schedule 3.9:
--------- ------------
(a) each material item of Equipment is in good condition and repair,
ordinary wear and tear excepted and is fit for operation in its intended use;
(b) the Equipment includes all material items of tangible personal
property utilized by ETV in connection with owning and operating the Business;
(c) none of the material items of Equipment or other assets owned,
used or operated by ETV in connection with the Business, or the ownership,
leasing or operation thereof, is in violation of any law, ordinance, code, rule
or regulation, the violation of which would have a material adverse impact on
the Business, and no written notice from any governmental authority or other
Person has been served upon or given to Sellers or ETV claiming any violation of
any such law, ordinance, code, rule or regulation, or requiring or calling
attention to the need for any repair, modification, replacement, installation or
other work on or in connection with such Equipment or assets; and
(d) the list of Equipment on Schedule 3.9 is a true and correct list
------------
of all material items of tangible personal property necessary for or used in the
operation of the Business in the manner in which it has been and is now
operated.
3.10 Contracts. Except as set forth in Schedule 3.10:
--------- -------------
(a) ETV has performed each term, covenant and condition of each of
the Contracts, and no event of default, or event which with the passing of time
or giving of notice would constitute a material default, exists under any of the
Contracts;
(b) the Contracts described in Schedule 3.10 constitute all of the
-------------
agreements relating to properties, undertakings or commitments to or from third
parties in the conduct of the Business other than each contract which is
cancelable by ETV without breach or penalty on not more than thirty (30) days
notice and which involves average annual payments or receipts by ETV of less
than $500 in the case of any single contract and $2,500 in the aggregate;
(c) each of the Contracts is in full force and effect, unimpaired by
any acts or omissions of ETV or its officers, and constitutes the legal and
binding obligation of the parties thereto in accordance with its terms;
(d) Sellers have furnished true and complete copies of all Contracts,
including all amendments, modifications and supplements thereto, and Schedule
--------
3.10 contains summaries of the provisions of all oral contracts; and
- ----
10
<PAGE>
(e) No consent, approval or waiver from any Person is required in
connection with the transactions contemplated by this Agreement.
3.11 Intangible Property. Except as set forth on Schedule 3.11:
------------------- -------------
(a) none of the Intangible Property infringes any proprietary right
of any Person and there are no claims, demands or proceedings instituted,
pending or threatened by any third party pertaining to or challenging ETV's
right to use any of the Intangible Property;
(b) there are no facts which would render any of the Intangible
Property invalid or unenforceable;
(c) there is no trademark, trade name, patent or copyright owned by a
third party which ETV is using without license to do so and there is no
Intangible Property owned by a third party that ETV is using without a license
to do so;
(d) the Intangible Property constitutes all the copyrights, patents,
trade secrets, trademarks, and other intellectual property utilized by ETV in
connection with owning and operating the Business; and
(e) Schedule 3.11 contains a true and complete list of all Intangible
-------------
Property and all agreements pursuant to which ETV licensed or authorized others
to use the Intangible Property.
3.12 Financial Statements.
--------------------
(a) Attached as Schedule 3.12(a) are true and complete copies of the
---------------
unaudited financial statements of ETV, as of December 31, 1991, December 31,
1992, December 31, 1993, December 31, 1994 and December 31, 1995, and the
related statements of income, for the fiscal years then ended (the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
preceding years and present fairly the financial condition of ETV as at the date
indicated and the results of its operations for the periods then ended, except
for the absence of footnotes.
(b) Attached as Schedule 3.12(b) are true and complete copies of the
-----------------
unaudited financial statements of ETV, as of March 31, 1996 and the related
statements of income, and changes in cash flows for the period then ended (the
"Interim Financial Statements"). The Interim Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with the Financial Statements and present fairly the
financial condition of ETV as at the date indicated and the results of its
operations for the periods then ended; subject, however, to year-end adjustments
-------- -------
which, in the aggregate, are not adverse and except for the absence of
footnotes.
11
<PAGE>
3.13 Absence of Undisclosed Liabilities.
----------------------------------
(a) ETV has no debt, liability or obligation of any kind, whether
accrued, absolute, contingent or otherwise, including, without limitation, any
liability or obligation on account of taxes or any governmental charges or
penalty, interest or fines, required to be reflected in its financial statements
in accordance with generally accepted accounting principles which would have, or
which in the case of contingent or inchoate liabilities, would have if accrued
or absolute, an adverse effect on the financial condition of ETV, except (i)
those liabilities reflected in the Financial Statements and Interim Financial
Statements, (ii) liabilities disclosed in Schedule 3.13(a), (iii) liabilities
----------------
incurred in the ordinary course of business (other than contingent liabilities)
since March 31, 1996, none of which has, individually or in the aggregate,
adversely affected the business, assets, results of operations or financial
condition of ETV and (iv) liabilities incurred in connection with the
transactions provided for in this Agreement.
(b) Except as set forth on Schedule 3.13(b), ETV has not, by written
----------------
instrument or otherwise, guaranteed the payment or collection or pledged any of
its assets to secure payment of any unsatisfied indebtedness of any Person.
Schedule 3.13 sets forth all indebtedness of ETV to Sellers.
- -------------
3.14 No Adverse Change. Except as set forth on Schedule 3.14, since March
----------------- -------------
31, 1996, there has been no:
(a) material adverse change in the financial condition or results of
operations of the Business;
(b) declaration, setting aside or payment, directly or indirectly, of
any cash or noncash dividend or other cash or noncash distribution in respect of
any of the securities of ETV or any direct or indirect redemption, purchase or
other acquisition of any securities of ETV or agreement to do so;
(c) damage, destruction or loss, whether or not covered by insurance,
adversely affecting the business or properties of ETV;
(d) increase in compensation payable or to become payable to any of
the officers, directors or employees of ETV or in any bonus payment or
arrangement made with any such person, or any change in personnel policies or
benefits except pursuant to existing compensation and fringe benefit plans,
practice and arrangements;
(e) contract, commitment or transaction entered into or consummated
by ETV except in the ordinary course of business;
(f) sale, assignment, lease or other transfer or disposition of any
of the assets or properties of ETV except in the ordinary course of business or
in connection with the acquisition of similar property or assets in the ordinary
course of business;
12
<PAGE>
(g) extraordinary losses (whether or not covered by insurance) or
waiver by ETV of any extraordinary rights of value;
(h) notice from any customer as to the customer's intention not to
conduct business with ETV, the result of which loss or losses of business,
individually or in the aggregate, has had, or could reasonably be expected to
have, a material adverse effect on the Business; or
(i) other event or condition of any character, that has or might
reasonably have a material adverse effect on ETV's financial condition or
assets.
3.15 No Litigation; Labor Disputes; Compliance with Law. Except as set
--------------------------------------------------
forth on Schedule 3.15:
-------------
(a) there is no decree, judgment, order or litigation at law or in
equity, no arbitration proceeding, and no proceeding before or by any
commission, agency or other administrative or regulatory body or authority,
pending or, to the Knowledge of Sellers, threatened, to which ETV is a party or
to which ETV or the ETV Assets are subject;
(b) ETV is not subject to or bound by any labor agreement, there is
no labor dispute, grievance, controversy, strike or request for union
representation pending or, to the Knowledge of Sellers, threatened against ETV,
and there has been no occurrence of any event which would give rise to any such
strike, request for union representation or other labor dispute, grievance or
controversy; and
(c) To the Knowledge of Sellers, ETV owns and operates, and has owned
and operated, its properties and assets, and carried on and conducted, and has
carried on and conducted, the Business in substantial compliance with all
federal, state and local laws, statutes, ordinances, rules and regulations, and
any court or administrative order or process, including, without limitation,
Occupational Safety and Health Administration, Equal Employment Opportunity
Commission, National Labor Relations Board and Environmental Laws.
3.16 Tax Returns and Tax Reports.
---------------------------
(a) Except as set forth on Schedule 3.16, all federal, state and
-------------
local tax returns and tax reports required to be filed by ETV have been filed
with the appropriate governmental agencies in all jurisdictions in which such
returns and reports are required to be filed, and ETV has not requested any
extension of time within which to file any such returns or reports which have
not been filed within such extension of time. All federal, state and local
income, profits, franchise, withholding and sales, use, occupation, property,
excise and other taxes (including interest and penalties) due from ETV in
accordance with such returns and reports have been fully paid. Each item
reflected on each of ETV's federal tax returns is complete, accurate and correct
in all respects.
13
<PAGE>
(b) Except as set forth on Schedule 3.16: (i) no issues have been
-------------
asserted by the Internal Revenue Service or any other taxing authority in
connection with an examination of any of the returns and reports referred to in
Section 3.16(a) which might, if determined adversely to ETV, materially
adversely affect the financial condition or business of ETV; and (ii) no waivers
of statutes of limitation with respect to taxes have been given with respect to
ETV. The federal income tax returns and information reports of ETV have been
examined by the Internal Revenue Service for the period or periods set forth in
Schedule 3.16, which lists all revenue agent reports issued in connection with
- -------------
audits of ETV. All deficiencies asserted or assessments made as a result of
examinations by the Internal Revenue Service or by appropriate state tax
authorities have been fully paid or adequately reflected on either the Financial
Statements, the Interim Financial Statements or on Schedule 3.16.
-------------
(c) Schedule 3.16 accurately reflects all currently proposed
-------------
adjustments to the taxable income of ETV for the years ended December 31, 1991
through December 31, 1995.
(d) ETV is not a party to or bound by, and has no obligation under,
any tax sharing or similar agreement, except for obligations provided by law
arising out of the filing of a consolidated federal income tax return or any
consolidated, unitary or combined state or local tax return or report of ETV.
(e) ETV has not consented and will not consent to have the provisions
of Section 341(f)(2) of the Code (or equivalent state law provisions) apply to
it and ETV has not agreed to, and has not been requested to make, any adjustment
under Section 481(c) of the Code by reason of a change in accounting method or
otherwise.
3.17 Governmental Authorizations. Except as set forth in Schedule 3.17,
--------------------------- -------------
no qualifications, registrations, filings, privileges, franchises, licenses,
permits, approvals or authorizations other than the Licenses are required in
order for ETV to own and operate the Business in the manner operated on the date
hereof. All Licenses are currently in full force and effect. As of the date
hereof, no action or proceeding is pending or, to the Knowledge of Sellers,
threatened before any governmental authority to revoke, refuse to renew or
modify such Licenses or other authorizations of the Business.
3.18 Compliance with Governmental Requirements. The Business, its
-----------------------------------------
physical facilities and electrical and mechanical systems are being and have
been operated in all respects in accordance with the specifications of the
applicable Licenses and with each document submitted in support of such
Licenses, and the Business is in compliance with all requirements, rules and
regulations of all governmental authorities, including without limitation, the
United States Occupational Safety and Health Administration. Except as set forth
in Schedule 3.18 and to the Knowledge of Sellers, all obligations, reports and
-------------
other filings required by all governmental authorities, including without
limitation, the United States Occupational Safety and Health Administration,
with respect to the Business have been duly and currently filed as of the date
hereof. There is currently pending no proceeding or complaint before any
governmental authority relating to the Business.
14
<PAGE>
3.19 Banks; Powers of Attorney. Schedule 3.19 lists the names of each bank
-------------------------
in which ETV has an account or safe deposit box and the names of all Persons
authorized to draw thereon or to have access thereto and the names of all
Persons holding powers of attorney from ETV, and a summary statement of the
terms thereof.
3.20 Employees. Schedule 3.20 is a true and complete list of the names and
--------- -------------
current annual salary rates or hourly wage rates of all employees of ETV, which
list includes for each such Person the amounts paid or payable as salary or
wages and describes any other future compensation arrangements for employees.
3.21 Employee Welfare Plans.
----------------------
(a) Except as set forth on Schedule 3.21, ETV has not at any time
-------------
maintained or been a party to or made contributions to any of the following: any
"employee pension benefit plan", (as such term is defined in Section 3(2) of
ERISA); or any "employee welfare benefit plan" (as such term is defined in
Section 3(1) of ERISA), whether written or oral. All employee benefit plans
maintained by ETV or to which ETV is obligated to contribute, are, and have in
the past been, in all respects maintained, funded and administered in compliance
with ERISA, and other applicable law; no such plan subject to Title IV of ERISA
has been terminated; no proceedings to terminate any such plan have been
instituted under Subtitle C of Title IV of ERISA; no reportable event within the
meaning of Section 4043 of Subtitle C of ERISA has occurred for any such plan
maintained by ETV; ETV has not withdrawn from a multi-employer plan (as defined
in Section 4001(a) of ERISA); the consummation of the transactions contemplated
hereby will not result in any withdrawal liability on the part of ETV under a
multi-employer plan; no benefit plan established or maintained by ETV or to
which ETV is obligated to contribute, has any accumulated funding deficiency (as
defined in ERISA); and ETV has not incurred any liability to the Pension Benefit
Guaranty Corporation with respect to any such plan.
(b) ETV has no formal or informal employee severance policy. Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, bonus, unemployment compensation or golden
parachute) becoming due to any director, officer or other employee of the
Company, (ii) increase any benefits otherwise payable under any ETV benefit plan
or (iii) result in the acceleration of the time of payment or vesting of any
such benefits.
3.22 Environmental Compliance.
------------------------
(a) ETV is not a party to any litigation or administrative
proceeding or, to the Knowledge of Sellers, is any litigation or administrative
proceeding threatened against it, which in either case (i) asserts or alleges
that ETV violated any Environmental Laws, (ii) asserts or alleges that ETV is
required to clean up, remove or take remedial or other response action due to
the disposal, depositing, discharge, leaking or other release of any hazardous
or toxic substances or materials or (iii) asserts or alleges that ETV is
required to pay all or a portion of the cost of any past, present or future
cleanup, removal or remedial or other response action
15
<PAGE>
which arises out of or is related to the disposal, depositing, discharge,
leaking or other release of any hazardous or toxic substances or materials by
ETV.
(b) No Person has caused or permitted materials to be stored,
deposited, treated, recycled or disposed of on, under or at any real property
owned, leased, used or occupied by ETV which materials, if known to be present,
would require cleanup, removal or some other remedial action under any
Environmental Laws.
(c) There are not now, nor have there previously been, tanks or
other facilities on, under, or at any real property owned, leased, used or
occupied by ETV which contained materials which, if known to be present in soils
or ground water, would require cleanup, removal or some other remedial action
under Environmental Laws.
(d) There are no conditions existing currently which would subject
ETV or Sellers to damages, penalties, injunctive relief or cleanup costs under
any Environmental Laws or which require or are likely to require cleanup,
removal, remedial action or other response pursuant to Environmental Laws by
ETV.
(e) ETV is not subject to any judgment, order or citation related to
or arising out of any Environmental Laws and has not been named or listed as a
potentially responsible party by any governmental body or agency in a matter
related to or arising out of any Environmental Laws.
3.23 Customer Relations. No communications have been made to ETV or
------------------
Sellers which would indicate that (a) any current customer of the Business which
accounted for more than 5% of its total net sales for the calendar year ending
December 31, 1995, or (b) any current supplier of the Business (if such
suppliers could not be replaced by the Sellers at comparable cost), will
terminate or substantially alter its business relations or the amount of
business with ETV.
3.24 Representation as of the Closing Date. Sellers' representations and
-------------------- ----------------
warranties set forth in this Agreement shall be true and correct on and as of
the Closing Date, as though such representations and warranties were made on and
as of such time.
3.25 Affiliate Transactions. Except as set forth on Schedule 3.25, none of
---------------------- -------------
the Sellers nor any of their respective family members or affiliates has any
agreement, contract or other arrangement with ETV. Each Seller hereby releases,
waives and discharges any and all claims such Seller may have, whether fixed or
contingent, known or unknown, against any of ETV, Buyer or Ellis Communications,
Inc., or any of their affiliates, respective officers, directors, employees,
agents or representatives arising out of any events occurring or facts existing
on or prior to the date hereof, except for rights under this Agreement and the
transaction documents contemplated hereby. Such Seller has not assigned any such
claims to any third party.
3.26 Disclosure. No statement of fact by Sellers contained in this
----------
Agreement and no written statement of fact furnished by Sellers to Buyer
pursuant to this Agreement contains any
16
<PAGE>
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements herein or therein contained not misleading.
3.27 Reliance on Representations and Warranties of Buyer. Sellers
---------------------------------------------------
understand and acknowledge that the representations and warranties of Buyer
contained in Article IV of this Agreement are the exclusive representations of
Buyer with respect to the subject matter hereof and the transactions
contemplated herein. With respect to the subject matter hereof and the
transactions contemplated herein, each Seller represents and warrants that (i)
no representation or warranty, express or implied, whether written or oral, as
to the financial condition, results of operations, prospects, properties or
business of Buyer or as to the desirability or value of an investment in Buyer
has been made to such Seller by or on behalf of Buyer other than those set forth
in Article IV hereof and the Stockholders Agreement, (ii) such Seller has relied
upon such Seller's own independent appraisal and investigation, and the advice
of such Seller's own counsel, tax advisors and other advisors, regarding the
risks of an investment in Buyer, and (iii) such Purchaser will continue to bear
sole responsibility for making his or her own independent evaluation and
monitoring of the risks of its investment in Buyer. Sellers acknowledge and
agree that all transactions contemplated herein between Sellers and Buyer, and
any other stockholders of Buyer, are arms-length transactions and that there is
no special relationship of trust, fiduciary relationship or other relationship
between Sellers and Buyer or any other stockholders of Buyer except as expressly
set forth herein or the documents executed in connection with the transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 Organization. Buyer is a corporation duly incorporated, validly
------------
existing and in good standing under the laws of the State of Delaware and on the
Closing Date Buyer will be duly qualified to do business as a foreign
corporation in Georgia, and Buyer has full corporate power to purchase the Stock
pursuant to this Agreement.
4.2 Authorization; Enforceability. The execution, delivery and
-----------------------------
performance of this Agreement and all of the documents and instruments required
hereby Buyer and the consummation by Buyer of the transactions contemplated
hereby and thereby, are within the corporate power of Buyer and have been duly
authorized by all necessary corporate action by Buyer. This Agreement is, and
the other documents and instruments required hereby will be, when executed and
delivered by Buyer the valid and binding obligations of Buyer enforceable
against Buyer in accordance with their respective terms, subject only to
bankruptcy, insolvency, reorganization, moratoriums or similar laws at the time
in effect affecting the enforceability or right of creditors generally and by
general equitable principles which may limit the right to obtain equitable
remedies.
17
<PAGE>
4.3 Absence of Conflicting Agreements. Except as set forth on Schedule
--------------------------------- --------
4.3, neither the execution, delivery or performance of this Agreement by Buyer
- ---
nor the consummation of the sale and purchase of the Stock or any other
transaction contemplated by this Agreement, does or will, after the giving of
notice, or the lapse of time, or otherwise:
(a) conflict with, result in a breach of, or constitute a default
under, the certificate of incorporation or bylaws of Buyer, or any material
federal, state or local law, statute, ordinance, rule or regulations applicable
to Buyer, or any court or administrative order or process, or any material
contract, agreement, arrangement, commitment or plan to which Buyer is a party
or by which Buyer or its assets is bound;
(b) require the consent, waiver, approval, permit, license,
clearance or authorization of, or any declaration or filing with, any court or
governmental or public agency; or
(c) require the consent of any Person under any material agreement,
material arrangement or material commitment of any nature which Buyer is a party
to or bound by.
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
5.1 Compliance with Agreement. Sellers shall have performed and complied
-------------------------
in all material respects with all of their respective obligations under this
Agreement which are to be performed or complied with by it prior to or at the
Closing.
5.2 Proceedings and Instruments Satisfactory. All proceedings, corporate
----------------------------------------
or other, to be taken by Sellers in connection with the performance of this
Agreement, and all documents incident thereto, shall be complete to the
reasonable satisfaction of Buyer and Buyer's counsel and Sellers shall have made
available to Buyer for examination the originals or true and correct copies of
all documents which Buyer may reasonably request in connection with the
transactions contemplated by this Agreement.
5.3 Representations and Warranties . The representations and warranties
------------------------------
made by Sellers in this Agreement shall be true and correct in the aggregate in
all material respects as of the Closing Date with the same force and effect as
though such representations and warranties had been made on the Closing Date,
except for changes permitted or contemplated by this Agreement.
5.4 Deliveries at Closing. Sellers shall have delivered or caused to be
---------------------
delivered to Buyer the documents, each properly executed and dated as of the
Closing Date as required
18
<PAGE>
pursuant to Section 2.3(a), and all other documents required to vest in buyer
good title to the Stock as contemplated by this Agreement.
5.5 Other Documents. Sellers shall have delivered to Buyer such documents
---------------
and certificates of officers of ETV and public officials as shall be reasonably
requested by Buyer's counsel to establish the existence and good standing of
ETV, the due authorization of this Agreement and the transactions contemplated
hereby, and any other aspect in connection with this Agreement.
5.6 Absence of Investigations and Proceedings. No action or proceeding or
-----------------------------------------
formal investigation by any Person or governmental agency shall be pending with
the object of challenging or preventing the Closing and no other proceedings
shall be pending with such object or to collect material damages from Buyer on
account thereof.
5.7 Governmental Consents. All authorizations, consents or approvals of
---------------------
any and all governmental regulatory authorities necessary in connection with the
consummation of the transactions contemplated by this Agreement shall have been
obtained and be in full force and effect.
5.8 Absence of Liens. On the Closing Date and simultaneously with the
----------------
Closing, there shall not be any Liens on the ETV Assets except for Permitted
Liens.
5.9 No Material Adverse Change. Between the date of this Agreement and
--------------------------
the Closing, there shall have been no material adverse change in the financial
condition, prospects or results of operation of the Business nor any adverse
change in the condition of the ETV Assets, including without limitation a
default under the terms of any of the Contracts or Leases (unless expressly
consented to or waived in writing) which would permit the acceleration of
amounts due thereunder of termination thereof.
5.10 Approvals and Consents. There shall have been secured such
----------------------
permissions, approvals, determinations, consents and waivers to the transactions
contemplated by this Agreement for such agreements set forth on Schedule 5.10.
5.11 Stock Purchase and Exchanges. The Stock Purchase, the CVI Exchange,
----------------------------
the IXL Exchange and the CVL Exchange shall have been consummated prior to or
contemporaneously with the Exchange.
5.12 Amendment to Articles of Incorporation. The Articles of Incorporation
--------------------------------------
of ETV shall have been amended and restated in the form attached hereto as
Exhibit E.
- ---------
5.13 Bylaws. ETV shall have adopted Amended and Restated Bylaws in the
------
form attached hereto as Exhibit F.
---------
19
<PAGE>
If any of the conditions set forth in this Article V have not been
satisfied, Buyer may in its sole discretion nevertheless elect to proceed with
the consummation of the transactions contemplated hereby.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
Each and every obligation of Sellers to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
6.1 Compliance with Agreement. Buyer shall have performed and complied
-------------------------
with all of its obligations under this Agreement which are to be performed or
complied with by it prior to or at the Closing.
6.2 Proceedings and Instruments Satisfactory. All proceedings, corporate
----------------------------------------
or other, to be taken by Buyer in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be complete to the
reasonable satisfaction of Sellers' counsel, and Buyer shall have made available
to Sellers for examination the originals or true and correct copies of all
documents which Sellers may reasonably request in connection with the
transactions contemplated by this Agreement.
6.3 Representations and Warranties. The representations and warranties
------------------------------
made by Buyer shall be true and correct in all material respects as of the
Closing Date with the same force and effect as though such representations and
warranties had been made on the Closing Date.
6.4 Deliveries at Closing. Buyer shall have delivered or caused to be
---------------------
delivered to Sellers the documents, each properly executed and dated as of the
Closing Date required pursuant to Section 2.3(b). Buyer shall also have made the
payments described in Section 2.2.
6.5 Other Documents. Buyer shall have delivered to Sellers such documents
---------------
and certificates of officers of Buyer and of public officials as shall be
reasonably requested by Sellers' counsel to establish the existence and good
standing of Buyer and the due authorization of this Agreement and the
transactions contemplated hereby by Buyer.
6.6 Absence of Investigations and Proceedings. No action or proceeding or
-----------------------------------------
formal investigation by any Person or governmental agency shall be pending with
the object of challenging or preventing the Closing and no other proceedings
shall be pending with such object or to collect damages from ETV or Sellers on
account thereof.
6.7 Governmental Consents. All material authorizations, consents or
------------ --------
approvals of any and all governmental regulatory authorities necessary in
connection with the consummation of the transactions contemplated by this
Agreement shall have been obtained and be in full force and effect.
20
<PAGE>
If any of the conditions set forth in this Article VI have not been
satisfied, all of the Sellers may in their sole discretion nevertheless
unanimously elect to proceed with the consummation of the transactions
contemplated hereby.
ARTICLE VII
MISCELLANEOUS
7.1 Further Assurances. From time to time after the Closing Date, upon
------------------
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments of conveyance, assignment and transfer and take such further action
as the requesting party may reasonably request in order to effectuate fully the
purposes, terms and conditions of this Agreement.
7.2 Entire Agreement; Amendment; and Waivers. This Agreement and the
----------------------------------------
documents referred to herein and to be delivered pursuant hereto constitute the
entire agreement between the parties pertaining to the subject matter hereof,
and supersede all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written, and there
are no warranties, representations or other agreements between the parties in
connection with the subject matter hereof, except as specifically set forth
herein. No amendment, supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision or breach of this Agreement,
whether or not similar, unless otherwise expressly provided. Each of the Sellers
expressly agrees with Buyer that the Sellers may agree to and execute, on behalf
of the Sellers, any and all amendments, supplements, modifications, waivers or
termination of this Agreement.
7.3 Expenses. Except as otherwise specifically provided herein, whether or
--------
not the transactions contemplated by this Agreement are consummated, each of the
parties hereto shall pay the fees and expenses of its respective counsel,
accountants and other experts incident to the negotiation and preparation of
this Agreement and consummation of the transactions contemplated hereby.
7.4 Benefit; Assignment. This Agreement shall be binding upon and inure to
-------------------
the benefit of and shall be enforceable by Buyer and Sellers and their
respective successors and permitted assigns. This Agreement shall not be
assigned by any party without the prior written consent of the other party.
7.5 Notices. All communications or notices required or permitted by this
-------
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of the other party, or
when sent by telecopy or facsimile machine to the number shown below, or when
properly deposited for delivery by commercial overnight delivery service,
prepaid, or by deposit in the United States mail, certified or registered mail,
postage prepaid, return receipt requested, and addressed as follows, unless and
until either of
21
<PAGE>
such parties notifies the other in accordance with this Section of a change of
address or change of telecopy number:
If to Buyer: IXL Holdings, Inc.
c/o Ellis Communications, Inc.
3060 Peachtree Road, Suite 340
Atlanta, Georgia 30305
Attention: U. Bertram Ellis, Jr.
Telephone No.: (404) 240-0424
Telecopy No.: (404) 240-0542
With a copy to: Minkin & Snyder, a Professional Corporation
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telephone No.: (404) 261-8000
Telecopy No.: (404) 261-5064
and to: Kelso & Company
320 Park Avenue
New York, New York 10022
Attention: James J. Connors, II, Esq.
Telephone No.: (212) 751-3939
Telecopy No.: (212) 233-2379
If to Sellers: Creative Video Library, Inc.
1465 Northside Drive, Suite 110
Atlanta, Georgia 30350
Attention: James R. Rocco
Telephone No.: (404) 351-4518
Telecopy No.: (404) 350-9823
With a copy to: David Kam, Esq.
P.O. Box 95297
Atlanta, Georgia 30347
Telephone No.: (404) 370-0180
Telecopy No.: (404) 370-1722
7.6 Counterparts; Headings. This Agreement may be executed in several
----------------------
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
22
<PAGE>
7.7 Severability. If any provision, clause or part of this Agreement or
------------
the application thereof under certain circumstances is held invalid, or
unenforceable, the remainder of this Agreement, or the application of such
provision, clause or part under other circumstances, shall not be affected
thereby.
7.8 Investigations; Non-Survival of Warranties. The respective
------------------------------------------
representations and warranties of Sellers and Buyer contained herein or in any
certificate or other documents delivered prior to or at the Closing shall not be
deemed waived or otherwise affected by any investigations made by any party
hereto. Each and every such representation and warranty shall survive for two
(2) years following the Closing, except that the representations and warranties
contained in Sections 3.17 and 3.22 shall survive the Closing until the
applicable statutes of limitation time periods expire with respect to any claims
under such Sections.
7.9 Governing Law. This Agreement shall be construed and interpreted
-------------
according to the laws of the State of Georgia, without regard to the conflict of
law principles thereof. The exclusive venue of adjudication of any dispute or
proceeding arising out of the Agreement or the performance hereof shall be the
courts located in the County of Fulton, State of Georgia, and the parties hereto
hereby consent to and submit to the jurisdiction of any court located in the
County of Fulton, State of Georgia and hereby waives, to the fullest extent
permitted by applicable law, any objection which such party may have to the
laying of venue of any such proceeding brought in such court and any claim that
such proceeding brought in such court has been brought in an inconvenient forum.
EACH OF THE PARTIES WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
[Signatures commence on following page]
23
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of
the day and year first above written.
BUYER:
-----
IXL HOLDINGS, INC.
By: /s/ U. Bertram Ellis Jr.
----------------------------------------
Name: U. Bertram Ellis Jr.
----------------------------------
Title: CEO
----------------------------------
SELLERS:
-------
/s/ James R. Rocco
---------------------------------------------
JAMES R. ROCCO
/s/ R. Guy Davidson, III
---------------------------------------------
R. GUY DAVIDSON, III
/s/ Barry T. Sikes
---------------------------------------------
BARRY T. SIKES
/s/ Larry B. Culbertson
---------------------------------------------
LARRY B. CULBERTSON
/s/ Jeff Vick
---------------------------------------------
JEFF VICK
24
<PAGE>
IXL Exhibits
------------
A. Exchange Consideration (see attached)............................ Exhibit A
B. Registration Rights Agreement.................................... Exhibit B
C. Stockholders' Agreement.......................................... Exhibit C
D. Sellers' Certificate............................................. Exhibit D
E. Amended and Restated Bylaws...................................... Exhibit E
<PAGE>
EXHIBIT A
---------
OWNERSHIP OF STOCK AND EXCHANGE CONSIDERATION
---------------------------------------------
<TABLE>
<CAPTION>
EXCHANGE CONSIDERATION
----------------------------------
CASH SHARES OF CLASS B
SELLER OWNERSHIP OF STOCK CONSIDERATION* COMMON STOCK
- -------------------- ------------------- -------------- -----------------
<S> <C> <C> <C>
James R. Rocco 400 Shares of Stock $ 35,210.00 151
R. Guy Davidson, III 265 Shares of Stock $ 23,310.00 100
Barry T. Sikes 50 Shares of Stock $ 4,410.00 19
Larry B. Culbertson 30 Shares of Stock $ 2,660.00 11
Jeff Vick 50 Shares of Stock $ 4,410.00 19
-------------- -----------------
TOTALS $ 70,000.00 300
============== =================
</TABLE>
____________________
* Less pro rata share of Outstanding Liabilities and Closing Expenses of
Sellers.
A-1
<PAGE>
LIST OF SCHEDULES
Schedule 3.1 Corporate Organization
Schedule 3.2 ETV Stock
Schedule 3.6 Absence of Conflicting Agreements
Schedule 3.7 Title to ETV Assets; Liens and
Encumbrances
Schedule 3.9 Equipment
Schedule 3.10 Contracts
Schedule 3.11 Intangible Property
Schedule 3.12(a) Financial Statements
Schedule 3.12(b) Interim Financial Statements
Schedule 3.13 Indebtedness of ETV to Sellers
Schedule 3.13(a) Absence of Undisclosed Liabilities
Schedule 3.13(b) Permitted Liens
Schedule 3.14 Adverse Change
Schedule 3.15 Litigation; Labor Disputes; Compliance with Law
Schedule 3.16 Tax Returns and Tax Reports
Schedule 3.17 Governmental Authorizations
Schedule 3.18 Compliance with Governmental Requirements
Schedule 3.19 Bank; Powers of Attorney
Schedule 3.20 Employees
Schedule 3.21 Employee Welfare Plans
Schedule 3.25 Affiliate Transactions
Schedule 4.3 Absence of Conflicting Agreements
Schedule 5.10 Approvals and Consents
<PAGE>
EXHIBIT 2.5
PURCHASE AND SALE AGREEMENT
BY AND AMONG
IXL ACQUISITION CORP.
AND
MEMPHIS ON LINE, INC.
SOUTHERN ON LINE SYSTEMS, INC.
SOUTHERN TEL SUPPLY, INC.
DATED AS OF JUNE 5, 1996
<PAGE>
EXHIBITS
Assumption Agreement.................................................. Exhibit A
Bill of Sale and Assignment........................................... Exhibit B
Buyer's Closing Certificate........................................... Exhibit C
Assignment and Assumption of Contracts................................ Exhibit D
Indemnity Guaranty Agreement.......................................... Exhibit E
Assignment and Assumption of Leases................................... Exhibit F
Noncompetition Agreement.............................................. Exhibit G
Seller's Closing Certificate.......................................... Exhibit H
Trademark Assignment.................................................. Exhibit I
<PAGE>
PURCHASE AND SALE AGREEMENT
---------------------------
THIS PURCHASE AND SALE AGREEMENT is entered into this 5th day of June,
1996, by and between MEMPHIS ON LINE, INC., a Tennessee corporation ("Memphis"),
SOUTHERN ON LINE SYSTEMS, INC., a Tennessee corporation ("Southern"), SOUTHERN
TEL SUPPLY, INC., a Mississippi corporation ("SouthCom") (individually, a
"Seller," collectively, the "Sellers), and IXL ACQUISITION CORP., a Delaware
corporation, or its successors or assigns ("Buyer").
R E C I T A L S:
- - - - - - - -
A. Memphis and Southern are engaged in the business of providing access to
the Internet, designing and preparing World Wide Web sites and assisting clients
in advertising their goods and services on the Internet, and other related
services.
B. SouthCom owns certain assets used by Memphis and Southern in their
respective Businesses.
C. Memphis and Southern are willing to sell to Buyer and Buyer is willing
to purchase from Memphis and Southern substantially all of the assets, business,
properties and rights of Memphis and Southern related to the conduct of their
respective Businesses; and SouthCom is willing to sell to Buyer and Buyer is
willing to purchase from SouthCom certain of the assets, properties and rights
of SouthCom, all on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the Recitals and of the mutual
covenants, conditions and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. When used in this Agreement, the following terms shall
have the meanings specified:
"ACCOUNTS RECEIVABLE" shall mean all accounts receivable of Memphis and
Southern related to the Businesses immediately prior to the Closing as
determined in accordance with generally accepted accounting principles;
"ADJUSTMENT AMOUNT" shall have the meaning set forth in Section 2.4;
"ADJUSTMENT LIST" shall have the meaning set forth in Section 2.4;
<PAGE>
"AGREEMENT" shall mean this Purchase and Sale Agreement, together with the
Schedules and the Exhibits attached hereto, as the same shall be amended from
time to time in accordance with the terms hereof;
"ASSUMED LIABILITIES" shall mean (a) the liabilities of Memphis and
Southern on their respective balance sheets as of April 30, 1996, as listed on
Schedule 1.1, (b) the obligations of Memphis and Southern under the Contracts
- ------------
and the Leases arising from and accruing with respect to the operation of the
Businesses of Memphis and Southern after the Closing Date, except those
Contracts and Leases, if any, included in the Retained Assets, (c) the
liabilities, obligations and claims resulting from the operation of the
Businesses prior to the Closing Date to the extent such liabilities, obligations
and claims are the subject of a purchase price adjustment pursuant to Section
2.4 in favor of Buyer, (d) the Mortgage, and (e) the liabilities and obligations
in connection with the Computer Financing Leases arising after the Closing Date;
"ASSUMPTION AGREEMENTS" shall mean instruments in the form of Exhibit A
---------
attached hereto by which the Assumed Liabilities are to be accepted by Buyer;
"BENEFIT ARRANGEMENTS" shall mean a benefit program or practice providing
for bonuses, incentive compensation, vacation pay, severance pay, insurance,
restricted stock, stock options, employee discounts, company cars, tuition
reimbursement or any other perquisite or benefit (including, without limitation,
any fringe benefit under Section 132 of the Code) to employees, officers or
independent contractors that is not a Plan;
"BILLS OF SALE AND ASSIGNMENT" shall mean instruments in the form of
Exhibit B attached hereto, by which Memphis and Southern will convey to Buyer
- ---------
title to the Customer Lists, the Equipment, the Intangible Property, the
Miscellaneous Assets, the Motor Vehicles and the Records, and by which SouthCom
will convey to Buyer title to the SouthCom Assets;
"BUSINESSES" shall mean the business operations of Memphis and Southern, as
required by the context, and "BUSINESS" shall mean the business operations of
either of Memphis or Southern;
"BUYER" shall mean IXL Acquisition Corp., a Delaware corporation;
"BUYER'S CLOSING CERTIFICATE" shall mean the certificate delivered by Buyer
to Sellers at Closing, in the form of Exhibit C attached hereto;
---------
"CASH" shall mean all moneys of Memphis and Southern relating to their
respective Businesses, whether in the form of cash, cash equivalents, or
deposits in bank accounts of any kind;
"CASH PURCHASE PRICE" shall mean Two Hundred Eighty Thousand One Hundred
Sixty-Five Dollars and 73/100 ($280,165.73), to be adjusted pursuant to Section
2.4 hereof;
2
<PAGE>
"CLOSING" shall mean the conference to be held at 10:00 a.m., Atlanta,
Georgia time on the Closing Date simultaneously at the offices of Minkin &
Snyder, P.C., One Buckhead Plaza, 3060 Peachtree Road, Suite 1100, Atlanta,
Georgia 30305 and The Bogatin Law Firm, PLC, 860 Ridge Lake Blvd., Suite 360,
Memphis, Tennessee 38120, with required signatures to be sent by facsimile and
overnight delivery, or at such other time and place as the parties may mutually
agree to in writing, at which the transactions contemplated by this Agreement
shall be consummated;
"CLOSING DATE" shall mean (a) May 31, 1996, or (b) such other date as Buyer
and Seller may agree upon in writing. The Closing shall be deemed effective as
of 12:01 a.m. on the first day subsequent to the Closing Date;
"CODE" shall mean the Internal Revenue Code of 1986, as amended;
"COMPUTER FINANCING LEASES" shall mean those financing leases between
SouthCom and third parties with respect to computer equipment set forth on
Schedule 1.2;
- ------------
"CONTRACT ASSIGNMENTS" shall mean the Assignments and Assumption of
Contracts, in the form of Exhibit D attached hereto, by which Memphis and
---------
Southern will assign the Contracts to Buyer and Buyer will assume certain of the
then-remaining respective rights and obligations of Memphis and Southern under
the Contracts;
"CONTRACTS" shall mean those agreements (other than those included in the
Retained Assets and other than the Leases) under which Memphis and Southern
conduct their respective Businesses, whether written, oral or implied, including
but not limited to those agreements listed on Schedule 1.3;
------------
"COPYRIGHTS" shall mean all copyrights and copyright applications owned by
or related to Sellers, including without limitation those items described on
Schedule 1.4;
- ------------
"CUSTOMER LISTS" shall mean all lists, documents, written information,
computer disks, computer tapes, programs and other computer readable media
possessed by Memphis and Southern concerning past, present and potential
purchasers of services from their respective Businesses;
"EMPLOYEE BENEFIT PLANS" shall mean any Plan or Benefit Arrangement in
which any current, former or retired employee of any Seller participates;
"ENVIRONMENTAL LAWS" shall mean all applicable rules and regulations of the
federal Environmental Protection Agency and all other federal, state and local
laws, including statutes, regulations, ordinances, codes, rules, as amended,
relating to the discharge of air pollutants, water pollutants or process waste
water or otherwise relating to the environment or Hazardous Materials or toxic
substances including, but not limited to, the Federal Solid Waste Disposal Act,
the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976, the Federal Comprehensive Environmental
Response, Compensation and
3
<PAGE>
Liability Act of 1980, regulations of the Environmental Protection Agency, the
Toxic Substance Control Act, regulations of the Nuclear Regulatory Agency, and
regulations of any state department of natural resources or state environmental
protection agency now or at any time hereafter in effect;
"EQUIPMENT" shall mean all equipment, computers, furniture, fixtures,
furnishings, machinery, parts and other items of tangible personal property of
Memphis and Southern used or useable in their respective Businesses, including
but not limited to those items listed on Schedule 1.5;
------------
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended;
"FINANCIAL STATEMENTS" shall mean the unaudited financial statements of
Memphis and Southern described in Section 3.11;
"FINANCING LEASES" shall mean any Lease, other than the Computer Financing
Leases, which is properly characterized as a capitalized lease obligation in
accordance with generally accepted accounting principles;
"HAZARDOUS MATERIALS" shall mean any wastes, substances, or materials
(whether solids, liquids or gases) that are deemed hazardous, toxic, pollutants,
or contaminants, including without limitation, substances defined as "hazardous
wastes," "hazardous substances," "toxic substances," "radioactive materials," or
other similar designations in, or otherwise subject to regulation under, any
Environmental Laws. "Hazardous Materials" includes but is not limited to
polychlorinated biphenyls (PCB's), asbestos, lead-based paints, infectious
wastes, radioactive materials and wastes and petroleum and petroleum products
(including, without limitation, crude oil or any fraction thereof);
"INDEMNITY GUARANTY AGREEMENT" shall mean the Indemnity Guaranty Agreement
by and among Stephen Gill, Jeffrey Stewart and Buyer, in the form of Exhibit E
---------
attached hereto;
"INTANGIBLE PROPERTY" shall mean: (a) the Copyrights; (b) the Trademarks;
(c) the Trade Secrets; (d) the Software, (e) all of the rights of Memphis and
Southern in and to the names "Memphis OnLine" and "Southern On Line Systems";
and (f) all goodwill associated therewith;
"KNOWLEDGE OF SELLERS" shall mean the actual knowledge of Stephen Gill or
Jeffrey Stewart, or knowledge which either of such Persons would have possessed
upon reasonable investigation of the business affairs and operations of the
Businesses;
"LEASE ASSIGNMENTS" shall mean the Assignments and Assumption of Leases in
the form of Exhibit F attached hereto, by which Memphis and Southern shall
---------
assign to Buyer their respective Leases, and by which SouthCom shall assign to
Buyer the Computer Financing Leases;
"LEASES" shall mean those leases of real and personal property related to
the Businesses, as listed on Schedule 1.6;
------------
4
<PAGE>
"LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation,
security interest, encumbrance, claim, lien, lease (including any capitalized
lease) or charge of any kind, whether voluntarily incurred or arising by
operation of law or otherwise, affecting any assets or property, including any
agreement to give or grant any of the foregoing, any conditional sale or other
title retention agreement and the filing of or agreement to give any financing
statement with respect to any assets or property under the Uniform Commercial
Code of the State of Tennessee or comparable law of any jurisdiction;
"MISCELLANEOUS ASSETS" shall mean all tangible and intangible assets used
or useable in the operation of the Businesses of Memphis and Southern and not
otherwise specifically referred to in this Agreement, including any warranties
related to any of the Purchased Assets, excepting therefrom only the Retained
Assets;
"MORTGAGE" shall mean the indebtedness and associated Lien related to the
Real Property.
"MOTOR VEHICLES" shall mean all motor vehicles used by Memphis and Southern
related to the operation of the Businesses, including without limitation those
listed on Schedule 1.7;
------------
"NON-COMPETITION AGREEMENT" shall mean the Non-Competition Agreement
entered into by Buyer and Stephen W. Gill on the date of this Agreement, in the
form of Exhibit G attached hereto;
---------
"PERSON" shall mean any natural person, general or limited partnership,
corporation, limited liability company, firm, association or other legal entity;
"PERMITTED LIENS" shall mean only the following Liens: (a) Liens existing
on the Closing Date related to the Computer Financing Leases and the Mortgage,
(b) Liens existing on Retained Assets; (b) Liens existing on the Closing Date to
remain on Purchased Assets as listed on Schedule 1.8; (c) Liens for taxes,
------------
assessments or other governmental charges or levies not yet due; (d) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (e) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; and (f)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the Real
Property or interfering with the ordinary conduct of any of the Businesses;
"PLAN" shall mean any plan, program or arrangement, whether or not written,
that is or was (a) an "employee benefit plan" as such term is defined in Section
3(3) of ERISA and (i) which was or is established or maintained by any Seller;
(ii) to which any Seller contributed or was obligated to contribute or to fund
or provide benefits; or (iii) which provides or promises benefits to any person
who performs or who has performed services for any Seller and because of those
services is or has been (A) a participant therein or (B) entitled to benefits
thereunder; (b) an "employee pension benefit plan" as such term is defined in
Section 3(2) of ERISA,
5
<PAGE>
including, without limitation, any such plan that satisfies, or is intended by
any Seller to satisfy, the requirements for tax qualification described in
Section 401 of the Code; (c) a "multiemployer plan" as such term is defined in
Section 3(37) of ERISA; or (d) an "employee welfare benefit plan" as such term
is defined in Section 3(1) of ERISA;
"PURCHASED ASSETS" shall mean the right, title and interest of Memphis and
Southern in and to (a) all assets used or useable in the business operations of
the Memphis and Southern, other than the Retained Assets, including but not
limited to (i) the Contracts, (ii) the Customer Lists, (iii) the Equipment, (iv)
the Intangible Property, (v) the Leases, (vi) the Miscellaneous Assets, (vii)
the Motor Vehicles, (viii) the Records; (ix) the Cash, and (x) the Accounts
Receivable;
"PURCHASE PRICE" shall mean the sum of (i) the Cash Purchase Price, (ii)
the total liabilities on the respective balance sheets of Memphis and Southern
as of April 30, 1996, as listed on Schedule 1.1, (iii) the total principal
------------
amount of the Mortgage as of the Closing Date, (iv) the total remaining
liabilities on the Computer Financing Leases as of the Closing Date;
"REAL PROPERTY" shall mean the SouthCom's fee simple interest in the real
property more particularly described on Schedule 1.9, and all buildings,
------------
improvements and fixtures thereon, together with all strips and gores, rights of
way, easements, privileges and appurtenances pertaining thereto, including any
right, title and interest of SouthCom in and to any street adjoining any portion
of the Real Property;
"RECORDS" shall mean all the files and records, including schematics,
technical information and engineering data, correspondence, books of account,
employment records, customer files, purchase and sales records and
correspondence, advertising records, files and literature, files and records and
all other written materials of Memphis and Southern relating to the Businesses;
provided, however, that Records shall not mean or include the internal corporate
- -------- -------
books and stock ownership records of Memphis and Southern;
"RETAINED ASSETS" shall mean (a) any and all claims of Sellers with respect
to transactions prior to the Closing Date including, without limitation, claims
for tax refunds except to the extent such claims relate to Assumed Liabilities,
the Purchased Assets or the SouthCom Assets, (b) all contracts of insurance
entered into by any Seller, (c) all assets related to the Employee Benefit
Plans, (d) all assets of SouthCom other than the SouthCom Assets, (f) all assets
and the rights and obligations under any agreements listed on Schedule 1.10
-------------
"RETAINED LIABILITIES" shall mean all the obligations and liabilities of
Seller whether now existing or previously or hereafter incurred, other than the
Assumed Liabilities, which Retained Liabilities shall include but not be limited
to (a) all taxes that result from or have accrued in connection with the
operation of the Businesses prior to the Closing Date, (b) liabilities and
obligations arising under Contracts and Leases transferred to Buyer in
accordance with this Agreement to the extent such liabilities and obligations
arise during or relate to or have accrued in connection with any period prior to
the Closing, except to the extent any such liabilities have been taken into
account in adjusting the Cash Purchase Price pursuant to Section 2.4, (c) all
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liabilities and obligations accruing with respect to the operation of the
Businesses prior to the Closing, except to the extent any such liabilities have
been taken into account in adjusting the Cash Purchase Price pursuant to Section
2.4, (d) all liabilities related to the Employee Benefit Plans, and (e) all
liabilities related to Financing Leases other than the Computer Financing
Leases;
"SCHEDULES" shall mean those schedules referred to in this Agreement which
have been delivered separately but concurrently with the execution of this
Agreement, which schedules are incorporated herein and made a part hereof;
"SELLER" and "SELLERS" shall have the meaning set forth in the preamble to
this Agreement;
"SELLERS' CLOSING CERTIFICATES" shall mean the certificate delivered by
each Seller to Buyer at the Closing, in the form of Exhibit H attached hereto;
---------
"SOFTWARE" shall mean the proprietary computer software programs and
interfaces identified on Schedule 1.11 hereto, in source and object code form;
-------------
"SOUTHCOM ASSETS" shall mean (a) the SouthCom Equipment, (b) the Real
Property, and (c) the SouthCom Name;
"SOUTHCOM EQUIPMENT" shall mean the equipment and other tangible personal
property of SouthCom listed on Schedule 1.12, which also lists the Equipment;
-------------
"SOUTHCOM NAME" shall mean the name "Southern Communications" and all
goodwill associated therewith;
"TITLE COMPANY" shall mean Mid-South Title Company;
"TITLE POLICY" shall mean the owner's title policy issued by the Title
Company with respect to the Real Property, and the preliminary reports on title
issued by the Title Company, which preliminary reports shall contain a
commitment of the Title Company (the "Title Commitment") to issue an owner's
----------------
title insurance policy on ALTA Owners Policy insuring the fee simple interest of
SouthCom in the Real Property. The Title Commitment shall be in the amount of
$650,000 and shall be subject only to (i) Permitted Liens; and (ii) such other
Liens that will be released at Closing. All standard exceptions, other than
those for which a survey is necessary, are to be deleted from the Title Policy
and Title Commitment.
"TRADE SECRETS" shall mean all proprietary information of the Memphis and
Southern relating to the Businesses;
"TRADEMARKS" shall mean all of those trade names, trademarks, service
marks, jingles, slogans, logos, trademark and service mark registrations and
trademark and service mark applications owned, used, held for use, licensed by
or leased by Memphis and Southern relating to the Businesses, as set forth on
Schedule 1.13;
- -------------
7
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"TRADEMARK ASSIGNMENTS" shall mean instruments, in the form of Exhibit I
---------
attached hereto, by which each Seller conveys to Buyer its respective
Trademarks; and
"WARRANTY DEED" shall mean a warranty deed in a form acceptable to the
Title Company pursuant to which SouthCom shall convey to Buyer at the Closing
the Real Property.
1.2 SINGULAR/PLURAL; GENDER. Where the context so requires or permits, the
use of the singular form includes the plural, and the use of the plural form
includes the singular, and the use of any gender includes any and all genders.
ARTICLE II
PURCHASE AND SALE
2.1 PURCHASE AND SALE. At the Closing on the Closing Date, and upon all
of the terms and subject to all of the conditions of this Agreement:
(a) Memphis and Southern shall sell, assign, convey, transfer and deliver
to Buyer, and Buyer shall purchase all of Memphis and Southern's respective
rights, title and interest, legal and equitable, in and to the Purchased Assets;
and
(b) SouthCom shall assign, convey, transfer and deliver to Buyer, and Buyer
shall purchase all of SouthCom's right, title and interest, legal and equitable,
in and to the SouthCom Assets.
Notwithstanding any provision of this Agreement to the contrary, Sellers shall
not transfer, convey or assign to Buyer, but shall retain, all of their
respective right, title and interest in and to the Retained Assets.
2.2 PAYMENTS ON CLOSING; ASSUMPTION OF LIABILITIES. At the Closing on
the Closing Date:
(a) Buyer shall pay Sellers, by wire transfer of immediately available
funds, an amount equal to the Cash Purchase Price, as adjusted pursuant to
Section 2.4, to such accounts and in such amounts as designated by Sellers; and
(b) Buyer shall assume the Assumed Liabilities.
2.3 CLOSING DATE DELIVERIES. At the Closing on the Closing Date:
(a) Sellers, as applicable, respectively shall deliver, or cause to be
delivered to Buyer properly executed and dated as of the Closing Date: (i) the
Assumption Agreements; (ii) the Bills of Sale and Assignment; (iii) the Contract
Assignments; (iv) the Indemnity Guaranty Agreement; (v) the Lease Assignments;
(vi) the Non-Competition Agreement; (vii) Sellers'
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Closing Certificates; (viii) the Trademark Assignments; (ix) the Title Policy
and (x) the Warranty Deed; and (xi) such other documents as provided in Article
V hereof or as Buyer shall reasonably request; and
(b) Buyer shall deliver, or cause to be delivered to Sellers, as
applicable, properly executed and dated as of the Closing Date: (i) the
Assumption Agreements; (ii) the Bills of Sale and Assignment; (iii) Buyer's
Closing Certificate; (iv) the Contract Assignments; (v) the Indemnity Guaranty
Agreement, (vi) the Lease Assignments; (vii) the Non-Competition Agreement;
(viii) the Trademark Assignments; and (ix) such other documents as provided in
Article VI hereof or as Sellers shall reasonably request.
2.4 ADJUSTMENTS TO CASH PURCHASE PRICE.
(a) All prepaid revenue, prepaid expenses and accrued expenses of the
Sellers as of the close of business on April 30, 1996 shall, except as otherwise
expressly provided herein, be adjusted and allocated between Seller and Buyer to
reflect the principle that all revenue and expenses arising from the operation
of the Business on or before April 30, 1996 shall be for the respective accounts
of Sellers, and all revenue and expenses arising from the operation of the
Business from and after April 30, 1996 shall be for the account of Buyer.
(b) To the extent not inconsistent with the express provisions of this
Agreement, all allocations made pursuant to this Section 2.4 shall be made in
accordance with generally accepted accounting principles.
(c) Net settlement of the adjustments contemplated under this Section
2.4 shall be made at the Closing based upon the Adjustment List (as defined
herein) as far as feasible. For items not readily subject to ascertainment at
the Closing, the following procedures shall apply. Buyer shall prepare and
deliver to Seller within sixty (60) business days following the Closing Date, or
such earlier or later date as shall be mutually agreed to by Sellers and Buyer,
an itemized list (the "Adjustment List") of all sums to be credited to or
---------------
charged against the account of Buyer, with a brief explanation thereof. Such
list shall show the net amount credited to or charged against the account of
Buyer (the "Adjustment Amount"). If the Adjustment Amount is a credit to the
-----------------
account of Buyer, Sellers shall pay such amount to Buyer; if the Adjustment
Amount is a charge to the account of Buyer, Buyer shall pay such amount to
Sellers. Except as provided otherwise in Section 2.4(g), payment of the
Adjustment Amount shall be made not later than ten (10) business days following
the delivery of the Adjustment List.
(d) Not later than ten (10) business days following the delivery of the
Adjustment List, Sellers may furnish Buyer with written notification of any
dispute concerning any items shown thereon or omitted therefrom together with a
detailed explanation in support of Sellers' position in respect thereof. Buyer
and Sellers shall consult to resolve any such dispute for a period of ten (10)
business days following the notification thereof. In the event of any such
dispute, that portion of the Adjustment Amount that is not in dispute shall be
paid to the party entitled to receive the same on the day for payment provided
in Section 2.4(c). If such ten (10) business day consultation period expires
and the dispute has not been resolved, the matter shall
9
<PAGE>
be referred to an independent public accounting firm mutually agreed upon by
Sellers and Buyer (the "Accountants"), which shall resolve the dispute and shall
-----------
render its decision (together with a brief explanation of the basis therefor) to
Buyer and Sellers not later than twenty (20) business days following submission
of the dispute to it; provided, however, if Buyer and Sellers are unable to
-------- -------
mutually agree upon an independent public accounting firm, then Buyer and
Sellers shall each choose an independent public accounting firm and those firms
shall appoint a third independent public accounting firm to act as the
Accountants. The disputed portion of the Adjustment Amount (the "Disputed
--------
Amount") shall be paid by the party required to pay the same within five (5)
- ------
business days after the delivery of a copy of such decision to Sellers and
Buyer. The fees and expenses of the Accountants (the "Accountants Fees") shall
----------------
be shared by Sellers and Buyer in accordance with the following principles: (i)
Buyer shall pay that portion of the Accountants Fees which results from
multiplying the Accountants Fees by a fraction, the numerator of which is the
sum of all items constituting a portion of the Disputed Amount which were paid
to Sellers and the denominator of which is the Disputed Amount; and (ii) Sellers
shall pay that portion of the Accountants Fees which results from multiplying
the Accountants Fees by a fraction, the numerator of which is the sum of all
items constituting a portion of the Disputed Amount which were paid to Buyer and
the denominator of which is the Disputed Amount.
(e) The Adjustment List (to the extent not disputed within the
specified period by Seller), any mutually agreed written settlement of any such
dispute concerning the Adjustment List and any determination of disputed items
by the Accountants shall be final, conclusive and binding on the parties hereto
absent manifest error.
2.5 NON-ASSUMPTION OF LIABILITIES. Buyer does not and shall not assume
or become obligated to pay any debt, obligation or liability of any kind or
nature of any Seller or the Businesses, whether or not incurred or accrued in
connection with the operation of any of the Businesses, except the Assumed
Liabilities or such other charges as are specifically allocated to Buyer
elsewhere in this Agreement.
2.6 TAXES. All federal, state, local and other transfer, sales and use
taxes applicable to, imposed upon or arising out of the transfer to Buyer of the
Purchased Assets and/or the SouthCom Assets as contemplated by this Agreement
shall be paid by Buyer.
2.7 ALLOCATION OF PURCHASE PRICE. The Purchase Price will be allocated
among each item or class of the Purchased Assets and the SouthCom Assets as
agreed by the parties and set forth on Schedule 2.7. Buyer and Seller each
------------
agree to report such allocation to the Internal Revenue Service in the form
required by Treasury Regulation 1.1060T.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Buyer (which representations and
warranties shall survive the Closing for a period of twenty-four (24) months,
except with respect to the representations
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<PAGE>
and warranties set forth in Sections 3.16 and 3.21, which representations and
warranties shall survive for the applicable statute of limitations) as follows:
3.1 ORGANIZATION. Memphis and Southern each is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Tennessee, and neither Memphis nor Southern has operations in any other state
which would require such Seller to become qualified to do business as a foreign
corporation in any such state. SouthCom is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Mississippi, is qualified to do business as a foreign corporation in the State
of Tennessee, and does not have operations in any other state which would
require SouthCom to be qualified to do business as a foreign corporation in such
state. SouthCom has registered to use the assumed name of "Southern
Communications" in Tennessee. Each Seller has the power and authority to own,
lease, and operate its properties and to carry on its business in the places
where such properties are now owned, leased or operated as such business is now
conducted. Complete and correct copies of the Articles of Incorporation of each
Seller as in effect through the date hereof are attached as Schedule 3.1.
------------
3.2 AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance of this Agreement and all of the documents and instruments required
hereby by each Seller and the consummation by each Seller of the transactions
contemplated hereby and thereby, are within the corporate power of each Seller
and have been duly authorized by all necessary action by each Seller. This
Agreement is, and the other documents and instruments required hereby will be,
when executed and delivered by each Seller and the valid and binding obligations
of each Seller, enforceable against it in accordance with their respective
terms, subject only to bankruptcy, insolvency, reorganization, moratoriums or
similar laws at the time in effect affecting the enforceability or rights of
creditors generally, and by general equitable principles which may limit the
right to obtain equitable remedies.
3.3 ABSENCE OF CONFLICTING AGREEMENTS. Except as set forth on Schedule
--------
3.3, neither the execution, delivery or performance of this Agreement by each
- ---
Seller, nor with respect to Memphis and Southern, the consummation of the sale
and purchase of the Purchased Assets, or with respect to SouthCom, the
consummation of the sale and purchase of the SouthCom Assets, or any other
transaction contemplated by this Agreement, does or will, after the giving of
notice, or the lapse of time or both, or otherwise:
(a) conflict with, result in a breach of, or constitute a default under
the Articles of Incorporation of each Seller, or any federal, state or local
law, statute, ordinance, rule or regulation applicable to any Seller, or any
court or administrative order or process, or any material Contract, agreement,
arrangement, commitment or plan to which a Seller is a party or by which any
Seller is bound and which relates to the ownership or operation of the
Businesses, the Purchased Assets or the SouthCom Assets;
(b) result in the creation of any Lien upon any of the Purchased
Assets or the SouthCom Assets;
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<PAGE>
(c) terminate, amend or modify, or give any party the right to
terminate, amend, modify, abandon or refuse to perform any material Contract or
other agreement, arrangement, commitment or plan to which any Seller is a party
and which relates to, the ownership or operation of the Businesses, the
Purchased Assets or the SouthCom Assets;
(d) accelerate or modify or give any party the right to accelerate or
modify, the time within which, or the terms under which, any duties or
obligations are to be performed, or any rights or benefits are to be received,
under any material Contract or other agreement, arrangement, commitment or plan
to which any Seller is a party and which relates to the ownership or operation
of any of the Businesses, the Purchased Assets or the SouthCom Assets;
(e) require the consent, waiver, approval, permit, license, clearance
or authorization of, or any declaration or filing with, any court or
governmental or public agency or other authority; or
(f) require the consent of any Person under any material agreement,
arrangement or commitment of any nature to which any Seller is a party or bound
by or to which the Businesses, the Purchased Assets or the SouthCom Assets are
bound or subject.
3.4 PURCHASED ASSETS. The Purchased Assets include: (a) all of the assets,
properties and rights of every type and description, real, personal and mixed,
tangible and intangible, that are necessary for, used or useable in the conduct
of the Businesses of Memphis and Southern in the manner in which those
Businesses have been and are now conducted, but excluding the Retained Assets.
All inventories of supplies of every type and spare parts necessary or
appropriate for the operation of the Businesses are at levels substantially
consistent with their past operations, subject to monthly and seasonal
variances.
3.5 TITLE TO PURCHASED ASSETS AND SOUTHCOM ASSETS; LIENS AND ENCUMBRANCES.
Except as set forth on Schedule 3.5, Sellers own good and marketable title to or
------------
have valid leasehold interests in all of the respective Purchased Assets and
SouthCom Assets (other than the Real Property as to which the provisions of
Section 3.9 apply) free and clear of any and all Liens, except for Permitted
Liens.
3.6 CONDITION OF EQUIPMENT. Except as set forth on Schedule 3.6:
------------
(a) each material item of Equipment and SouthCom Equipment is in good
condition and repair, ordinary wear and tear excepted, is fit for operation in
its intended use and is not in need of imminent repair or replacement;
(b) the Equipment includes all items of tangible personal property
utilized by Memphis and Southern in connection with owning and operating their
respective Businesses;
(c) Schedule 1.5 (and by reference, Schedule 1.12) contains a true and
------------ -------------
correct list of all items of tangible personal property necessary for or used in
the operation of the
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<PAGE>
respective Businesses of Memphis and Southern in the manner in which each is now
operated; and
(d) Schedule 1.12 contains a true and correct list of all of the
-------------
SouthCom Equipment; and
3.7 THE CONTRACTS. Except as set forth on Schedule 3.7:
-----------
(a) the Contracts described on Schedule 1.3 constitute all of the
------------
agreements (other than the Leases) relating to properties, undertakings or
commitments to or from third parties in the conduct of the respective Businesses
of Memphis and Southern other than agreements which are cancelable by any Seller
----- ----
or its assignee without breach or penalty on not more than thirty (30) days
notice and which involve average annual payments or receipts by any Seller of
less than $1,000 in the case of any single contract and $5,000 in the aggregate;
(b) Memphis and Southern each has performed each term, covenant and
condition of each of its respective Contracts required to be listed on Schedule
--------
1.3, and no default on the part of either Memphis or Southern, and to the
- ---
Knowledge of Sellers, any other party thereto, exists under any of the
Contracts;
(c) no event has occurred under any of the Contracts required to be
listed on Schedule 1.3 which would constitute a default thereunder on the part
------------
of Memphis or Southern and, to the Knowledge of Sellers, any other party thereto
but for the requirement that notice be given or time elapse or both;
(d) each of the Contracts listed on Schedule 1.3 is in full force and
------------
effect, unimpaired by any acts or omissions of Memphis or Southern, and
constitutes the legal and binding obligation of, and is legally enforceable
against Memphis or Southern, respectively, and to the Knowledge of Sellers,
against each other party thereto in accordance with its terms;
(e) Memphis and Southern have furnished true and complete copies of
all Contracts listed on Schedule 1.3, including all amendments, modifications
------------
and supplements thereto, and Schedule 1.3 contains summaries of the provisions
------------
of all oral contracts;
(f) the respective right, title and interest in and to the respective
Contracts of Memphis and Southern required to be listed on Schedule 1.3 is fully
------------
assignable to Buyer without the consent, approval or waiver of any other Person.
3.8 INTANGIBLE PROPERTY. Except as set forth on Schedule 3.8:
------------
(a) there are no claims, demands or proceedings instituted, pending
or, to the Knowledge of Sellers, threatened by any third party pertaining to or
challenging Memphis or Southern's right to use any of the Intangible Property or
SouthCom's right to use the SouthCom Name;
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<PAGE>
(b) there are no facts which would render any of the Intangible
Property or SouthCom's right to use the SouthCom Name invalid or unenforceable;
(c) there is no trademark, trade name, patent or copyright owned by a
third party which any Seller is using without license to do so (which licenses,
if any, constitute part of the Contracts);
(d) there are no royalty or licensing agreements between the
respective Sellers, as applicable, and any third party relating to any of the
Intangible Property or the SouthCom Name;
(e) the Intangible Property and the SouthCom Name constitute all
Copyrights, Trademarks, Trade Secrets and rights in and to the
operating/business names necessary or appropriate for or used in the operation
of the Businesses; and
(f) all Copyrights and Trademarks are described, listed or set forth
on Schedules 1.4 and 1.13, respectively, all of which are transferable to Buyer
------------- ----
by the sole act of Memphis or Southern.
3.9 REAL PROPERTY. Except as set forth on Schedule 3.9:
------------
(a) SouthCom has good, marketable and insurable title in the Real
Property. Attached to Schedule 3.9 are all policies of title insurance
------------
currently existing in favor of SouthCom with respect to the Real Property.
Except for Permitted Liens, there are no Liens, restrictions or encumbrances to
title to any portion of the Real Property. SouthCom has not subjected the Real
Property to any easements, rights, duties, obligations, covenants, conditions,
restrictions, limitations or agreements not of record;
(b) No Seller has received notice of any pending condemnation or
similar proceeding affecting the Real Property or any portion thereof, and to
the Knowledge of Sellers, no such action is presently contemplated or
threatened;
(c) No Seller has received any written notice from any insurance
company of any defects or inadequacies in the Real Property or any part thereof
which would adversely affect the insurability of the Real Property or the
premiums for the insurance thereof. No Seller has received any notice from any
insurance company which has issued or refused to issue a policy with respect to
any portion of the Real Property or by any board of fire underwriters (or other
body exercising similar functions) requesting the performance of any repairs,
alterations or other work with which compliance has not been made;
(d) There are no parties in possession of any portion of the Real
Property other than Sellers, whether as lessees, tenants at will, trespassers or
otherwise;
(e) The Real Property and the present use thereof does not violate any
zoning, building, land-use or other federal, state or municipal law, ordinance,
regulation or restriction
14
<PAGE>
applicable to the Real Property. The current use of the Real Property and all
parts thereof as aforesaid does not violate any restrictive covenants affecting
the Real Property;
(f) There is no law, ordinance, order, regulation or requirement now
in existence, including, without limitation, any Environmental Law which would
require any expenditure to modify or improve any of the Real Property in order
to bring it into substantial compliance therewith;
(g) The Real Property has adequate access to and from completed,
dedicated and accepted public roads, and there is no pending or, to the
Knowledge of Sellers, threatened governmental proceeding which would impair or
curtail such access;
(h) There are presently in existence water, sewer, gas and/or
electrical lines or private systems on the Real Property which have been
completed, installed and paid for and which are sufficient to service adequately
the current operations of each building or other facility located on the Real
Property; and
(i) There are no structural, electrical, mechanical, plumbing, air
conditioning, heating or other defects in the building located on the Real
Property, and the roof of the building located on the Real Property is free from
leaks and in good condition.
3.10 THE LEASES. Except as set forth on Schedule 3.10:
-------------
(a) Leases.
------
(i) The Leases described on Schedule 1.6 constitute all of the Leases
------------
between Memphis or Southern and third parties relating to the operation of
the Businesses;
(ii) Memphis and Southern, as applicable, have performed each term,
covenant and condition of each Lease listed on Schedule 1.6 which is to be
------------
performed by Memphis or Southern at or before the date hereof, and no
default on the part of Memphis or Southern and, to the Knowledge of
Sellers, on the part of any other party thereto, exists under any Lease;
(iii) no event has occurred under any of the Leases which would
constitute a default thereunder on the part of Memphis or Southern, and to
the Knowledge of Sellers, on the part of any other party thereto but for
the requirement that notice be given or time elapse or both;
(iv) each of the Leases is in full force and effect, unimpaired by any
acts or omissions of Memphis or Southern, and constitutes the legal and
binding obligation of Memphis or Southern, as applicable, and to the
Knowledge of Sellers, any other party thereto in accordance with its terms;
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(v) Memphis and Southern have furnished true and complete copies of
the Leases to Buyer, including any and all amendments thereto;
(vi) there are no leasing commissions or similar payments due, arising
out of, resulting from or with respect to any Lease which is owed by
Memphis or Southern;
(vii) Memphis and Southern's respective rights, title and interest in
and to each of the Leases is fully assignable to Buyer without the consent,
waiver or approval of any Person; and
(viii) each of the Financing Leases are listed as such on Schedule
--------
1.6.
---
(b) Computer Financing Leases.
-------------------------
(i) The Computer Financing Leases described on Schedule 1.2 constitute
------------
all of the Computer Financing Leases between SouthCom and third parties
related to computer equipment used in the operation of the Businesses;
(ii) SouthCom has performed each term, covenant and condition of each
Computer Financing Lease listed on Schedule 1.2 which is to be performed by
------------
SouthCom at or before the date hereof, and no default on the part of
SouthCom and, to the Knowledge of Sellers, on the part of any other party
thereto, exists under any Computer Financing Lease;
(iii) no event has occurred under any of the Computer Financing Leases
which would constitute a default thereunder on the part of SouthCom and, to
the Knowledge of Sellers, on the part of any other party thereto but for
the requirement that notice be given or time elapse or both;
(iv) each of the Computer Financing Leases is in full force and
effect, unimpaired by any acts or omissions of SouthCom, and constitutes
the legal and binding obligation of SouthCom and to the Knowledge of
Sellers, any other party thereto in accordance with its terms;
(v) SouthCom has furnished true and complete copies of all the
Computer Financing Leases to Buyer, including any and all amendments
thereto;
(vi) there are no leasing commissions or similar payments due, arising
out of, resulting from or with respect to any Computer Financing Lease
which is owed by SouthCom; and
(vii) SouthCom's rights, title and interest in and to each of the
Computer Financing Leases is fully assignable to Buyer without the consent,
waiver or approval of any Person.
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3.11 FINANCIAL STATEMENTS. Attached as Schedule 3.11 with respect to
-------------
each Seller are true and complete copies of the unaudited balance sheet, as at
December 31, 1995 and April 30, 1996, and the related statements of income and
changes in cash flow for the periods then ended. The Financial Statements are
in accordance with the books and records of the Seller, have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with preceding years and present fairly in all material respects the
financial condition of each Seller as at the date indicated and the results of
its operations and changes in cash flows for the period then ended.
3.12 NO CHANGES. Except as set forth on Schedule 3.12, since April 30,
-------------
1996, there has not been any:
(a) transaction by Memphis or Southern with respect to Businesses
except in the ordinary course of business consistent with past practices
conducted as of that date;
(b) material adverse change in the financial condition, liabilities,
assets or results of operation of Memphis or Southern or the Businesses;
(c) default under any indebtedness of Memphis or Southern, or any
event which with the lapse of time or the giving of notice, or both, would
constitute such a default;
(d) amendment or termination of any Contract, Lease, Financing Lease
or Computer Financing Lease to which any Seller is a party, except in the
ordinary course of business;
(e) increase in compensation paid, payable or to become payable by
Memphis or Southern to any of their respective employees, except normal
increases arising on annual employee review consistent with past practices;
(f) extraordinary losses (whether or not covered by insurance) or
waiver by Memphis or Southern of any extraordinary rights of value;
(g) commitment to or liability to any labor organization which
represents, or proposes to represent, employees of either Business;
(h) change in either Business's accounting principles;
(i) a sale, assignment, lease or other transfer or disposition of any
of the SouthCom Assets or any of the assets or properties of either Business
except in the ordinary course of business or in connection with the acquisition
of similar property or assets in the ordinary course of business;
(j) to the Knowledge of Sellers, other event or condition of any
character, that has or might reasonably have a material adverse effect on the
financial condition, business or assets of any Seller or either Business; or
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(k) agreement by any Seller to do any of the foregoing.
3.13 SOFTWARE.
(a) All of the Software and every severable component thereof is free
of material defects in programming and operation;
(b) Except as set forth on Schedule 3.13, the Software was developed
-------------
exclusively by employees of Memphis or Southern during such time as they were
employed by Memphis or Southern. The Software does not include any inventions
or developments of such employees made prior to the time that they became
employees of Memphis or Southern and the Software does not include any
proprietary intellectual property of any previous employer of any such
employees;
(c) All right, title and interest in and to the Software is owned by
Memphis or Southern and the Software is free and clear of all liens and rights
of others and is fully transferable to Buyer, and, except as set forth on
Schedule 3.13, no Person other than Memphis or Southern has any right, title or
- -------------
interest in or to the Software, including, without limitation, any license,
contingent interest or otherwise. The development, use, sale and exploitation
of the Software by Memphis or Southern does not violate any material rights of
any other Person, and neither Memphis nor Southern has received any written
communication alleging such a violation. Except as set forth on Schedule 3.13,
-------------
neither Memphis nor Southern has obligation to compensate any Person for the
development, use, sale or exploitation of the Software, and neither Memphis nor
Southern has granted to any other Person or entity any license, option or other
right to develop, use, sell or exploit in any manner the Software, whether
requiring the payment of royalties or not;
(d) Except as set forth on Schedule 3.13, Memphis and Southern haver
-------------
kept secret the source code for, and other trade secret materials relating to,
the Software and have not disclosed any of such source code or materials to any
person or entity. To the Knowledge of Sellers, Memphis and Southern have taken
appropriate measures to protect the confidential and proprietary nature of the
Software. Except as set forth on Schedule 3.13, there have been no patents
-------------
applied for and no copyrights registered for any part of the Software. Except
as set forth in Schedule 3.13, there are no trademark rights of any person
-------------
relating to the Software; and
(e) To the Knowledge of Sellers, no person is using the Software in
violation of any of the rights thereto of Memphis and Southern.
3.14 UNDISCLOSED LIABILITIES. To the Knowledge of Sellers, neither
Memphis nor Southern has any debt, liability or obligation of any kind with
respect to its respective Business, whether accrued, absolute, contingent or
otherwise, including, without limitation, any liability or obligation on account
of taxes or any governmental charges or penalty, interest or fines, except: (i)
those liabilities reflected in the Financial Statements; (ii) liabilities
disclosed on Schedule 3.14 including any contingent liabilities; (iii)
-------------
liabilities incurred in the ordinary course of business
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(other than contingent liabilities) since April 30, 1996; and (iv) liabilities
incurred in connection with the transactions provided for in this Agreement.
3.15 NO LITIGATION; LABOR DISPUTES; COMPLIANCE WITH LAWS. Except as set
forth on Schedule 3.15:
-------------
(a) There is no decree, judgment, order, litigation at law or in
equity, arbitration proceeding or proceeding before or by any commission, agency
or other administrative or regulatory body or authority pending or, to the
Knowledge of Sellers, threatened, to which any Seller is a party or to which any
Seller, the Purchased Assets or the SouthCom Assets are subject which would have
a material adverse effect on either Business or such assets taken as whole.
There is no investigation by any commission, agency or other administrative or
regulatory body or authority pending or, to the Knowledge of Sellers,
threatened, which is specifically concerned with the operations, business or
affairs of any Seller, either Business, the Purchased Assets or the SouthCom
Assets.
(b) Neither Business is subject to or bound by any labor agreement
or collective bargaining agreement, there is no labor dispute, grievance,
controversy, strike or request for union representation pending or to the
Knowledge of Sellers threatened against any Seller relating to or affecting the
business or operations of either Business, and there has been no occurrence of
any events which would give rise to any such labor dispute, controversy, strike
or request for representation.
(c) Memphis and Southern each owns and operates, and has owned and
operated, its respective properties and assets, and carries on and conducts, and
has carried on and conducted, the business and affairs of its respective
Business in compliance with all federal, foreign, state and local laws,
statutes, ordinances, rules and regulations, and all court or administrative
orders or processes, including but not limited to Occupational Safety and Health
Administration, Equal Employment Opportunity Commission, National Labor
Relations Board and Environmental Protection Agency, a violation of which may
reasonably be expected to have a material adverse effect either Business or any
Seller's rights, assets or properties with respect thereto. Each Business
complies in all material respects with all applicable statutes, rules and
regulations pertaining to equal employment opportunity.
3.16 TAXES. Except as disclosed on Schedule 3.16:
-------------
(a) Memphis and Southern each has filed all federal, state and
local tax returns, reports and estimates for all years and periods (and portions
thereof) for which any such returns, reports and estimates were due, and any and
all amounts shown on such returns and reports to be due and payable have been
paid in full except as may be contested in good faith. All of such returns,
reports and estimates are true and complete in all respects. Memphis and
Southern each has withheld all tax required to be withheld under applicable law
and regulations, and such withholdings have either been paid to the proper
governmental agency or set aside in accounts for such purpose, or accrued,
reserved against and entered upon the books of the applicable Seller, as the
case may be;
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(b) there are, and after the date of this Agreement will be, no tax
deficiencies (including penalties and interest) of any kind assessed against or
relating to with respect to any taxable periods ending on or before, or
including, the Closing Date of a character or nature that would result in Liens
or claims on any of the Purchased Assets or the SouthCom Assets or on Buyer's
title to or use of the Purchased Assets or SouthCom Assets, or that would result
in any claim against Buyer; and
(c) Memphis and Southern each previously has elected under the Code
and has continuously maintained, for federal income tax purposes, to be taxed as
a Subchapter S corporation.
3.17 INSURANCE. Memphis and Southern each has in full force and effect
the liability and casualty insurance and errors and omissions insurance insuring
the business, properties and assets of the Businesses as described on Schedule
--------
3.17, and such insurance is for such coverage and in such amounts as is usual
- ----
and customary for businesses similar to that of the Businesses. Neither Memphis
nor Southern is in default with respect to such insurance policies, nor has
Memphis or Southern failed to give any notice or present any claim under any
policies in due and timely fashion.
3.18 BROKERS. Neither this Agreement nor the sale and purchase of the
Purchased Assets or SouthCom Assets or any other transaction contemplated by
this Agreement was induced or procured through any Person acting on behalf of or
representing any Seller as broker, finder, investment banker, financial advisor
or in any similar capacity.
3.19 EMPLOYEES. Schedule 3.19 is a true and complete list showing the
-------------
names and current annual salary rates of all employees of Memphis or Southern
which list includes for each such Person the amounts paid or payable as base
salary and describes any other compensation arrangements, including bonuses,
severance or other perquisites. Except as set forth on Schedule 3.19 hereto,
-------------
there are no employment agreements between Memphis or Southern and their
respective employees or professional service agreements not terminable at will
relating to either Business. The consummation of the transactions contemplated
under this Agreement will not cause Buyer to incur or suffer any liability
relating to, or obligation to pay, severance, termination, or other payments to
any Person or entity.
3.20 EMPLOYEE BENEFIT PLANS. Except as set forth on Schedule 3.20:
-------------
(a) No Seller has at any time maintained or been a party to or made
contributions to any Employee Benefit Plan. All Employee Benefit Plans
maintained by any Seller or to which any Seller is obligated to contribute, are,
and have in the past been, in all material respects maintained, funded and
administered in compliance with ERISA and the Code, and other applicable law; no
Plan subject to Title 4 of ERISA has been terminated; no proceedings to
terminate any Plan have been instituted under Subtitle C of Title 4 of ERISA;
no reportable event within the meaning of Section 4043 of Subtitle C of ERISA
has occurred for any Plan maintained any Seller; No Seller has withdrawn from a
multi-employer plan (as defined in Section 4001(a) of ERISA); the consummation
of the transactions contemplated hereby will
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not result in any withdrawal liability on the part of any Seller under a multi-
employer plan; no Plan or Benefit Arrangement established or maintained by any
Seller or to which any Seller is obligated to contribute has any "accumulated
funding deficiency," as defined in ERISA; and no Seller has incurred any
liability to the Pension Benefit Guaranty Corporation with respect to any Plan.
No Seller, and to the Knowledge of Sellers any plan fiduciary, have engaged in
any "prohibited transaction," as defined in Section 406 of ERISA, or in Section
4975 of the Code with respect to any Plan of any Seller.
(b) Each Seller has (i) filed or caused to be filed all returns and
reports on the Plans that it is required to file and (ii) paid or made adequate
provision for all fees, interest, penalties, assessments or deficiencies that
have become due pursuant to those returns or reports or pursuant to any
assessment or adjustment that has been made relating to those returns or
reports. All other fees, interest, penalties and assessments that are payable
by or for each Seller with respect to the Plans have been timely reported, fully
paid and discharged. There are no unpaid fees, penalties, interest or
assessments due from any Seller or from any other Person with respect to the
Plans that are or could become a Lien on any Purchased Asset or any SouthCom
Asset or could otherwise adversely affect the Business, the Purchased Assets and
the SouthCom Assets. Each Seller has collected or withheld all amounts that are
required to be collected or withheld by it to discharge its obligations with
respect to the Plans, and all of those amounts have been paid to the appropriate
governmental authority or set aside in appropriate accounts for future payment
when due. Each Seller has furnished to Buyer true and complete copies of all
documents setting forth the terms and funding of each Plan.
3.21 ENVIRONMENTAL COMPLIANCE. Except as set forth on Schedule 3.21:
-------------
(a) Each Seller has complied in all material respects and is in
compliance with, and the Real Property and all improvements thereon are in
material compliance with, all Environmental Laws.
(b) No Seller is a party to any litigation or administrative
proceeding or, to the Knowledge of Sellers, is any litigation or administrative
proceeding threatened against it, which in either case (i) asserts or alleges
that such Seller violated any Environmental Laws, (ii) asserts or alleges that
such Seller is required to clean up, remove or take remedial or other response
action due to the disposal, depositing, discharge, leaking or other release of
any Hazardous Materials at the Real Property or (iii) asserts or alleges that
such Seller is required to pay all or a portion of the cost of any past, present
or future cleanup, removal or remedial or other response action which arises out
of or is related to the disposal, depositing, discharge, leaking or other
release of any Hazardous Materials at the Real Property.
(c) With respect to the period during which SouthCom owned or
occupied the Real Property, and, to the Knowledge of Sellers with respect to the
time before SouthCom owned or occupied any Real Property, no Person has caused
or permitted Hazardous Materials to be stored, deposited, treated, recycled or
disposed of on, under or at the Real Property which Hazardous Materials, if
known to be present, would require cleanup, removal or some other remedial
action under any Environmental Laws.
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(d) There are not now, nor to the Knowledge of Sellerrs have there
previously been, tanks or other facilities on, under, or at the Real Property
which contained any Hazardous Materials which, if known to be present in soils
or ground water, would require cleanup, removal or some other remedial action
under Environmental Laws.
(e) There are no conditions existing currently at the Real Property
which would subject any Seller to damages, penalties, injunctive relief or
cleanup costs under any Environmental Laws or which require or are likely to
require cleanup, removal, remedial action or other response pursuant to
Environmental Laws by any Seller.
(f) No Seller is subject, as a result of its interest in the Real
Property, to any judgment, order or citation related to or arising out of any
Environmental Laws and no Seller has been named or listed as a potentially
responsible party by any governmental body or agency in a matter related to or
arising out of any Environmental Laws.
(g) SouthCom has been duly issued, and currently has and will
maintain through the Closing Date, all permits, licenses, certificates and
approvals required under any Environmental Law. A true and complete list of such
permits, licenses, certificates and approvals, all of which are valid and in
full force and effect, is set out in Schedule 3.21. Except in accordance with
-------------
such permits, licenses, certificates and approvals, there has been no discharge
of any Hazardous Materials or any other material regulated by such permits,
licenses, certificates or approvals.
3.22 DISCLOSURE. No statement of fact by any Seller or the Sellers
collectively contained in this Agreement and no written statement of fact
furnished or to be furnished by any Seller or the Sellers collectively to Buyer
pursuant to or in connection with this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements herein or therein contained not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers (which representations and
warranties shall survive the Closing for a period of twenty-four (24) months) as
follows:
4.1 ORGANIZATION. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and on the
Closing Date, the Buyer will be duly qualified to do business as a foreign
corporation in Tennessee, and Buyer has full corporate power to purchase the
Purchased Assets pursuant to this Agreement.
4.2 AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance of this Agreement and all of the documents and instruments required
herein by Buyer and the consummation by Buyer of the transactions contemplated
hereby and thereby, are within the
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corporate power of Buyer and have been duly authorized by all necessary
corporate action by Buyer. This Agreement is, and the other documents and
instruments required hereby will be, when executed and delivered by Buyer the
valid and binding obligations of Buyer enforceable against Buyer in accordance
with their respective terms, subject only to bankruptcy, insolvency,
reorganization, moratoriums or similar laws at the time in effect affecting the
enforceability or right of creditors generally and by general equitable
principles which may limit the right to obtain equitable remedies.
4.3 ABSENCE OF CONFLICTING AGREEMENTS. Except as set forth on Schedule
--------
4.3, neither the execution, delivery or performance of this Agreement by Buyer
- ---
nor the consummation of the sale and purchase of the Purchased Assets or any
other transaction contemplated by this Agreement, does or will, after the giving
of notice, or the lapse of time, or otherwise:
(a) conflict with, result in a breach of, or constitute a default
under, the Certificate of Incorporation or Bylaws of Buyer, or any federal,
state or local law, statute, ordinance, rule or regulations applicable to Buyer,
or any court or administrative order or process, or any material contract,
agreement, arrangement, commitment or plan to which Buyer is a party or by which
Buyer or its assets is bound;
(b) require the consent, waiver, approval, permit, license, clearance
or authorization of, or any declaration or filing with, any court or
governmental or public agency; or
(c) require the consent of any person under any material Contract or
other material agreement, arrangement or commitment of any nature which Buyer is
a party to or bound by.
4.4 BROKERS. Neither this Agreement nor the sale and purchase of the
Purchased Assets or any other transaction contemplated by this Agreement was
induced or procured through any Person acting on behalf of or representing Buyer
as broker, finder, investment banker, financial advisor or in any similar
capacity.
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
5.1 COMPLIANCE WITH AGREEMENT. Each Seller shall have performed and
complied in all material respects with all of its obligations under this
Agreement which are to be performed or complied with by it prior to or at the
Closing.
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5.2 PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All proceedings to be taken
by each Seller in connection with the performance of this Agreement, and all
documents incident thereto, shall be complete to the reasonable satisfaction of
Buyer and Buyer's counsel and each Seller shall have made available to Buyer for
examination the originals or true and correct copies of all documents which
Buyer may reasonably request in connection with the transactions contemplated by
this Agreement.
5.3 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Sellers shall be true and correct in all material respects as of the
Closing Date.
5.4 DELIVERIES AT CLOSING. Each Seller shall have delivered or caused to
be delivered to Buyer the documents, each properly executed and dated as of the
Closing Date as required pursuant to Section 2.3(a).
5.5 OTHER DOCUMENTS. Each Seller shall have delivered to Buyer such
documents and certificates of officers of each Seller and public officials as
shall be reasonably requested by Buyer's counsel to establish the existence and
good standing of each Seller and the due authorization of this Agreement and the
transactions contemplated hereby by each Seller, including board of directors
and stockholders resolutions of each Seller.
5.6 INSTRUMENTS OF CONVEYANCE AND TRANSFER; GOOD TITLE. Sellers shall
deliver to Buyer at the Closing such other documents as shall be effective to
vest in Buyer good and marketable title to the Purchased Assets and the SouthCom
Assets as contemplated by this Agreement.
5.7 FINANCING LEASES. Each of the Financing Leases, other than the
Computer Financing Leases, shall be paid and satisfied in full and all Liens
associated therewith shall be released.
5.8 NON-GOVERNMENTAL CONSENTS. All permissions, approvals,
determinations, consents and waivers of all non-governmental third-parties, if
any, shall be secured as may be required by any Contract, Lease or other
agreement in connection with assignment or transfer of the Contracts, Leases,
the Purchased Assets or the SouthCom Assets to the Buyer.
5.9 GOVERNMENTAL CONSENTS. All authorizations, consents or approvals of
any and all governmental regulatory authorities necessary in connection with the
consummation of the transactions contemplated by this Agreement shall have been
obtained and be in full force and effect.
5.10 ABSENCE OF INVESTIGATIONS AND PROCEEDINGS. Except as set forth on
Schedule 5.10, no action or proceeding or formal investigation by any Person or
- -------------
governmental agency shall be pending with the object of challenging or
preventing the Closing and no other proceedings shall be pending with such
object or to collect damages from Buyer on account thereof.
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5.11 ABSENCE OF LIENS. On the Closing Date and simultaneously with the
Closing, there shall not be any Liens on the Purchased Assets or the SouthCom
Assets, except for Permitted Liens.
If any of the conditions set forth in this Article V have not been
satisfied, Buyer may in its sole discretion nevertheless elect to proceed with
the consummation of the transactions contemplated hereby.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
Each and every obligation of Sellers to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
6.1 COMPLIANCE WITH AGREEMENT. Buyer shall have performed and complied in
all material respects with all of its obligations under this Agreement which are
to be performed or complied with by it prior to or at the Closing.
6.2 PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All proceedings, corporate
or other, to be taken by Buyer in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be complete to the
reasonable satisfaction of Sellers and their counsel, and Buyer shall have made
available to Sellers for examination the originals or true and correct copies of
all documents which Sellers may reasonably request in connection with the
transactions contemplated by this Agreement.
6.3 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Buyer shall be true and correct in all material respects as of the
Closing Date.
6.4 DEL4ERIES AT CLOSING. Buyer shall have delivered or caused to be
delivered to Sellers the documents, each properly executed and dated as of the
Closing Date required pursuant to Section 2.3(b). Buyer shall also have made
the payments described in Section 2.2.
6.5 OTHER DOCUMENTS. Buyer shall have delivered to Sellers such documents
and certificates of officers of Buyer and of public officials as shall be
reasonably requested by Sellers' counsel to establish the existence and good
standing of Buyer and the due authorization of this Agreement and the
transactions contemplated hereby by Buyer, including board of director
resolutions of Buyer.
6.6 ABSENCE OF INVESTIGATIONS AND PROCEEDINGS. No action or proceeding or
formal investigation by any Person or governmental agency shall be pending with
the object of challenging or preventing the Closing and no other proceedings
shall be pending with such object or to collect damages from any Seller on
account thereof.
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6.7 GOVERNMENTAL CONSENTS. All material authorizations, consents or
approvals of any and all governmental regulatory authorities necessary in
connection with the consummation of the transactions contemplated by this
Agreement shall have been obtained and be in full force and effect.
If any of the conditions set forth in this Article VI have not been
satisfied, Seller may nevertheless elect to proceed with the consummation of the
transactions contemplated hereby.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATION BY SELLERS.
(a) Sellers jointly and severally shall indemnify and hold Buyer and
Buyer's employees, officers, directors and stockholders (collectively, "Buyer
-----
Indemnified Parties") harmless from and against, and agree promptly to defend
- -------------------
Buyer from and reimburse Buyer Indemnified Parties for, any and all losses,
damages, costs, expenses, liabilities, obligations and claims of any kind
(including, without limitation, reasonable attorneys' fees and other legal costs
and expenses) which Buyer Indemnified Parties may at any time suffer or incur,
or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by any Seller in or pursuant to this Agreement, or in any
instrument, certificate or affidavit delivered by any Seller at the Closing in
accordance with the provisions of any Section hereof;
(ii) any failure by any Seller to carry out, perform, satisfy
and discharge any of its covenants, agreements, undertakings, liabilities or
obligations under this Agreement or under any of the documents and materials
delivered by any Seller pursuant to this Agreement;
(iii) the Retained Liabilities or the Retained Assets;
(iv) the operation or ownership of the Businesses, the
Purchased Assets or the SouthCom Assets prior to the Closing (except for the
Assumed Liabilities); or
(v) any suit, action or other proceeding brought by any
governmental authority or Person arising out of, or in any way related to, any
of the matters referred to in Sections 7.1(a)(i), 7.1(a)(ii), 7.1(a)(iii), or
7.1(a)(iv).
(b) The amounts for which Sellers shall be liable under Section
7.1(a) of this Agreement shall be net of (i) any insurance proceeds payable to
Buyer Indemnified Parties in connection with the facts giving rise to the right
of indemnification and (ii) any tax benefits received by or accruing to the
Buyer Indemnified Parties.
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(c) Notwithstanding any other provision to the contrary, Sellers
shall not be required to indemnify and hold harmless Buyer Indemnified Parties
pursuant to Section 7.1(a)(i) or 7.1(a)(v) (to the extent applicable to Section
7.1(a)(i)), unless:
(i) Buyer has asserted a claim with respect to such matters
within twenty-four (24) months after the Closing, except with respect to matters
arising under Section 3.16 or 3.21 hereof, in which event Buyer must have
asserted a claim within the applicable statute of limitations; and
(ii) such claims for indemnification exceed an aggregate of
$15,000, at which time Sellers shall pay all such claims up to a maximum amount
equal to the Purchase Price (after adjustment to the Cash Purchase Price portion
of the Purchase Price pursuant to Section 2.4).
7.2 INDEMNIFICATION BY BUYER.
(a) Buyer shall indemnify and hold each Seller and its respective
employees, officers, directors and stockholders (collectively, "Seller
------
Indemnified Parties") harmless from and against, and agrees to promptly defend
- -------------------
Seller Indemnified Parties from and reimburse Seller Indemnified Parties for,
any and all losses, damages, costs, expenses, liabilities, obligations and
claims of any kind (including, without limitation, reasonable attorneys' fees
and other legal costs and expenses) which Seller Indemnified Parties may at any
time suffer or incur, or become subject to, as a result of or in connection
with:
(i) any breach or inaccuracy of any representations and
warranties made by Buyer in or pursuant to this Agreement, or in any certificate
or affidavit delivered by Buyer at the Closing in accordance with the provisions
of any Section hereof;
(ii) any failure by Buyer to carry out, perform, satisfy and
discharge any of its covenants, agreements, undertakings, liabilities or
obligations under this Agreement or under any of the documents and materials
delivered by Buyer pursuant to this Agreement;
(iii) the Assumed Liabilities;
(iv) the operation and ownership of the Businesses, the
Purchased Assets or the SouthCom Assets by Buyer from and after the Closing
Date; or
(v) any suit, action or other proceeding brought by any
governmental authority or person arising out of, or in any way related to, any
of the matters referred to in Sections 7.2(a)(i), 7.2(a)(ii) or 7.2(a)(iii) or
7.2(a)(iv).
(b) The amounts for which Buyer shall be liable under Section 7.2(a)
of this Agreement shall be net of (i) any insurance proceeds receivable by
Sellers from their own insurance policies in connection with the facts giving
rise to the right of indemnification and (ii) any tax benefits received by or
accruing to the Seller Indemnified Parties.
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(c) Notwithstanding any other provision to the contrary, Buyer shall
not be required to indemnify and hold harmless Seller Indemnified Parties
pursuant to Section 7.2(a)(i) or 7.2(a)(v) to the extent applicable to Section
7.2(a)(i), unless such Seller has asserted a claim with respect to such matters
within twenty-four (24) months after the Closing.
7.3 NOTIFICATION OF CLAIMS.
(a) A party entitled to be indemnified pursuant to Section 7.1 or 7.2
(the "Indemnified Party") shall notify the party liable for such indemnification
-----------------
(the "Indemnifying Party") in writing of any claim or demand which the
------------------
Indemnified Party has determined has given or could give rise to a right of
indemnification under this Agreement. Subject to the Indemnifying Party's right
to defend in good faith third party claims as hereinafter provided, the
Indemnifying Party shall satisfy its obligations under this Article VII within
thirty (30) days after the receipt of written notice thereof from the
Indemnified Party.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any claim or demand pursuant to Section 7.3(a), and if such claim or demand
relates to a claim or demand asserted by a third party against the Indemnified
Party which the Indemnifying Party acknowledges is a claim or demand for which
it must indemnify or hold harmless the Indemnified Party under Section 7.1 or
7.2, the Indemnifying Party shall have the right to employ counsel acceptable to
the Indemnified Party to defend any such claim or demand asserted against the
Indemnified Party. The Indemnified Party shall have the right to participate in
the defense of any such claim or demand at its own expense. The Indemnifying
Party shall notify the Indemnified Party in writing, as promptly as possible
(but in any case before the due date for the answer or response to a claim)
after the date of the notice of claim given by the Indemnified Party to the
Indemnifying Party under Section 7.3(a) of its election to defend in good faith
any such third party claim or demand. So long as the Indemnifying Party is
defending in good faith any such claim or demand asserted by a third party
against the Indemnified Party, the Indemnified Party shall not settle or
compromise such claim or demand. The Indemnified Party shall make available to
the Indemnifying Party or its agents all records and other materials in the
Indemnified Party's possession reasonably required by it for its use in
contesting any third party claim or demand. Whether or not the Indemnifying
Party elects to defend any such claim or demand, the Indemnified Party shall
have no obligations to do so.
ARTICLE VIII
FURTHER AGREEMENTS
8.1 EMPLOYEES. Buyer may at any time approach employees of Memphis or
Southern and make arrangements or enter into agreements with such employees
concerning becoming employees of the Buyer, although Buyer assumes by this
Agreement no obligation to employ or continue the employment of any Person after
the Closing. It is Buyer's intention as of the date hereof to make such
arrangements will substantially all of the employees of Memphis and/or Southern,
but specifically excluding John Clarke. Memphis and Southern agree to fully
cooperate
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with the Buyer in connection with its offer to hire any such employees and will
not take any action, directly or indirectly, to prevent any employee from
becoming employed by Buyer from and after the Closing. Memphis and Southern
agree that for a period of twelve (12) months following the Closing, they shall
not solicit or induce any employee to remain in or return to the employment of
any Seller or otherwise attempt to retain or obtain the services of any such
employee. Sellers shall be solely responsible for and shall pay all salaries and
other compensation (including, but not limited to, any deferred or incentive
compensation and any severance pay) which will or may become payable at any time
in the future to any employee for services rendered by such employee to any
Seller on or before the Closing Date.
8.2 COOPERATION; CONSENTS AND APPROVALS. If any consents, approvals or
authorizations of any type required pursuant to Section 5.8 and/or 5.9 hereof
are not secured as of the Closing Date, after the Closing Date Buyer and Sellers
will cooperate in all respects and Sellers shall use their good faith best
efforts in order to: (a) secure any nongovernmental approvals, consents and
waivers of third parties necessary for the assignment of the Contracts and
Leases to Buyer and the transfer of the Purchased Assets and SouthCom Assets
from Sellers to Buyer; and (b) give notices to any governmental authority, and
secure the permission, approval, determination, consent or waiver of any
governmental authority, required by law in connection with the transfer of the
Purchased Assets and the SouthCom Assets from Sellers to Buyer.
8.3 FURTHER ASSURANCES. From time to time after the Closing Date, upon
the reasonable request of Buyer, Sellers shall execute and deliver or cause to
be executed and delivered such further instruments of conveyance, assignment and
transfer and take such further action as Buyer may reasonably request in order
more effectively to sell, assign, convey, transfer, reduce to possession and
record title to any of the Purchased Assets. Sellers agree to cooperate with
Buyer in all reasonable respects to assure to Buyer the continued title to and
possession of the Purchased Assets in the condition and manner contemplated by
this Agreement.
8.4 BULK TRANSFER. Buyer and Sellers hereby waive compliance with the
Bulk Transfer provisions of the Uniform Commercial Code of the State of
Tennessee and all similar laws. Except for the Assumed Liabilities, each Seller
shall promptly pay and discharge when and as due all liabilities and obligations
arising out of or relating to its ownership, operation and sale of its Business.
Except for the Assumed Liabilities, Sellers hereby agree to indemnify, defend
and hold Buyer harmless from and against any and all liabilities, losses, costs,
damages or causes of action (including, without limitation, reasonable attorney
fees and other legal costs and expenses) arising out of or relating to claims
asserted against Buyer pursuant to the Bulk Transfer provisions of the Uniform
Commercial Code of Tennessee or any similar law.
ARTICLE IX
MISCELLANEOUS
9.1 ENTIRE AGREEMENT; AMENDMENT; AND WAIVERS. This Agreement and the
documents referred to herein and to be delivered pursuant hereto constitute the
entire agreement
29
<PAGE>
between the parties pertaining to the subject matter hereof, and supersede all
prior and contemporaneous agreements, understandings, negotiations and
discussions of the parties, whether oral or written, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof, except as specifically set forth
herein. No amendment, supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision or breach of this Agreement,
whether or not similar, unless otherwise expressly provided.
9.2 SURVIVAL. The obligations to indemnify contained in Article VII
hereof, the agreements contained herein and, as limited by the introductory
paragraphs of Articles 3 and 4 hereof, the representations and warranties
made in this Agreement or made pursuant hereto shall survive the Closing and the
consummation of the transactions contemplated by this Agreement, and shall
survive any independent investigation by Buyer or Sellers, and any dissolution,
merger or consolidation of Buyer or any Seller and shall bind the legal
representatives, assigns and successors of Buyer and such Seller.
9.3 EXPENSES. Except as otherwise specifically provided herein, whether
or not the transactions contemplated by this Agreement are consummated, each of
the parties hereto shall pay the fees and expenses of its respective counsel,
accountants and other experts incident to the negotiation and preparation of
this Agreement and consummation of the transactions contemplated hereby. The
cost of a title search shall be paid by Sellers. The cost of title insurance
and transfer fees relating to the Real Property shall be paid by Buyer.
9.4 BENEFIT; ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of and shall be enforceable by Buyer and Sellers and their
respective successors and assigns. This Agreement shall not be assigned by any
party without the prior written consent of the other party; provided, however,
-------- -------
that Buyer may, without such consent, assign any or all of its rights and
obligations under this Agreement to any corporation, partnership, limited
liability company or joint venture controlled by or under common control with
Buyer.
9.5 NOTICES. All communications or notices required or permitted by this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of the other party, or
when sent by telecopy or facsimile machine to the number shown below, or when
properly deposited for delivery by commercial overnight delivery service,
prepaid, or by deposit in the United States mail, certified or registered mail,
postage prepaid, return receipt requested, and addressed as follows, unless and
until either of such parties notifies the other in accordance with this Section
of a change of address or change of telecopy number:
30
<PAGE>
If to Buyer: IXL ACQUISITION CORP.
3060 Peachtree Rd., Suite 340
Atlanta, Georgia 30305
Attention: James Rocco, President
Telephone No.: (404) 351-4518
Telecopy No.: (404) 350-9823
With a copy to: MINKIN & SNYDER, P.C.
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy No.: (404) 261-5064
If to Sellers: MEMPHIS ON LINE, INC.
SOUTHERN ON LINE SYSTEMS, INC.
SOUTHERN COMMUNICATIONS, INC.
3160 Directors Row
Memphis, Tennessee 38131
Attention: Jeffrey Stewart
Telephone No.: (901) 345-9999
Telecopy No.: (901) 345-9992
With a copy to: THE BOGATIN LAW FIRM
860 Ridge Lake Blvd., Suite 360
Memphis, Tennessee 38120
Attention: Matthew Cavitch, Esq.
Telephone No.: (901) 767-1234
Telecopy No.: (901) 767-2803
9.6 COUNTERPARTS; HEADINGS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Article and
Section headings in this Agreement are inserted for convenience of reference
only and shall not constitute a part hereof.
9.7 INCOME TAX POSITION. Neither Buyer nor Sellers shall take a position
for income tax purposes which is inconsistent with this Agreement.
9.8 SEVERABILITY. If any provision, clause or part of this Agreement or
the application thereof under certain circumstances is held invalid, or
unenforceable, the remainder of this Agreement, or the application of such
provision, clause or part under other circumstances, shall not be affected
thereby.
31
<PAGE>
9.9 NO RELIANCE. Except for (i) any assignees permitted by Section 9.3 of
this Agreement and (ii) lenders providing financing for the consummation of the
transactions contemplated by this Agreement:
(a) no third party is entitled to rely on any of the representations,
warranties or agreements of Buyer or Seller contained in this Agreement; and
(b) Buyer and Seller assume no liability to any third party because
of any reliance on the representations, warranties or agreements of Buyer and
Seller contained in this Agreement.
9.10 GOVERNING LAW. This Agreement shall be construed and interpreted
according to the laws of the State of Georgia without regard to the conflict of
law principles thereof.
32
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Purchase and Sale
Agreement as of the day and year first above written.
IXL ACQUISITION CORP.
By: /s/ James V. Sandry
----------------------------------------
Name: James V. Sandry
Title: Executive Vice President
MEMPHIS ON LINE, INC.
By: /s/ Jeff Stewart
-----------------------------------------
Name: Jeff Stewart
Title: President
SOUTHERN ON LINE SYSTEMS, INC.
By: /s/ Jeff Stewart
-----------------------------------------
Name: Jeff Stewart
Title: President
SOUTHERN TEL SUPPLY, INC.
By: /s/ Steve Gill
-----------------------------------------
Name: Steve Gill
Title: President
33
<PAGE>
EXHIBIT LIST (Memphis On Line)
------------
Assumption Agreement............................................. Exhibit A
Bill of Sale and Assignment...................................... Exhibit B
Buyer's Closing Certificate...................................... Exhibit C
Assignment and Assumption of Contracts........................... Exhibit D
Indemnity Guaranty Agreement..................................... Exhibit E
Assignment and Assumption of Leases.............................. Exhibit F
Non-Competition Agreement........................................ Exhibit G
Seller's Closing Certificate..................................... Exhibit H
Trademark Assignment............................................. Exhibit I
<PAGE>
SCHEDULE 1.1
------------
ASSUMED LIABILITIES
SCHEDULE 1.2
------------
COMPUTER FINANCING LEASES
SCHEDULE 1.3
------------
CONTRACTS
SCHEDULE 1.4
------------
COPYRIGHTS
SCHEDULE 1.5
------------
EQUIPMENT
SCHEDULE 1.6
------------
LEASES
SCHEDULE 1.7
------------
MOTOR VEHICLES
1
<PAGE>
SCHEDULE 1.8
------------
PERMITTED LIENS
SCHEDULE 1.9
------------
REAL PROPERTY
SCHEDULE 1.10
-------------
RETAINED ASSETS
SCHEDULE 1.11
-------------
COMPUTER SOFTWARE PROGRAMS
SCHEDULE 1.12
-------------
SOUTHCOM EQUIPMENT
SCHEDULE 1.13
-------------
TRADEMARKS
SCHEDULE 2.7
------------
ALLOCATION OF PURCHASE PRICE
2
<PAGE>
SCHEDULE 3.1
------------
ARTICLES OF INCORPORATION OF EACH SELLER
SCHEDULE 3.3
------------
EXCEPTIONS TO ABSENCE OF CONFLICTING AGREEMENTS
SCHEDULE 3.5
------------
TITLE TO PURCHASED ASSETS AND SOUTHCOM ASSETS; LIENS AND ENCUMBRANCES
SCHEDULE 3.6
------------
EXCEPTIONS TO GOOD CONDITION OF EQUIPMENT
SCHEDULE 3.7
------------
EXCEPTIONS TO CONTRACTS
SCHEDULE 3.8
------------
EXCEPTIONS TO INTANGIBLE PROPERTY
SCHEDULE 3.9
------------
EXCEPTIONS TO REAL PROPERTY
3
<PAGE>
SCHEDULE 3.10
-------------
EXCEPTIONS TO LEASES
SCHEDULE 3.11
-------------
FINANCIAL STATEMENTS
SCHEDULE 3.12
-------------
EXCEPTIONS TO NO CHANGES
SCHEDULE 3.13
-------------
EXCEPTIONS TO SOFTWARE
SCHEDULE 3.14
-------------
UNDISCLOSED LIABILITIES
SCHEDULE 3.15
-------------
LITIGATION; LABOR DISPUTES; COMPLIANCE WITH LAWS
SCHEDULE 3.16
-------------
EXCEPTIONS TO TAXES BEING TIMELY FILED AND PAID
4
<PAGE>
SCHEDULE 3.17
-------------
INSURANCE
SCHEDULE 3.19
-------------
EMPLOYEES
SCHEDULE 3.20
-------------
EMPLOYEE BENEFIT PLANS
SCHEDULE 3.21
-------------
EXCEPTIONS TO ENVIRONMENTAL COMPLIANCE
SCHEDULE 4.3
------------
EXCEPTIONS TO ABSENCE OF CONFLICTING AGREEMENTS
SCHEDULE 5.10
-------------
EXCEPTIONS TO ABSENCE OF INVESTIGATIONS AND PROCEEDINGS
5
<PAGE>
EXHIBIT 2.6
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
IXL MERGER CORP.,
IXL HOLDINGS, INC.,
CONSUMER FINANCIAL NETWORK, INC.
MELLETT, REENE & SMITH, LLC
DEREK V. SMITH,
MICHAEL W. REENE
AND
EDWIN R. MELLETT
DATED AS OF DECEMBER 13, 1996
<PAGE>
EXHIBITS
--------
Sub's Closing Certificate............................................. Exhibit A
CFN's Closing Certificate............................................. Exhibit B
Merger Certificates................................................... Exhibit C
i
<PAGE>
SCHEDULES
---------
<TABLE>
<S> <C>
Certificate of Incorporation of Surviving Corporation.............................. Schedule 3.1
Articles of Incorporation and Bylaws of CFN........................................ Schedule 5.1(a)
Articles of Organization and Operating Agreement of MRS............................ Schedule 5.1(b)
Absence of Conflicting Agreements.................................................. Schedule 5.4
Title to CFN Assets................................................................ Schedule 5.6
The Contracts...................................................................... Schedule 5.7(a)
Exceptions to Contracts............................................................ Schedule 5.7(b)
Intangible Property................................................................ Schedule 5.8(a)
Exceptions to Intangible Property.................................................. Schedule 5.8(b)
No Litigation; Labor Disputes; Compliance with Laws................................ Schedule 5.9
Insurance.......................................................................... Schedule 5.11
Employees.......................................................................... Schedule 5.13
Conflicting Agreements............................................................. Schedule 6.3
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into this 13th day of
December, 1996, by and between CONSUMER FINANCIAL NETWORK, INC., a Georgia
corporation ("CFN"); MELLETT, REENE & SMITH, LLC, a Georgia limited liability
partnership ("MRS"); DEREK V. SMITH ("Smith"); MICHAEL W. REENE ("Reene"); EDWIN
R. MELLETT ("Mellett"); IXL HOLDINGS, INC., a Delaware corporation ("Parent");
and IXL MERGER CORP., a Delaware corporation, or its successors or assigns
("Sub").
R E C I T A L S:
- - - - - - - -
A. CFN is engaged in the business of Internet-based insurance brokerage.
B. 100% of the outstanding capital stock of CFN is owned by MRS.
C. 100% of the outstanding membership interests in MRS are owned by Smith,
Reene and Mellett.
D. CFN and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein.
E. The respective Boards of Directors of Parent, Sub and CFN deem it
advisable and in the best interests of their respective corporations and
respective stockholders that Sub and CFN merge with each other pursuant to the
Georgia Business Corporation Code and the Delaware General Corporation Law, with
Sub as the surviving corporation, as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. When used in this Agreement, the following terms shall
have the meanings specified:
"AGREEMENT" shall mean this Agreement and Plan of Merger, together with the
Schedules and the Exhibits attached hereto, as the same shall be amended from
time to time in accordance with the terms hereof;
"AMENDMENT TO STOCKHOLDERS AGREEMENT" shall mean the First Amendment to
Stockholders Agreement dated of even date herewith among the stockholders of
Parent.
<PAGE>
"BUSINESS" shall mean the business operations of CFN;
"CFN GROUP" shall mean CFN, the CFN Shareholder, Mellett, Reene and
Smith;
"CFN SHAREHOLDER" shall mean MRS;
"CFN ASSETS" shall mean the right, title and interest of CFN in and to
all assets used in the Business;
"CFN STOCK" shall mean one thousand eight hundred seventy six (1,876)
shares of the no par value common capital stock of CFN;
"CFN'S CLOSING CERTIFICATE" shall mean the certificate delivered by
CFN to Sub at the Closing, in the form of Exhibit B attached hereto;
---------
"CLOSING" shall mean the conference to be held at 10:00 a.m., Atlanta,
Georgia time on the Closing Date at the offices of Minkin & Snyder, P.C.,
One Buckhead Plaza, 3060 Peachtree Road, Suite 1100, Atlanta, Georgia
30305, or at such other time and place as the parties may mutually agree to
in writing, at which the transactions contemplated by this Agreement shall
be consummated;
"CLOSING DATE" shall mean the date hereof;
"COPYRIGHTS" shall mean all copyrights and copyright applications
owned by CFN or related to the Business;
"EFFECTIVE TIME" shall have the meaning set forth in Section 1.3
hereof;
"INTANGIBLE PROPERTY" shall mean (a) the Copyrights, (b) the
Trademarks, (c) the Trade Secrets, and (d) all goodwill associated
therewith;
"KNOWLEDGE OF CFN" shall mean the actual knowledge of Joseph Switzer,
or the knowledge he would have possessed upon reasonable investigation of
the affairs and operations of the Business;
"LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation,
security interest, encumbrance, claim, lien, lease (including any
capitalized lease) or charge of any kind, whether voluntarily incurred or
arising by operation of law or otherwise, affecting any assets or property
of CFN or the Business, and any agreement to give or grant any of the
foregoing;
"MERGER" shall mean the merger between CFN and Sub as contemplated by
this Agreement;
2
<PAGE>
"MERGER CERTIFICATES" shall mean the Certificates of Merger, in the
form of Exhibit A attached hereto, to be dated of even date herewith, filed
---------
with the Secretary of State of Delaware and the Secretary of State of
Georgia;
"PARENT" shall mean IXL Holdings, Inc., a Delaware corporation;
"PARENT STOCK" shall mean Five Hundred (500) shares of the Class B
Common Stock, $.01 par value per share, of Parent;
"PERSON" shall mean any natural person, general or limited
partnership, corporation, limited liability company, firm, association or
other legal entity;
"STOCKHOLDERS AGREEMENT" shall mean the Stockholders Agreement, dated
April 30, 1996, as amended by and among Parent and the other parties
thereto;
"SUB'S CLOSING CERTIFICATE" shall mean the certificate delivered by
Sub to CFN at Closing, in the form of Exhibit C attached hereto;
---------
"SURVIVING CORPORATION" shall have the meaning set forth in Section
2.1 hereof.
"TRADE SECRETS" shall mean all proprietary information of the CFN
relating to the Business;
"TRADEMARKS" shall mean all of those trade names, trademarks, service
marks, logos, trademark and service mark registrations and trademark and
service mark applications owned, used, held for use, licensed by or leased
by CFN relating to the Business;
1.2 SINGULAR/PLURAL; GENDER. Where the context so requires or
permits, the use of the singular form includes the plural, and the use of
the plural form includes the singular, and the use of any gender includes
any and all genders.
ARTICLE II
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions hereof,
at the Effective Time, CFN shall be merged with and into Sub, and the
separate existence of CFN shall thereupon cease, and Sub shall continue as
the surviving corporation in the Merger under the laws of the State of
Delaware under the name set forth in the Certificate of Incorporation of
Sub. For purposes of this Agreement, Sub shall be referred to, for the
period commencing on the Effective Time, as the "Surviving Corporation".
2.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become effective
upon the filing of the respective Merger Certificates with the Secretary of
State of Delaware and the Secretary of State of Georgia, in accordance with
the provisions of the Delaware General Corporation Law
3
<PAGE>
(the "DGCL") and the Georgia Business Corporation Code ("GBCC"), or at such
other time as Sub and CFN shall agree should be specified in the
Certificate of Merger. When used in this Agreement, the term "Effective
Time" shall mean the time at which the Merger Certificate is accepted for
filing by the Secretary of State of Delaware and Secretary of State of
Georgia or such time as otherwise specified in the Merger Certificates.
2.3 EFFECT OF THE MERGER. The Merger shall, from and after the
Effective Time, have all the effects provided by the DGCL and GBCC. If at
any time after the Effective Time, any further action is deemed necessary
or desirable to carry out the purposes of this Agreement, the parties
hereto agree that the Surviving Corporation and its proper officers and
directors shall be authorized to take, and shall take, any and all such
action.
ARTICLE III
THE SURVIVING CORPORATION
3.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
of the Sub, a copy of which is attached hereto as Schedule 3.1, shall be
------------
the Certificate of Incorporation of the Surviving Corporation after the
Effective Time, until thereafter changed or amended as provided therein or
by applicable law.
3.2 BYLAWS. The Bylaws of the Sub as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law.
3.3 BOARD OF DIRECTORS; OFFICERS. The Board of Directors and
officers of the Sub immediately prior to the Effective Time shall be the
Board of Directors and officers, respectively, of the Surviving
Corporation, until the earlier of their respective resignations or the time
that their respective successors are duly elected or appointed and
qualified.
ARTICLE IV
CONVERSION OF SHARES
4.1 MERGER CONSIDERATION. As of the Effective Time, by virtue of the
Merger and without any action on the part of any stockholder of CFN or Sub:
(a) All shares of CFN Stock held by CFN shall be canceled and
retired and shall cease to exist, and no consideration shall be delivered
in exchange therefor;
(b) Each issued and outstanding share of CFN Stock (other than
any Dissenting Shares, as defined in Section 4.2) shall be canceled and
retired and shall cease to exist;
4
<PAGE>
(c) The CFN Shareholder shall receive .267 shares of the Class
B Common Stock of Parent for each share of CFN Stock owned by the CFN
Shareholder and canceled pursuant to Section 4.1(b); and
(d) Each issued and outstanding share of common stock of Sub
shall be converted into and become one fully paid and nonassessable share
of common stock of the Surviving Corporation.
4.2 DISSENTING SHARES. Notwithstanding anything in this Agreement to
the contrary, no issued and outstanding share of CFN Stock held by a
stockholder of CFN who objects to the Merger and complies with all of the
provisions of the DGCL and GBCC concerning the right of holders of CFN
Stock to dissent from the Merger and require appraisal of his shares of CFN
Stock ("Dissenting Stockholders") shall be canceled as described in Section
4.1(b), but shall instead become the right to receive such consideration as
may be determined to be due to such Dissenting Stockholder pursuant to the
DGCL and GBCC; provided, however, that each share of CFN Stock issued and
--------- -------
outstanding immediately prior to the Effective Time of the Merger and held
by a Dissenting Stockholder ("Dissenting Shares") who shall, after the
Effective Time of the Merger, withdraw his demand for appraisal or lose his
right of appraisal, in either case pursuant to the DGCL and GBCC, shall be
deemed to be canceled as of the Effective Time of the Merger, and such CFN
shareholder shall receive such shares of Parent Stock, all as set forth in
Section 4.1 hereof. CFN shall give Parent prompt notice of any written
demands for appraisal of shares of CFN Stock, and the opportunity to direct
all negotiations and proceedings with respect to any such demands. CFN
shall not, without the prior written consent of Parent, voluntarily make
any payment with respect to, or settle, or offer to settle or otherwise
negotiate, any such demands.
4.3 NO FURTHER RIGHTS. From and after the Effective Time, holders of
certificates theretofore evidencing CFN Stock shall cease to have any
rights as stockholders of CFN, except as provided herein or by law.
4.4 CLOSING OF THE CFN'S TRANSFER BOOKS. At the Effective Time, the
stock transfer books of CFN shall be closed and no transfer of CFN Stock
shall be made thereafter. If after the Effective Time, certificates for CFN
Stock are presented to Parent or the Surviving Corporation, they shall be
canceled and exchanged for an amount of Parent Stock as set forth in
Section 4.1 hereof, subject to applicable law in the case of Dissenting
Shares.
4.5 CLOSING DATE DELIVERIES. On the Closing Date:
(a) CFN shall deliver, or cause to be delivered to Parent,
properly executed and dated as of the Closing Date (i) the Merger
Certificates, (ii) CFN's Closing Certificate, (iii) the Amendment to
Stockholders Agreement, and (iv) such other documents as Parent or Sub may
reasonably request.
(b) Sub shall deliver, or cause to be delivered to CFN,
properly executed and dated as of the Closing Date (i) the Merger
Certificates, (ii) Sub's Closing Certificate, and (iii) such other
documents as CFN may reasonably request.
5
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CFN
Subject to the limitations provided in Sections 8.8(a) and (b) hereof,
each of CFN, the CFN Shareholder, Mellett, Reene and Smith, as applicable,
represent and warrant to Sub (which representations and warranties shall
survive the Closing for a period of six (6) months), as follows:
5.1 ORGANIZATION.
(a) CFN is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia, and is qualified to
do business as a foreign corporation in all jurisdictions where such
qualification is required for the operation of the Business. CFN has the
power and authority to own, lease and operate its properties and to carry
on the Business in the places where such properties are now owned, leased
or operated as the Business is now conducted. Complete and correct copies
of the Articles of Incorporation and Bylaws of CFN as in effect on the date
hereof are attached as Schedule 5.1(a) hereto.
---------------
(b) MRS is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Georgia, and
is qualified to do business as a foreign limited liability company in all
jurisdictions where such qualification is required for the operation of its
business. MRS has the power and authority to own, lease and operate its
properties and to carry on its business in the places where such properties
are now owned, leased or operated as its business is now conducted.
Complete and correct copies of the Articles of Organization and Operating
Agreement of MRS as in effect on the date hereof are attached as Schedule
--------
5.1(b) hereto.
------
5.2 CAPITALIZATION. The authorized capital stock of CFN consists of
Five Thousand (5,000) shares of common capital stock, no par value, and
Five Thousand (5,000) shares of preferred stock. As of the date hereof, (i)
1,876 shares of CFN Stock are validly issued and outstanding, fully paid
and nonassessable; (ii) all of the previously outstanding preferred stock
of CFN has been properly redeemed and canceled; (iii) there are no bonds,
debentures, notes or other indebtedness issued or outstanding having
general voting rights under ordinary circumstances; and (iv) except as
contemplated by this Agreement, there are no options, warrants, calls or
other rights, agreements or commitments presently outstanding obligating
CFN to issue, deliver or sell shares of its capital stock, or obligating
CFN to grant, extend or enter into any such option, warrant, call or other
such right, agreement or commitment.
5.3 AUTHORIZATION; ENFORCEABILITY. CFN has the necessary corporate
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby by
CFN have been duly and validly authorized and approved by CFN's Board of
Directors and the holders of the required percentage of CFN Stock and no
other corporate or stockholder proceedings on the part of CFN necessary to
authorize or approve this
6
<PAGE>
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each member of the CFN
Group and constitutes the valid and binding obligation of the members of
the CFN Group, enforceable against each member of the CFN Group in
accordance with its terms except as such enforceability may be limited by
general principles of equity or principles applicable to creditors rights
generally.
5.4 ABSENCE OF CONFLICTING AGREEMENTS. Except as set forth on Schedule
--------
5.4 hereto, neither the execution, delivery or performance of this
---
Agreement by CFN, nor the consummation of the Merger or any other
transaction contemplated by this Agreement, does or will, after the giving
of notice, or the lapse of time or both, or otherwise:
(a) conflict with, result in a breach of, or constitute a
default under the Articles of Incorporation and Bylaws of CFN, or any
federal, state or local law, statute, ordinance, rule or regulation
applicable to CFN, or any court or administrative order or process, or any
Contract or other material agreement, arrangement, commitment or plan to
which CFN is a party or by which CFN is bound, and which relates to the
ownership or operation of the Business or the CFN Assets;
(b) result in the creation of any Lien upon any of the CFN
Assets;
(c) terminate, amend or modify, or give any party the right to
terminate, amend, modify, abandon or refuse to perform any material
agreement to which CFN is a party or bound or to which the Business or the
CFN Assets are bound or subject;
(d) require the consent, waiver, approval, permit, license,
clearance or authorization of, or any declaration or filing with, any court
or governmental or public agency or other authority; or
(e) require the consent of any Person under any material
agreement to which CFN is a party or bound or to which the Business or the
CFN Assets are bound or subject.
5.5 CFN ASSETS. The CFN Assets include all of the assets, properties
and rights of every type and description that are necessary for or used in
the conduct of the Business of CFN in the manner in which the Business has
been and is now conducted.
5.6 TITLE TO CFN ASSETS. Except as set forth on Schedule 5.6 hereto,
------------
CFN owns good and marketable title to, or has valid leasehold interests in,
all of the respective CFN Assets, free and clear of any and all Liens,
other than liens for taxes not yet due and payable.
5.7 THE CONTRACTS. Schedule 5.7(a) hereto contains a list of all of
---------------
the agreements relating to the Business that involve average annual
payments or receipts by CFN of greater than One Thousand Dollars ($1,000)
(the "Contracts"). Except as set forth on Schedule 5.7(b) hereto;
---------------
7
<PAGE>
(a) no event has occurred under any of the Contracts that would
constitute a default thereunder or that, with notice or the lapse of time
or both, would constitute such a default on the part of CFN or, to the
Knowledge of CFN, on the part of any other party thereto;
(b) each of the Contracts is in full force and effect, and
constitutes the legal and binding obligation of, and is legally enforceable
against CFN, and to the Knowledge of CFN, against each other party thereto
in accordance with its terms;
(c) CFN has furnished to Parent true and complete copies of all
Contracts, including all amendments, modifications and supplements thereto,
and Schedule 5.7(a) hereto contains summaries of the provisions of all oral
---------------
contracts;
(d) all right, title and interest in and to the Contracts is
fully assignable to Sub without the consent, approval or waiver of any
other Person.
5.8 INTANGIBLE PROPERTY. Schedule 5.8(a) hereto contains a complete
---------------
and accurate list of all Intangible Property used in the Business. Except
as set forth on Schedule 5.8(b) hereto:
---------------
(a) there are no claims, demands or proceedings instituted,
pending or, to the Knowledge of CFN, threatened by any third party
pertaining to or challenging CFN's right to use any of the Intangible
Property;
(b) there are no royalty or licensing agreements relating to any
of the Intangible Property;
(c) the Intangible Property constitutes all Copyrights,
Trademarks, Trade Secrets and rights in and to the operating/business names
necessary or appropriate for or used in the operation of the Business; and
(d) all Copyrights and Trademarks included in the Intangible
Property are transferable to Sub by the sole act of CFN.
5.9 NO LITIGATION; LABOR DISPUTES; COMPLIANCE WITH LAWS. Except as
set forth on Schedule 5.9 hereto:
------------
(a) There is no decree, judgment, order, litigation at law or in
equity, arbitration proceeding or proceeding before or by any commission,
agency or other administrative or regulatory body or authority pending or,
to the Knowledge of CFN, threatened, to which CFN is a party or to which
CFN or the CFN Assets are subject which would have a material adverse
effect on the Business or the CFN Assets. There is no investigation by any
commission, agency or other administrative or regulatory body or authority
pending or, to the Knowledge of CFN, threatened, which is specifically
concerned with CFN, the Business or the CFN Assets.
(b) The Business is not subject to or bound by any labor
agreement or collective bargaining agreement, there is no labor dispute,
grievance, controversy, strike or request
8
<PAGE>
for union representation pending or to the Knowledge of CFN threatened
against CFN relating to or affecting the Business, and no events have
occurred that would give rise to any such labor dispute, controversy,
strike or request for representation.
(c) CFN owns and operates, and has owned and operated, its
properties and assets, and carries on and conducts, and has carried on and
conducted, the Business, in compliance with all material federal, foreign,
state and local laws, statutes, ordinances, rules and regulations, and all
court or administrative orders or processes.
5.10 TAXES. CFN has duly filed all federal, state and local income,
franchise, excise, real and personal property and other tax returns and
reports, including extensions (including, but not limited to, those filed
on a consolidated, combined or unitary basis), required to have been filed
by CFN prior to the date hereof, and has timely paid all amounts shown
thereon to be due and payable. As of the date hereof, all deficiencies
proposed as a result of any audits have been paid or settled.
5.11 INSURANCE. CFN has in full force and effect the liability and
casualty insurance insuring the Business and the CFN Assets attached hereto
as Schedule 5.11. CFN is not in default with respect to such insurance
-------------
policies, and CFN has not failed to give any notice or present any claim
under any policies in due and timely fashion.
5.12 BROKERS. Neither this Agreement nor the Merger or any other
transaction contemplated by this Agreement was induced or procured through
any Person acting on behalf of or representing CFN as broker, finder,
investment banker, financial advisor or in any similar capacity.
5.13 EMPLOYEES. Schedule 5.13 hereto is a true and complete list
-------------
showing the names and current annual salary rates of all employees,
consultants and independent contractors of CFN. There are no employment
agreements between CFN and their respective employees or professional
service agreements not terminable at will relating to the Business. The
consummation of the transactions contemplated under this Agreement will not
cause Sub or Parent to incur or suffer any liability relating to, or
obligation to pay, severance, termination, or other payments to any Person
or entity.
5.14 EMPLOYEE BENEFIT PLANS. CFN has not at any time maintained or
been a party to or made contributions to any Employee Benefit Plan.
5.15 ACCREDITED INVESTORS; INVESTMENT PURPOSE. Each of Mellett,
Reene and Smith represents that he is an "accredited investor" as such term
is defined in Rule 501 of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"). Each of the CFN Shareholder, and Mellett, Reene and
Smith, through their respective ownership interests in the CFN Shareholder,
is acquiring the Parent Stock solely for his or its own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof, whether directly or indirectly. Each of the CFN
Shareholder and Mellett, Reene and Smith agrees that none of them will,
directly or indirectly, offer, transfer, sell,
9
<PAGE>
pledge, hypothecate or otherwise dispose of any Parent Stock (or solicit
any offers to buy, purchase or other acquire or take a pledge of any such
shares) except in compliance with the Securities Act and the rules and
regulations thereunder, other applicable laws, rules and regulations, and
the Stockholders' Agreement.
5.16 RESTRICTIONS ON TRANSFER. The CFN Shareholder and each of
Mellett, Reene and Smith acknowledge that (i) the shares of Parent Stock
received by the CFN Shareholder hereunder have not been registered under
the Act, (ii) such shares may be required to be held indefinitely, and the
CFN Shareholder must continue to bear the economic risk of the investment
in such shares unless such shares are subsequently registered under the
Securities Act or an exemption from such registration is available, (iii)
there may not be any public market for such shares in the foreseeable
future, (iv) Rule 144 promulgated under the Securities Act is not presently
available with respect to sales of any securities of Parent and Parent has
made no covenants to make such Rule available and such Rule is not
anticipated to be available in the foreseeable future, (v) when and if such
shares may be disposed of without registration in reliance upon Rule 144,
such disposition can be made only in limited amounts and in accordance with
the terms and conditions of such Rule, (vi) if the exemption afforded by
Rule 144 is not available, public sale without registration will require
the availability of an exemption under the Securities Act, (vii)
restrictive legends shall be placed on the certificates representing such
shares, and (viii) a notation shall be made in the appropriate records of
CFN indicating that such shares are subject to restrictions on transfer
and, if CFN should in the future engage the services of a stock transfer
agent, appropriate stop-transfer instructions will be issued to such
transfer agent with respect to such shares.
5.17 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION.
Each of the CFN Shareholder, Mellett, Reene and Smith represents and
warrants that (i) his or its financial situation is such that he or it, as
the case may be, can afford to bear the economic risk of holding the Sub
Stock acquired by him or it (whether directly or indirectly) hereunder for
an indefinite period and (ii) he or it, as the case may be, can afford to
suffer the complete loss of such shares. Each of Mellett, Reene and Smith
represents and warrants that (x) he has been granted the opportunity to ask
questions of, and receive answers from, representatives of Sub and Parent
concerning the terms and conditions of the Parent Stock hereunder and to
obtain any additional information that he deems necessary, (y) his
knowledge and experience in financial business matters is such that he is
capable of evaluating the merits and risk of ownership of the Stock, and
(z) he has carefully reviewed the terms of the Stockholders' Agreement and
has evaluated the restrictions and obligations contained therein.
5.18 UNDISCLOSED LIABILITIES. Neither CFN nor the Business has any
debt, liability or obligation of any kind, whether accrued, absolute or
otherwise, including, without limitation, any liability or obligation on
account of taxes or any governmental charges or penalty, interest or fines,
except (i) liabilities incurred in the ordinary course of business since
August 31, 1996; and (ii) liabilities incurred in connection with the
transactions contemplated by this Agreement.
5.19 DISCLOSURE. No statement of fact by any member of the CFN Group
contained in this Agreement and no written statement of fact furnished or
to be furnished by any member of
10
<PAGE>
the CFN Group to Parent or Sub pursuant to or in connection with this
Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary in order to make
the statements herein or therein contained not misleading.
5.20 CONDUCT OF THE BUSINESS. Since August 31, 1996, none of Mellett,
Smith, Reene or the CFN Shareholder has taken any action that would (a)
obligate CFN or its assets or properties in any way; (b) result in the
creation of any Lien on any of the assets or properties of CFN; or (c) have
a material adverse effect on the Business or on the overall financial
condition of CFN.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to CFN
(which representations and warranties shall survive the Closing for a
period of six (6) months) as follows:
6.1 ORGANIZATION. Parent is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. Sub
is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware. Each of Parent and Sub has the
power and authority to own, lease and operate its properties and to carry
on its business in the places where such properties are now owned, leased
or operated as such business is now conducted.
6.2 AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance of this Agreement and all of the documents and instruments
required herein by Parent and Sub and the consummation by Parent and Sub of
the transactions contemplated hereby and thereby, are within the respective
corporate power of Parent and Sub and have been duly authorized by their
respective Boards of Directors, and all other necessary corporate action
has been taken by Parent and Sub. This Agreement is, and the other
documents and instruments required hereby will be, when executed and
delivered by Parent and Sub, the valid and binding obligations of Parent
and Sub, as applicable, enforceable against Parent and Sub in accordance
with their respective terms, subject only to bankruptcy, insolvency,
reorganization, moratoriums or similar laws at the time in effect affecting
the enforceability or right of creditors generally and by general equitable
principles which may limit the right to obtain equitable remedies.
6.3 ABSENCE OF CONFLICTING AGREEMENTS. Except as set forth on
Schedule 6.3, neither the execution, delivery and performance of this
------------
Agreement by Parent and Sub, nor the consummation of the Merger or any
other transaction contemplated by this Agreement, does or will, after the
giving of notice, or the lapse of time, or otherwise:
(a) conflict with, result in a breach of, or constitute a
default under, the respective Certificate of Incorporation or Bylaws of
Parent or Sub, or any federal, state or local law, statute, ordinance, rule
or regulations applicable to Parent or Sub, or any court or administrative
order or process;
11
<PAGE>
(b) require the consent, waiver, approval, permit, license,
clearance or authorization of, or any declaration or filing with, any court
or governmental or public agency; or
(c) require the consent of any person under any material
contract, agreement, arrangement or commitment of any nature which Parent
or Sub is a party to or bound by.
6.4 BROKERS. Neither this Agreement nor the Merger or any other
transaction contemplated by this Agreement was induced or procured through
any Person acting on behalf of or representing Parent or Sub as broker,
finder, investment banker, financial advisor or in any similar capacity.
6.5 PARENT STOCK. When delivered to CFN stockholders in accordance
with the terms hereof, the Parent Stock will be fully paid and
nonassessable, and free and clear of all Liens, other than liens for taxes
not yet due and payable.
6.6 REVIEW OF CFN. Without limiting the representations and
warranties of CFN set forth in Article V hereof, Parent and Sub have had
the opportunity to review the manner in which the Business operates,
including documentation with respect thereto, and have satisfied themselves
with such operations.
ARTICLE VII
FURTHER AGREEMENTS
7.1 FURTHER ASSURANCES. From time to time after the Closing Date,
upon the reasonable request of Sub, CFN shall execute and deliver or cause
to be executed and delivered such further instruments and take such further
action as Sub may reasonably request in order more effectively to
consummate fully the Merger and other transactions contemplated herein.
ARTICLE VIII
MISCELLANEOUS
8.1 ENTIRE AGREEMENT; AMENDMENT; AND WAIVERS. This Agreement and the
documents referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all prior and contemporaneous agreements,
understandings, negotiations and discussions of the parties, whether oral
or written, and there are no warranties, representations or other
agreements between the parties in connection with the subject matter
hereof, except as specifically set forth herein. No amendment, supplement,
modification, waiver or termination of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute
a waiver of any other provision or breach of this Agreement, whether or not
similar, unless otherwise expressly provided.
12
<PAGE>
8.2 EXPENSES. Except as otherwise specifically provided herein,
whether or not the transactions contemplated by this Agreement are
consummated, each of the parties hereto shall pay the fees and expenses of
its respective counsel, accountants and other experts incident to the
negotiation and preparation of this Agreement and consummation of the
transactions contemplated hereby.
8.3 BENEFIT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of and shall be enforceable by Parent, Sub and CFN and
their respective successors and assigns. This Agreement shall not be
assigned by any party without the prior written consent of the other party;
provided, however, that Sub may, without such consent, assign any or all of
-------- -------
its rights and obligations under this Agreement to any corporation,
partnership, limited liability company or joint venture controlled by or
under common control with Sub.
8.4 NOTICES. All communications or notices required or permitted by
this Agreement shall be in writing and shall be deemed to have been given
at the earlier of the date when actually delivered to an officer of the
other party, or when sent by telecopy or facsimile machine to the number
shown below, or when properly deposited for delivery by commercial
overnight delivery service, prepaid, or by deposit in the United States
mail, certified or registered mail, postage prepaid, return receipt
requested, and addressed as follows, unless and until either of such
parties notifies the other in accordance with this Section of a change of
address or change of telecopy number:
If to Parent: IXL Holdings, Inc.
1465 Northside Drive, Suite 110
Atlanta, Georgia 30318
Attention: James V. Sandry, Executive Vice President
Telephone No.: (404) 351-4518
Telecopy No.: (404) 350-9823
With a copy to: MINKIN & SNYDER, P.C.
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telephone No.: (404) 261-8000
Telecopy No.: (404) 261-5064
If to CFN, the
CFN Shareholder: CONSUMER FINANCIAL NETWORK, INC.
2022 Powers Ferry Rd., Suite 210
Attention: Joseph Switzer
Telephone No.: (404) 267-1221
Telecopy No.: (404) 355-7298
13
<PAGE>
If to Mellett: Edwin R. Mellett
725 West Conway Drive, N.W.
Atlanta, Georgia 30327
If to Reene: Michael W. Reene
704 Millport Pointe
Duluth, Georgia 30155
If to Smith: Derek V. Smith
15120 North Valleyfield Road
Alpharetta, Georgia 30201
8.5 COUNTERPARTS; HEADINGS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such
counterparts shall together constitute but one and the same Agreement. The
Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
8.6 SEVERABILITY. If any provision, clause or part of this Agreement
or the application thereof under certain circumstances is held invalid, or
unenforceable, the remainder of this Agreement, or the application of such
provision, clause or part under other circumstances, shall not be affected
thereby.
8.7 GOVERNING LAW. This Merger Agreement, except to the extent that
the DGCL or GBCC is mandatorily applicable to the Merger and the rights of
the CFN Shareholders, shall be governed in all respects by the laws of the
State of Georgia (without giving effect to the provisions thereof relating
to conflicts of law).
8.8 LIMITATION ON RECOVERY. Any prior provision in this Agreement, or
in any agreement, certificate or other document executed or delivered in
connection with this Agreement or its performance to the contrary
notwithstanding:
(a) Neither CFN, the CFN Shareholder, Mellett, Reene nor Smith,
nor any two or more of them together, shall be obligated or liable for any
damages resulting from or related to any breach or inaccuracy of any one or
more representations, warranties or covenants, in the total aggregate for
all such breaches, for any amount in excess of $125,000, and recovery for
all such breaches, in the aggregate, shall be limited to $125,000. For
purposes of satisfying any such claims, payment shall be made by delivering
shares of Parent Stock received pursuant to Section 4.1(c) hereof;
provided, however, that for purposes of determining the number of shares of
Parent Stock required to be delivered in satisfaction of any such claim,
the value of such Parent stock shall be deemed to be $250 per share,
regardless of the actual value of such Parent Stock at the time any payment
is required to be made hereunder.
(b) Neither CFN, the CFN Shareholder, Mellett, Reene nor Smith
shall be obligated or liable in any respect for any damages resulting from
or in any manner related to the
14
<PAGE>
operation of the Business subsequent to August 31, 1996, whether or not in
the ordinary course, unless such damages result from, or are otherwise
attributable to, any breach or inaccuracy of the representation set forth
in Section 5.20 hereof, in all respects, subject to Section 8.8(a) above.
IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Merger as of the day and year first above written.
IXL MERGER CORP.
By: /s/ James V. Sandry
--------------------------------
Name: James V. Sandry
Title: Executive Vice President
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
--------------------------------
Name: James V. Sandry
Title: Executive Vice President
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
15
<PAGE>
CONSUMER FINANCIAL NETWORK, INC.
By: /s/ Joseph F. Switzer, Jr.
-------------------------------------
Name: Joseph F. Switzer, Jr.
-----------------------------------
Title: President
----------------------------------
MELLETT, REENE & SMITH, LLC
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
----------------------------------------
Derek V. Smith
----------------------------------------
Michael W. Reene
----------------------------------------
Edwin R. Mellett
16
<PAGE>
CONSUMER FINANCIAL NETWORK, INC.
By: ____________________________________
Name: __________________________________
Title: _________________________________
MELLETT, REENE & SMITH, LLC
By: /s/ Edwin R. Mellett
-------------------------------------
Name: __________________________________
Title: _________________________________
________________________________________
Derek V. Smith
________________________________________
Michael W. Reene
/s/ Edwin R. Mellett
----------------------------------------
Edwin R. Mellett
17
<PAGE>
CONSUMER FINANCIAL NETWORK, INC.
By: ____________________________________
Name: __________________________________
Title: _________________________________
MELLETT, REENE & SMITH, LLC
By: ____________________________________
Name: __________________________________
Title: _________________________________
/s/ Derek V. Smith
----------------------------------------
Derek V. Smith
________________________________________
Michael W. Reene
________________________________________
Edwin R. Mellett
18
<PAGE>
CONSUMER FINANCIAL NETWORK, INC.
By: ____________________________________
Name: __________________________________
Title: _________________________________
MELLETT, REENE & SMITH, LLC
By: ____________________________________
Name: __________________________________
Title: _________________________________
________________________________________
Derek V. Smith
/s/ Michael W. Reene
----------------------------------------
Michael W. Reene
________________________________________
Edwin R. Mellett
19
<PAGE>
EXHIBITS
--------
Merger Certificate ............................................. Exhibit A
CFN's Closing Certificate ...................................... Exhibit B
Sub's Closing Certificate ...................................... Exhibit C
<PAGE>
SCHEDULE 3.1
------------
CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION
SCHEDULE 5.1(A)
---------------
ARTICLES OF INCORPORATION AND BYLAWS OF CFN
SCHEDULE 5.1(B)
---------------
ARTICLES OF ORGANIZATION AND OPERATING AGREEMENT OF MRS
SCHEDULE 5.4
------------
EXCEPTIONS TO ABSENCE OF CONFLICTING AGREEMENTS
SCHEDULE 5.6
------------
EXCEPTIONS TO TITLE TO CFN ASSETS
SCHEDULE 5.7(A)
---------------
CONTRACTS
SCHEDULE 5.7(B)
---------------
EXCEPTIONS TO CONTRACTS
<PAGE>
SCHEDULE 5.8(A)
---------------
INTANGIBLE PROPERTY
SCHEDULE 5.8(B)
---------------
EXCEPTIONS TO INTANGIBLE PROPERTY
SCHEDULE 5.9
------------
LITIGATION
SCHEDULE 5.11
-------------
INSURANCE
SCHEDULE 5.13
-------------
EMPLOYEES
SCHEDULE 6.3
------------
CONFLICTING AGREEMENTS
<PAGE>
EXHIBIT 2.7
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
IXL HOLDINGS, INC.,
IXL, INC.
WEBBED FEET, LLC,
F. BLAIR SCHMIDT-FELLNER
AND
MICHAEL BRENDON DOWDLE
DATED AS OF FEBRUARY 14, 1997
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT is entered into this 14th day of February,
1997, by and between WEBBED FEET, LLC, a Georgia limited liability company
("Seller"), IXL, INC., a Delaware corporation ("Buyer") IXL HOLDINGS, INC., a
Delaware corporation ("IXL"), and the members of Webbed Feet as listed on the
signature page hereto (the "Webbed Feet Members").
R E C I T A L S:
- - - - - - - -
A. Seller is engaged in the business of creating and maintaining websites
for companies (the "Business").
B. The Webbed Feet Members own 100% of the issued and outstanding
membership interests of Seller.
C. Seller is willing to sell to Buyer and Buyer is willing to purchase
from Seller, substantially all of the assets, business, properties and rights of
Seller related to the conduct of the Business on the terms and subject to the
conditions set forth herein.
D. Buyer is a wholly owned subsidiary of IXL.
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
PURCHASE AND SALE
-----------------
1.1 Purchase and Sale. Contemporaneously with the execution and delivery
-----------------
of this Agreement, and upon the terms and conditions hereof, Seller shall sell
and deliver to Buyer, and Buyer shall purchase, all of Seller's right, title and
interest in and to the assets of Seller described on Schedule 1.1 hereto
------------
(collectively, the "Purchased Assets"). Notwithstanding any implication to the
contrary contained herein, the Purchased Assets shall not include any cash held
by Seller, as reflected on the Financial Statement (as defined in Section 2.4
hereof).
1.2 The Closing. The closing of the aforementioned purchase and sale (the
-----------
"Closing") shall take place at the offices of Minkin & Snyder, A Professional
Corporation, One Buckhead Plaza, 3060 Peachtree Plaza, Suite 1100, Atlanta,
Georgia 30305, or at such other place as the parties may mutually agree.
<PAGE>
1.3 Purchase Price. As consideration for the purchase of the Purchased
--------------
Assets, Buyer shall pay to Seller an amount equal to $160,000.00 (the "Purchase
Price"), payable as follows:
(a) 400 shares of validly issued, fully paid and nonassessable Class
B Common Stock of IXL, $.01 par value (the "IXL Stock"), valued at $250.00 per
share as of the date hereof, 66 2/3% of which (267 shares) shall be delivered to
F. Blair Schmidt-Fellner, and 33 1/3% of which (133 shares) shall be delivered
to Michael B. Dowdle, in each case, at the Closing in accordance with Section
5.2 hereof; and
(b) cash in the amount of $60,000.00 (made payable to Cygnus Media
Corporation).
1.4 Assumption of Liabilities. In addition to the payment of the Purchase
-------------------------
Price, as additional consideration for the purchase of the Purchased Assets,
Buyer shall assume the liabilities of Seller listed on Schedule 1.4 hereto (the
------------
"Assumed Liabilities").
1.5 Allocation of Purchase Price. The Purchase Price will be allocated
----------------------------
among the Purchased Assets in accordance with their respective net book values,
as reflected on the most recent Financial Statement. Each of the parties hereto
agrees to report the federal, state and local income and other tax consequences
of the transactions contemplated by this Agreement in a manner consistent with
such allocation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller and the Webbed Feet Members, jointly and severally, represent and
warrant to Buyer, which representations and warranties shall survive the Closing
in accordance with Section 7.1 of this Agreement, as follows:
2.1 Organization and Qualification. Seller is a limited liability company
------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Georgia. Seller has the requisite power and authority to carry on the
Business as it is now being conducted and is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary. Complete and correct copies of the Articles of
Organization and the Operating Agreement of the Seller, dated as of February 28,
1996 and as amended January 17, 1997 (as amended, the "Operating Agreement"),
both as in effect on the date hereof are attached as Schedule 2.1 hereto.
------------
2.2 Authority. Seller has the necessary power and authority to execute
---------
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby by Seller have been duly and validly
authorized and approved by the Webbed Feet Members in accordance with the terms
of the Operating Agreement and applicable law, and no other proceedings on the
part
2
<PAGE>
of Seller or the Webbed Feet Members are necessary to authorize or approve this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Seller and each Webbed Feet Member, and
assuming the due authorization, execution and delivery by Buyer, constitutes the
valid and binding obligation of Seller and each Webbed Feet Member, enforceable
against Seller and each Webbed Feet Member in accordance with its terms.
2.3 No Conflicts, Required Filings and Consents. None of the execution
-------------------------------------------
and delivery of this Agreement by Seller or the Webbed Feet Members, the
consummation by Seller and the Webbed Feet Members of the transactions
contemplated hereby or compliance by Seller with any of the provisions hereof
will:
(a) conflict with or violate the Articles of Organization of Seller or
the Operating Agreement;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Seller or the Purchased Assets;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, contract, agreement,
arrangement, lease, license, permit, judgment, decree, franchise or other
instrument or obligation to which Seller is a party or by which the Purchased
Assets may be bound or affected (collectively, for purposes of this Section 2.3,
a "Webbed Feet Agreement");
(d) result in the creation of any Lien on any of the Purchased Assets;
or
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), of (i) any government or subdivision thereof,
whether domestic, foreign or multinational, or any administrative, governmental,
or regulatory authority, agency, commission, court, tribunal or body, whether
domestic, foreign or multinational (a "Governmental Entity"); or (ii) any other
individual, corporation, trust, partnership, limited liability company or other
entity (collectively, a "Person").
2.4 Financial Statements. Seller has heretofore furnished Buyer with a
--------------------
true and complete copy of the unaudited financial statement of Seller for the
period ending January 7, 1997, a copy of which is attached hereto as Schedule
--------
2.4 (the "Financial Statement"). The Financial Statement has been prepared in
- ---
accordance with generally accepted accounting principles, consistently followed
throughout the period indicated, and presents fairly the financial position and
operating results of Seller as of the dates, and during the periods, indicated
therein. The Financial Statement is complete and correct in all material
respects.
2.5 Absence of Changes. Except as provided in Schedule 2.5 hereto, since
------------------ ------------
January 7, 1997, (a) Seller has not entered into any transaction affecting the
Purchased Assets that was
3
<PAGE>
not in the ordinary course of business; (b) there has been no material damage,
destruction or loss of any of the Purchased Assets (whether or not covered by
insurance); (c) Seller has not failed to satisfy any of its debts, obligations
or liabilities related to the Business or the Purchased Assets as the same
become due and owing; and (d) there has been no other event or condition
pertaining to and materially affecting the Purchased Assets or the ability of
Seller to consummate the transactions contemplated by this Agreement.
2.6 Undisclosed Liabilities. Seller does not have any debt, liability or
-----------------------
obligation of any kind, whether accrued, absolute or otherwise, including,
without limitation, any liability or obligation on account of taxes or any
governmental charges or penalty, interest or fines, except (a) liabilities not
in excess of $5,000 (whether individually or in the aggregate) incurred in the
ordinary course of business after January 7, 1997; (b) liabilities reflected on
the Financial Statement; and (c) liabilities incurred as a result of the
transactions contemplated by this Agreement.
2.7 Purchased Assets. The Purchased Assets include all of the assets,
----------------
properties and rights of every type and description, real, personal and mixed,
tangible and intangible, that are necessary for, or used in, the conduct of the
Business as conducted by Seller.
2.8 Title to Properties. Except as set forth on Schedule 2.8 hereto,
------------------- ------------
Seller has good and marketable title to all of the Purchased Assets (other than
leasehold interests), and good title to all leasehold interests included as part
of the Purchased Assets, in each case, free and clear of any and all Liens other
than liens for taxes not yet due and payable.
2.9 Equipment. Each item of tangible personal property included in the
---------
Purchased Assets is in good condition and repair, ordinary wear and tear
excepted.
2.10 Intellectual Property. Seller owns, or is validly licensed or
---------------------
otherwise has the right to use or exploit, all intangible property (including,
without limitation, trade names, trademarks, patents, copyrights and software)
included in the Purchased Assets (the "Intangible Property"), free of any
obligation to make any payment (whether of a royalty, license fee, compensation
or otherwise). No claims are pending or, to the knowledge of Seller,
threatened, that Seller is infringing or otherwise adversely affecting the
rights of any Person with regard to any item of Intangible Property. Seller has
used its reasonable best efforts to protect its rights in the Intangible
Property and, to the knowledge of Seller, no Person is infringing the rights of
Seller with respect to any Intangible Property. No intangible property is
required for the conduct of the Business other than the Intangible Property.
2.11 Contracts. Schedule 2.11 hereto sets forth a complete list of all
--------- -------------
agreements and commitments (whether oral or written) to which Seller is a party,
or by which the Purchased Assets may otherwise be bound or affected (the
"Contracts"). Complete and accurate copies of the Contracts have previously
been delivered to Buyer. Neither Seller nor, to the knowledge of Seller and the
Webbed Feet Members, any other party to any of the Contracts, (a) is in default
under (nor does there exist any condition that, with notice or lapse of time or
both, would cause such a default under) any of the Contracts, or (b) has waived
any material right it may have
4
<PAGE>
under any of the Contracts. All of the Contracts constitute the valid and
binding obligation of Seller, and, to the knowledge of Seller and the Webbed
Feet Members, the other parties thereto.
2.12 Litigation. Except as set forth on Schedule 2.12 hereto, there is no
---------- -------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Seller and the Webbed Feet Members, threatened against or affecting Seller or
the Purchased Assets, nor is there any judgment, decree, injunction or order of
any applicable Governmental Entity or arbitrator outstanding against Seller
that, either individually or in the aggregate, would have a material adverse
effect on the Purchased Assets or the financial condition of Seller.
2.13 Payroll Information. Schedule 2.13 hereto sets forth a true and
------------------- -------------
complete copy of the most recent payroll report of Seller, showing all current
employees of Seller and their current levels of compensation, other than bonuses
and other extraordinary compensation. Also set forth on Schedule 2.13 are the
-------------
dates and amounts of the latest raises (by percentage) provided to the employees
of Seller.
2.14 Employee Benefit Plans/Labor Relations.
--------------------------------------
(a) Except as disclosed in Schedule 2.14 hereto, there are no
-------------
employee benefit plans, agreements or arrangements maintained by Seller,
including, without limitation, (i) "employee benefit plans," within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"); (ii) affirmative action plans; (iii) current or deferred
compensation, pension, profit sharing, vacation or severance plans or programs;
or (iv) medical, hospital, accident, disability or death benefit plans
(collectively, "Webbed Feet Benefit Plans"). All Webbed Feet Benefit Plans are
administered in accordance with, and are in compliance with, all applicable laws
and regulations. No default exists with respect to the obligations of Seller
under any Webbed Feet Benefit Plans.
(b) Seller is not a party to any collective bargaining agreement, no
such agreement determines the terms and conditions of employment of any employee
of Seller, no collective bargaining agent has been certified as a representative
of any of the employees of Seller, no representation campaign or election is now
in progress with respect to any employee of Seller and there are no labor
disputes, grievances, controversies, strikes or requests for union
representation pending, or, to the knowledge of Seller and the Webbed Feet
Members, threatened, relating to or affecting the Business. To the knowledge of
Seller and the Webbed Feet Members, no event has occurred that could give rise
to any such dispute, controversy, strike or request for representation.
2.15 ERISA.
-----
(a) All Webbed Feet Benefit Plans that are subject to ERISA have
been administered in accordance with, and are in compliance with, the applicable
provisions of ERISA. Each of Webbed Feet Benefit Plans that is intended to meet
the requirements of Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code") has been determined by the Internal Revenue Service to meet
such requirements within the meaning of such provision. No
5
<PAGE>
Webbed Feet Benefit Plan is subject to Title IV of ERISA or Section 412 of the
Code. Seller has not engaged in any non-exempt "prohibited transactions," as
such term is defined in Section 4975 of the Code or Section 406 of ERISA,
involving Webbed Feet Benefit Plans that would subject Seller to the penalty or
tax imposed under Section 502(i) of ERISA or Section 4975 of the Code. Seller
has not engaged in any transaction described in Section 4069 of ERISA within the
last five years. Except as disclosed in Schedule 2.15 hereto, neither the
-------------
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation or golden parachute)
becoming due to any director or other employee of Seller, (ii) increase any
benefits otherwise payable under any Webbed Feet Benefit Plan or (iii) result in
the acceleration of the time of payment or vesting of any such benefits to any
extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Webbed Feet Benefit Plan that is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA and
that is intended to meet the requirements of Section 401(a) of the Code (a
"Pension Plan"), or by any entity that is considered one employer with Seller
under Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate"),
within the 12-month period ending on the date hereof. Seller has not incurred
any liability to the Pension Benefit Guaranty Corporation in respect of any
Webbed Feet Benefit Plan that remains unpaid.
2.16 Taxes. Seller has duly and timely filed all federal, state and
-----
local income, franchise, excise, real and personal property and other tax
returns and reports, including extensions, required to have been filed by Seller
on or prior to the date hereof. Seller has duly and timely paid all taxes and
other governmental charges, and all interest and penalties with respect thereto,
required to be paid by Seller (whether by way of withholding or otherwise) to
any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefore have
been provided in the Financial Statement). As of the date hereof, all
deficiencies proposed as a result of any audits have been paid or settled.
2.17 Compliance with Applicable Laws. Seller holds all permits,
-------------------------------
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the Purchased Assets, as
appropriate, and to carry on the Business as now conducted (the "Permits"). To
the knowledge of Seller and the Webbed Feet Members, Seller is in compliance
with all applicable laws, ordinances and regulations and the terms of the
Permits. Schedule 2.17 hereto sets forth a list of the Permits, a true and
-------------
correct copy of each of which has been provided to Buyer.
2.18 Brokers. Except as set forth on Schedule 2.18 hereto, no broker or
------- -------------
finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated by this Agreement as a result of
arrangements made by or on behalf of Seller.
6
<PAGE>
2.19 Interest in Customers, Suppliers and Competitors. Except as
------------------------------------------------
provided in Schedule 2.19 hereto, no member, manager or employee of Seller, and
-------------
no family member of any of the foregoing, has any direct or indirect interest in
any customer, supplier or competitor of Seller, or in any Person from whom or to
whom Seller leases any real or personal property, or in any other Person with
whom Seller is doing business, whether directly or indirectly (including,
without limitation, as a debtor or creditor), whether in existence as of the
date hereof or proposed, other than the ownership of stock of publicly traded
corporations that does not exceed 1% of the issued and outstanding stock of such
corporation.
2.20 Accounts Receivable. All accounts, notes, contracts and other
-------------------
receivables of Seller included in the Assumed Liabilities (collectively,
"Accounts Receivable") were acquired by Seller in the ordinary course of
business arising from bona fide transactions completed in accordance with the
terms and provisions contained in any documents related thereto. There are no
set-offs, counterclaims or disputes asserted with respect to any Accounts
Receivable that would result in claims in excess of the reserve for bad debts
set forth on the Financial Statement and, to the knowledge of Seller and the
Webbed Feet Members, subject to such reserve, all Accounts Receivable are
collectible in full.
2.21 Accounts Payable. All accounts, notes, contracts and other amounts
----------------
payable of Seller included in the Purchased Assets are currently within their
respective terms, and are neither in default nor otherwise past due by more than
30 days.
2.22 Insurance. Seller currently maintains, and has, for at least the
---------
past year maintained, in full force and effect, all insurance policies that are
either (a) required to be maintained for the conduct of the Business or the
ownership of the Purchased Assets; or (b) otherwise maintained by companies
engaged in a business comparable to the Business (collectively, the "Insurance
Policies"). All of the Insurance Policies are listed on Schedule 2.22 hereto,
-------------
and true and compete copies of all Insurance Policies have previously been
provided to Buyer. Seller (i) is not in default regarding the provisions of any
Insurance Policy; (ii) has paid all premiums due thereunder; and (iii) has not
failed to present any notice or present any material claim thereunder in a due
and timely fashion.
2.23 Bankruptcy. Neither Seller, the Webbed Feet Members, nor any
----------
entities affiliated, related or controlled by any of such parties, has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
2.24 Investment Purpose; Investment Purpose. Each Webbed Feet Member
--------------------------------------
represents that he is an "accredited investor" as such term is defined in Rule
501 of Regulation D promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Securities Act"). Each Webbed Feet
Member further represents that he is acquiring the IXL Stock solely for his own
account for investment and not with a view to, or for sale in connection with,
any distribution thereof. Each Webbed Feet Member agrees that he will
7
<PAGE>
not, directly or indirectly, offer, transfer, sell, pledge, hypothecate or
otherwise dispose of any IXL Stock (or solicit any offers to buy, purchase or
other acquire or take a pledge of any such shares) except in compliance with the
Securities Act and the rules and regulations thereunder, other applicable laws,
rules and regulations, and the Stockholders Agreement of Seller, dated as of
April 30, 1996, as amended December 13, 1996 (the "Stockholders Agreement").
2.25 Restrictions on Transfer. Each Webbed Feet Member acknowledges that
------------------------
(a) the IXL Stock received by him hereunder has not been registered under the
Securities Act; (b) the IXL Stock may be required to be held indefinitely, and
the Webbed Feet Members must continue to bear the economic risk of the
investment in such shares unless such shares are subsequently registered under
the Securities Act or an exemption from such registration is available; (c)
there may not be any public market for the IXL Stock in the foreseeable future;
(d) Rule 144 promulgated under the Securities Act is not presently available
with respect to sales of any securities of Buyer, and such Rule is not
anticipated to be available in the foreseeable future; (e) when and if IXL Stock
may be disposed of without registration in reliance upon Rule 144, such
disposition can be made only in limited amounts and in accordance with the terms
and conditions of such Rule; (f) if the exemption afforded by Rule 144 is not
available, public sale without registration will require the availability of an
exemption under the Securities Act; (g) the IXL Stock is subject to the terms
and conditions of the Stockholders Agreement; (h) restrictive legends shall be
placed on the certificates representing IXL Stock; and (i) a notation shall be
made in the appropriate records of Seller indicating that IXL Stock is subject
to restrictions on transfer and, if Seller should in the future engage the
services of a stock transfer agent, appropriate stop-transfer instructions will
be issued to such transfer agent with respect to IXL Stock.
2.26 Disclosure. No statement of fact by Seller contained in this
----------
Agreement and no written statement of fact furnished or to be furnished by
Seller to Buyer pursuant to or in connection with this Agreement contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements herein or
therein contained not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller and the Webbed Feet Members, which
representations and warranties shall survive the Closing in accordance with
Section 7.1 of this Agreement, as follows:
3.1 Organization and Qualification. Buyer is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has the requisite corporate power and authority to carry on its
business as it is now being conducted and is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary.
8
<PAGE>
3.2 Authority. Buyer has the necessary corporate power and authority to
---------
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Buyer have been duly and
validly authorized and approved by its Board of Directors and shareholders, and
no other corporate or shareholder proceedings on the part of Buyer, its Boards
of Directors or shareholders, are necessary to authorize or approve this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Buyer, and assuming the due
authorization, execution and delivery by Seller and the Webbed Feet Members,
constitutes the valid and binding obligation of Buyer, enforceable in accordance
with its terms.
3.3 No Conflicts, Required Filings and Consents. None of the execution
-------------------------------------------
and delivery of this Agreement by Buyer, the consummation by Buyer of the
transactions contemplated hereby or compliance by Buyer with any of the
provisions hereof will:
(a) conflict with or violate the Articles of Incorporation or Bylaws
of Buyer;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Buyer, or by which Buyer, its properties
or assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, contract, agreement,
arrangement, lease, license, permit, judgment, decree, franchise or other
instrument or obligation to which Buyer is a party or by which Buyer or its
properties may be bound or affected (collectively, for purposes of this Section
3.3, an "IXL Agreement");
(d) result in the creation of any Lien on any of the property or
assets of Buyer; or
(e) require any Consent of (i) any Governmental Entity (except for
compliance with any applicable securities laws) or (ii) any other Person.
3.4 Litigation. Except as set forth on Schedule 3.4 hereto, there is no
---------- ------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Buyer, threatened against or affecting Buyer, nor is there any judgment, decree,
injunction or order of any applicable Governmental Entity or arbitrator
outstanding against Buyer that, either individually or in the aggregate, would
have a material adverse effect on the assets, business or financial condition of
Buyer.
3.5 Brokers. Except as disclosed on Schedule 3.5 hereto, No broker or
------- ------------
finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer.
9
<PAGE>
3.6 IXL Stock.
---------
(a) The authorized capital stock of IXL consists of (i) (A) 250,000
shares of Class A Common Stock, $.01 par value, of which no shares are validly
issued and outstanding, and (B) 1,000,000 shares of Class B Common Stock, $.01
par value, of which 40,348 shares are validly issued and outstanding (without
taking into account any shares of IXL Stock to be issued pursuant to this
Agreement), fully paid and nonassessable; and (ii) 250,000 shares of Class A
Convertible Preferred stock, of which 111,500 shares are validly issued and
outstanding, fully paid and nonassessable. All outstanding securities of IXL
were issued in accordance with applicable federal and state securities laws.
Except as set forth on Schedule 3.6(a) hereto, there are no options, warrants,
---------------
calls, agreements, commitments or other rights presently outstanding that would
obligate IXL to issue, deliver or sell shares of its capital stock, or to grant,
extend or enter into any such option, warrant, call, agreement, commitment or
other right. In addition to the foregoing, as of the date hereof, IXL has no
bonds, debentures, notes or other indebtedness issued or outstanding that have
voting rights in IXL under ordinary circumstances.
(b) The holders of record of the issued and outstanding shares of IXL
Stock are set forth on Schedule 3.6(b) hereto.
---------------
(c) When delivered to Seller in accordance with the terms hereof, the
IXL Stock will (d) be fully paid and nonassessable, (e) represent approximately
1% of the issued and outstanding shares of IXL Stock, and (f) represent, on an
as-converted and fully diluted basis, approximately .3% of the issued and
outstanding capital stock of IXL, (g) and be free and clear of all Liens, other
than liens for taxes not yet due and payable.
ARTICLE IV
ADDITIONAL AGREEMENTS
---------------------
4.1 Public Announcements. The parties agree that, except as may otherwise
--------------------
be required to comply with applicable laws and regulations (including, without
limitation, applicable securities laws), public disclosure of the transactions
contemplated by this Agreement shall be coordinated between the parties, and no
party shall make any such disclosure without the prior consent of the other
parties, which consent shall not be unreasonably withheld or delayed.
4.2 Efforts; Consents.
-----------------
(a) Subject to the terms and conditions herein provided, and fiduciary
duties under applicable law, each of the parties hereto agrees to use its
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable, to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement and to cooperate with each other in connection with the foregoing.
Without limiting the generality of the foregoing, each of Seller, the Webbed
Feet Members and Buyer shall (i) obtain or cause to be obtained all Consents
required to be obtained in connection with the transactions contemplated by this
Agreement, (ii) make or cause to be
10
<PAGE>
made all required filings with applicable Governmental Entities, and (iii) use
its reasonable efforts to fulfill all conditions to this Agreement.
(b) Each of Buyer and Seller shall promptly provide the other with a
copy of any inquiry or request for information (including notice of any oral
request for information), pleading, order or other document either party
receives from any Governmental Entity with respect to the matters referred to in
this Section 4.2.
ARTICLE V
DELIVERIES AT OR PRIOR TO CLOSING
---------------------------------
5.1 Deliveries of Seller.
--------------------
(a) At the Closing, Seller and the Webbed Feet Members shall deliver,
or cause to be delivered, to Buyer, properly executed and dated as of the date
hereof: (i) the Bill of Sale and Assignment in the form of Exhibit "A" hereto
-----------
(the "Bill of Sale"); (ii) an Agreement to be Bound to Registration Rights
Agreement, substantially in the form of Exhibit "B" hereto (the "Agreement to be
-----------
Bound to Registration Rights Agreement"); (iii) an Agreement to be Bound to
Stockholders Agreement, substantially in the form of Exhibit "C" hereto (the
-----------
"Agreement to be Bound to Stockholders Agreement"); (iv) a closing certificate
of Seller, substantially in the form of Exhibit "D" hereto; (v) such other
-----------
documents as Buyer shall reasonably request.
(b) In addition to the foregoing, at or prior to the Closing, Seller
and the Webbed Feet Members shall have (i) obtained or caused to be obtained all
of the Consents listed on Schedule 5.1(b) hereto; and (ii) delivered to Buyer a
---------------
Certificate of Existence of Seller, and a copy of the Articles of Organization
of Seller, both as certified by the Secretary of State of Georgia.
5.2 Deliveries of Buyer.
-------------------
(a) In addition to the payment of the Purchase Price in accordance
with Section 1.3 hereof (including the delivery of certificates representing the
shares of IXL Stock being delivered to Seller in connection therewith), at the
Closing, Buyer shall deliver, or cause to be delivered, to Seller, properly
executed and dated as of the date hereof: (i) the Bill of Sale; (ii) a closing
certificate of Buyer, substantially in the form of Exhibit "E" hereto; (iii) the
-----------
Agreement to be Bound to Registration Rights Agreement; (iv) the Agreement to be
Bound to Stockholders Agreement; and (v) such other documents as Seller shall
reasonably request.
(b) In addition to the foregoing, at or prior to the Closing, Buyer
shall have (i) obtained or caused to be obtained all of the Consents listed on
Schedule 5.2(b) hereto; and (ii) delivered to Seller a Certificate of Existence
- ---------------
of Buyer, and a copy of the Certificate of Incorporation of Buyer, both as
certified by the Secretary of State of Delaware.
11
<PAGE>
ARTICLE VI
INDEMNIFICATION
---------------
6.1 Indemnification by Buyer. Buyer shall indemnify and hold Seller, the
------------------------
Webbed Feet Members and Seller's employees (collectively, the "Seller
Indemnified Parties") harmless from and against, and agree promptly to defend
each of the Seller Indemnified Parties from and reimburse each of the Seller
Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including, without limitation,
reasonable attorney fees and other legal costs and expenses) that any of the
Seller Indemnified Parties may at any time suffer or incur, or become subject
to, as a result of or in connection with:
(a) any breach or inaccuracy of any of the representations and
warranties made by Buyer in or pursuant to this Agreement, or in any instrument,
certificate or affidavit delivered by Buyer at the Closing in accordance with
the provisions hereof;
(b) any failure by Buyer to carry out, perform, satisfy and discharge
any of its respective covenants, agreements, undertakings, liabilities or
obligations under this Agreement or under any of the documents and materials
delivered by Buyer pursuant to this Agreement; and
(c) any suit, action or other proceeding arising out of, or in any way
related to, any of the matters referred to in this Section 6.1.
6.2 Indemnification by Seller. Each of Seller and the Webbed Feet Members
-------------------------
shall jointly and severally indemnify and hold Buyer, its shareholders,
directors, officers and employees (collectively, the "Buyer Indemnified
Parties") harmless from and against, and agree to promptly defend each of the
Buyer Indemnified Parties from and reimburse each of the Buyer Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including, without limitation, reasonable
attorney fees and other legal costs and expenses) that any of the Buyer
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(a) any breach or inaccuracy of any representations and warranties
made by Seller or Webbed Feet Members in or pursuant to this Agreement, or in
any certificate or affidavit delivered by the same at the Closing in accordance
with the provisions hereof;
(b) any failure by Seller or Webbed Feet Members to carry out,
perform, satisfy and discharge any of their respective covenants, agreements,
undertakings, liabilities or obligations under this Agreement or under any of
the documents and materials delivered by Seller pursuant to this Agreement; and
(c) any suit, action or other proceeding arising out of, or in any way
related to, any of the matters referred to in this Section 6.2.
12
<PAGE>
6.3 Notification of Claims; Election to Defend.
------------------------------------------
(a) A party entitled to be indemnified pursuant to Section 6.1 or 6.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification under this Agreement. Subject
to the Indemnifying Party's right to defend in good faith third party Claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VI within 30 days after the receipt of written notice thereof from
the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 6.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section 6.1 or 6.2 hereof, as the case may
be, the Indemnifying Party shall have the right, at its sole cost and expense,
to employ counsel reasonably acceptable to the Indemnified Party to defend any
such Claim asserted against the Indemnified Party. The Indemnified Party shall
have the right to participate in the defense of any such Claim. The
Indemnifying Party shall notify the Indemnified Party in writing, as promptly as
possible (but in any case before the due date for the answer or response to a
claim) after the date of the notice of claim given by the Indemnified Party to
the Indemnifying Party under Section 6.3(a) hereof of its election to defend in
good faith any such third party Claim. So long as the Indemnifying Party is
defending in good faith any such Claim asserted by a third party against the
Indemnified Party, the Indemnified Party shall not settle or compromise such
Claim without the prior written consent of the Indemnifying Party. The
Indemnified Party shall cooperate with the Indemnifying Party in connection with
any such defense and shall make available to the Indemnifying Party or its
agents all records and other materials in the Indemnified Party's possession
reasonably required by it for its use in contesting any third party Claim;
provided, however, that the Indemnifying Party shall have agreed, in writing, to
- -------- -------
keep such records and other materials confidential expect to the extent required
for defense of the relevant Claim. Whether or not the Indemnifying Party elects
to defend any such Claim, the Indemnified Party shall have no obligations to do
so. Within 30 days after a final determination (including, without limitation,
a settlement) has been reached with respect to any Claim contested pursuant to
this Section 8.2(b), the Indemnifying Party shall satisfy its obligations with
respect thereto. Any amounts paid thereafter shall include interest thereon for
the period commencing at the end of such 30-day period and ending on the actual
date of payment, at a rate of 15% per annum,
13
<PAGE>
or, if lower, at the highest rate of interest permitted by applicable law at the
time of such payment.
6.4 Limit on Indemnification. Notwithstanding any implication to the
------------------------
contrary contained herein, the parties hereby agree that the maximum amount of
indemnification to which the Buyer Indemnified Parties, whether individually or
collectively, or the Seller Indemnified Parties, whether individually or
collectively, shall be entitled under this Article VI shall be $100,000.00 in
the aggregate. The parties acknowledge and agree that such a limitation is
reasonable.
ARTICLE VII
GENERAL PROVISIONS
------------------
7.1 Survival; Recourse. None of the agreements contained in this
------------------
Agreement shall survive the Closing, except that (i) the obligations to
indemnify contained in Article VI hereof shall survive indefinitely (except to
the extent a shorter period of time is explicitly specified therein) and (ii)
the representations and warranties made in Articles II and III of this Agreement
shall survive the Closing for a period of six months, and shall survive any
independent investigation by the parties, and any dissolution, merger or
consolidation of Seller or Buyer, and shall bind the legal representatives,
assigns and successors of Seller, the Webbed Feet Members and Buyer.
7.2 Notices. All notices or other communications under this Agreement
-------
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by personal delivery, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Seller: Webbed Feet, LLC
250 14th Street, NW
4th Floor
Atlanta, Georgia 30318
Attention: F. Blair Schmidt-Fellner, President
14
<PAGE>
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
If to the Webbed
Feet Members: F. Blair Schmidt-Fellner
310 West Berwicke Common
Atlanta, Georgia 30342
Michael B. Dowdle
1073 Capital Club Circle, NE
Atlanta, Georgia 30319-2662
If to Buyer: iXL, Inc.
1465 Northside Drive
Suite 110
Atlanta, Georgia 30318
Attention: James V. Sandry
Telecopy: 404/350-9823
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
and to: Kelso & Company
320 Park Avenue
New York, New York 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
If to IXL: IXL Holdings, Inc.
1465 Northside Drive
Suite 110
Atlanta, Georgia 30318
Attention: James V. Sandry
Telecopy: 404/350-9823
15
<PAGE>
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
and to: Kelso & Company
320 Park Avenue
New York, New York 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
7.3 Entire Agreement. This Agreement and the documents, schedules and
----------------
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof. There are no other representations or warranties, whether
written or oral, between the parties in connection the subject matter hereof,
except as expressly set forth herein.
7.4 Assignments; Parties in Interest. Neither this Agreement nor any of
--------------------------------
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests and
obligations of Buyer hereunder may be assigned to any wholly owned subsidiary of
Buyer without such prior consent. Subject to the preceding sentence, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any Person not a party hereto any right, benefit or remedy of
any nature whatsoever under or by reason of this Agreement, except as otherwise
provided herein.
7.5 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of Georgia (without giving effect to the provisions
thereof relating to conflicts of law).
7.6 Headings. The descriptive headings herein are inserted for
--------
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
7.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
16
<PAGE>
7.8 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economics or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon determination that any term or other provision
hereof is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
- SIGNATURES ON THE FOLLOWING PAGE -
17
<PAGE>
IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be signed
by their respective officers thereunder duly authorized, and Webbed Feet Members
have signed this Agreement, all as of the date first written above.
"SELLER"
WEBBED FEET, LLC, a Georgia limited liability company
By: /s/ Michael Dowdle
--------------------------------------------
Title: Executive Vice President
--------------------------------------------
"BUYER"
iXL, INC., a Delaware corporation
By: /s/ James V. Sandry
--------------------------------------------
Title: Executive Vice President
--------------------------------------------
"IXL"
IXL HOLDINGS, INC., a Delaware corporation
By: /s/ James V. Sandry
-----------------------------------------
Title: Executive Vice President
-----------------------------------------
"WEBBED FEET MEMBERS"
/s/ F. Blair Schmidt-Fellner
--------------------------------------------
F. BLAIR SCHMIDT-FELLNER
/s/ Michael Brendon Dowdle
--------------------------------------------
MICHAEL BRENDON DOWDLE
18
<PAGE>
EXHIBITS
--------
Bill of Sale.................................................... Exhibit A
Agreement to be Bound to Registration Rights Agreement.......... Exhibit B
Agreement to be Bound to Stockholders' Agreement................ Exhibit C
Seller's Closing Certificate.................................... Exhibit D
Buyer's Closing Certificate..................................... Exhibit E
<PAGE>
SCHEDULE 1.1
------------
PURCHASED ASSETS
SCHEDULE 1.4
------------
ASSUMED LIABILITIES
SCHEDULE 2.1
------------
ARTICLES OF ORGANIZATION AND OPERATING AGREEMENT OF SELLER
SCHEDULE 2.4
------------
FINANCIAL STATEMENTS OF SELLER
SCHEDULE 2.5
------------
EXCEPTIONS TO ABSENCE OF CHANGES
SCHEDULE 2.8
------------
EXCEPTIONS TO TITLE TO PROPERTIES
SCHEDULE 2.11
-------------
CONTRACTS
<PAGE>
SCHEDULE 2.22
-------------
INSURANCE
SCHEDULE 3.4
------------
BUYER LITIGATION
SCHEDULE 3.5
------------
BUYER BROKERS
SCHEDULE 3.6(A) & (B)
---------------------
OBLIGATIONS TO ISSUE STOCK, OPTIONS, OR WARRANTS OF IXL
SCHEDULE 5.1(B)
---------------
REQUIRED CONSENTS OF SELLER AND THE WEBBED FEET MEMBERS
SCHEDULE 5.2(B)
---------------
BUYER CONSENTS
<PAGE>
EXHIBIT 2.8
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
IXL HOLDINGS, INC.,
IXL MERGER CORP. II, INC.
THE WHITLEY GROUP, INC.,
AND
WILLIAM C. WHITLEY
DATED AS OF APRIL 4, 1997
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into this 4th day of
April, 1997, by and between THE WHITLEY GROUP, INC., a North Carolina
corporation ("TWG"), IXL HOLDINGS, INC., a Delaware corporation ("Parent"),
IXL MERGER CORP. II, INC., a Delaware corporation, or its successors or
assigns ("Sub"), and WILLIAM C. WHITLEY, a North Carolina resident, (the
"TWG Shareholder").
R E C I T A L S:
- - - - - - - -
A. TWG is engaged in the business of creating multimedia
presentations for third parties (the "TWG Business").
B. TWG and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set
forth herein (the "Merger").
C. The TWG Shareholder owns 100% of the issued and outstanding
capital stock of TWG (the "TWG Stock").
D. The respective Boards of Directors and stockholders of Parent,
Sub and TWG have approved the Merger, upon the terms and subject to the
conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal
income tax purposes, as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof,
at the Effective Time (as defined in Section 1.3 hereof), (a) TWG shall be
merged with and into Sub, (b) the separate existence of TWG shall cease,
and (c) Sub shall continue as the surviving corporation in the Merger under
the laws of the State of Delaware under the name IXL Charlotte, Inc. For
purposes of this Agreement, Sub shall be referred to, for the period
commencing on the Effective Time, as the "Surviving Corporation".
<PAGE>
1.2 CLOSING. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 9.1 hereof, and subject to the satisfaction or waiver of the
conditions set forth in Article VII hereof, the closing of the Merger (the
"Closing") will take place at the offices of Minkin & Snyder, A
Professional Corporation, One Buckhead Plaza, 3060 Peachtree Road, Suite
1100, Atlanta, Georgia 30305, at such date, time and place as are agreed to
in writing by the parties hereto (the "Closing Date").
1.3 EFFECTIVE TIME OF THE MERGER. As soon as practicable on the
Closing Date, the parties hereto shall cause (a) a certificate of merger
(the "Certificate of Merger") to be filed with the office of the Secretary
of State of the State of Delaware (the "Certificate of Merger") in
accordance with the provisions of the Delaware General Corporation Law, as
amended (the "DGCL"); and (b) articles of merger (the "Articles of Merger")
to be filed with the office of the Secretary of State of the State of North
Carolina in accordance with the provisions of the North Carolina Business
Corporation Act, as amended (the "NBCA"). When used in this Agreement, the
term "Effective Time" shall mean the time when both the Certificate of
Merger and the Articles of Merger have been accepted for filing by the
Secretary of State of the State of Delaware and North Carolina,
respectively, or such time as otherwise specified in the Certificate of
Merger and the Articles of Merger.
1.4 EFFECT OF THE MERGER. The Merger shall, from and after the
Effective Time, have all the effects provided by the DGCL and NBCA. If at
any time after the Effective Time, any further action is deemed necessary
or desirable to carry out the purposes of this Agreement, the parties
hereto agree that the Surviving Corporation and its proper officers and
directors shall be authorized to take, and shall take, any and all such
action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Amended and Restated
Certificate of Incorporation of Sub, a form of which is attached hereto as
Schedule 2.1, shall be the Certificate of Incorporation of the Surviving
------------
Corporation after the Effective Time, until thereafter changed or amended
as provided therein or by applicable law.
2.2 BYLAWS. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law.
2.3 BOARD OF DIRECTORS; OFFICERS. The Board of Directors and
officers of Sub immediately prior to the Effective Time shall be the Board
of Directors and officers, respectively, of the Surviving Corporation,
until the earlier of their respective resignations or the time that their
respective successors are duly elected or appointed and qualified.
2
<PAGE>
ARTICLE III
CONVERSION OF SHARES
3.1 MERGER CONSIDERATION. As of the Effective Time, by virtue of
the Merger and without any action on the part of any stockholder of TWG or
Sub:
(a) All shares of TWG Stock owned by TWG shall be canceled and
retired and shall cease to exist, and no consideration shall be delivered
in exchange therefor;
(b) Each issued and outstanding share of TWG Stock (other than
any Dissenting Shares, as defined in Section 3.2 hereof) shall be converted
into, and become exchangeable for, (i) 4.544 shares of validly issued,
fully paid and nonassessable Class B Common Stock of Parent, $.01 par value
(the "Parent Stock"), and, (ii) $82.047 in cash.
(c) Each issued and outstanding share of common stock of Sub
shall be converted into and become one fully paid and nonassessable share
of common stock of the Surviving Corporation.
3.2 DISSENTING SHARES. Notwithstanding any provisions of this
Agreement to the contrary, any shares of TWG Stock held by a Dissenting
Shareholder (as hereinafter defined) shall not be canceled as described in
Section 3.1(b) hereof, but instead shall be converted into the right to
receive the consideration due a Dissenting Shareholder pursuant to the DGCL
or the NBCA, as applicable; provided, however, that if, after the Effective
-------- -------
Time, a Dissenting Shareholder shall withdraw his demand or otherwise lose
his right for appraisal under the terms of the DGCL or the NBCA, as
applicable, the TWG Stock held by such Dissenting Shareholder (the
"Dissenting Shares") shall be deemed to be canceled as of the Effective
Time in accordance with the provisions of Section 3.1 hereof. TWG shall
give Parent prompt notice of any written demands for appraisal of shares of
TWG Stock, and the opportunity to direct all negotiations and proceedings
with respect to any such demands. Without the prior written consent of
Parent, TWG shall not voluntarily make any payment with respect to, settle,
or offer to settle or otherwise negotiate, any such demands. For purposes
of this Agreement, the term "Dissenting Shareholder" shall mean a TWG
Shareholder who (a) objects to the Merger; and (b) complies with the
applicable provisions of the DGCL and NBCA concerning dissenter's rights.
3.3 NO FURTHER RIGHTS. From and after the Effective Time, holders
of certificates theretofore evidencing TWG Stock shall cease to have any
rights as stockholders of TWG, except as provided herein or by law.
3.4 CLOSING OF THE TWG'S TRANSFER BOOKS. At the Effective Time,
the stock transfer books of TWG shall be closed and no transfer of TWG
Stock shall be made thereafter. If after the Effective Time, certificates
for TWG Stock are presented to Parent or the Surviving Corporation, they
shall be canceled and exchanged for an amount of Parent Stock as set forth
in Section 3.1 hereof, subject to applicable law in the case of Dissenting
Shares.
3
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TWG
TWG and the TWG Shareholder, jointly and severally, represent and
warrant to Parent and Sub, which representations and warranties shall
survive the Closing in accordance with Section 10.1 of this Agreement, as
follows:
4.1 ORGANIZATION AND QUALIFICATION. TWG is a corporation duly
organized, validly existing and in good standing under the laws of the
State of North Carolina. TWG has the requisite corporate power and
authority to carry on the Business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary.
Complete and correct copies of the Articles of Incorporation and Bylaws of
TWG as in effect on the date hereof are attached as Schedule 4.1 hereto.
------------
The minute book of TWG, a true and complete copy of which has been
delivered to Parent, (a) accurately reflects all action taken by the
directors and shareholders of TWG at meetings of TWG's Board of Directors
or shareholders, as the case may be; and (b) except as set forth on
Schedule 4.1, contains true and complete copies of, or originals of, the
------------
respective minutes of all meetings or consent actions of the directors or
shareholders.
4.2 AUTHORITY. TWG has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by TWG have been duly
and validly authorized and approved by TWG's Board of Directors and the TWG
Shareholder, and no other corporate or shareholder proceedings on the part
of TWG, its Board of Directors or the TWG Shareholder is necessary to
authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
TWG and each TWG Shareholder, and assuming the due authorization, execution
and delivery by Parent and Sub, constitutes the valid and binding
obligation of TWG and each TWG Shareholder, enforceable against TWG and
each TWG Shareholder in accordance with its respective terms.
4.3 CAPITALIZATION.
(a) The authorized capital stock of TWG consists of 100,000
shares of common stock, $1.00 par value, of which 1,000 shares are validly
issued and outstanding, fully paid and nonassessable. All outstanding
securities of TWG were issued in accordance with applicable federal and
state securities laws. There are no classes of or series of capital stock
of TWG outstanding other than the TWG Stock, and except as set forth on
Schedule 4.3 hereto, no options, warrants, calls, agreements, commitments
------------
or other rights presently outstanding that would obligate TWG or the TWG
Shareholder to issue, deliver or sell shares of its capital stock, or to
grant, extend or enter into any such option, warrant, call, agreement,
commitment or other right. In addition to the foregoing, as of the date
hereof, TWG has no bonds, debentures, notes or other indebtedness issued or
outstanding that have voting rights in TWG under ordinary circumstances.
4
<PAGE>
(b) All of the issued and outstanding shares of capital stock of
TWG are validly issued, fully paid and nonassessable and owned by the TWG
Shareholder, free and clear of any lien, charge, security interest, pledge,
option, right of first refusal, voting proxies or other voting agreements,
or encumbrance of any kind or nature (any of the foregoing, a "Lien").
4.4 SUBSIDIARIES. TWG has no subsidiaries and does not otherwise
own or control, directly or indirectly, any equity interest in, or any
security convertible into an equity interest in, any corporation,
partnership, limited liability company, joint venture, association or other
business entity.
4.5 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set
forth on Schedule 4.5 hereto, none of the execution and delivery of this
------------
Agreement by TWG or the TWG Shareholder, the consummation by TWG and the
TWG Shareholder of the transactions contemplated hereby or compliance by
TWG with any of the provisions hereof will:
(a) conflict with or violate the Articles of Incorporation or
Bylaws of TWG;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to TWG or the TWG
Shareholder, or by which TWG or its properties or assets may be bound or
affected;
(c) result in a violation or breach of, or constitute a default
(or an event that, with notice or lapse of time or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any note, bond, mortgage, indenture, or
any material contract, agreement, arrangement, lease, license, permit,
judgment, decree, franchise or other instrument or obligation to which TWG
is a party or by which TWG or its properties may be bound or affected
(collectively, for purposes of this Section 4.5, a "TWG Agreement");
(d) result in the creation of any Lien on any of the property or
assets of TWG; or
(e) require any consent, waiver, license, approval,
authorization, order, permit, registration or filing with, or notification
to (any of the foregoing being a "Consent"), of (i) any government or
subdivision thereof, whether domestic, foreign or multinational, or any
administrative, governmental, or regulatory authority, agency, commission,
court, tribunal or body, whether domestic, foreign or multinational (a
"Governmental Entity"), except for the filing of the Certificates of Merger
pursuant to the DGCL and NBCA; or (ii) any other individual, corporation,
trust, partnership, limited liability company or other entity
(collectively, a "Person") pursuant to any TWG Agreement.
4.6 FINANCIAL STATEMENTS. TWG has heretofore furnished Parent with a
true and complete copy of (a) the unaudited financial statements of TWG for
the period ending December 31, 1995; (b) the unaudited financial statements
of TWG for the period ending December 31, 1996; and (c) the unaudited
financial statements of TWG for the period ending February 28,
5
<PAGE>
1997, a copy of each of which is attached hereto as Schedule 4.6
------------
(collectively herein referred to as the "Financial Statements"). The
Financial Statements have been prepared in accordance with generally
accepted accounting principles (except for the absence of footnotes and,
for the unaudited financial statements for the period ending February 28,
1997, normal year-end adjustments) consistently followed throughout the
period indicated, and present fairly, in all material respects, the
financial position and operating results of TWG as of the dates, and during
the periods, indicated therein.
4.7 ABSENCE OF CHANGES. Except as provided in Schedule 4.7 hereto
------------
and except as contemplated by this Agreement, since December 31, 1996, (a)
TWG has not entered into any transaction that was not in the ordinary
course of business; (b) there has been no sale, assignment, transfer,
mortgage, pledge, encumbrance or lease of any material assets or properties
of TWG; (c) there has been (i) no declaration or payment of a dividend, or
any other declaration, payment or distribution of any type or nature to any
shareholder of TWG in respect of its stock, whether in cash or property,
and (ii) no purchase or redemption of any shares of the capital stock of
TWG; (d) there has been no declaration, payment, or commitment for the
payment, by TWG, of a bonus or other additional salary, compensation, or
benefit to any employee of TWG that was not in the ordinary course of
business; (e) there has been no release, compromise, waiver or cancellation
of any debts to or claims by TWG, or waiver of any rights of TWG, in each
case having a value in excess of $10,000; (f) there have been no capital
expenditures in excess of $10,000 for any single item, or $25,000 in the
aggregate; (g) there has been no change in accounting methods or practices
or revaluation of any assets of TWG (other than TWG Accounts Receivable (as
defined in Section 4.26 hereof) written down in the ordinary course of
business that are not in excess of $10,000 for any single TWG Account
Receivable and $25,000 in the aggregate); (h) there has been no material
damage, destruction or loss of physical property (whether or not covered by
insurance) adversely affecting the TWG Business or the operations of TWG;
(i) there has been no loan by TWG, or guaranty by TWG of any loan, to any
employee of TWG or to any Person related to the TWG Business; (j) TWG has
not ceased to transact business with any customer that, as of the date of
such cessation, represented more than 5% of the annual gross revenues of
TWG; (k) there has been no termination or resignation of any key employee
or officer of TWG, and neither TWG nor the TWG Shareholder is aware of any
such termination or resignation that is threatened; (l) there has been no
amendment or termination of any material oral or written contract,
agreement or license related to the TWG Business, to which TWG is a party
or by which it is bound, except in the ordinary course of business, or
except as expressly contemplated by this Agreement; (m) TWG has not failed
to satisfy any of its debts, obligations or liabilities related to the TWG
Business or the assets of TWG as the same become due and owing (except for
TWG Accounts Payable (as defined in Section 4.27 hereof), payable in
accordance with past practices and in the ordinary course of business); (n)
there has been no agreement or commitment by TWG to do any of the
foregoing; and (o) there has been no other event or condition of any
character pertaining to and materially affecting the assets, Business or
financial condition of TWG.
4.8 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.8
------------
hereto, neither TWG nor the TWG Business has any debt, liability or
obligation of any kind, whether accrued, absolute or otherwise, including,
without limitation, any liability or obligation on account of taxes or any
6
<PAGE>
governmental charges or penalty, interest or fines, except (a) liabilities
not in excess of $50,000 (whether individually or in the aggregate)
incurred in the ordinary course of business after December 31, 1996; (b)
liabilities reflected on the TWG Financial Statements; and (c) liabilities
incurred as a result of the transactions contemplated by this Agreement.
4.9 TITLE TO PROPERTIES. Except as set forth on Schedule 4.9
------------
hereto, TWG has good and marketable title to all property and assets used
in the TWG Business (other than TWG Real Property (as defined in Section
4.12 hereof)), and good title to all of its leasehold interests, in each
case, free and clear of any and all Liens other than liens for taxes not
yet due and payable.
4.10 EQUIPMENT. Schedule 4.10 hereto sets forth a true and correct
-------------
list as of January 2, 1996 (and a summary of tangible assets purchased
since such date) of all items of tangible personal property (including,
without limitation, computer hardware) necessary for or used in the
operation of the TWG Business in the manner in which it has been and is now
operated by TWG ("the TWG Equipment"), except for personal property having
a net book value of less than $1,000. Except as set forth on Schedule 4.10,
-------------
each material item of TWG Equipment is in good condition and repair,
ordinary wear and tear excepted.
4.11 INTELLECTUAL PROPERTY.
(a) Schedule 4.11(a) hereto sets forth a list, by trade name or
----------------
other commonly used description, of all material proprietary technology,
trade secrets, know-how, patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, service marks, service mark rights,
copyrights, and other intellectual property rights used by TWG in the
conduct of the TWG Business (collectively, "TWG Intellectual Property
Rights"). No material intangible property is required for the conduct of
the TWG Business as it has been and is currently being conducted other than
the TWG Intellectual Property Rights. TWG owns, or is validly licensed or
otherwise has the right to use or exploit, all TWG Intellectual Property
Rights, free of any obligation to make any payment (whether of a royalty,
license fee, compensation or otherwise). No claims are pending or, to the
knowledge of TWG and the TWG Shareholder, threatened, that TWG is
infringing or otherwise adversely affecting the rights of any Person with
regard to any TWG Intellectual Property Right. TWG has used commercially
reasonable efforts to protect the TWG Intellectual Property Rights, and, to
the knowledge of TWG and the TWG Shareholder, no Person is infringing the
rights of TWG with respect to any TWG Intellectual Property Right. To the
knowledge of TWG and the TWG Shareholder, neither TWG nor any employee,
agent or independent contractor of TWG has used, appropriated or disclosed,
directly or indirectly, any trade secrets or other proprietary or
confidential information of any other Person, or otherwise violated any
confidential relationship with any other Person. To the knowledge of TWG
and the TWG Shareholder, use of the name "The Whitley Group" does not
infringe upon the rights of any Person.
(b) Schedule 4.11(b) hereto sets forth a list and a brief
----------------
description of all material computer software used by TWG in the conduct of
the TWG Business (the "TWG Software"). TWG currently licenses, or otherwise
has the legal right to use, all of the TWG Software (including any
upgrades, alterations or enhancements with respect thereto), and all of
7
<PAGE>
the TWG Software is being used in compliance with any applicable licenses
or other agreements. No material computer software other than the TWG
Software is required for the conduct of the TWG Business as it has been and
is currently being conducted.
4.12 REAL PROPERTY. Except as set forth on Schedule 4.12 hereto:
-------------
(a) TWG has good and insurable leasehold interest in all real
property (including all buildings, improvements and fixtures thereon) used
in the operation of the TWG Business (the "TWG Real Property"). TWG owns no
real property. Except for liens for current taxes not yet due and the items
set forth on Schedule 4.12, there are no Liens on TWG's interest in any of
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the TWG Real Property.
(b) There are no parties in possession of any portion of the
TWG Real Property other than TWG, whether as sublessees, subtenants at
will, trespassers or otherwise.
(c) There are water, sewer, gas and electrical lines presently
in existence on the TWG Real Property that are sufficient to service
adequately the operations of the TWG Business as presently operated in each
building located on the TWG Real Property.
(d) To the knowledge of TWG and the TWG Shareholder, there is
no pending or threatened condemnation or similar proceeding affecting the
TWG Real Property or any portion thereof, and, to the knowledge of TWG and
the TWG Shareholder, no such action is presently contemplated.
(e) To the knowledge of TWG and the TWG Shareholder, there are
no laws, ordinances, restrictions, judicial or administrative actions,
actions by adjacent landowners, or natural or artificial conditions upon
the TWG Real Property, or any other fact or condition, that would have a
material adverse effect upon the use of the TWG Real Property for the
operation of the TWG Business.
(f) To the knowledge of TWG and the TWG Shareholder, TWG's use,
operation and maintenance of the TWG Real Property does not violate any
restrictive covenants affecting the TWG Real Property, or any zoning,
building or other federal, state or municipal law, ordinance, regulation or
restriction.
(g) To the knowledge of TWG and the TWG Shareholder, there is
no law, ordinance, order, regulation or requirement now in existence or
under active consideration by any Governmental Entity, that would require,
under the provisions of any of the TWG Leases (as hereinafter defined), any
material expenditure by TWG to modify or improve any of the TWG Real
Property to bring it into compliance therewith.
(h) To the knowledge of TWG and the TWG Shareholder, there are
no structural, or material electrical, mechanical, plumbing, or other
defects in the buildings located on the TWG Real Property and the buildings
thereon are free from leaks.
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4.13 LEASES. Schedule 4.13 hereto sets forth a list of all leases
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pursuant to which TWG leases, as lessor or lessee, real or personal
property used in operating the TWG Business or otherwise (the "TWG
Leases"). Copies of the TWG Leases, which have previously been provided to
Parent, are true and complete copies thereof. All of the TWG Leases are
valid, binding and enforceable in accordance with their respective terms,
and there is not under any such TWG Lease any existing default by TWG, or,
to the knowledge of TWG and the TWG Shareholder, by any other party
thereto, or any condition or event of that, with notice or lapse of time or
both, would constitute a default. TWG has not received notice that the
landlord of any of the TWG Leases intends to cancel, suspend or terminate
the TWG Leases or to exercise or not exercise any options under any of the
TWG Leases. The current offices used by TWG are suitable for the operation
of the TWG Business in the manner in which it is now being conducted by
TWG.
4.14 CONTRACTS. Except as set forth on Schedule 4.14 hereto, TWG is
-------------
not, directly or indirectly, a party (in its own name or as a successor in
interest), or otherwise bound by, any written or oral:
(a) material service agreement or commitment (including,
without limitation, agreements or commitments covering business and office
equipment, repairs, interior design, outdoor landscaping, graphics,
sanitation, voice mail, advertising, and vending machines);
(b) material supplier agreement or commitment (including,
without limitation, agreements or commitments involving office supplies,
cleaning supplies, food/refreshment supplies);
(c) material agreement or commitment with any customer of TWG
(including without limitation any agreement or commitment providing for a
retainer) entered into on or prior to March 26, 1997;
(d) shareholder agreement (including voting agreements, proxies
and the like);
(e) employment agreement;
(f) agreement or commitment relating to computer systems,
including those relating to hardware, software, maintenance, and upgrades;
(g) agreement or commitment with a term of more than one year;
(h) material merger or acquisition agreement or commitment
whereby TWG acquired or disposed of (or will acquire or dispose of) stock
or assets;
(i) agreement or commitment on the part of TWG to loan money
to, or to guarantee the indebtedness of, any third party;
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(j) agreement or commitment on the part of TWG to borrow money
from, or receive a guarantee of indebtedness from, any third party,
including, without limitation, any agreement in connection therewith
creating a Lien on any of the property or assets of TWG;
(k) agreement or commitment containing covenants (i) limiting,
directly or indirectly, the freedom of TWG to compete in any line of
business in any geographical area (including, without limitation, any such
agreement affecting any material employee of TWG); (ii) limiting, directly
or indirectly, the freedom of TWG to use any Intellectual Property Right in
any geographic area; or (iii) requiring TWG, directly or indirectly, to
share any profits or revenues;
(l) material warranty arrangements (whether TWG is the provider
or the recipient);
(m) agreement or commitment including dividend restrictions or
other negative covenants;
(n) indemnity agreements or commitments given or received by
TWG; or
(o) any other material agreement or commitment relating to TWG
or the TWG Business.
True and complete copies of each such written contract or commitment,
and a true and complete narrative description of any oral contract or
commitments, listed on Schedule 4.14 (collectively, the "TWG Contracts") have
-------------
previously been made available to Parent. Neither TWG nor, to the knowledge of
TWG and the TWG Shareholder, any other party to any of the TWG Contracts, (x) is
in default under (nor does there exist any condition that, with notice or lapse
of time or both, would cause such a default under) any of the TWG Contracts, or
(y) has waived any material right it may have under any of the TWG Contracts.
All of the TWG Contracts constitute the valid and binding obligation of TWG,
and, to the knowledge of TWG and the TWG Shareholder, the other parties thereto.
For purposes of this Agreement, an agreement or commitment shall be deemed to be
"material" to the extent such agreement or commitment obligates TWG to pay, or
entitles TWG to receive, in any one year or in the aggregate, in excess of
$10,000. In addition to the foregoing, TWG hereby represents and warrants that
the aggregate value of all payment obligations, and rights to receive payments,
under agreements, contracts and commitments (whether oral or in writing) to
which TWG is a party or by which it is otherwise bound, that would not be
considered "material" in accordance with the preceding sentence is less than
$200,000 (calculating such value by adding together the value of rights and
obligations, and not by determining the net amount thereof).
4.15 DIRECTORS AND OFFICERS. Schedule 4.15 hereto sets forth a
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list, as of the date of this Agreement, of the name of each director and
officer of TWG and the offices held by each.
4.16 PAYROLL INFORMATION. Schedule 4.16 hereto sets forth a true
-------------
and complete copy of the most recent payroll report of TWG, showing all
current employees of TWG and their current levels of compensation, other
than bonuses and other extraordinary compensation.
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4.17 LITIGATION. Except as set forth on Schedule 4.17 hereto, there
-------------
is no suit, action, claim, investigation or proceeding pending or, to the
knowledge of TWG, threatened against or affecting TWG, the TWG Business, or the
TWG Shareholder, nor is there any judgment, decree, injunction or order of any
applicable Governmental Entity or arbitrator outstanding against TWG that,
either individually or in the aggregate, would have a material adverse effect on
the assets, business or financial condition of TWG.
4.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 4.18 hereto, there are no
-------------
employee benefit plans, agreements or arrangements maintained by TWG, including,
without limitation, (i) "employee benefit plans," within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"); (ii) affirmative action plans; (iii) current or deferred
compensation, pension, profit sharing, vacation or severance plans or programs;
or (iv) medical, hospital, accident, disability or death benefit plans
(collectively, "TWG Benefit Plans"). All TWG Benefit Plans are administered in
accordance with, and are in material compliance with, all applicable laws and
regulations. No default exists with respect to the obligations of TWG under any
TWG Benefit Plans.
(b) TWG is not a party to any collective bargaining agreement,
no such agreement determines the terms and conditions of employment of any
employee of TWG, no collective bargaining agent has been certified as a
representative of any of the employees of TWG, no representation campaign or
election is now in progress with respect to any employee of TWG and there are no
labor disputes, grievances, controversies, strikes or requests for union
representation pending, or, to the knowledge of TWG and the TWG Shareholder,
threatened, relating to or affecting the TWG Business. To the knowledge of TWG
and the TWG Shareholder, no event has occurred that could give rise to any such
dispute, controversy, strike or request for representation.
4.19 ERISA.
(a) All TWG Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of TWG Benefit Plans that is intended to
meet the requirements of Section 401(a) of the Code has been determined by the
Internal Revenue Service to meet such requirements within the meaning of such
provision. No TWG Benefit Plan is subject to Title IV of ERISA or Section 412
of the Code. TWG has not engaged in any non-exempt "prohibited transactions,"
as such term is defined in Section 4975 of the Code or Section 406 of ERISA,
involving TWG Benefit Plans that would subject TWG to the penalty or tax imposed
under Section 502(i) of ERISA or Section 4975 of the Code. TWG has not engaged
in any transaction described in Section 4069 of ERISA within the last five
years. Except as disclosed in Schedule 4.19 hereto or pursuant to the terms of
-------------
TWG Benefit Plans, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation or
golden parachute) becoming due to any director or other employee of TWG, (ii)
increase any benefits
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otherwise payable under any TWG Benefit Plan or (iii) result in the acceleration
of the time of payment or vesting of any such benefits to any extent.
(b) No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any TWG Benefit Plan that is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA and
that is intended to meet the requirements of Section 401(a) of the Code, or by
any entity that is considered one employer with TWG under Section 4001 of ERISA
or Section 414 of the Code (an "ERISA Affiliate"), within the 12-month period
ending on the date hereof. TWG has not incurred any liability to the Pension
Benefit Guaranty Corporation in respect of any TWG Benefit Plan that remains
unpaid.
4.20 TAXES.
(a) TWG has duly and timely filed all federal, state and local
income, franchise, excise, real and personal property and other tax returns and
reports, including extensions, required to have been filed by TWG on or prior to
the date hereof. TWG has duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by TWG (whether by way of withholding or otherwise) to any federal, state,
local or other taxing authority (except to the extent the same are being
contested in good faith, and adequate reserves therefore have been provided in
the TWG Financial Statements). As of the date hereof, all deficiencies proposed
as a result of any audits have been paid or settled.
(b) TWG is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) TWG has not consented to have the provisions of Section
341(f)(2) of the Code (or comparable state law provisions) apply to it, and TWG
has not agreed or been requested to make any adjustment under Section 481(c) of
the Code by reason of a change in accounting method or otherwise.
4.21 COMPLIANCE WITH APPLICABLE LAWS. TWG holds all material
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of TWG, as appropriate, and to carry on the TWG Business as now
conducted (the "TWG Permits"). To the knowledge of TWG, TWG is in material
compliance with all applicable laws, ordinances and regulations and the terms of
the TWG Permits. Schedule 4.21 hereto sets forth a list of the TWG Permits, a
-------------
true and correct copy of each of which has been provided to Parent.
4.22 BOARD OF DIRECTOR/SHAREHOLDER CONSENT. Both the Board of
Directors of TWG and the TWG Shareholder have, by unanimous written consent,
adopted and approved this Agreement and the transactions contemplated hereby
(including, without limitation, the Merger).
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4.23 BROKERS. Except as set forth on Schedule 4.23 hereto, no
-------------
broker or finder is entitled to any broker's or finder's fee or other commission
in connection with the transactions contemplated by this Agreement as a result
of arrangements made by or on behalf of TWG.
4.24 ENVIRONMENTAL MATTERS.
(a) To the knowledge of TWG and the TWG Shareholder, no real
property currently or formerly owned or operated by TWG is contaminated with any
Hazardous Substances (as hereinafter defined);
(b) TWG is not a party to any litigation or administrative
proceeding nor, to the knowledge of TWG and the TWG Shareholder, is any
litigation or administrative proceeding threatened against it, that, in either
case, asserts or alleges that TWG (i) violated any Environmental Laws (as
hereinafter defined); (ii) is required to clean up, remove or take remedial or
other response action due to the disposal, deposit, discharge, leak or other
release of any Hazardous Substances; or (iii) is required to pay all or a
portion of the cost of any past, present or future cleanup, removal or remedial
or other action that arises out of or is related to the disposal, deposit,
discharge, leak or other release of any Hazardous Substances.
(c) To the knowledge of TWG and the TWG Shareholder, there are
not now nor have there previously been tanks or other facilities on, under, or
at any real property owned, leased, used or occupied by TWG containing materials
that, if known to be present in soils or ground water, would require cleanup,
removal or other remedial action under Environmental Laws.
(d) To the knowledge of TWG and the TWG Shareholder, there are
no conditions existing currently that would subject TWG or the TWG Shareholder
(as owners of TWG) to damages, penalties, injunctive relief or cleanup costs
under any Environmental Laws, or that would require cleanup, removal, remedial
action or other response pursuant to Environmental Laws.
(e) To the knowledge of TWG and the TWG Shareholder, TWG is not
subject to any judgment, order or citation related to or arising out of any
Environmental Laws and has not been named or listed as a potentially responsible
party by any Governmental Entity in a matter related to or arising out of any
Environmental Laws.
(f) For purposes of this Agreement, (i) the term "Environmental
Law" means any federal, state or local law (including statutes, regulations,
ordinances, codes, rules, judicial opinions and other governmental restrictions
and requirements), relating to the discharge of air pollutants, water
pollutants, noise, odors or process waste water, or otherwise relating to the
environment or hazardous or toxic substances; and (ii) the term "Hazardous
Substance" means any toxic or hazardous substance that is regulated by or under
authority of any Environmental Law, including, without limitation, any petroleum
products, asbestos or polychlorinated biphenyls.
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4.25 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as
provided in Schedule 4.25 hereto, no officer, director, shareholder or employee
-------------
of TWG, and no family member of any of the foregoing, has any direct or indirect
interest in any customer, supplier or competitor of TWG, or in any Person from
whom or to whom TWG leases any real or personal property, or in any other Person
with whom TWG is doing business, whether directly or indirectly (including,
without limitation, as a debtor or creditor), whether in existence as of the
date hereof or proposed, other than the ownership of stock of publicly traded
corporations that does not exceed 1% of the issued and outstanding stock of such
corporation.
4.26 ACCOUNTS RECEIVABLE. All accounts, notes, contracts and other
receivables of TWG (collectively, "TWG Accounts Receivable") were acquired by
TWG in the ordinary course of business arising from bona fide transactions
completed in accordance with the terms and provisions contained in any documents
related thereto. To the knowledge of TWG and the TWG Shareholder, there are no
set-offs, counterclaims or disputes asserted with respect to any TWG Accounts
Receivable that would result in claims in excess of the reserve for bad debts
set forth on the TWG Financial Statements and, to the knowledge of TWG and the
TWG Shareholder, subject to such reserve, all TWG Accounts Receivable are
collectible in full. Schedule 4.26 hereto is a true and complete aging report
-------------
prepared as of February 28, 1997, which shows the time elapsed since invoice
date for all TWG Accounts Receivable.
4.27 ACCOUNTS PAYABLE. All material accounts, notes, contracts and
other amounts payable of TWG (collectively, "TWG Accounts Payable") are
currently within their respective terms, and are neither in default nor
otherwise past due by more than 90 days. Schedule 4.27 hereto is a true and
-------------
complete aging report prepared as of February 28, 1997, which shows the time
elapsed since invoice date for all TWG Accounts Payable.
4.28 INSURANCE. The insurance policies maintained by TWG (the "TWG
Insurance Policies") are listed on Schedule 4.28 hereto, and true and compete
-------------
copies of all TWG Insurance Policies have previously been provided to Parent.
TWG (i) is not in default regarding the provisions of any TWG Insurance Policy;
(ii) has paid all premiums due thereunder; and (iii) has not failed to present
any notice or present any material claim thereunder in a due and timely fashion.
4.29 BANKRUPTCY. Neither TWG nor the TWG Shareholder has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
4.30 ACCREDITED INVESTORS; INVESTMENT PURPOSE. The TWG Shareholder
represents that he is an "accredited investor" as such term is defined in Rule
501 of Regulation D promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Securities Act"). The TWG
Shareholder is acquiring the Parent Stock solely for his own account for
investment and not with a view to, or for sale in connection with, any
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<PAGE>
distribution thereof. The TWG Shareholder agrees that he will not, directly or
indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of
any Parent Stock (or solicit any offers to buy, purchase or other acquire or
take a pledge of any such shares) except in compliance with the Securities Act
and the rules and regulations thereunder, other applicable laws, rules and
regulations, and the Stockholders' Agreement (as defined in Section 7.1 hereof).
4.31 RESTRICTIONS ON TRANSFER. The TWG Shareholder acknowledges
that (a) the Parent Stock received by him hereunder has not been registered
under the Securities Act; (b) the Parent Stock may be required to be held
indefinitely, and the TWG Shareholder must continue to bear the economic risk of
the investment in such shares unless such shares are subsequently registered
under the Securities Act or an exemption from such registration is available;
(c) there may not be any public market for the Parent Stock in the foreseeable
future; (d) Rule 144 promulgated under the Securities Act is not presently
available with respect to sales of any securities of Parent, and such Rule is
not anticipated to be available in the foreseeable future; (e) when and if
Parent Stock may be disposed of without registration in reliance upon Rule 144,
such disposition can be made only in limited amounts and in accordance with the
terms and conditions of such Rule; (f) if the exemption afforded by Rule 144 is
not available, public sale without registration will require the availability of
an exemption under the Securities Act; (g) the Parent Stock is subject to the
terms and conditions of the Stockholders' Agreement; (h) restrictive legends
shall be placed on the certificates representing Parent Stock; and (i) a
notation shall be made in the appropriate records of Parent indicating that
Parent Stock is subject to restrictions on transfer and, if Parent should in the
future engage the services of a stock transfer agent, appropriate stop-transfer
instructions will be issued to such transfer agent with respect to Parent Stock.
4.32 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION.
The TWG Shareholder represents and warrants that (a) his financial situation is
such that he can afford to bear the economic risk of holding Parent Stock
acquired by him hereunder for an indefinite period; (b) he can afford to suffer
the complete loss of such Parent Stock; (c) he has been granted the opportunity
to ask questions of, and receive answers from, representatives of Sub and Parent
concerning the terms and conditions of the Parent Stock and to obtain any
additional information that he deems necessary; (d) his knowledge and experience
in financial business matters is such that he is capable of evaluating the
merits and risk of ownership of the Parent Stock; and (e) he has carefully
reviewed the terms of the Stockholders' Agreement and has evaluated the
restrictions and obligations contained therein.
4.33 DISCLOSURE. No statement of fact by TWG contained in this
Agreement and no written statement of fact furnished or to be furnished by TWG
to Parent or Sub pursuant to or in connection with this Agreement contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements herein or
therein contained not misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub represents and warrants to TWG and the TWG
Shareholder, which representations and warranties shall survive the Closing in
accordance with Section 10.1 of this Agreement, as follows:
5.1 ORGANIZATION AND QUALIFICATION. Each of Parent and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation. Each of Parent and
its Subsidiaries has the requisite corporate power and authority to carry on its
business as it is now being conducted and is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary. Complete and correct copies of the Certificates
of Incorporation and Bylaws of Parent and Sub as in effect on the date hereof
are attached as Schedule 5.1 hereto. The minute books of Parent and Sub, a true
------------
and complete copy of each of which has been delivered to TWG, (a) accurately
reflects all action taken by the directors and shareholders of Parent at
meetings of Parent's Board of Directors or shareholders, as the case may be; and
(b) contains true and complete copies of, or originals of, the respective
minutes of all meetings or consent actions of the directors or shareholders.
5.2 AUTHORITY. Each of Parent and Sub has the necessary corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by each of Parent
and Sub have been duly and validly authorized and approved by their respective
Board of Directors and shareholders, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective boards of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by TWG and the TWG Shareholder,
constitutes the valid and binding obligation of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms.
5.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth
on Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
------------
Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby or compliance by Parent and Sub with any of the provisions
hereof will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Parent or Sub, or the organizational documents of any other
Subsidiaries (as defined in Section 10.12 hereof);
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<PAGE>
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to Parent or its Subsidiaries,
or by which Parent, any of its Subsidiaries, or their respective properties or
assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected (collectively, for purposes of this Section 5.3, an
"IXL Agreement");
(d) result in the creation of any Lien on any of the property or
assets of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for
(x) compliance with any applicable requirements of any applicable securities
laws, and (y) the filing of the Certificates of Merger pursuant to the DGCL and
NBCA; or (ii) any other Person.
5.4 LITIGATION. Except as set forth on Schedule 5.4 hereto, there is
------------
no suit, action, claim, investigation or proceeding pending or, to the knowledge
of Parent, threatened against or affecting Parent or its Subsidiaries, nor is
there any judgment, decree, injunction or order of any applicable Governmental
Entity or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 BROKERS. Except as disclosed on Schedule 5.5 hereto, No broker
------------
or finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Sub.
5.6 PARENT STOCK.
(a) As of the date hereof the authorized capital stock of Parent
consists of (i) (A) 250,000 shares of Class A Common Stock, $.01 par value (the
"Class A Common Stock"), of which no shares are validly issued and outstanding,
and (B) 1,000,000 shares of Class B Common Stock, $.01 par value, of which
40,748 shares are validly issued and outstanding (without taking into account
any shares of Parent Stock to be issued pursuant to this Agreement), fully paid
and nonassessable; and (ii) 250,000 shares of Class A Convertible Preferred
stock, of which 111,500 shares are validly issued and outstanding, fully paid
and nonassessable. All outstanding securities of Parent were issued in
accordance with applicable federal and state securities laws. Except as set
forth on Schedule 5.6(a) hereto, there are no options, warrants, calls,
---------------
agreements, commitments or other rights presently outstanding that would
obligate Parent to issue, deliver or sell shares of its capital stock, or to
grant, extend or enter into any such option, warrant, call, agreement,
commitment or other right. In addition to the foregoing, as of
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the date hereof, Parent has no bonds, debentures, notes or other indebtedness
issued or outstanding that have voting rights in Parent under ordinary
circumstances.
(b) The holders of record as of the date hereof of the issued and
outstanding shares of capital stock of Parent are set forth on Schedule 5.6(b)
---------------
hereto.
(c) The holders of record as of the Effective Date of the outstanding
shares of capital stock of Parent, together with the number of shares of capital
stock then outstanding, are set forth on a pro forma basis on Schedule 5.6(c)
---------------
hereto (determined based on certain assumptions described therein).
(d) When delivered to the TWG Shareholder in accordance with the terms
hereof, the Parent Stock will (i) be duly authorized, fully paid and
nonassessable, (ii) represent 10.0327% of the issued and outstanding shares of
Parent Stock (determined based on the assumptions set forth on Schedule 5.6(c)),
---------------
(iii) represent, on an as-converted and fully diluted basis, 2.2574% of the
issued and outstanding capital stock of Parent (determined based on the
assumptions set forth in Schedule 5.6(c)), and (iv) be free and clear of all
---------------
Liens.
5.7 SUBSIDIARIES. Except as set forth on Schedule 5.7 hereto, Parent
------------
has no subsidiaries and does not otherwise own or control, directly or
indirectly, any equity interest in, or any security convertible into an equity
interest in, any corporation, partnership, limited liability company, joint
venture, association or other business entity. Schedule 5.7 hereto lists the
name of each of the Subsidiaries of Parent, and indicates their respective
jurisdictions of incorporation and authorized and outstanding capitalization.
All of the issued and outstanding shares of capital stock of each of the
Subsidiaries of Parent is duly authorized, validly issued, fully paid and non-
assessable and is owned by Parent free and clear of all Liens; and there are no
voting trusts, voting agreement or similar understandings applicable to such
shares. There are no outstanding subscriptions, options, rights, warrants,
puts, calls, registration or other agreements or commitments of any type (i)
obligating Parent or any of its Subsidiaries to issue, sell or transfer any
shares of capital stock of any subsidiary, any securities convertible into or
exchangeable for shares of capital stock of any Subsidiary, or any rights to
acquire capital stock of any Subsidiary; (ii) obligating Parent to grant, offer
or enter into any of the foregoing; or (iii) relating to the voting or control
of any shares of capital stock of any Subsidiary.
5.8 FINANCIAL STATEMENTS. Parent has heretofore furnished TWG with a
true and complete copy of (a) the audited financial statements of iXL
Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31,
1993, 1994 and 1995; (b) audited combined financial statements for Creative
Video, Inc., Creative Video Library, Inc. and Entrepreneur Television, Inc. for
the years ending December 31, 1993, 1994 and 1995; (c) the unaudited combined
financial statements of iXL, Inc., Creative Video, Inc., Creative Video Library,
Inc. and Entrepreneur Television, Inc. for the four months ended April 30, 1996;
(d) the unaudited consolidated financial statements for Parent and its
Subsidiaries, dated December 31, 1996, for the eight months ended December 31,
1996; and (e) the unaudited consolidated financial statements for Parent and its
Subsidiaries, dated February 28, 1997 (collectively herein referred to as the
"Parent Financial Statements"). The Parent Financial Statements have been
prepared
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in accordance with generally accepted accounting principles (except, in the case
of the unaudited financial statements, for the exclusion of footnotes and normal
year-end adjustments) consistently followed throughout the period indicated, and
present fairly, in all material respects, the financial position and operating
results of Parent and its Subsidiaries as of the dates, and during the periods,
indicated therein.
5.9 ABSENCE OF CHANGES. Except as provided in Schedule 5.9 hereto
------------
and except as contemplated by this Agreement, since December 31, 1996, (a)
neither Parent nor any of its Subsidiaries has entered into any transaction that
was not in the ordinary course of business; (b) there has been no sale,
assignment, transfer, mortgage, pledge, encumbrance or lease of any material
assets or properties of Parent or any of its Subsidiaries; (c) there has been
(i) no declaration or payment of a dividend, or any other declaration, payment
or distribution of any type or nature to any shareholder of Parent in respect of
its stock, whether in cash or property, and (ii) no purchase or redemption of
any shares of the capital stock of Parent; (d) there has been no declaration,
payment, or commitment for the payment by Parent or its Subsidiaries of a bonus
or other additional salary, compensation, or benefit to any employee of Parent
or any of its Subsidiaries that was not in the ordinary course of business; (e)
there has been no release, compromise, waiver or cancellation of any debts to or
claims by Parent or any of its Subsidiaries, or waiver of any rights of Parent
or any of its Subsidiaries, in each case having a value in excess of $10,000;
(f) there have been no capital expenditures by Parent in excess of $100,000 for
any single item, or $250,000 in the aggregate; (g) there has been no change in
accounting methods or practices or revaluation of any assets of Parent or its
Subsidiaries (other than Parent Accounts Receivable (as defined in Section 5.26
hereof) written down in the ordinary course of business that are not in excess
of $10,000 for any single Parent Account Receivable and $25,000 in the
aggregate); (h) there has been no material damage, destruction or loss of
physical property (whether or not covered by insurance) adversely affecting the
business or the operations of Parent or any of its Subsidiaries (referred to in
this Article 5 as "Parent's Business"); (i) there has been no loan by Parent or
any of its Subsidiaries, or guaranty by Parent or any of its Subsidiaries of any
loan, to any employee of Parent or any of its Subsidiaries or to any Person
related to Parent's Business; (j) neither Parent nor any of its Subsidiaries has
ceased to transact business with any customer that, as of the date of such
cessation, represented more than 5% of the annual gross revenues of Parent and
its Subsidiaries, taken as a whole; (k) there has been no termination or
resignation of any key employee or officer of Parent or any of its Subsidiaries,
and Parent is not aware of any such termination or resignation that is
threatened; (l) there has been no amendment or termination of any material oral
or written contract, agreement or license related to the Parent's Business, to
which Parent or any of its Subsidiaries is a party or by which Parent or any of
its Subsidiaries is bound, except in the ordinary course of business; (m)
neither Parent nor any of its Subsidiaries has failed to satisfy any of its
debts, obligations or liabilities related to Parent's Business, or the assets of
Parent or any of its Subsidiaries, as the same become due and owing (except for
Parent Accounts Payable (as defined in Section 5.27 hereof), payable in
accordance with past practices and in the ordinary course of business); (n)
there has been no agreement or commitment by Parent or any of its Subsidiaries
to do any of the foregoing; and (o) there has been no other event or condition
of any character pertaining to and materially affecting the assets, business or
financial condition of Parent and its Subsidiaries, taken as a whole.
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5.10 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 5.10
-------------
hereto, neither Parent nor any of its Subsidiaries has any debt, liability or
obligation of any kind, whether accrued, absolute or otherwise, including,
without limitation, any liability or obligation on account of taxes or any
governmental charges or penalty, interest or fines, except (a) liabilities not
in excess of $200,000 (whether individually or in the aggregate) incurred in the
ordinary course of business after December 31, 1996; (b) liabilities reflected
on the Parent Financial Statements; and (c) liabilities incurred as a result of
the transactions contemplated by this Agreement.
5.11 TITLE TO PROPERTIES. Except as set forth on Schedule 5.11
-------------
hereto, Parent or one of its Subsidiaries has good and marketable title to all
property and assets used in Parent's Business (other than Parent Real Property
(as defined in Section 5.14 hereof)), and good title to all of its leasehold
interests, in each case, free and clear of any and all Liens other than liens
for taxes not yet due and payable.
5.12 EQUIPMENT. Schedule 5.12 hereto sets forth a true and correct
-------------
list of all items of tangible personal property (including, without limitation,
computer hardware) necessary for or used in the operation of Parent's Business
in the manner in which it has been and is now operated by Parent (the "Parent
Equipment"), except for personal property having a net book value of less than
$1,000. Except as set forth on Schedule 5.12, each material item of Parent
-------------
Equipment is in good condition and repair, ordinary wear and tear excepted.
5.13 INTELLECTUAL PROPERTY.
(a) Schedule 5.13(a) hereto sets forth a list, by trade name or
----------------
other commonly used description, of all material proprietary technology, trade
secrets, know-how, patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, service marks, service mark rights, copyrights, and
other intellectual property rights used by Parent or its Subsidiaries in the
conduct of Parent's Business (collectively, "Parent Intellectual Property
Rights"). No material intangible property is required for the conduct of
Parent's Business as it has been and is currently being conducted other than the
Parent Intellectual Property Rights. Except as set forth on Schedule 5.13(a),
-----------------
Parent or one of its Subsidiaries owns, or is validly licensed or otherwise has
the right to use or exploit, all Parent Intellectual Property Rights, free of
any obligation to make any payment (whether of a royalty, license fee,
compensation or otherwise). No claims are pending or, to the knowledge of
Parent, threatened, that Parent or any of its Subsidiaries is infringing or
otherwise adversely affecting the rights of any Person with regard to any Parent
Intellectual Property Right. Parent and its Subsidiaries have used commercially
reasonable efforts to protect the Intellectual Property Rights, and, to the
knowledge of Parent, no Person is infringing the rights of Parent or its
Subsidiaries with respect to any Parent Intellectual Property Right. To the
knowledge of Parent, neither Parent nor any employee, agent or independent
contractor of Parent has used, appropriated or disclosed, directly or
indirectly, any trade secrets or other proprietary or confidential information
of any other Person, or otherwise violated any confidential relationship with
any other Person. To the knowledge of Parent, use of the names "iXL, Inc.", "IXL
Holdings, Inc." and the other names used in the conduct of Parent's Business do
not infringe upon the rights of any Person.
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(b) Schedule 5.13(b) hereto sets forth a list and a brief
----------------
description of all material computer software used in the conduct of
Parent's Business (the "Parent Software"). Parent and/or its Subsidiaries
currently licenses, or otherwise has the legal right to use, all of the
Parent Software (including any upgrades, alterations or enhancements with
respect thereto), and all of the Parent Software is being used in
compliance with any applicable licenses or other agreements. No material
computer software other than the Parent Software is required for the
conduct of Parent's Business as it has been and is currently being
conducted.
5.14 REAL PROPERTY. Except as set forth on Schedule 5.14 hereto:
-------------
(a) Parent or one of its Subsidiaries has good and marketable,
insurable fee simple title or good and insurable leasehold interest in all
real property (including all buildings, improvements and fixtures thereon)
used in the operation of Parent's Business (the "Parent Real Property").
Attached to Schedule 5.14 are all policies of title insurance currently
-------------
existing in favor of Parent or one of its Subsidiaries with respect to the
Parent Real Property. Except for liens for current taxes not yet due and
the items set forth on Schedule 5.14, there are no Liens on any of the
-------------
Parent Real Property or the interest of Parent or one of its Subsidiaries
therein.
(b) There are no parties in possession of any portion of the
Parent Real Property other than Parent or one of its Subsidiaries, whether
as lessees, tenants at will, trespassers or otherwise.
(c) There are water, sewer, gas and electrical lines presently
in existence on the Parent Real Property that are sufficient to service
adequately the operations of Parent Business as presently operated in each
building located on the Parent Real Property.
(d) To the knowledge of Parent, there is no pending or
threatened condemnation or similar proceeding affecting the Parent Real
Property or any portion thereof, and, to the knowledge of Parent, no such
action is presently contemplated.
(e) To the knowledge of Parent, there are no laws, ordinances,
restrictions, judicial or administrative actions, actions by adjacent
landowners, or natural or artificial conditions upon the Parent Real
Property, or any other fact or condition, that would have a material
adverse effect upon the use of the Parent Real Property for the operation
of Parent's Business.
(f) Parent has not received any notice from any insurance
company of any defects or inadequacies in the Parent Real Property or any
part thereof that would materially adversely affect the insurability of
Parent's or its Subsidiaries' interest in the Parent Real Property or the
premiums for the insurance thereof.
(g) To the knowledge of Parent, neither Parent's nor its
Subsidiaries' use, operation and maintenance of the Parent Real Property
violates any restrictive covenants affecting the Parent Real Property, or
any zoning, building or other federal, state or municipal law, ordinance,
regulation or restriction.
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(h) To the knowledge of Parent, there is no law, ordinance,
order, regulation or requirement now in existence, or, to the knowledge of
Parent, under active consideration by any Governmental Entity, that would
require Parent or its Subsidiaries (whether directly or under the
provisions of any of the Parent Leases (as hereinafter defined) covering
the Parent Real Property) to make any material expenditure to modify or
improve any of the Parent Real Property to bring it into compliance
therewith.
(i) To the knowledge of Parent, there are no structural, or
material electrical, mechanical, plumbing, or other defects in the
buildings located on the Parent Real Property and the buildings thereon are
free from leaks.
5.15 LEASES. Schedule 5.15 hereto sets forth a list of all leases
-------------
pursuant to which Parent or its Subsidiaries lease, as lessor or lessee,
real or personal property used in operating Parent's Business or otherwise
(the "Parent Leases"). Copies of the Parent Leases, which have previously
been made available to TWG, are true and complete copies thereof. All of
the Parent Leases are valid, binding and enforceable in accordance with
their respective terms, and there is not under any such Lease any existing
default by Parent or its Subsidiaries, or, to the knowledge of Parent, by
any other party thereto, or any condition or event of that, with notice or
lapse of time or both, would constitute a default. None of Parent or its
Subsidiaries has received notice that the landlord of any of the Parent
Leases intends to cancel, suspend or terminate the Parent Leases or to
exercise or not exercise any options under any of the Parent Leases.
5.16 CONTRACTS. Except as set forth on Schedule 5.16 hereto, neither
-------------
Parent nor any of its Subsidiaries is, directly or indirectly, a party (in
its own name or as a successor in interest), or otherwise bound by, any
written or oral:
(a) material service agreement or commitment (including, without
limitation, agreements or commitments covering business and office
equipment, repairs, interior design, outdoor landscaping, graphics,
sanitation, voice mail, advertising, and vending machines);
(b) material supplier agreement or commitment (including,
without limitation, agreements or commitments involving office supplies,
cleaning supplies, food/refreshment supplies);
(c) material agreement or commitment with any customer of Parent
or its Subsidiaries (including without limitation any agreement or
commitment providing for a retainer) entered into on or prior to March 26,
1997;
(d) shareholder agreement (including voting agreements, proxies
and the like) covering the shareholders of Parent;
(e) employment agreement covering employees of Parent or any of
its Subsidiaries;
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(f) agreement or commitment relating to computer systems,
including those relating to hardware, software, maintenance, and upgrades;
(g) agreement or commitment with a term of more than one year;
(h) material merger or acquisition agreement or commitment
whereby Parent or any of its Subsidiaries acquired or disposed of (or will
acquire or dispose of) stock or assets;
(i) agreement or commitment on the part of Parent or any of its
Subsidiaries to loan money to, or to guarantee the indebtedness of, any
third party;
(j) agreement or commitment on the part of Parent or any of its
Subsidiaries to borrow money from, or receive a guarantee of indebtedness
from, any third party, including, without limitation, any agreement in
connection therewith creating a Lien on any of the property or assets of
Parent or any of its Subsidiaries;
(k) agreement or commitment containing covenants (i) limiting,
directly or indirectly, the freedom of Parent or any of its Subsidiaries to
compete in any line of business in any geographical area (including,
without limitation, any such agreement affecting any material employee of
Parent or any of its Subsidiaries); (ii) limiting, directly or indirectly,
the freedom of Parent or any of its Subsidiaries to use any Parent
Intellectual Property Right in any geographic area; or (iii) requiring
Parent, directly or indirectly, to share any profits or revenues;
(l) material warranty arrangements (whether Parent or any of its
Subsidiaries is the provider or the recipient);
(m) agreement or commitment including dividend restrictions or
other negative covenants;
(n) indemnity agreements or commitments given or received by
Parent or any of its Subsidiaries; or
(o) any other material agreement or commitment relating to
Parent, any of its Subsidiaries or Parent's Business.
True and complete copies of each such written contract or commitment,
and a true and complete narrative description of any oral contract or
commitments, listed on Schedule 5.16 (collectively, the "Parent Contracts")
-------------
have previously been made available to TWG. Neither Parent nor any of its
Subsidiaries nor, to the knowledge of Parent, any other party to any of the
Parent Contracts, (x) is in default under (nor does there exist any
condition that, with notice or lapse of time or both, would cause such a
default under) any of the Parent Contracts, or (y) has waived any material
right it may have under any of the Parent Contracts. All of the Parent
Contracts constitute the valid and binding obligation of Parent (or, if
applicable, its Subsidiary), and, to the knowledge of Parent, the other
parties thereto. For purposes of this Agreement, an agreement or commitment
shall be deemed to be "material" to the extent such agreement or
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commitment obligates Parent (or its Subsidiary, if applicable) to pay, or
entitles Parent (or its Subsidiary) to receive, in any one year or in the
aggregate, in excess of $10,000. In addition to the foregoing, Parent
hereby represents and warrants that the aggregate value of all payment
obligations, and rights to receive payments, under agreements, contracts
and commitments (whether oral or in writing) to which Parent or any of its
Subsidiaries is a party or by which any thereof is otherwise bound, that
would not be considered "material" in accordance with the preceding
sentence is less than $200,000 (calculating such value by adding together
the value of rights and obligations, and not by determining the net amount
thereof).
5.17 DIRECTORS AND OFFICERS. Schedule 5.17 hereto sets forth a list,
-------------
as of the date of this Agreement, of the name of each director and officer
of Parent and the offices held by each.
5.18 PAYROLL INFORMATION. Schedule 5.18 hereto sets forth a true and
-------------
complete copy of the payroll report of Parent and each of its Subsidiaries
for March 14, 1997, showing all current employees of Parent and each of its
Subsidiaries and their current levels of compensation, other than bonuses
and other extraordinary compensation.
5.19 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 5.19 hereto, there are no
-------------
employee benefit plans, agreements or arrangements maintained by Parent or
any of its Subsidiaries, including, without limitation, (i) "employee
benefit plans," within the meaning of Section 3(3) of ERISA; (ii)
affirmative action plans; (iii) current or deferred compensation, pension,
profit sharing, vacation or severance plans or programs; or (iv) medical,
hospital, accident, disability or death benefit plans (collectively,
"Parent Benefit Plans"). All Parent Benefit Plans are administered in
accordance with, and are in material compliance with, all applicable laws
and regulations. No default exists with respect to the obligations of
Parent under any Parent Benefit Plans.
(b) Neither Parent nor any of its Subsidiaries is a party to
any collective bargaining agreement, no such agreement determines the terms
and conditions of employment of any employee of Parent or any of its
Subsidiaries, no collective bargaining agent has been certified as a
representative of any of the employees of Parent or any of its
Subsidiaries, no representation campaign or election is now in progress
with respect to any employee of Parent or any of its Subsidiaries and there
are no labor disputes, grievances, controversies, strikes or requests for
union representation pending, or, to the knowledge of Parent, threatened,
relating to or affecting the Parent's Business. To the knowledge of Parent,
no event has occurred that could give rise to any such dispute,
controversy, strike or request for representation.
5.20 ERISA.
(a) All Parent Benefit Plans that are subject to ERISA have
been administered in accordance with, and are in material compliance with,
the applicable provisions of ERISA. Each of Parent Benefit Plans that is
intended to meet the requirements of Section 401(a) of the Code has been
determined by the Internal Revenue Service to meet such requirements within
the meaning of such provision. No Parent Benefit Plan is subject to Title
IV of ERISA or
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Section 412 of the Code. Neither Parent nor any of its Subsidiaries has
engaged in any non-exempt "prohibited transactions," as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, involving
Parent Benefit Plans that would subject Parent or any of its Subsidiaries
to the penalty or tax imposed under Section 502(i) of ERISA or Section 4975
of the Code. Neither Parent nor any of its Subsidiaries has engaged in any
transaction described in Section 4069 of ERISA within the last five years.
Except as disclosed in Schedule 5.20 hereto or pursuant to the terms of
-------------
Parent Benefit Plans, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance,
unemployment compensation or golden parachute) becoming due to any director
or other employee of Parent or any of its Subsidiaries, (ii) increase any
benefits otherwise payable under any Parent Benefit Plan or (iii) result in
the acceleration of the time of payment or vesting of any such benefits to
any extent.
(b) No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not
been waived, has been required to be filed for any Parent Benefit Plan that
is an "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA and that is intended to meet the requirements of Section 401(a) of
the Code, or by any entity that is considered one employer with Parent
under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"), within the 12-month period ending on the date hereof. Neither
Parent nor any Subsidiary has incurred any liability to the Pension Benefit
Guaranty Corporation in respect of any Parent Benefit Plan that remains
unpaid.
5.21 TAXES.
(a) All federal, state and local income, franchise, excise, real
and personal property and other tax returns and reports, including
extensions, required to have been filed by Parent and its Subsidiaries
(including, where applicable, consolidated returns) on or prior to the date
hereof have been duly and timely filed by or on behalf of Parent and its
Subsidiaries. All taxes and other governmental charges, and all interest
and penalties with respect thereto, required to be paid by Parent and its
Subsidiaries (whether by way of withholding or otherwise) to any federal,
state, local or other taxing authority have been paid by or on behalf of
Parent and its Subsidiaries (except to the extent the same are being
contested in good faith, and adequate reserves therefore have been provided
in the Parent Financial Statements). As of the date hereof, all
deficiencies proposed as a result of any audits have been paid or settled.
(b) Neither Parent nor any of its Subsidiaries is a party to, or
bound by, or otherwise in any way obligated under, any tax sharing or
similar agreement.
(c) Neither Parent nor any of its Subsidiaries has consented to
have the provisions of Section 341(f)(2) of the Code (or comparable state
law provisions) apply to it, and Parent has not agreed or been requested to
make any adjustment under Section 481(c) of the Code by reason of a change
in accounting method or otherwise.
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5.22 COMPLIANCE WITH APPLICABLE LAWS. Parent or its Subsidiaries
holds all material permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary to own, lease or operate
all of the assets and properties of Parent and its Subsidiaries, as
appropriate, and to carry on Parent's Business as now conducted (the
"Parent Permits"). To the knowledge of Parent, Parent and its Subsidiaries
are in material compliance with all applicable laws, ordinances and
regulations and the terms of the Parent Permits. Schedule 5.22 hereto sets
-------------
forth a list of the Parent Permits, a true and correct copy of each of
which has been made available to TWG.
5.23 BOARD OF DIRECTOR CONSENT. Both the Board of Directors of Parent
and Sub have, by unanimous written consent, adopted and approved this
Agreement and the transactions contemplated hereby (including, without
limitation, the Merger).
5.24 ENVIRONMENTAL MATTERS.
(a) To the knowledge of Parent, no real property currently or
formerly owned or operated by Parent or its Subsidiaries is contaminated
with any Hazardous Substances;
(b) None of Parent or its Subsidiaries is a party to any
litigation or administrative proceeding or, to the knowledge of Parent, is
any litigation or administrative proceeding threatened against Parent or
its Subsidiaries, that, in either case, asserts or alleges that Parent or
any of its Subsidiaries (i) violated any Environmental Laws; (ii) is
required to clean up, remove or take remedial or other response action due
to the disposal, deposit, discharge, leak or other release of any Hazardous
Substances; or (iii) is required to pay all or a portion of the cost of any
past, present or future cleanup, removal or remedial or other action that
arises out of or is related to the disposal, deposit, discharge, leak or
other release of any Hazardous Substances.
(c) To the knowledge of Parent, there are not now, nor have
there previously been, tanks or other facilities on, under, or at any real
property owned, leased, used or occupied by Parent or any of its
Subsidiaries containing materials that, if known to be present in soils or
ground water, would require cleanup, removal or other remedial action under
Environmental Laws.
(d) To the knowledge of Parent, there are no conditions
existing currently that would subject Parent or its Subsidiaries to
damages, penalties, injunctive relief or cleanup costs under any
Environmental Laws, or that would require cleanup, removal, remedial action
or other response pursuant to Environmental Laws.
(e) To the knowledge of Parent, neither Parent nor its
Subsidiaries is subject to any judgment, order or citation related to or
arising out of any Environmental Laws and, to the knowledge of Parent,
neither Parent nor its Subsidiaries have been named or listed as a
potentially responsible party by any Governmental Entity in a matter
related to or arising out of any Environmental Laws.
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5.25 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as
provided in Schedule 5.25 hereto, no officer, director, shareholder or
-------------
employee of Parent or any of its Subsidiaries, and no family member of any
of the foregoing, has any direct or indirect interest in any customer,
supplier or competitor of Parent or any of its Subsidiaries, or in any
Person from whom or to whom Parent leases any real or personal property, or
in any other Person with whom Parent or any of its Subsidiaries is doing
business, whether directly or indirectly (including, without limitation, as
a debtor or creditor), whether in existence as of the date hereof or
proposed, other than the ownership of stock of publicly traded corporations
that does not exceed 1% of the issued and outstanding stock of such
corporation.
5.26 ACCOUNTS RECEIVABLE. Except as set forth on Schedule 5.26
-------------
hereto, all accounts, notes, contracts and other receivables of Parent
(collectively, "Parent Accounts Receivable") were acquired by Parent in the
ordinary course of business arising from bona fide transactions completed
in accordance with the terms and provisions contained in any documents
related thereto. To the knowledge of Parent, there are no set-offs,
counterclaims or disputes asserted with respect to any Parent Accounts
Receivable that would result in claims in excess of the reserve for bad
debts set forth on the Parent Financial Statements and, to the knowledge of
Parent, subject to such reserve, all Parent Accounts Receivable are
collectible in full. Schedule 5.26 hereto is a true and complete aging
-------------
report prepared as of February 28, 1997, which shows the time elapsed since
invoice date for all Parent Accounts Receivable.
5.27 ACCOUNTS PAYABLE. All material accounts, notes, contracts and
other amounts payable of Parent and its Subsidiaries (collectively, "Parent
Accounts Payable") are currently within their respective terms, and are
neither in default nor otherwise past due by more than 90 days. Schedule
--------
5.27 hereto is a true and complete aging report prepared as of February 28,
----
1997, which shows the time elapsed since invoice date for all Parent
Accounts Payable.
5.28 INSURANCE. The insurance policies maintained by Parent or its
Subsidiaries (collectively, the "Parent Insurance Policies") are listed on
Schedule 5.28 hereto, and true and compete copies of all Parent Insurance
-------------
Policies have previously been made available to TWG. Neither Parent nor any
of its Subsidiaries (i) is in default regarding the provisions of any
Insurance Policy; (ii) has paid all premiums due thereunder; and (iii) has
not failed to present any notice or present any material claim thereunder
in a due and timely fashion.
5.29 BANKRUPTCY. Neither Parent nor any of its Subsidiaries has filed
a petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof,
made any general assignment for the benefit of creditors, or consented to
the appointment of a receiver or trustee, including a custodian under the
United States bankruptcy laws, whether such receiver or trustee is
appointed in a voluntary or involuntary proceeding.
5.30 DISCLOSURE. No statement of fact by Parent or Sub contained in
this Agreement and no written statement of fact furnished or to be
furnished by Parent or Sub to TWG pursuant to or in connection with this
Agreement contains or will contain any untrue statement of a
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material fact or omits or will omit to state a material fact necessary in
order to make the statements herein or therein contained not misleading.
5.31 OWNERSHIP OF SUB; NO PRIOR ACTIVITIES. Sub was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement.
As of the Effective Time, all of the outstanding capital stock of Sub will
be owned directly by Parent.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME. From and after
the date hereof, prior to the Effective Time, except as expressly
contemplated by this Agreement, TWG, Parent and its Subsidiaries shall each
carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, and shall use
reasonable efforts to keep available the services of its current employees
and preserve its relationships with suppliers and others having business
dealings with TWG, Parent or Parent's Subsidiaries, as the case may be.
Without limiting the generality of the foregoing, and except as expressly
contemplated by this Agreement, prior to the Effective Time, neither TWG,
Parent nor Parent's Subsidiaries shall:
(a) (i) declare, set aside, or pay any dividends on, or make any
other distributions in respect of, any of its capital stock (excluding
intercompany dividends), (ii) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock,
or (iii) purchase, redeem or otherwise acquire any shares of its capital
stock;
(b) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock or any options to acquire any shares of its
capital stock;
(c) amend its Articles/Certificate of Incorporation, Bylaws or
other comparable organizational documents;
(d) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, limited
liability company, joint venture, association or other business
organization or division thereof;
(e) subject to a Lien or sell, lease or otherwise dispose of any
of its properties or assets, except in the ordinary course of business;
(f) (i) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person, or issue or sell any debt
securities, guarantee any debt securities of another Person, or enter into
any "keep well" or other agreement to maintain any financial condition of
another Person, except, in any such case, for borrowings or other
transactions not in excess of $25,000 (whether individually or in the
aggregate), incurred in the ordinary course
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of business, or (ii) make any loans, advances or capital contributions to,
or investments in, any other Person, or settle or compromise any material
claim or litigation (other than, in the case of Parent, in respect of any
payments made or services provided to University Netcasting, Inc.);
(g) declare, pay, or enter into a commitment to pay, any bonus
or other additional salary, compensation, or benefit to any employee not in
the ordinary course of business;
(h) release, compromise, waive or cancel any debts to or claims
by it, or waive any rights, in each case having a value in excess of
$2,500;
(i) change its accounting methods or practices;
(j) voluntarily cease to transact business with any customer
that, as of the date of such cessation, represents more than 5% of its
annual gross revenues;
(k) amend or terminate any oral or written contract, agreement
or license related to the TWG Business or the Parent's Business, to which
it is a party or by which it is bound, except in the ordinary course of
business, or except as expressly contemplated by this Agreement;
(l) fail to satisfy, within 180 days of the due date, any of its
material debts, obligations or liabilities related to the TWG Business or
Parent's Business, as the case may be, or its assets as the same become due
and owing; or
(m) authorize, commit or agree to take any of the foregoing
actions.
6.2 PUBLIC ANNOUNCEMENTS. The parties agree that, except as may
otherwise be required to comply with applicable laws and regulations
(including, without limitation, applicable securities laws), public
disclosure of the transactions contemplated by this Agreement shall be made
only upon or after the consummation of the Merger. Any such disclosure
shall be coordinated between the parties, and no party shall make any such
disclosure without the prior consent of the other parties, which consent
shall not be unreasonably withheld or delayed.
6.3 EFFORTS; CONSENTS.
(a) Subject to the terms and conditions herein provided, and
fiduciary duties under applicable law, each of the parties hereto agrees to
use its reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or advisable, to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement and the Merger and to cooperate with each
other in connection with the foregoing. Without limiting the generality of
the foregoing, each of TWG, the TWG Shareholder and Parent shall use its
reasonable efforts to (i) obtain or cause to be obtained all Consents
required to be obtained in connection with the transactions contemplated by
this
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Agreement, (ii) make or cause to be made all required filings with
applicable Governmental Entities, and (iii) use its reasonable efforts to
fulfill all conditions to this Agreement.
(b) Each of Parent and TWG shall promptly provide the other with
a copy of any inquiry or request for information (including notice of any
oral request for information), pleading, order or other document either
party receives from any Governmental Entity with respect to the matters
referred to in this Section 6.3.
6.4 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND EXPENSES.
Parent agrees that, to the extent it is legally able to do so, the
Surviving Corporation will pay all real property transfer, gains and other
similar taxes and all documentary stamps, filing fees, recording fees and
sales and use taxes, if any, and any penalties or interest with respect
thereto, payable in connection with consummation of the Merger.
6.5 BONUS. Parent shall pay, by wire transfer to such accounts as
shall be designated by TWG, bonuses (the "Bonuses") in the amounts and to
those individuals listed on Schedule 6.5 hereto.
------------
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATION OF TWG AND THE TWG SHAREHOLDER TO
EFFECT THE MERGER. The obligation of TWG and the TWG Shareholder to effect
the Merger shall be subject to the fulfillment at or prior to the Effective
Time of the following conditions:
(a) Parent and Sub shall have performed in all material
respects all agreements, obligations and covenants contained in this
Agreement required to be performed by them at or prior to the Effective
Time;
(b) the representations and warranties of Parent and Sub
contained in this Agreement shall be true and correct in all material
respects when made, and at and as of the Effective Time, as if made at and
as of such time (except for representations and warranties made as of a
specified date, which need only be true as of such date), except as
otherwise provided in this Agreement;
(c) (i) the appropriate officers of Parent shall have executed
and delivered to TWG at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-1" hereto
------------
(collectively "Parent's Closing Certificate"), and (ii) the appropriate
officers of Sub shall have executed and delivered to TWG at the Closing, a
closing certificate and incumbency certificate, substantially in the form
of Exhibit "A-2" hereto (collectively "Sub's Closing Certificate");
------------
(d) Parent shall have obtained all of the Consents listed on
Schedule 7.1(e) hereto;
---------------
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(e) TWG shall have received, at the Closing, a duly executed
opinion of counsel to Parent, substantially in the form of Exhibit "B"
-----------
hereto ("Parent's Opinion of Counsel");
(f) TWG shall have received a corporate certificate of good
standing for Parent and Sub, each issued by the Secretary of State of the
State of Delaware;
(f) Parent shall have executed and delivered to the TWG
Shareholder at the Closing (i) the First Amended and Restated Stockholders'
Agreement (the "Stockholders' Agreement"), substantially in the form of
Exhibit "C" hereto; (ii) an Employment Agreement for each of Whitley and
-----------
Michael E. Wells ("Wells") substantially in the form of Exhibit "D" hereto
-----------
(each, an "Employment Agreement"); and (iii) an Option Agreement for each
of Wells, Timothy E. Thompson and Mark White substantially in the form of
Exhibit "E" hereto (each, an "Option Agreement");
-----------
(g) Parent shall have paid the Bonuses in accordance with
Section 6.5 hereof; and
(h) TWG shall have received from Parent such other documents as
TWG's counsel shall have reasonably requested, in form and substance
reasonably satisfactory to TWG's counsel.
7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER.
The obligations of Parent and Sub to effect the Merger shall be subject to
the fulfillment, at or prior to the Effective Time of the following
conditions:
(a) TWG and TWG Shareholder shall have performed in all material
respects all agreements, obligations and covenants contained in this
Agreement required to be performed by them at or prior to the Effective
Time;
(b) the representations and warranties of TWG and the TWG
Shareholder contained in this Agreement shall be true and correct in all
material respects when made, and at and as of the Effective Time, as if
made at and as of such time (except for representations and warranties made
as of a specified date, which need only be true as of such date);
(c) There shall have been delivered to Parent at the Closing,
(i) the Stockholders' Agreement executed by Whitley; (ii) an Employment
Agreement executed by each of Whitley and Wells, an Employment Agreement;
(iii) an Option Agreement executed by each of Wells, Timothy E. Thompson
and Mark White;
(d) the appropriate officers of TWG shall have executed and
delivered to Parent at the Closing, a closing certificate, substantially in
the form of Exhibit "F" hereto ("TWG's Closing Certificate");
-----------
(e) TWG and the TWG Shareholder shall have obtained or caused to
be obtained all of the Consents listed on Schedule 7.2(e) hereto;
---------------
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(f) Parent shall have received a Certificate of Existence of
TWG, and a copy of the Articles of Incorporation of TWG, both as certified
by the Secretary of State of North Carolina;
(g) Parent shall have received, at the Closing, a duly executed
opinion of counsel to TWG and the TWG Shareholder, substantially in the
form of Exhibit "G" hereto ("TWG's Opinion of Counsel"); and
-----------
(h) Parent shall have received from TWG or the TWG Shareholder,
as the case may be, such other documents as Parent's counsel shall have
reasonably requested, in form and substance reasonably satisfactory to
Parent's counsel.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY PARENT.
(a) Parent shall indemnify and hold TWG, the TWG Shareholder and
TWG's directors, officers and employees (collectively, the "TWG Indemnified
Parties") harmless from and against, and agree promptly to defend each of
the TWG Indemnified Parties from and reimburse each of the TWG Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including, without limitation,
reasonable attorney fees and other legal costs and expenses) (collectively
a "TWG Loss") that any of the TWG Indemnified Parties may at any time
suffer or incur, or become subject to, as a result of or in connection
with:
(i) any breach or inaccuracy of any of the
representations and warranties made by Parent or Sub in or pursuant to this
Agreement, or in any instrument, certificate or affidavit delivered by
Parent at the Closing in accordance with the provisions hereof;
(ii) any failure by Parent to carry out, perform, satisfy
and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the
documents and materials delivered by Parent pursuant to this Agreement; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section
8.1.
(b) Notwithstanding any other provision to the contrary Parent
shall not have any liability under this Section 8.1, (i) unless the
aggregate of all TWG Losses for which Parent would be liable but for this
sentence exceeds on a cumulative basis an amount equal to $200,000 and then
only to the extent of such excess, and (ii) for amounts in excess of
$2,075,000, and (C) unless the TWG Shareholder has asserted a claim with
respect to the matters set forth in Section 8.1(a)(i) or 8.1(a)(iii) to the
extent applicable to Section 8.1(a)(i) within twenty-four (24) months
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of the Effective Time. The parties acknowledge that a decrease in the value
of Parent Stock would not, by itself, constitute a TWG Loss, but to the
extent a decrease in the value of Parent Stock has been demonstrated to be
as a result of or in connection with any event described in Sections
8.1(a)(i), (ii) or (iii), such decrease would constitute a TWG Loss.
8.2 INDEMNIFICATION BY TWG SHAREHOLDER.
(a) The TWG Shareholder shall jointly and severally indemnify
and hold Parent, Sub, Surviving Corporation and their respective
shareholders, directors, officers and employees (collectively, the "Parent
Indemnified Parties") harmless from and against, and agree to promptly
defend each of the Parent Indemnified Parties from and reimburse each of
the Parent Indemnified Parties for, any and all losses, damages, costs,
expenses, liabilities, obligations and claims of any kind (including,
without limitation, reasonable attorney fees (collectively, a "Parent
Loss") that any of the Parent Indemnified Parties may at any time suffer or
incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any representations and
warranties made by TWG or TWG Shareholder in or pursuant to this Agreement,
or in any certificate or affidavit delivered by the same at the Closing in
accordance with the provisions hereof;
(ii) any failure by TWG or TWG Shareholder to carry out,
perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations under this Agreement
or under any of the documents and materials delivered by TWG pursuant to
this Agreement; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section
8.2.
(b) Notwithstanding the above, the TWG Shareholder shall not
have any liability under this Section 8.2, (i) unless the aggregate of all
Parent Losses for which the TWG Shareholder would be liable but for this
sentence exceeds on a cumulative basis an amount equal to $200,000 and then
only to the extent of such excess, (ii) for amounts in excess of
$2,075,000, and (iii) unless Parent has asserted a claim with respect to
the matters set forth in Section 8.2(a)(i) or 8.2(a)(iii) (to the extent
applicable to Section 8.2(a)(i) within twenty-four (24) months of the
Effective Time, except with respect to the matters arising under Sections
4.19 and 4.24 hereof, in which event Parent must have asserted a claim
within thirty-six (36) months of the Effective Time, and matters arising
under Section 4.20 hereof, in which event Parent must have asserted a claim
within forty-two (42) months of the Effective Time.
8.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND.
(a) A party entitled to be indemnified pursuant to Section 8.1
or 8.2 hereof, as the case may be (the "Indemnified Party"), shall notify
the party liable for such indemnification (the "Indemnifying Party") in
writing of any claim or demand (a "Claim") that
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the Indemnified Party has determined has given or could give rise to a
right of indemnification under this Agreement.
(b) If the Indemnified Party shall notify the Indemnifying Party
of any Claim pursuant to Section 8.3(a) hereof, and if such Claim relates
to a Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or
hold harmless the Indemnified Party under Section 8.1 or 8.2 hereof, as the
case may be, the Indemnifying Party shall have the right, at its sole cost
and expense, to employ counsel of its own choosing to defend any such Claim
asserted against the Indemnified Party. The Indemnified Party shall have
the right to participate in the defense of any such Claim at its own
expense, but the Indemnifying Party shall retain control over such
litigation. The Indemnifying Party shall notify the Indemnified Party in
writing, as promptly as possible (but in any case before the due date for
the answer or response to a claim) after the date of the notice of claim
given by the Indemnified Party to the Indemnifying Party under Section
8.3(a) hereof of its election to defend in good faith any such third party
Claim. So long as the Indemnifying Party is defending in good faith any
such Claim asserted by a third party against the Indemnified Party, the
Indemnified Party shall not settle or compromise such Claim without the
prior written consent of the Indemnifying Party. The Indemnified Party
shall cooperate with the Indemnifying Party in connection with any such
defense and shall make available to the Indemnifying Party or its agents
all records and other materials in the Indemnified Party's possession
reasonably required by it for its use in contesting any third party Claim;
provided, however, that the Indemnifying Party shall have agreed, in
-------- -------
writing, to keep such records and other materials confidential expect to
the extent required for defense of the relevant Claim. Whether or not the
Indemnifying Party elects to defend any such Claim, the Indemnified Party
shall have no obligations to do so. Within 30 days after a final
determination (including, without limitation, a settlement) has been
reached with respect to any Claim contested pursuant to this Section
8.2(b), the Indemnifying Party shall satisfy its obligations with respect
thereto. Any amounts paid thereafter shall include interest thereon for the
period commencing at the end of such 30-day period and ending on the actual
date of payment, at a rate of 9% per annum, or, if lower, at the highest
rate of interest permitted by applicable law at the time of such payment.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time:
(a) by mutual written consent of Parent and TWG;
(b) by TWG, upon a material breach of this Agreement on the part
of Parent or Sub that has not been cured by the earlier of (i) 15 days
after written notice of such breach has been received by Parent, and (ii)
April 15, 1997;
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(c) by Parent, upon a material breach of this Agreement on the
part of TWG or the TWG Shareholder set forth in this Agreement that has not
been cured by the earlier of (i) 15 days after receipt of written notice of
such breach has been received by TWG, and (ii) April 15, 1997;
(d) by Parent or TWG if any court of competent jurisdiction
shall have issued, enacted, entered, promulgated or enforced any order,
judgment, decree, injunction or ruling which restrains, enjoins or
otherwise prohibits the Merger and such order, judgment, decree, injunction
or ruling shall have become final and nonappealable; or
(e) by either Parent or TWG if the Merger shall not have been
consummated on or before April 15, 1997; provided the terminating party is
not otherwise in material breach of its representations, warranties or
obligations under this Agreement.
9.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either
Parent or TWG as provided in Section 9.1 hereof (other than pursuant to
Section 9.1(b) or (c) hereof), this Agreement shall forthwith become void
and there shall be no liability hereunder on the part of any of TWG, TWG
Shareholder or Parent or the respective officers or directors of Parent or
TWG; provided that Sections 9.2, 9.3 and 10.4 shall survive such
termination.
(b) In the event of a termination of this Agreement pursuant to
Section 9.1(b) or (c) hereof, then Parent, in the case of a termination
under Section 9.1(c) hereof, or TWG and the TWG Shareholder, in the case of
a termination under Section 9.1(b) hereof, shall be entitled to claim as
its sole liquidated damages the sum of $100,000, together with any interest
accrued thereon, as such party's sole remedy at law or in equity. The
parties further agree that the liquidated damages provided in this Section
9.2(b) are intended to apply to limit the claims that any party may have
against the other in the circumstances described herein.
(c) The parties acknowledge and agree that the liquidated
damages provided in Section 9.2(b) hereof bear a reasonable relationship to
the anticipated harm that will be caused by a breach of this Agreement. The
parties further acknowledge and agree that the amount of actual loss caused
by a breach of this Agreement is incapable and difficult of precise
estimation and that the parties would not have a convenient and adequate
alternative to liquidated damages hereunder.
9.3 FEES AND EXPENSES. All reasonable fees and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such fees or expenses.
9.4 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties hereto; provided that
after the Effective Time, any such amendment must be signed by the former
holders of a majority of the TWG Stock.
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9.5 WAIVER. At any time prior to the Effective Time, the parties
hereto may, to the extent permitted by applicable law, (i) extend the time
for the performance of any of the obligations or other acts of any other
party hereto, (ii) waive any inaccuracies in the representations and
warranties by any other party contained herein or in any documents
delivered by any other party pursuant hereto and (iii) waive compliance
with any of the agreements of any other party or with any conditions to its
own obligations contained herein; provided, however, that any agreement
-------- -------
granting any such extension or waiver shall be valid only if set forth in
an instrument in writing signed by the party granting such extension or
waiver.
ARTICLE X
GENERAL PROVISIONS
10.1 SURVIVAL; RECOURSE. None of the agreements contained in this
Agreement shall survive the Merger, except that (i) the agreements
contained in Article III hereof, the obligations to indemnify contained in
Article VIII hereof and the agreements of the Surviving Corporation
referred to in Sections 10.10 and 10.11 hereof, shall survive the Merger
indefinitely (except to the extent a shorter period of time is explicitly
specified therein) and (ii) the representations and warranties made in
Articles IV and V of this Agreement shall survive the Merger, and shall
survive any independent investigation by the parties, and any dissolution,
merger or consolidation of TWG or Parent, and shall bind the legal
representatives, assigns and successors of TWG, the TWG Shareholder,
Parent, for a period of two years after the Closing Date (other than the
representations and warranties contained in Sections 4.19 and 4.24 hereof,
which shall survive for a period of three years after the Closing Date, and
the representations and warranties contained in Section 4.20 hereof, which
shall survive for a period of three and a half years after the Closing
Date).
10.2 NOTICES. All notices or other communications under this
Agreement shall be in writing and shall be given (and shall be deemed to
have been duly given upon receipt) by delivery in Person, by telecopy (with
confirmation of receipt), or by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
If to TWG: The Whitley Group, Inc.
8701 Mallard Creek Road
Charlotte, North Carolina 28262
Attention: William C. Whitley, Chief
Executive Officer
With copies to: Robinson, Bradshaw & Hinson, P.A.
Attorneys at Law
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246-1900
Attention: Robert C. Griffin
Telecopy: 704/378-4000
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If to the TWG The Whitley Group, Inc.
Shareholder: 8701 Mallard Creek Road
Charlotte, North Carolina 28262
Attention: William C. Whitley,
Chief Executive Officer
With copies to: Robinson, Bradshaw & Hinson, P.A.
Attorneys at Law
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246-1900
Attention: Robert C. Griffin
Telecopy: 704/378-4000
If to Parent: IXL Holdings, Inc.
1465 Northside Drive
Suite 110
Atlanta, Georgia 30318
Attention: James V. Sandry
Telecopy: 404/350-9823
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
and to: Kelso & Company
320 Park Avenue
New York, New York 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
If to Sub/Surviving
Corporation: IXL Merger Corp. II, Inc.
1465 Northside Drive
Suite 110
Atlanta, Georgia 30318
Attention: James V. Sandry
Telecopy: 404/350-9823
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With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
and to: Kelso & Company
320 Park Avenue
New York, New York 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
or to such other address as any party may have furnished to the other
parties in writing in accordance with this Section.
10.3 ENTIRE AGREEMENT. This Agreement and the documents, schedules
and instruments referred to herein and to be delivered pursuant hereto
constitute the entire agreement between the parties pertaining to the
subject matter hereof, and supersede all other prior agreements and
understandings, both written and oral, among the parties, or any of them,
with respect to the subject matter hereof. There are no other
representations or warranties, whether written or oral, between the parties
in connection the subject matter hereof, except as expressly set forth
herein.
10.4 CONFIDENTIALITY.
(a) Parent agrees that prior to the Effective Time, Parent and
its respective agents and representatives shall not use for its or their
own benefit (except when required by law, rule or regulation and except for
use in connection with Parent's financing of the transaction and Parent's
investigation of the TWG Business and its assets in connection with this
Agreement), and shall hold in strict confidence and not disclose, (i) any
data or information relating to TWG, its affiliates, or the TWG Business
obtained from TWG or the TWG Shareholder or any of their directors,
officers, employees, agents or representatives in connection with this
Agreement, or (ii) any data and information relating to the business,
customers, financial statements, conditions or operations of the TWG
Business which is confidential in nature and not generally known to the
public (clauses (i) and (ii) together, "TWG's Information"). If the
transactions contemplated in this Agreement are not consummated for any
reason, Parent shall return to TWG all data, information and any other
written material obtained by Parent from TWG in connection with this
transaction and any copies, summaries or extracts thereof, and shall
refrain from disclosing any of TWG's Information to any third party or
using any of TWG's Information for its own benefit or that of any other
person.
(b) TWG and the TWG Shareholder agree that TWG and their agents
and representatives shall not use for their own benefit (except when
required by law, rule or regulation and except for use in connection with
its investigations and review of Parent in connection with this Agreement),
and shall hold in strict confidence and not disclose, (i) any data
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or information, relating to Parent or its affiliates obtained from Parent,
or from any of its directors, officers, employees, agents or
representatives, in connection with this Agreement, or (ii) any data and
information relating to the business, customers, financial statements,
conditions or operations of Parent which is confidential in nature and not
generally known to the public (clauses (i) and (ii) together "Parent's
Information"). If the transactions contemplated in this Agreement are not
consummated for any reason, TWG shall return to Parent all data,
information and any other written material obtained by Seller from Buyer in
connection with this transaction and any copies, summaries or extracts,
thereof and shall refrain from disclosing any of Parent's Information to
any third party or using any of Parent's Information for its own benefit or
that of any other person.
10.5 ASSIGNMENTS; PARTIES IN INTEREST. Neither this Agreement nor any
of the rights, interests or obligations hereunder may be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties, except that the rights,
interests, and obligations of Sub hereunder may be assigned to any wholly
owned Delaware subsidiary of Parent without such prior consent. Subject to
the preceding sentence, this Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any Person not a
party hereto any right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement, except as otherwise provided herein.
10.6 GOVERNING LAW. This Agreement, except to the extent that the
NBCA or the DGCL is mandatorily applicable to the Merger or the rights of
the shareholders of TWG or the other parties hereto with respect to the
Merger, shall be governed in all respects by the laws of the State of
Georgia (without giving effect to the provisions thereof relating to
conflicts of law).
10.7 HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
10.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
taken together shall constitute a single agreement.
10.9 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economics or
legal substance of the transactions contemplated hereby are not affected in
any manner materially adverse to any party. Upon determination that any
term or other provision hereof is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled
to the extent possible.
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10.10 POST-CLOSING ACCESS. For a period of at least three years after
the Closing Date, TWG Shareholder and their agents and representatives
shall have reasonable access to the books and records of TWG.
10.11 POST-CLOSING NOTICE. To the extent the Surviving Corporation
receives written notice of any event or circumstance that materially
affects the TWG Shareholder, the Surviving Corporation shall promptly
notify the affected TWG Shareholder of such matter, information, or event
and shall provide them with copies of all relevant documentation or
correspondence in connection thereto.
10.12 CERTAIN DEFINITIONS. As used in this Merger Agreement (a) the
term "Subsidiary" or "Subsidiaries" means, with respect to Parent or any
other Person, any corporation, partnership, joint venture or other legal
entity of which Parent or such other Person, as the case may be (either
alone or through or together with any other Subsidiary) owns, directly or
indirectly, stock or other equity interests the holders of which are
generally entitled to more than 50% of the vote for the election of the
board of directors or other governing body of such corporation or other
legal entity (including, without limitation, Sub); provided, however, that
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with respect to the Parent, the terms "Subsidiary" and "Subsidiaries" shall
not include (i) University Netcasting, Inc., (ii) Virtual Resources, Inc.,
or (iii) IXL Merger Corp. III, Inc.; and (b) any representation or warranty
stated to be made "to the knowledge" of a party shall refer to such party's
knowledge following reasonable inquiry as to the matter in question;
provided, that knowledge of TWG shall refer solely to the knowledge of
Whitley and Wells.
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IN WITNESS WHEREOF, Parent, Sub and TWG have caused this Agreement to
be signed by their respective officers thereunder duly authorized, and TWG
Shareholder has signed this Agreement, all as of the date first written
above.
"TWG"
THE WHITLEY GROUP, INC., a North Carolina corporation
By: /s/ William C. Whitley
-----------------------------------------------------------
Title: CEO
---------------------------------------------------------
[Corporate Seal]
"PARENT"
IXL HOLDINGS, INC., a Delaware corporation
By: /s/ James V. Sandry
------------------------------------------------------------
Title: Executive Vice President
---------------------------------------------------------
"SUB"
IXL MERGER CORP. II, INC., a Delaware corporation
By: /s/ James V. Sandry
------------------------------------------------------------
Title: Vice President
---------------------------------------------------------
[Corporate Seal]
"TWG SHAREHOLDER"
/s/ William C. Whitley
----------------------------------------------------------
WILLIAM C. WHITLEY
41
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate....................................... Exhibit A-1
Sub's Closing Certificate.......................................... Exhibit A-2
Parent's Opinion of Counsel........................................ Exhibit B
Stockholders' Agreement............................................ Exhibit C
Employment Agreement............................................... Exhibit D
Option Agreement................................................... Exhibit E
TWG's Closing Certificate.......................................... Exhibit F
TWG's Opinion of Counsel........................................... Exhibit G
<PAGE>
SCHEDULE 2.1
------------
CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION
SCHEDULE 4.1
------------
ARTICLES OF INCORPORATION AND BYLAWS OF TWG
SCHEDULE 4.3
------------
OUTSTANDING OBLIGATIONS OF TWG TO ISSUE OPTIONS, WARRANTS OR OTHER
TWG STOCK RIGHTS
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF TWG
SCHEDULE 4.6
------------
FINANCIAL STATEMENTS OF TWG
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF TWG
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF TWG
<PAGE>
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF TWG
SCHEDULE 4.10
-------------
EQUIPMENT OF TWG
SCHEDULE 4.11(A)
----------------
INTELLECTUAL PROPERTY OF TWG
SCHEDULE 4.11(B)
----------------
TWG SOFTWARE
SCHEDULE 4.12
-------------
EXCEPTIONS TO TWG REAL PROPERTY
SCHEDULE 4.13
-------------
LEASES OF TWG
SCHEDULE 4.14
-------------
CONTRACTS OF TWG
<PAGE>
SCHEDULE 4.15
-------------
LIST OF DIRECTORS AND OFFICERS OF TWG
SCHEDULE 4.16
-------------
PAYROLL INFORMATION OF TWG
SCHEDULE 4.17
-------------
LITIGATION OF TWG
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF TWG
SCHEDULE 4.19
-------------
ERISA ISSUES OF TWG
SCHEDULE 4.21
-------------
TWG PERMITS
SCHEDULE 4.23
-------------
BROKERS OF TWG
<PAGE>
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS
SCHEDULE 4.26
-------------
AGING REPORT FOR TWG ACCOUNTS RECEIVABLE PREPARED AS OF FEBRUARY 28, 1997
SCHEDULE 4.27
-------------
AGING REPORT FOR TWG ACCOUNTS PAYABLE PREPARED AS OF FEBRUARY 28, 1997
SCHEDULE 4.28
-------------
INSURANCE OF TWG
SCHEDULE 5.1
------------
CERTIFICATE OF INCORPORATION AND BYLAWS OF PARENT AND SUB
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
<PAGE>
SCHEDULE 5.5
------------
PARENT BROKERS
SCHEDULE 5.6(A)
---------------
PARENT STOCK RIGHTS OUTSTANDING
SCHEDULE 5.6(B)
---------------
PARENT STOCKHOLDERS AS OF THE DATE OF THE MERGER AGREEMENT
SCHEDULE 5.6(C)
---------------
PARENT STOCKHOLDERS AS OF THE EFFECTIVE DATE
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF PARENT
SCHEDULE 5.10
-------------
UNDISCLOSED LIABILITIES OF PARENT
<PAGE>
SCHEDULE 5.11
-------------
EXCEPTIONS TO TITLE TO PROPERTIES OF PARENT
SCHEDULE 5.12
-------------
PARENT EQUIPMENT
SCHEDULE 5.13(A)
----------------
INTELLECTUAL PROPERTY OF PARENT
SCHEDULE 5.13(B)
----------------
PARENT SOFTWARE
SCHEDULE 5.14
-------------
TITLE POLICIES TO AND LIENS ON REAL PROPERTY OF PARENT
SCHEDULE 5.15
-------------
LEASES OF PARENT
SCHEDULE 5.16
-------------
CONTRACTS OF PARENT
<PAGE>
SCHEDULE 5.17
-------------
DIRECTORS AND OFFICERS OF PARENT
SCHEDULE 5.18
-------------
PAYROLL OF PARENT AND SUBSIDIARIES
SCHEDULE 5.19
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS
SCHEDULE 5.20
-------------
ERISA OF PARENT
SCHEDULE 5.22
-------------
PARENT PERMITS
SCHEDULE 5.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS
SCHEDULE 5.26
-------------
PARENT ACCOUNTS RECEIVABLE
<PAGE>
SCHEDULE 5.27
-------------
PARENT ACCOUNTS PAYABLE
SCHEDULE 5.28
-------------
PARENT INSURANCE POLICIES
SCHEDULE 6.5
------------
PARENT BONUSES PAYABLE TO TWG EMPLOYEES
SCHEDULE 7.1(E)
---------------
PARENT CONSENTS
SCHEDULE 7.2(E)
---------------
CONSENTS OF TWG
<PAGE>
EXHIBIT 2.9
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
IXL HOLDINGS, INC.,
IXL MERGER CORP. III, INC.
BOXTOP INTERACTIVE, INC.,
KEVIN WALL,
DAVID WYLER,
LISA JANZEN,
JEFF DEMMA,
GLEN GOLENBERG,
PHILIP GUSTLIN,
MARC GUREN,
STEPHEN D. SILBERT,
DAVID V. KARNEY
AND
KATHERINE NOTO
DATE AS OF MAY 30, 1997
<PAGE>
AGREEMENT AND PLAN OF MERGER
---------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into this 30th day of MAY,
1997, by and between BOXTOP INTERACTIVE, INC., a California corporation ("BII"),
IXL HOLDINGS, INC., a Delaware corporation ("Parent"), IXL MERGER CORP. III,
INC., a Delaware corporation, or its successors or assigns ("Sub"), and the
shareholders of BII as listed on the signature page hereto (the "BII
Shareholders").
R E C I T A L S:
- - - - - - - -
A. BII is engaged in the business of (i) creating and designing WEB pages
and providing internet hosting; and (ii) developing video conference software
(the "BII Business").
B. BII and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The BII Shareholders collectively own 100% of the issued and
outstanding capital stock of BII (the "BII Stock").
D. The respective Boards of Directors and stockholders of Parent, Sub and
BII have approved the Merger, upon the terms and subject to the conditions set
forth herein.
E. The parties hereto intend for the Merger to qualify, for federal
income tax purposes, as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, at
the Effective Time (as defined in Section 1.3 hereof), (a) BII shall be merged
with and into Sub, (b) the separate existence of BII shall cease, and (c) Sub
shall continue as the surviving corporation in the Merger under the laws of the
State of Delaware under the name BoxTop Interactive, Inc. For purposes of this
Agreement, Sub shall be referred to, for the period commencing on the Effective
Time, as the "Surviving Corporation".
<PAGE>
1.2 CLOSING. Subject to the satisfaction or waiver of the conditions set
forth in Article VII hereof, the closing of the Merger (the "Closing") will take
place at the offices of Minkin & Snyder, A Professional Corporation, One
Buckhead Plaza, 3060 Peachtree Road, Suite 1100, Atlanta, Georgia 30305.
1.3 EFFECTIVE TIME OF THE MERGER. At the Closing, the parties hereto shall
cause (a) a certificate of merger (the "Certificate of Merger") to be filed
with the office of the Secretary of State of the State of Delaware in accordance
with the provisions of the Delaware General Corporation Law, as amended (the
"DGCL"); and (b) a copy of the Certificate of Merger to be filed with the office
of the Secretary of State of the State of California in accordance with the
provisions of the California Corporations Code, as amended (the "CCC"). When
used in this Agreement, the term "Effective Time" shall mean the time when the
Certificate of Merger has been accepted for filing by the Secretary of State of
the State of Delaware and California, respectively, or such time as otherwise
specified in the Certificate of Merger.
1.4 EFFECT OF THE MERGER. The Merger shall, from and after the Effective
Time, have all the effects provided by the DGCL and CCC. If at any time after
the Effective Time, any further action is deemed necessary or desirable to carry
out the purposes of this Agreement, the parties hereto agree that the Surviving
Corporation and its proper officers and directors shall be authorized to take,
and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Amended and Restated Certificate of
Incorporation of Sub, a form of which is attached hereto on Schedule 5.1, shall
------------
be the Certificate of Incorporation of the Surviving Corporation after the
Effective Time, until thereafter changed or amended as provided therein or by
applicable law.
2.2 BYLAWS. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub are included on Schedule 5.1 hereto.
------------
2.3 BOARD OF DIRECTORS; OFFICERS. The Board of Directors and officers of
Sub immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified; provided, however, that the President and
Chief Executive Officer of the Surviving
2
<PAGE>
Corporation after the Effective Time will be Kevin Wall, until such time as he
resigns or his successor is duly elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
3.1 MERGER CONSIDERATION. As of the Effective Time, by virtue of the
Merger and without any action on the part of any stockholder of BII or Sub:
(a) All shares of BII Stock owned by BII (including treasury shares)
shall be canceled and retired and shall cease to exist, and no consideration
shall be delivered in exchange therefor;
(b) Each issued and outstanding share of BII Stock (other than any
Dissenting Shares, as defined in Section 3.2 hereof) shall be converted into,
and become exchangeable for, 0.011562 shares of validly issued, fully paid and
nonassessable Class B Common Stock of Parent, $.01 par value (the "Parent
Stock").
(c) Each issued and outstanding share of common stock of Sub shall be
converted into and become one fully paid and nonassessable share of common stock
of the Surviving Corporation.
(d) As additional consideration for the Merger, each issued and
outstanding BII Stock Right (as defined in Section 6.4 hereof) shall be
surrendered and exchanged for a specified number of options or warrants to
purchase Parent Stock, as applicable, as set forth in Section 6.4 hereof.
3.2 DISSENTING SHARES. Notwithstanding any provisions of this Agreement to
the contrary, any shares of BII Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be canceled as described in Section 3.1(b)
hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Shareholder pursuant to the DGCL or the CCC, as
applicable; provided, however, that if a Dissenting Shareholder shall fail to
-------- -------
perfect his demand, withdraw his demand or otherwise lose his right for
appraisal under the terms of the DGCL or the CCC, as applicable, the BII Stock
held by such Dissenting Shareholder (the "Dissenting Shares") shall be deemed to
be canceled as of the Effective Time in accordance with the provisions of
Section 3.1 hereof. BII shall give Parent prompt notice of any written demands
for appraisal of shares of BII Stock, and the opportunity to direct all
negotiations and proceedings with respect to any such demands. Without the prior
written consent of Parent, BII shall not voluntarily make any payment with
respect to, settle, or offer to settle or otherwise negotiate, any such demands.
All amounts paid to Dissenting
3
<PAGE>
Shareholders shall be paid without interest thereon (to the extent permitted by
applicable law) by the Surviving Corporation. For purposes of this Agreement,
the term "Dissenting Shareholder" shall mean a BII Shareholder who (a) objects
to the Merger; and (b) complies with the applicable provisions of the DGCL and
CCC concerning dissenter's rights.
3.3 NO FURTHER RIGHTS. From and after the Effective Time, holders of
certificates theretofore evidencing BII Stock shall cease to have any rights as
stockholders of BII, except as provided herein or by law.
3.4 CLOSING OF THE BII'S TRANSFER BOOKS. At the Effective Time, the stock
transfer books of BII shall be closed and no transfer of BII Stock shall be made
thereafter. If after the Effective Time, certificates for BII Stock are
presented to Parent or the Surviving Corporation, they shall be canceled and
exchanged for an amount of Parent Stock as set forth in Section 3.1 hereof,
subject to applicable law in the case of Dissenting Shares.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BII
BII, Kevin Wall ("Wall") and David Wyler ("Wyler") jointly and severally
make to Parent and Sub the representations and warranties set forth in this
Article IV, other than the representations and warranties specifically
enumerated in the following sentence. In addition, the BII Shareholders
(including Wall and Wyler) individually (but not jointly and severally) make the
representations and warranties that are stated in this Article IV to be made by
each BII Shareholder (specifically, the representations and warranties contained
in Sections 4.3(b), 4.29, 4.31, 4.32, 4.33 and 4.34). The representations and
warranties contained in this Article IV shall survive the Closing in accordance
with Section 9.1 of this Agreement.
4.1 ORGANIZATION AND QUALIFICATION. BII is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
BII has the requisite corporate power and authority to carry on the BII Business
as it is now being conducted and is duly qualified or licensed to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities makes such
qualification necessary. Complete and correct copies of the Articles of
Incorporation and Bylaws of BII as in effect on the date hereof are attached as
Schedule 4.1 hereto. The minute book of BII, a true and complete copy of which
- ------------
has been delivered to Parent, (a) accurately reflects all action taken by the
directors and shareholders of BII at meetings of BII's Board of Directors or
shareholders, as the case may be; and (b) contains true and complete copies of,
or originals of,
4
<PAGE>
the respective minutes of all meetings or consent actions of the directors or
shareholders.
4.2 AUTHORITY. BII has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by BII have been duly and
validly authorized and approved by BII's Board of Directors and the BII
Shareholders, and no other corporate or shareholder proceedings on the part of
BII, its Board of Directors or the BII Shareholders is necessary to authorize or
approve this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by BII and each BII
Shareholder, and assuming the due authorization, execution and delivery by
Parent and Sub, constitutes the valid and binding obligation of BII and each BII
Shareholder, enforceable against BII and each BII Shareholder in accordance with
its terms.
4.3 CAPITALIZATION.
(a) The authorized capital stock of BII consists (i) of 50,000,000
shares of common stock, $.01 par-value, of which (A) 3,595,265 shares were
validly issued and outstanding prior to the execution and delivery of the
Redemption Agreements (as defined in Section 7.1(h) hereof), and (B) 2,955,265
shares are validly issued and outstanding, fully paid and nonassessable
immediately following the execution and delivery of the Redemption Agreements;
and (ii) 5,000,000 shares of preferred stock, $.01 par value, of which no shares
are validly issued and outstanding. All outstanding capital stock of BII was
issued in accordance with applicable federal and state securities laws. There
are no classes of or series of capital stock of BII outstanding other than the
BII Stock, and except as set forth on Schedule 4.3 hereto, no options, warrants,
------------
calls, agreements, commitments or other rights presently outstanding that would
obligate BII or the any of the BII Shareholders to issue, deliver or sell shares
of its capital stock, or to grant, extend or enter into any such option,
warrant, call, agreement, commitment or other right. In addition to the
foregoing, as of the date hereof, BII has no bonds, debentures, notes or other
indebtedness issued or outstanding that have voting rights in BII. Schedule 4.3
------------
sets forth a list of all holders of record of BII Stock Rights, the number of
shares of capital stock of BII represented by the BII Stock Rights and held by
each such holder, and the exercise price for each such BII Stock Right.
(b) Each of the BII Shareholders represents and warrants that the BII
Stock held by such BII Shareholder is free and clear of any lien, charge,
security interest, pledge, option, right of first refusal, voting proxies or
other voting agreements, or encumbrance of any kind or nature (any of the
foregoing, a "Lien").
5
<PAGE>
4.4 SUBSIDIARIES. BII has no subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest in, or any security
convertible into an equity interest in, any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 4.5 hereto, none of the execution and delivery of this Agreement by BII
- ------------
or the BII Shareholders, the consummation by BII and the BII Shareholders of the
transactions contemplated hereby or compliance by BII with any of the provisions
hereof will:
(a) conflict with or violate the Articles of Incorporation or Bylaws
of BII;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to BII or the BII Shareholders,
or by which BII or its properties or assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which BII is a party or by which BII or its
properties may be bound or affected (collectively, for purposes of this Section
4.5, a "BII Agreement");
(d) result in the creation of any Lien on any of the property or
assets of BII; or
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), of (i) any government or subdivision thereof,
whether domestic, foreign or multinational, or any administrative, governmental,
or regulatory authority, agency, commission, court, tribunal or body, whether
domestic, foreign or multinational (a "Governmental Entity"), except for the
filing of the Certificate of Merger pursuant to the DGCL and CCC; or (ii) any
other individual or Entity (collectively, a "Person") pursuant to any BII
Agreement.
4.6 FINANCIAL STATEMENTS. BII has heretofore furnished Parent with a true
and complete copy of (a) the unaudited financial statements of BII for the
period ending September 30, 1996; and (b) the unaudited financial statements of
BII for the period ending March 31, 1997, a copy of each of which is attached
hereto as Schedule 4.6 (collectively herein referred to as the
------------
6
<PAGE>
"BII Financial Statements"). The BII Financial Statements have been prepared in
accordance with generally accepted accounting principles (except, in the case of
the unaudited financial statements, for the absence of footnotes and normal
year-end adjustments) consistently followed throughout the period indicated, and
present fairly, in all material respects, the financial position and operating
results of BII as of the dates, and during the periods, indicated therein.
4.7 ABSENCE OF CHANGES. Except as provided in Schedule 4.7 hereto and
------------
except as contemplated by this Agreement, since March 31, 1997, (a) BII has not
entered into any transaction that was not in the ordinary course of business;
(b) there has been no sale, assignment, transfer, mortgage, pledge, encumbrance
or lease of any material assets or properties of BII; (c) there has been (i) no
declaration or payment of a dividend, or any other declaration, payment or
distribution of any type or nature to any shareholder of BII in respect of its
stock, whether in cash or property, and (ii) no purchase or redemption of any
shares of the capital stock of BII; (d) there has been no declaration, payment,
or commitment for the payment, by BII, of a bonus or other additional salary,
compensation, or benefit to any employee of BII that was not in the ordinary
course of business; (e) there has been no release, compromise, waiver or
cancellation of any debts to or claims by BII, or waiver of any rights of BII,
in each case having a value in excess of $10,000; (f) there have been no capital
expenditures in excess of $10,000 for any single item, or $25,000 in the
aggregate; (g) there has been no change in accounting methods or practices or
revaluation of any assets of BII (other than BII Accounts Receivable (as defined
in Section 4.26 hereof) written down in the ordinary course of business that are
not in excess of $10,000 for any single BII Account Receivable and $25,000 in
the aggregate); (h) there has been no material damage, destruction or loss of
physical property (whether or not covered by insurance) adversely affecting the
BII Business or the operations of BII; (i) there has been no loan by BII, or
guaranty by BII of any loan, to any employee of BII or to any Person related to
the BII Business; (j) to the knowledge of BII, BII has not ceased to transact
business with any customer that, as of the date of such cessation, represented
more than 5% of the annual gross revenues of BII; (k) there has been no
termination or resignation of any key employee or officer of BII, and to the
knowledge of BII, no such termination or resignation is threatened; (1) there
has been no amendment or termination of any material oral or written contract,
agreement or license related to the BII Business, to which BII is a party or by
which it is bound, except in the ordinary course of business, or except as
expressly contemplated by this Agreement; (m) BII has not failed to satisfy any
of its debts, obligations or liabilities related to the BII Business or the
assets of BII as the same become due and owing (except for BII Accounts Payable
(as defined in Section 4.27 hereof), payable in accordance with past practices
and in the ordinary course of business); (n) there has
7
<PAGE>
been no agreement or commitment by BII to do any of the foregoing; and (o) there
has been no other event or condition of any character pertaining to and
materially affecting the assets or financial condition of BII or the BII
Business.
4.8 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.8 hereto,
------------
BII has no debt, liability or obligation of any kind, whether accrued, absolute
or otherwise, including, without limitation, any liability or obligation on
account of taxes or any governmental charges or penalty, interest or fines,
except (a) liabilities not in excess of $50,000 (whether individually or in the
aggregate) incurred in the ordinary course of business after March 31, 1997; (b)
liabilities reflected on the BII Financial Statements; and (c) liabilities
incurred as a result of the transactions contemplated by this Agreement.
4.9 TITLE TO PROPERTIES. Except as set forth on Schedule 4.9 hereto, BII
------------
has good and marketable title to all property and assets used in the BII
Business (other than BII Real Property (as defined in Section 4.12 hereof)), and
good title to all of its leasehold interests, in each case, free and clear of
any and all Liens other than liens for taxes not yet due and payable.
4.10 EQUIPMENT. Schedule 4.10 hereto sets forth a true and correct list of
-------------
all items of tangible personal property (including, without limitation, computer
hardware) necessary for or used in the operation of the BII Business in the
manner in which it has been and is now operated by BII ("the BII Equipment"),
except for personal property having a net book value of less than $1,000. Except
as set forth on Schedule 4.10, each material item of BII Equipment is in good
-------------
condition and repair, ordinary wear and tear excepted.
4.11 INTELLECTUAL PROPERTY.
(a) BII owns, or is validly licensed or otherwise has the right to
use or exploit, all BII Intellectual Property Rights (as hereinafter defined),
free of any obligation to make any payment (whether of a royalty, license fee,
compensation or otherwise). No claims are pending or, to the knowledge of BII,
threatened, that BII is infringing or otherwise adversely affecting the rights
of any Person with regard to any BII Intellectual Property Right. BII has used
commercially reasonable efforts to protect the BII Intellectual Property Rights,
and, to the knowledge of BII, no Person is infringing the rights of BII with
respect to any BII Intellectual Property Right. To the knowledge of BII, neither
BII nor any employee, agent or independent contractor of BII has used,
appropriated or disclosed, directly or indirectly, any trade secrets or other
proprietary or confidential information of any other Person, or otherwise
violated any confidential relationship with any other Person. To the knowledge
of BII, use of the name "BoxTop Interactive, Inc." does not infringe upon the
rights of any
8
<PAGE>
Person. For purposes of this Section 4.11(a), the term "BII Intellectual
Property Right(s)" shall mean all material proprietary technology, trade
secrets, know-how, patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, service marks, service mark rights, copyrights, and
other intellectual property rights used or required to be used by BII in the
conduct of the BII Business.
(b) BII currently licenses, or otherwise has the legal right to use,
all of the BII Software (as hereinafter defined) (including any upgrades,
alterations or enhancements with respect thereto), and all of the BII Software
is being used in compliance with any applicable licenses or other agreements.
For purposes of this Section 4.11(b), the term "BII Software" shall mean all
material computer software used or required to be used by BII in the conduct of
the BII Business.
4.12 REAL PROPERTY. Except as set forth on Schedule 4.12 hereto:
-------------
(a) BII has good and valid leasehold interest in all real property
(including all buildings, improvements and fixtures thereon) used in the
operation of the BII Business (the "BII Real Property"). BII owns no real
property. Except for liens for current taxes not yet due and the items set forth
on Schedule 4.12, there are no Liens on BII's interest in any of the BII Real
-------------
Property.
(b) There are no parties in possession of any portion of the BII Real
Property other than BII, whether as sublessees, subtenants at will, trespassers
or otherwise.
(c) There are water, sewer, gas and electrical lines presently in
existence on the BII Real Property that are sufficient to service adequately the
operations of the BII Business as presently operated in each building located on
the BII Real Property.
(d) To the knowledge of BII, there is no pending or threatened
condemnation or similar proceeding affecting the BII Real Property or any
portion thereof, and, to the knowledge of BII, no such action is presently
contemplated.
(e) To the knowledge of BII, there are no laws, ordinances,
restrictions, judicial or administrative actions, actions by adjacent
landowners, or natural or artificial conditions upon the BII Real Property, or
any other fact or condition, that would have a material adverse effect upon the
use of the BII Real Property for the operation of the BII Business.
(f) To the knowledge of BII, BII's use, operation and maintenance of
the BII Real Property does not violate any restrictive covenants affecting the
BII Real Property, or any
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zoning, building or other federal, state or municipal law, ordinance, regulation
or restriction.
(g) To the knowledge of BII, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, under the provisions of any of the BII
Leases (as hereinafter defined), any material expenditure by BII to modify or
improve any of the BII Real Property to bring it into compliance therewith.
(h) To the knowledge of BII, there are no structural, or material
electrical, mechanical, plumbing, or other defects in the buildings located on
the BII Real Property and the buildings thereon are free from leaks.
4.13 LEASES. Schedule 4.13 hereto sets forth a list of all leases pursuant
-------------
to which BII leases, as lessor or lessee, real or personal property used in
operating the BII Business or otherwise (the "BII" Leases"). Copies of the BII
Leases, which have previously been provided to Parent, are true and complete
copies thereof. All of the BII Leases are valid, binding and enforceable in
accordance with their respective terms against BII (and, to the knowledge of
BII, against the other parties thereto), and there is not under any such BII
Lease any existing default by BII, or, to the knowledge of BII, by any other
party thereto, or any condition or event of that, with notice or lapse of time
or both, would constitute a default. BII has not received written notice that
the landlord of any of the BII Leases intends to cancel, suspend or terminate
the BII Leases or to exercise or not exercise any options under any of the BII
Leases. The current offices used by BII are suitable for the operation of
the BII Business in the manner in which it is now being conducted by BII.
4.14 CONTRACTS. Except as set forth on Schedule 4.14 hereto, BII is not,
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directly or indirectly, a party (in its own name or as a successor in interest),
or otherwise bound by, any written or oral:
(a) material service agreement or commitment (including, without
limitation, agreements or commitments covering business and office equipment,
repairs, interior design, outdoor landscaping, graphics, sanitation, voice mail,
advertising, and vending machines);
(b) material supplier agreement or commitment (including, without
limitation, agreements or commitments involving office supplies, cleaning
supplies, food/refreshment supplies);
(c) material agreement or commitment with any customer of BII
(including without limitation any agreement or commitment
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providing for a retainer) entered into on or prior to May 27, 1997;
(d) shareholder agreement (including voting agreements, proxies and
the like);
(e) employment agreement;
(f) agreement or commitment relating to computer systems, including
those relating to hardware, software, maintenance, and upgrades;
(g) agreement or commitment with a term of more than one year;
(h) merger or acquisition agreement or commitment whereby BII acquired
or disposed of (or will acquire or dispose of) stock or assets;
(i) agreement or commitment on the part of BII to loan money to, or
to guarantee the indebtedness of, any third party;
(j) agreement or commitment on the part of BII to borrow money from,
or receive a guarantee of indebtedness from, any third party, including, without
limitation, any agreement in connection therewith creating a Lien on any of the
property or assets of BII;
(k) agreement or commitment containing covenants (i) limiting,
directly or indirectly, the freedom of BII (or, to the knowledge of BII or the
BII Shareholders, a material employee of BII) to compete in any line of business
in any geographical area; (ii) limiting, directly or indirectly, the freedom of
BII to use any Intellectual Property Right in any geographic area; or (iii)
requiring BII, directly or indirectly, to share any profits or revenues;
(1) material warranty arrangements (whether BII is the provider or the
recipient);
(m) agreement or commitment including dividend restrictions or other
negative covenants;
(n) indemnity agreements or commitments given or received by BII; or
(o) any other material agreement or commitment relating to BII or the
BII Business.
True and complete copies of each such written contract or commitment, and a
true and complete narrative description of any oral contract or commitments,
listed on Schedule 4.14 (collectively, the "BII Contracts") have previously
-------------
been made
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available to Parent. Neither BII nor, to the knowledge of BII, any other party
to any of the BII Contracts, (x) is in default under (nor does there exist any
condition that, with notice or lapse of time or both, would cause such a default
under) any of the BII Contracts, or (y) has waived any right it may have under
any of the BII Contracts, the waiver of which would have a material adverse
effect on the assets or financial condition of BII or the BII Business taken as
a whole. All of the BII Contracts constitute the valid and binding obligation of
BII, and, to the knowledge of BII, the other parties thereto. For purposes of
this Agreement, an agreement or commitment shall be deemed to be "material" to
the extent such agreement or commitment obligates BII to pay, or entitles BII to
receive, in any one year or in the aggregate, in excess of $10,000. In addition
to the foregoing, BII hereby represents and warrants that the aggregate value of
all payment obligations, and rights to receive payments, under agreements,
contracts and commitments (whether oral or in writing) to which BII is a party
or by which it is otherwise bound, that would not be considered "material" in
accordance with the preceding sentence, and that are not listed on Schedule 4.
----------
14, is less than $200,000 (calculating such value by adding together the value
- --
of rights and obligations, and not by determining the net amount thereof).
4.15 DIRECTORS AND OFFICERS. Schedule 4.1.5 hereto sets forth a list, as of
--------------
the date of this Agreement, of the name of each director and officer of BII and
the offices held by each.
4.16 PAYROLL INFORMATION. Schedule 4.16 hereto sets forth a true and
-------------
complete copy of the most recent payroll report of BII, showing all current
employees of BII and their current levels of compensation, other than bonuses
and other extraordinary compensation. BII has paid all compensation required to
be paid to employees of BII on or prior to the date hereof.
4.17 LITIGATION. Except as set forth on Schedule 4.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
BII, threatened against or affecting BII, the BII Business, or the BII
Shareholders, nor is there any judgment, decree, injunction or order of any
applicable Governmental Entity or arbitrator outstanding against BII that,
either individually or in the aggregate, would have a material adverse effect on
the assets or financial condition of BII or the BII Business taken as a whole.
4.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 4.18 hereto, there are no employee
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benefit plans, agreements or arrangements maintained by BII, including, without
limitation, (i) "employee benefit plans," within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA");
(ii) affirmative action plans; (iii) current or
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deferred compensation, pension, profit sharing, vacation or severance plans or
programs; or (iv) medical, hospital, accident, disability or death benefit plans
(collectively, "BII Benefit Plans"). All BII Benefit Plans are administered in
accordance with, and are in material compliance with, all applicable laws and
regulations. No default exists with respect to the obligations of BII under any
BII Benefit Plans.
(b) BII is not a party to any collective bargaining agreement, no such
agreement determines the terms and conditions of employment of any employee of
BII, no collective bargaining agent has been certified as a representative of
any of the employees of BII, no representation campaign or election is now in
progress with respect to any employee of BII and there are no labor disputes,
grievances, controversies, strikes or requests for union representation pending,
or, to the knowledge of BII, threatened, relating to or affecting the BII
Business. To the knowledge of BII, no event has occurred that could give rise to
any such dispute, controversy, strike or request for representation.
4.19 ERISA.
(a) All BII Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of BII Benefit Plans that is intended to
meet the requirements of Section 401(a) of the Code has been determined by the
Internal Revenue Service to meet such requirements within the meaning of such
provision. No BII Benefit Plan is subject to Title IV of ERISA or Section 412 of
the Code. BII has not engaged in any non-exempt "prohibited transactions," as
such term is defined in Section 4975 of the Code or Section 406 of ERISA,
involving BII Benefit Plans that would subject BII to the penalty or tax imposed
under Section 502(i) of ERISA or Section 4975 of the Code. BII has not engaged
in any transaction described in Section 4069 of ERISA within the last five
years. Except as disclosed in Schedule 4.19 hereto or pursuant to the terms of
-------------
BII Benefit Plans, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation or
golden parachute) becoming due to any director or other employee of BII, (ii)
increase any benefits otherwise payable under any BII Benefit Plan or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits to any extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any BII Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code,
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<PAGE>
or by any entity that is considered one employer with BII under Section 4001 of
ERISA or Section 414 of the Code (an "ERISA Affiliate"), within the 12-month
period ending on the date hereof. BII has not incurred any liability to the
Pension Benefit Guaranty Corporation in respect of any BII Benefit Plan that
remains unpaid.
4.20 TAXES.
(a) BII has duly and timely filed all federal, state and local income,
franchise, excise, real and personal property and other tax returns and reports,
including extensions, required to have been filed by BII on or prior to the date
hereof. BII has duly and timely paid all taxes and other governmental charges,
and all interest and penalties with respect thereto, required to be paid by BII
(whether by way of withholding or otherwise) to any federal, state, local or
other taxing authority (except to the extent the same are being contested in
good faith, and adequate reserves therefore have been provided in the BII
Financial Statements). As of the date hereof, all deficiencies proposed as a
result of any audits have been paid or settled.
(b) BII is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) BII has not consented to have the provisions of Section 341(f)(2)
of the Code (or comparable state law provisions) apply to it, and BII has not
agreed or been requested to make any adjustment under Section 481(c) of the Code
by reason of a change in accounting method or otherwise.
(d) As of the date hereof, BII has made all payments required to be
made by it under that certain IRS Form 433-D Installment Agreement, dated as of
November 11, 1996.
4.21 COMPLIANCE WITH APPLICABLE LAWS. BII holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
BII, and to carry on the BII Business as now conducted (the "BII Permits"). To
the knowledge of BII, BII is in material compliance with all applicable laws,
ordinances and regulations and the terms of the BII Permits. Schedule 4.21
-------------
hereto sets forth a list of the BII Permits, a true and correct copy of each of
which has been provided to Parent.
4.22 BOARD OF DIRECTOR/SHAREHOLDER CONSENT. Both the Board of Directors BII
and the BII Shareholders have, by all requisite action under applicable law,
adopted and approved this Agreement and the transactions contemplated hereby
(including, without limitation, the Merger).
14
<PAGE>
4.23 BROKERS. Except as set forth on Schedule 4.23 hereto, no broker or
-------------
finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated by this Agreement as a result of
arrangements made by or on behalf of BII.
4.24 ENVIRONMENTAL MATTERS.
(a) To the knowledge of BII, no real property currently or formerly
owned or operated by BII is contaminated with any Hazardous Substances (as
hereinafter defined);
(b) BII is not a party to any litigation or administrative proceeding
nor, to the knowledge of BII, is any litigation or administrative proceeding
threatened against it, that, in either case, asserts or alleges that BII (i)
violated any Environmental Laws (as hereinafter defined); (ii) is required to
clean up, remove or take remedial or other response action due to the disposal,
deposit, discharge, leak or other release of any Hazardous Substances; or (iii)
is required to pay all or a portion of the cost of any past, present or future
cleanup, removal or remedial or other action that arises out of or is related to
the disposal, deposit, discharge, leak or other release of any Hazardous
Substances.
(c) To the knowledge of BII, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by BII containing materials that, if known to be
present in soils or ground water, would require cleanup, removal or other
remedial action under Environmental Laws.
(d) To the knowledge of BII, there are no conditions existing
currently that would subject BII or the BII Shareholders ,(as owners of BII) to
damages, penalties, injunctive relief or cleanup costs under any Environmental
Laws, or that would require cleanup, removal, remedial action or other response
pursuant to Environmental Laws.
(e) To the knowledge of BII, BII is not subject to any judgment, order
or citation related to or arising out of any Environmental Laws and has not been
named or listed as a potentially responsible party by any Governmental Entity in
a matter related to or arising out of any Environmental Laws.
(f) For purposes of this Agreement, (i) the term "Environmental Law"
means any federal, state or local law (including statutes, regulations,
ordinances, codes, rules, judicial opinions and other governmental restrictions
and requirements), relating to the discharge of air pollutants, water
pollutants, noise, odors or process waste water, or otherwise relating to the
environment or hazardous or toxic substances; and (ii) the term "Hazardous
Substance" means any toxic or hazardous
15
<PAGE>
substance that is regulated by or under authority of any Environmental Law,
including, without limitation, any petroleum products, asbestos or
polychlorinated biphenyls.
4.25 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as provided
in Schedule 4.25 hereto, no officer, director, shareholder or employee of BII,
-------------
and no family member of any of the foregoing, has any direct or indirect
material interest in any material customer, supplier or competitor of BII, or in
any Person from whom or to whom BII leases any real or personal property, or in
any other Person with whom BII is doing business, whether directly or indirectly
(including, without limitation, as a debtor or creditor), whether in existence
as of the date hereof or proposed, other than the ownership of stock of publicly
traded corporations that does not exceed 1% of the issued and outstanding stock
of such corporation.
4.26 ACCOUNTS RECEIVABLE. All accounts, notes, contracts and other
receivables of BII (collectively, "BII Accounts Receivable") were acquired by
BII in the ordinary course of business arising from bona fide transactions
completed in accordance with the terms and provisions contained in any documents
related thereto. To the knowledge of BII, there are no set-offs, counterclaims
or disputes asserted with respect to any BII Accounts Receivable that would
result in claims in excess of the reserve for bad debts set forth on the BII
Financial Statements and, to the knowledge of BII, subject to such reserve, all
BII Accounts Receivable are collectible in full. Schedule 4.26 hereto is a true
-------------
and complete aging report prepared as of April 16, 1997, which shows the time
elapsed since invoice date for all BII Accounts Receivable.
4.27 ACCOUNTS PAYABLE. All material accounts, notes, contracts and other
amounts payable of BII (collectively, "BII Accounts Payable") are currently
within their respective terms, and are neither in default nor otherwise past due
by more than 90 days. Schedule 4.27 hereto is a true and complete aging report
-------------
prepared as of April 16, 1997, which shows the time elapsed since invoice date
for all BII Accounts Payable.
4.28 INSURANCE. BII currently maintains, in full force and effect, all
insurance policies that are either (a) required to be maintained for the conduct
of the BII Business or the ownership of BII's property (both real and personal);
or (b) otherwise maintained by companies engaged in a business comparable to the
BII Business (collectively, the "BII Insurance Policies"). The BII Insurance
Policies are listed on Schedule 4.28 hereto, and true and complete copies of all
-------------
BII Insurance Policies have previously been provided to Parent. BII (i) is not
in default regarding the provisions of any BII Insurance Policy; (ii) has paid
all premiums due thereunder; and (iii) has not failed to present any notice or
present any material claim thereunder in a due and timely fashion.
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4.29 BANKRUPTCY. BII hereby represents and warrants that it has not, and
each BII Shareholder hereby represents and warrants that he or she has not,
filed a petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
4.30 BII DEBT. As of the date one day prior to the date hereof, the
aggregate amount of BII Debt (as hereinafter defined) outstanding was no greater
than $2,365,680. For purposes of this Agreement, the term "BII Debt" shall mean
and include (i) the aggregate amount of debt for borrowed money (including any
bank overdrafts), customer advances (other than advances made by Interactive
Channel, Inc.), deferred income and capitalized leases of BII, together with
accrued interest on any of the foregoing; (ii) the aggregate purchase price
required to be paid by BII for the repurchase of certain of the outstanding
capital stock of BII pursuant to the Redemption Agreements; and (iii) the amount
required to be paid for the BoxTop Entertainment license (as described on
Schedule 4.14 hereto); provided, however, that BII Debt shall be reduced by any
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cash of BoxTop (determined in accordance with generally accepted accounting
principles) as of such date.
4.31 ACCREDITED INVESTORS; INVESTMENT PURPOSE. Each BII Shareholder
represents that he is an "accredited investor" as such term is defined in Rule
501 of Regulation D promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Securities Act"). Each BII
Shareholder further represents that he is acquiring the Parent Stock solely for
his own account for investment and not with a view to, or for sale in connection
with, any distribution thereof. Each BII Shareholder agrees that he will not,
directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise
dispose of any Parent Stock (or solicit any offers to buy, purchase or other
acquire or take a pledge of any such shares) except in compliance with the
Securities Act and the rules and regulations thereunder, other applicable laws,
rules and regulations, and the First Amended and Restated Stockholders'
Agreement of Parent, as amended effective the date hereof (the "Stockholders'
Agreement").
4.32 RESTRICTIONS ON TRANSFER. Each BII Shareholder acknowledges that (a)
the Parent Stock received by him hereunder has not been registered under the
Securities Act; (b) the Parent Stock may be required to be held indefinitely,
and each BII Shareholder must continue to bear the economic risk of the
investment in such shares unless such shares are subsequently registered under
the Securities Act or an exemption from such registration is available; (c)
there may not be any public market
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<PAGE>
for the Parent Stock in the foreseeable future; (d) Rule 144 promulgated under
the Securities Act is not presently available with respect to sales of any
securities of Parent, and such Rule is not anticipated to be available in the
foreseeable future; (e) when and if Parent Stock may be disposed of without
registration in reliance upon Rule 144, such disposition generally can be made
only in limited amounts and in accordance with the terms and conditions of such
Rule; (f) if the exemption afforded by Rule 144 is not available, public sale
without registration will require the availability of an exemption under the
Securities Act; (g) the Parent Stock is subject to the terms and conditions of
the Stockholders, Agreement; (h) restrictive legends shall be placed on the
certificates representing Parent Stock; and (i) a notation shall be made in the
appropriate records of Parent indicating that Parent Stock is subject to
restrictions on transfer and, if Parent should in the future engage the services
of a stock transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to Parent Stock.
4.33 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION. Each BII
Shareholder represents and warrants that (a) his financial situation is such
that he can afford to bear the economic risk of holding Parent Stock acquired by
him hereunder for an indefinite period; (b) he can afford to suffer the complete
loss of such Parent Stock; (c) he has been granted the opportunity to ask
questions of, and receive answers from, representatives of Sub and Parent
concerning the terms and conditions of the Parent Stock and to obtain any
additional information that he deems necessary; (d) his knowledge and experience
in financial business matters is such that he is capable of evaluating the
merits and risk of ownership of the Parent Stock; and (e) he has carefully
reviewed the terms of the Stockholders' Agreement and has evaluated the
restrictions and obligations contained therein.
4.34 CONFIDENTIAL MEMORANDUM. Each of the BII Shareholders represents and
warrants that he or she (i) has received a copy of the Confidential Memorandum,
dated May 21, 1997 (the "Memorandum"); (ii) has carefully examined the
Memorandum, and has had an opportunity to ask questions of, and receive answers
from, representatives of Parent, and to obtain additional information concerning
Parent and its Subsidiaries (as hereinafter defined); (iii) does not require
additional information regarding Parent or its Subsidiaries in connection with
the Merger.
4.35 DISCLOSURE. No statement of fact by BII contained in this Agreement
and no written statement of fact furnished by BII to Parent or Sub pursuant to
or in connection with this Agreement contains contain any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein contained not misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub represents and warrants to BII and the BII
Shareholders, which representations and warranties shall survive the Closing in
accordance with Section 9.1 of this Agreement, as follows:
5.1 ORGANIZATION AND QUALIFICATION. Each of Parent and its Subsidiaries (as
defined in Section 9.12 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached as Schedule 5.1 hereto. The minute
------------
books of Parent and Sub, a true and complete copy of each of which has been made
available to BII, (a) accurately reflects all action taken by the directors and
shareholders of Parent at meetings of Parent's Board of Directors or
shareholders, as the case may be; and (b) contains true and complete copies of,
or originals of, the respective minutes of all meetings or consent actions of
the directors or shareholders.
5.2 AUTHORITY. Each of Parent and Sub has the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by each of Parent
and Sub have been duly and validly authorized and approved by their respective
Board of Directors and shareholders, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective boards of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by BII and the BII Shareholders,
constitutes the valid and binding obligation of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms.
5.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby or compliance by Parent and Sub with any of the provisions
hereof Will:
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<PAGE>
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Parent or Sub, or the organizational documents of any other
Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected (collectively, for purposes of this Section 5.3, an
"IXL Agreement");
(d) result in the creation of any Lien on any of the property or
assets of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for
(x) compliance with any applicable requirements of any applicable securities
laws, and (y) the filing of the Certificate of Merger pursuant to the DGCL and
CCC; or (ii) any other Person.
5.4 LITIGATION. Except as set forth on Schedule 5.4 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 BROKERS. Except as disclosed on Schedule 5.5 hereto, No broker or
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finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Sub.
5.6 PARENT STOCK.
(a) As of the date hereof the authorized capital stock of Parent
consists of (i) (A) 250,000 shares of Class A Common Stock, $.01 par value (the
"Class A Common Stock"), of which no
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shares are validly issued and outstanding, and (B) 1,000,000 shares of Class B
Common Stock, $.01 par value, of which 45,292 shares are validly issued and
outstanding (without taking into account any shares of Parent Stock to be issued
pursuant to this Agreement), fully paid and nonassessable; and (ii) 250,000
shares of Class A Convertible Preferred stock, of which 157,760 shares are
validly issued and outstanding, fully paid and nonassessable. All outstanding
capital stock of Parent was issued in accordance with applicable federal and
state securities laws. Except as set forth on Schedule 5.6(a) hereto, there are
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no options, warrants, calls, agreements, commitments or other rights presently
outstanding that would obligate Parent to issue, deliver or sell shares of its
capital stock, or to grant, extend or enter into any such option, warrant, call,
agreement, commitment or other right. In addition to the foregoing, as of the
date hereof, Parent has no bonds, debentures, notes or other indebtedness issued
or outstanding that have voting rights in Parent.
(b) The holders of record as of the Effective Time of the outstanding
shares of capital stock of Parent, together with the number of shares of capital
stock then outstanding, are set forth on a pro forma basis on Schedule 5.6(b)
---------------
hereto.
(c) When delivered to the BII Shareholders in accordance with the
terms hereof, the Parent Stock will (i) be duly authorized, fully paid and
nonassessable, (ii) represent 43.0% of the issued and outstanding shares of
Parent Stock, (iii) represent, on an as-converted and fully diluted basis, 14.4%
of the issued and outstanding capital stock of Parent, and (iv) be free and
clear of all Liens.
5.7 SUBSIDIARIES. Except as set forth on Schedule 5.7 hereto, Parent has
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no subsidiaries and does not otherwise own or control, directly or indirectly,
any equity interest in, or any security convertible into an equity interest in,
any Entity. Schedule 5.7 hereto lists the name of each of the Subsidiaries of
-------------
Parent, and indicates their respective jurisdictions of incorporation and
authorized and outstanding capitalization.
5.8 FINANCIAL STATEMENTS. Parent has heretofore furnished BII with a true
and complete copy of (a) the audited financial statements of iXL Interactive
Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31, 1993, 1994
and 1995, and for the-four-month period ending April 30, 1996; (b) audited
combined financial statements for Creative Video, Inc. (n/k/a iXL, Inc.),
Creative Video Library, Inc. and Entrepreneur Television, Inc. for the years
ending December 31, 1993, 1994 and 1995, and for the four-month period ending
April 30, 1996; (c) the audited consolidated financial statements for Parent and
its Subsidiaries for the eight months ended December 31, 1996; and (d) the
unaudited consolidated financial statements for Parent and its Subsidiaries,
dated March 31, 1997 (collectively herein referred to as the "Parent Financial
Statements"). The Parent Financial
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statements have been prepared in accordance with generally accepted accounting
principles (except, in the case of the unaudited financial statements, for the
exclusion of footnotes and normal year-end adjustments) consistently followed
throughout the period indicated, and present fairly, in all material respects,
the financial position and operating results of Parent and its Subsidiaries as
of the dates, and during the periods, indicated therein.
5.9 ABSENCE OF CHANGES. Except as provided in Schedule 5.9 hereto and
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except as contemplated by this Agreement, since March 31, 1997, (a) neither
Parent nor any of its Subsidiaries has entered into any transaction that was not
in the ordinary course of business; (b) there has been no sale, assignment,
transfer, mortgage, pledge, encumbrance or lease of any material assets or
properties of Parent or any of its Subsidiaries; (c) there has been (i) no
declaration or payment of a dividend, or any other declaration, payment or
distribution of any type or nature to any shareholder of Parent in respect of
its stock, whether in cash or property, and (ii) no purchase or redemption of
any shares of the capital stock of Parent; (d) there has been no declaration,
payment, or commitment for the payment by Parent or its Subsidiaries of a bonus
or other additional salary, compensation, or benefit to any employee of Parent
or any of its Subsidiaries that was not in the ordinary course of business; (e)
there has been no release, compromise, waiver or cancellation of any debts to or
claims by Parent or any of its Subsidiaries, or waiver of any rights of Parent
or any of its Subsidiaries, in each case having a value in excess of $10,000;
(f) there have been no capital expenditures by Parent in excess of $100,000 for
any single item, or $250,000 in the aggregate; (g) there has been no change in
accounting methods or practices or revaluation of any assets of Parent or its
Subsidiaries (other than Parent Accounts Receivable (as defined in Section 5.26
hereof) written down in the ordinary course of business that are not in excess
of $10,000 for any single Parent Account Receivable and $25,000 in the
aggregate); (h) there has been no material damage, destruction or loss of
physical property (whether or not covered by insurance) adversely affecting the
business or the operations of Parent or any of its Subsidiaries (referred to in
this Article V as "Parent's Business"); (i) there has been no loan by Parent or
any of its Subsidiaries, or guaranty by Parent or any of its Subsidiaries of any
loan, to any employee of Parent or any of its Subsidiaries or to any Person
related to Parent's Business; (i) to the knowledge of Parent, neither Parent nor
any of its Subsidiaries has ceased to transact business with any customer that,
as of the date of such cessation, represented more than 5% of the annual gross
revenues of Parent and its Subsidiaries, taken as a whole; (k) there has been
no termination or resignation of any key employee or officer of Parent or any of
its Subsidiaries, and to the knowledge of Parent no such termination or
resignation is threatened; (1) there has been no amendment or termination of any
material oral or written
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contract, agreement or license related to the Parent's Business, to which Parent
or any of its Subsidiaries is a party or by which Parent or any of its
Subsidiaries is bound, except in the ordinary course of business; (m) neither
Parent nor any of its Subsidiaries has failed to satisfy any of its debts,
obligations or liabilities related to Parent's Business, or the assets of Parent
or any of its Subsidiaries, as the same become due and owing (except for Parent
Accounts Payable (as defined in Section 5.27 hereof), payable in accordance with
past practices and in the ordinary course of business); (n) there has been no
agreement or commitment by Parent or any of its Subsidiaries to do any of the
foregoing; and (o) there has been no other event or condition of any character
pertaining to and materially affecting Parent's Business or the assets or
financial condition of Parent and its Subsidiaries, taken as a whole.
5.10 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 5.10 hereto,
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neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including, without
limitation, any liability or obligation on account of taxes or any governmental
charges or penalty, interest or fines, except (a) liabilities not in excess of
$300,000 (whether individually or in the aggregate) incurred in the ordinary
course of business after March 31, 1997; (b) liabilities reflected on the Parent
Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated by this Agreement.
5.11 TITLE TO PROPERTIES. Except as set forth on Schedule 5.11 hereto,
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Parent or one of its Subsidiaries has good and marketable title to all property
and assets used in Parent's Business (other than Parent Real Property (as
defined in Section 5.14 hereof)), and good title to all of its leasehold
interests, in each case, free and clear of any and all Liens other than liens
for taxes not yet due and payable.
5.12 EQUIPMENT. Schedule 5.12 hereto sets forth a true and correct list of
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all items of tangible personal property (including, without limitation, computer
hardware) necessary for or used in the operation of Parent's Business in the
manner in which it has been and is now operated by Parent (the "Parent
Equipment"), except for personal property having a net book value of less than
$1,000. Except as set forth on Schedule 5.12, each material item of Parent
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Equipment is in good condition and repair, ordinary wear and tear excepted.
5.13 INTELLECTUAL PROPERTY.
(a) Except as set forth on Schedule 5.13 hereto, Parent or one of its
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Subsidiaries owns, or is validly licensed or otherwise has the right to use or
exploit, all Parent Intellectual Property Rights (as hereinafter defined), free
of any obligation to make any payment (whether of a royalty, license
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fee, compensation or otherwise). No claims are pending or, to the knowledge of
Parent, threatened, that Parent or any of its Subsidiaries is infringing or
otherwise adversely affecting the rights of any Person with regard to any Parent
Intellectual Property Right. Parent and its Subsidiaries have used commercially
reasonable efforts to protect the Intellectual Property Rights, and, to the
knowledge of Parent, no Person is infringing the rights of Parent or its
Subsidiaries with respect to any Parent Intellectual Property Right. To the
knowledge of Parent, neither Parent nor any employee, agent or independent
contractor of Parent has used, appropriated or disclosed, directly or
indirectly, any trade secrets or other proprietary or confidential information
of any other Person, or otherwise violated any confidential relationship with
any other Person. To the knowledge of Parent, use of the names "iXL, Inc.",
"IXL Holdings, Inc." and the other names used in the conduct of Parent's
Business do not infringe upon the rights of any Person. For purposes of this
Section 5.13(a), the term "Parent Intellectual Property Right(s)" shall mean all
material proprietary technology, trade secrets, know-how, patents, patent
rights, trademarks, trademark rights, trade names, trade name rights, service
marks, service mark rights, copyrights, and other intellectual property rights
used or required to be used by Parent or its Subsidiaries in the conduct of
Parent's Business.
(b) Except as set forth on Schedule 5.13 hereto, Parent and/or its
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Subsidiaries currently licenses, or otherwise has the legal right to use, all of
the Parent Software (as hereinafter defined) (including any upgrades,
alterations or enhancements with respect thereto), and all of the Parent
Software is being used in compliance with any applicable licenses or other
agreements. For purposes of this Section 5.13(b), the term "Parent Software"
shall mean all material computer software used or required to be used in the
conduct of Parent's Business.
5.14 REAL PROPERTY. Except as set forth on Schedule 5.14 hereto:
-------------
(a) Parent or one of its Subsidiaries has good and marketable,
insurable fee simple title or good and valid leasehold interest in all real-
property (including all buildings, improvements and fixtures thereon) used in
the operation of Parent's Business (the "Parent Real Property"). Attached to
Schedule 5.14 are all policies of title insurance currently existing in favor of
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Parent or one of its Subsidiaries with respect to the Parent Real Property.
Except for liens for current taxes not yet due and the items set forth on
Schedule 5.14, there are no Liens on any of the Parent Real Property or the
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interest of Parent or one of its Subsidiaries therein.
(b) There are no parties in possession of any portion of the Parent
Real Property other than Parent or one of its
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Subsidiaries, whether as lessees, tenants at will, trespassers or otherwise.
(c) There are water, sewer, gas and electrical lines presently in
existence on the Parent Real Property that are sufficient to service adequately
the operations of Parent Business as presently operated in each building located
on the Parent Real Property.
(d) To the knowledge of Parent, there is no pending or threatened
condemnation or similar proceeding affecting the Parent Real Property or any
portion thereof, and, to the knowledge of Parent, no such action is presently
contemplated.
(e) To the knowledge of Parent, there are no laws, ordinances,
restrictions, judicial or administrative actions, actions by adjacent
landowners, or natural or artificial conditions upon the Parent Real Property,
or any other fact or condition, that would have a material adverse effect upon
the use of the Parent Real Property for the operation of Parent's Business.
(f) Parent has not received any notice from any insurance company of
any defects or inadequacies in the Parent Real Property or any part thereof that
would materially adversely affect the insurability of Parent's or its
Subsidiaries' interest in the Parent Real Property or the premiums for the
insurance thereof.
(g) To the knowledge of Parent, neither Parent's nor its Subsidiaries,
use, operation and maintenance of the Parent Real Property violates any
restrictive covenants affecting the Parent Real Property, or any zoning,
building or other federal, state or municipal law, ordinance, regulation or
restriction.
(h) To the knowledge of Parent, there is no law, ordinance, order,
regulation or requirement now in existence, or, to the knowledge of Parent,
under active consideration by any Governmental Entity, that would require Parent
or its Subsidiaries (whether directly or under the provisions of any of the
Parent Leases (as hereinafter defined) or otherwise covering the Parent Real
Property) to make any material expenditure to modify or improve any of the
Parent Real Property to bring it into compliance therewith.
(i) To the knowledge of Parent, there are no structural, or material
electrical, mechanical, plumbing, or other defects in the buildings located on
the Parent Real Property and the buildings thereon are free from leaks.
5.15 LEASES. Schedule 5.15 hereto sets forth a list of all leases pursuant
-------------
to which Parent or its Subsidiaries lease, as lessor or lessee, real or personal
property used in operating
25
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Parent's Business or otherwise (the "Parent Leases"). Copies of the Parent
Leases, which have previously been made available to BII, are true and complete
copies thereof. All of the Parent Leases are valid, binding and enforceable in
accordance with their respective terms against Parent or its Subsidiary, as
applicable (and, to the knowledge of Parent, against the other parties thereto),
and there is not under any such Lease any existing default by Parent or its
Subsidiaries, or, to the knowledge of Parent, by any other party thereto, or any
condition or event of that, with notice or lapse of time or both, would
constitute a default. None of Parent or its Subsidiaries has received written
notice that the landlord of any of the Parent Leases intends to cancel, suspend
or terminate the Parent Leases or to exercise or not exercise any options under
any of the Parent Leases.
5.16 CONTRACTS. Except as set forth on Schedule 5.16 hereto, neither Parent
--------------
nor any of its Subsidiaries is, directly or indirectly, a party (in its own name
or as a successor in interest), or otherwise bound by, any written or oral:
(a) material service agreement or commitment (including, without
limitation, agreements or commitments covering business and office equipment,
repairs, interior design, outdoor landscaping, graphics, sanitation, voice mail,
advertising, and vending machines);
(b) material supplier agreement or commitment (including, without
limitation, agreements or commitments involving office supplies, cleaning
supplies, food/refreshment supplies);
(c) material agreement or commitment with any customer of Parent or
its Subsidiaries (including without limitation any agreement or commitment
providing for a retainer) entered into on or prior to May 27, 1997;
(d) shareholder agreement (including voting agreements, proxies and
the like) covering the shareholders of Parent;
(e) employment agreement covering employees of Parent or any of its
Subsidiaries;
(f) agreement or commitment relating to computer systems, including
those relating to hardware, software, maintenance, and upgrades;
(g) agreement or commitment with a term of more than one year;
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(h) merger or acquisition agreement or commitment whereby parent or
any of its subsidiaries acquired or disposed of (or will acquire or dispose of)
stock or assets;
(i) agreement or commitment on the part of Parent or any of its
Subsidiaries to loan money to, or to guarantee the indebtedness of, any third
party;
(j) agreement or commitment on the part of Parent or any of its
Subsidiaries to borrow money from, or receive a guarantee of indebtedness from,
any third party, including, without limitation, any agreement in connection
therewith creating a Lien on any of the property or assets of Parent or any of
its Subsidiaries;
(k) agreement or commitment containing covenants (i) limiting,
directly or indirectly, the freedom of Parent (or, to the knowledge of Parent, a
material employee of Parent or one of its Subsidiaries) or any of its
Subsidiaries to compete in any line of business in any geographical area; (ii)
limiting, directly or indirectly, the freedom of Parent or any of its
Subsidiaries to use any Parent Intellectual Property Right in any geographic
area; or (iii) requiring Parent, directly or indirectly, to share any profits or
revenues;
(1) material warranty arrangements (whether Parent or any of its
Subsidiaries is the provider or the recipient);
(m) agreement or commitment including dividend restrictions or other
negative covenants;
(n) indemnity agreements or commitments given or received by Parent
or any of its Subsidiaries; or
(o) any other material agreement or commitment relating to Parent,
any of its Subsidiaries or Parent's Business.
True and complete copies of each such written contract or commitment, and a
true and complete narrative description of any oral contract or commitments,
listed on Schedule 5.16 (collectively, the "Parent Contracts") have previously
-------------
been made available to BII. Neither Parent nor any of its Subsidiaries nor, to
the knowledge of Parent, any other party to any of the Parent contracts, (x) is
in default under (nor does there exist any condition that, with notice or lapse
of time or both, would cause such a default under) any of the Parent Contracts,
or (y) has waived any right it may have under any of the Parent Contracts, the
waiver of which would have a material adverse effect on the assets or financial
condition of Parent and its Subsidiaries, taken as a whole, or on Parent's
Business. All of the Parent Contracts constitute the valid and binding
obligation of Parent (or, if applicable, its Subsidiary), and, to the knowledge
of Parent, the other parties thereto. For purposes of
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this Agreement, an agreement or commitment shall be deemed to be "material" to
the extent such agreement or commitment obligates Parent (or its Subsidiary, if
applicable) to pay, or entitles Parent (or its Subsidiary) to receive, in any
one year or in the aggregate, in excess of $25,000. In addition to the
foregoing, Parent hereby represents and warrants that the aggregate value of all
payment obligations, and rights to receive payments, under agreements, contracts
and commitments (whether oral or in writing) to which Parent or any of its
Subsidiaries is a party or by which any thereof is otherwise bound, that would
not be considered "material" in accordance with the preceding sentence, and that
are not listed on Schedule 5.16, is less than $300,000 (calculating such value
-------------
by adding together the value of rights and obligations, and not by determining
the net amount thereof).
5.17 DIRECTORS AND OFFICERS. Schedule 5.17 hereto sets forth a list, as of
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the date of this Agreement, of the name of each director and officer of Parent
and each Subsidiary and the offices held by each.
5.18 [INTENTIONALLY OMITTED]
5.19 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 5.19 hereto, there are no
-------------
employee benefit plans, agreements or arrangements maintained by Parent or any
of its Subsidiaries, including, without limitation, (i) "employee benefit
plans," within the meaning of Section 3(3) of ERISA; (ii) affirmative action
plans; (iii) current or deferred compensation, pension, profit sharing, vacation
or severance plans or programs; or (iv) medical, hospital, accident, disability
or death benefit plans (collectively, "Parent Benefit Plans"). All Parent
Benefit Plans are administered in accordance with, and are in material
compliance with, all applicable laws and regulations. No default exists with
respect to the obligations of Parent under any Parent Benefit Plans.
(b) Neither Parent nor any of its Subsidiaries is a party to any
collective bargaining agreement, no such agreement determines the terms and
conditions of employment of any employee of Parent or any of its Subsidiaries,
no collective bargaining agent has been certified as a representative of any of
the employees of Parent or any of its Subsidiaries, no representation campaign
or election is now in progress with respect to any employee of Parent or any of
its Subsidiaries and there are no labor disputes, grievances, controversies,
strikes or requests for union representation pending, or, to the knowledge of
Parent, threatened, relating to or affecting the Parent's Business. To the
knowledge of Parent, no event has occurred that could give rise to any such
dispute, controversy, strike or request for representation.
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5.20 ERISA.
(a) All Parent Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of Parent Benefit Plans that is intended to
meet the requirements of Section 401(a) of the Code has been determined by the
Internal Revenue Service to meet such requirements within the meaning of such
provision. No Parent Benefit Plan is subject to Title IV of ERISA or Section 412
of the Code. Neither Parent nor any of its Subsidiaries has engaged in any non-
exempt "prohibited transactions," as such term is defined in Section 4975 of the
Code or Section 406 of ERISA, involving Parent Benefit Plans that would subject
Parent or any of its Subsidiaries to the penalty or tax imposed under Section
502(i) of ERISA or Section 4975 of the Code. Neither Parent nor any of its
Subsidiaries has engaged in any transaction described in Section 4069 of ERISA
within the last five years. Except as disclosed in Schedule 5.20 hereto or
-------------
pursuant to the terms of Parent Benefit Plans, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment (including, without limitation, severance,
unemployment compensation or golden parachute) becoming due to any director or
other employee of Parent or any of its Subsidiaries, (ii) increase any benefits
otherwise payable under any Parent Benefit Plan or (iii) result in the
acceleration of the time of payment or vesting of any such benefits to any
extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Parent Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code, or by any
entity that is considered one employer with Parent under Section 4001 of ERISA
or Section 414 of the Code (an "ERISA Affiliate"), within the 12-month period
ending on the date hereof. Neither Parent nor any Subsidiary has incurred any
liability to the Pension Benefit Guaranty Corporation in respect of any Parent
Benefit Plan that remains unpaid.
5.21 TAXES.
(A) Except as set forth on Schedule 5.21 hereto, all federal, state
-------------
and local income, franchise, excise, real and personal property and other tax
returns and reports, including extensions, required to have been filed by Parent
and its Subsidiaries (including, where applicable, consolidated returns) on or
prior to the date hereof have been duly and timely filed by or on behalf of
Parent and its Subsidiaries. All taxes and other governmental charges, and all
interest and penalties with respect thereto, required to be paid by Parent and
its Subsidiaries (whether by way of withholding or otherwise) to any federal,
29
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state, local or other taxing authority have been paid by or on behalf of Parent
and its Subsidiaries (except to the extent the same are being contested in good
faith, and adequate reserves therefore have been provided in the Parent
Financial Statements). As of the date hereof, all deficiencies proposed as a
result of any audits have been paid or settled.
(b) Neither Parent nor any of its Subsidiaries is a party to, or
bound by, or otherwise in any way obligated under, any tax sharing or similar
agreement.
(c) Neither Parent nor any of its Subsidiaries has consented to have
the provisions of Section 341(f)(2) of the Code (or comparable state law
provisions) apply to it, and Parent has not agreed or been requested to make any
adjustment under Section 481(c) of the Code by reason of a change in accounting
method or otherwise.
5.22 COMPLIANCE WITH APPLICABLE LAWS. Parent or its Subsidiaries holds all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's Business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
Schedule 5.22 hereto sets forth a list of the Parent Permits, a true and correct
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copy of each of which has been made available to BII.
5.23 BOARD OF DIRECTOR CONSENT. Both the Board of Directors of Parent and
Sub have, by all requisite action under applicable law, adopted and approved
this Agreement and the transactions contemplated hereby (including, without
limitation, the Merger).
5.24 ENVIRONMENTAL MATTERS.
(a) To the knowledge of Parent, no real property currently or
formerly owned or operated by Parent or its Subsidiaries is contaminated with
any Hazardous Substances;
(b) None of Parent or its Subsidiaries is a party to any litigation
or administrative proceeding or, to the knowledge of Parent, is any litigation
or administrative proceeding threatened against Parent or its Subsidiaries,
that, in either case, asserts or alleges that Parent or any of its Subsidiaries
(i) violated any Environmental Laws; (ii) is required to clean up, remove or
take remedial or other response action due to the disposal, deposit, discharge,
leak or other release of any Hazardous Substances; or (iii) is required to pay
all or a portion of the cost of any past, present or future cleanup, removal or
remedial or other action that arises out of or is
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related to the disposal, deposit, discharge, leak or other release of any
Hazardous Substances.
(c) To the knowledge of Parent, there are not now, nor have there
previously been, tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by Parent or any of its Subsidiaries containing
materials that, if known to be present in soils or ground water, would require
cleanup, removal or other remedial action under Environmental Laws.
(d) To the knowledge of Parent, there are no conditions existing
currently that would subject Parent or its Subsidiaries to damages, penalties,
injunctive relief or cleanup costs under any Environmental Laws, or that would
require cleanup, removal, remedial action or other response pursuant to
Environmental Laws.
(e) To the knowledge of Parent, neither Parent nor its Subsidiaries
is subject to any judgment, order or citation related to or arising out of any
Environmental Laws and,,to the knowledge of Parent, neither Parent nor its
Subsidiaries have been named or listed as a potentially responsible party by any
Governmental Entity in a matter related to or arising out of any Environmental
Laws.
5.25 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as provided
in Schedule 5.25 hereto, no officer, director, shareholder or employee of Parent
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or any of its Subsidiaries, and no family member of any of the foregoing, has
any direct or indirect material interest in any material customer, supplier or
competitor of Parent or any of its Subsidiaries, or in any Person from whom or
to whom Parent leases any real or personal property, or in any other Person with
whom Parent or any of its Subsidiaries is doing business, whether directly or
indirectly (including, without limitation, as a debtor or creditor), whether in
existence as of the date hereof or proposed, other than the ownership of stock
of publicly traded corporations that does not exceed 1% of the issued and
outstanding stock of such corporation.
5.26 ACCOUNTS RECEIVABLE. Except as set forth on Schedule 5.26 hereto, all
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accounts, notes, contracts and other receivables of Parent (collectively,
"Parent Accounts Receivable") were acquired by Parent in the ordinary course of
business arising from bona fide transactions completed in accordance with the
terms and provisions contained in any documents related thereto. To the
knowledge of Parent, there are no set-offs, counterclaims or disputes asserted
with respect to any Parent Accounts Receivable that would result in claims in
excess of the reserve for bad debts set forth on the Parent Financial Statements
and, to the knowledge of Parent, subject to such reserve, all Parent Accounts
Receivable are collectible in full. Schedule 5.26 hereto is a true and complete
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aging report prepared as of March
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31, 1997 (or April 24, 1997, in the case of IXL-Memphis, Inc.), which shows the
time elapsed since invoice date for all Parent Accounts Receivable.
5.27 ACCOUNTS PAYABLE. All material accounts, notes, contracts and other
amounts payable of Parent and its Subsidiaries (collectively, "Parent Accounts
Payable") are currently within their respective terms, and are neither in
default nor otherwise past due by more than 90 days. Schedule 5.27 hereto is a
-------------
true and complete aging report prepared as of March 31, 1997 (or April 9, 1997,
in the case of IXL-Memphis, Inc.), which shows the time elapsed since invoice
date for all Parent Accounts Payable.
5.28 INSURANCE. Parent or one of its Subsidiaries currently maintains, in
full force and effect, all insurance policies that are either (a) required to be
maintained for the conduct of Parent's Business or the ownership of Parent's
property (both real and personal); or (b) otherwise maintained by companies
engaged in a business comparable to Parent's Business (collectively, the "Parent
Insurance Policies"). The Parent Insurance Policies are listed on Schedule 5.28
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hereto, and true and complete copies of all Parent Insurance Policies have
previously been made available to BII. Neither Parent nor any of its
Subsidiaries (i) is in default regarding the provisions of any Insurance Policy;
(ii) has paid all premiums due thereunder; and (iii) has not failed to present
any notice or present any material claim thereunder in a due and timely fashion.
5.29 BANKRUPTCY. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.30 DISCLOSURE. No statement of fact by Parent or Sub contained in this
Agreement and no written statement of fact furnished or to be furnished by
Parent or Sub to BII pursuant to or in connection with this Agreement contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements herein or
therein contained not misleading.
5.31 OWNERSHIP OF SUB; NO PRIOR ACTIVITIES. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement. As of
the Effective Time, all of the outstanding capital stock of Sub will be owned by
Parent.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 PUBLIC ANNOUNCEMENTS. The parties agree that, except as may otherwise
be required to comply with applicable laws and regulations (including, without
limitation, applicable securities laws), public disclosure of the transactions
contemplated by this Agreement shall be made only upon or after the consummation
of the Merger. Any such disclosure shall be coordinated between the parties, and
no party shall make any such disclosure without the prior consent of the other
parties, which consent shall not be unreasonably withheld or delayed.
6.2 EFFORTS; CONSENTS.
(a) Subject to the terms and conditions herein provided, and
fiduciary duties under applicable law, each of the parties hereto agrees to use
its reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable, to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement and the Merger c-ind to cooperate with each other in connection with
the foregoing. Without limiting the generality of the foregoing, each of BII,
the BII Shareholders and Parent shall use its or his reasonable efforts to (i)
obtain or cause to be obtained all Consents required to be obtained in
connection with the transactions contemplated by this Agreement, (ii) make or
cause to be made all required filings with applicable Governmental Entities, and
(iii) use its reasonable efforts to fulfill all conditions to this Agreement.
(b) Each of Parent and BII shall promptly provide the other with a
copy of any inquiry or request for information (including notice of any oral
request for information), pleading, order or other document either party
receives from any Governmental Entity with respect to the matters referred to in
this Section 6.2.
6.3 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND EXPENSES. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.4 OPTIONS/WARRANTS.
(a) BII hereby covenants and agrees that, at the Effective Time, all
of the outstanding options, warrants and other rights to purchase capital stock
of BII (all of which are set forth on Schedule 4.3 hereto) (collectively, the
------------
"BII Stock
33
<PAGE>
Rights") shall have been properly canceled, and, except for the right to receive
options or warrants (as the case may be) to acquire Parent Stock described in
Section 6.4(b) below, all rights and obligations thereunder shall have been
terminated.
(b) Parent hereby covenants and agrees that, at the Effective Time,
each of the holders of BII Stock Rights shall receive, as appropriate, either
(i) options to purchase that number shares of validly issued, fully paid and
nonassessable Parent Stock, at an exercise price per share, as is set forth on
Schedule 6.4(b) hereto, all of which shall have been issued pursuant to the IXL
- ---------------
Holdings, Inc. 1996 Stock Option Plan, as amended (the "Parent Stock Option
Plan"); and/or (ii) warrants to purchase that number of shares of validly
issued, fully paid and nonassessable Parent Stock, at an exercise price per
share, as is set forth on Schedule 6.4(b).
---------------
(c) In addition to the foregoing, at the Effective Time, Parent shall
issue options to purchase 4,000 shares of validly issued, fully paid and
nonassessable Parent Stock, at an exercise price of $250 per share, to those
Persons listed on Schedule 6.4(c) hereto, pursuant to the Parent.Stock Option
---------------
Plan. Parent hereby agrees and acknowledges that the options issued pursuant to
this subsection (c) shall be in addition to any options issued in connection
with acquisitions of other companies discussed by Parent and any of the BII
Shareholders.
6.5 BII DEBT. Parent hereby agrees that, as soon as reasonably
practicable after the Effective Time, Parent shall cause the BII Debt to be paid
or otherwise satisfied, other than BII Debt attributable to capital leases of
BII.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATION OF BII AND THE BII SHAREHOLDERS TO EFFECT THE
MERGER. The obligation of BII and the BII Shareholders to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) (i) the appropriate officers of Parent shall have executed and
delivered to BII at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-1" hereto (collectively
------------
"Parent's Closing Certificate"), and (ii) the appropriate officers of Sub shall
have executed and delivered to BII at the Closing, a closing certificate and
incumbency certificate, substantially in the form of Exhibit "A-2" hereto
------------
(collectively "Sub's Closing Certificate");
34
<PAGE>
(b) Parent shall have obtained all of the Consents listed on Schedule
--------
7.1(b) hereto;
- ------
(c) Parent shall have executed and delivered at the Closing an Option
Agreement for each of the Persons listed on Schedule 7.1(c) hereto,
---------------
substantially in the form of Exhibit "B-" and Exhibit "B-2" hereto (each, an
------------ -------------
"Option Agreement");
(d) Parent shall have executed and delivered at the Closing a Warrant
Agreement for each of the Persons listed on Schedule 7.1(d) hereto,
---------------
substantially in the form of Exhibit "C" hereto (each, a "Warrant Agreement");
-----------
(e) BII shall have received a corporate certificate of good standing
for Parent and Sub, and a copy of the Articles of Incorporation of Parent and
Sub, both as certified by the Secretary of State of the State of Delaware;
(f) there shall have been delivered to the BII Shareholders, duly
executed by the required shareholders of Parent, the First Amendment to the
First Amended and Restated Stockholders' Agreement of Parent (the "Stockholders'
Agreement Amendment"), substantially in the form of Exhibit "D" hereto;
-----------
(g) there shall have been delivered to the BII Shareholders, duly
executed by Parent, a copy of an Agreement to Be Bound By the Registration
Rights Agreement, substantially in the form of Exhibit "E" hereto (the
-----------
"Agreement to Be Bound");
(h) there shall have been delivered to BII duly executed copies of
the Amendment to the Settlement Agreement and Mutual Release, dated as of the
date hereof, between BII and certain former shareholders of BII listed thereon
(the "Redemption Agreements"), and the transactions contemplated thereby shall
have been consummated in accordance with the terms thereof;
(i) Parent shall have complied with its obligations under Section
6.4(b), 6.4(c) and 6.5 hereof;
(j) Parent shall have duly executed and delivered to BII the
Assumption Agreement, dated of even date herewith, between Parent and BII;
(k) BII shall have received, at the Closing, a duly executed opinion
of counsel to Parent, substantially in the form of Exhibit "F" hereto ("Parent's
-----------
Opinion of Counsel"); and
(l) BII shall have received from Parent such other documents as BII's
counsel shall have reasonably requested, in form and substance reasonably
satisfactory to BII's counsel.
35
<PAGE>
7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time of the following conditions:
(a) the appropriate officers of BII shall have executed and delivered
to Parent at the Closing, a closing certificate, substantially in the form of
Exhibit "G" hereto (11BII's Closing Certificate");
- -----------
(b) BII and the BII Shareholders shall have obtained or caused to be
obtained all of the Consents listed on Schedule 7.2(b) hereto;
---------------
(c) there shall have been delivered to Parent at the Closing, (i)
duly executed by each of the BII Shareholders, the Stockholders' Agreement
Amendment and the Agreement to Be Bound; and (ii) duly executed by each of the
Persons listed on Schedule 7.1(c) above, an Option Agreement;
---------------
(d) Parent shall have received (i) a corporate certificate of good
standing for BII, and (ii) a copy of the Articles of Incorporation of BII, both
as certified by the Secretary of State of California;
(e) Parent shall have received a Tax Clearance Certificate for BII,
that is valid as of the date hereof, issued by the State of California Franchise
Tax Board;
(f) the total amount of BII Debt outstanding as of the date one day
prior to the date hereof shall be no greater than $2,365,680;
(g) Parent shall have received duly executed copies of the Redemption
Agreements, and the transactions contemplated thereby shall have been
consummated in accordance with the terms thereof;
(h) BII shall have complied with its obligations under Section 6.4(a)
hereof (and Parent shall have received evidence thereof, in the case of the
surrender of BII Stock Rights);
(i) Parent shall have received, at the Closing, a duly executed
opinion of counsel to BII and the BII Shareholder, substantially in the form of
Exhibit "H" hereto ("BII's Opinion of Counsel"); and
- -----------
(j) Parent shall have received from BII or the BII Shareholders, as
the case may be, such other documents as Parent's counsel shall have reasonably
requested, in form and substance reasonably satisfactory to Parent's counsel.
36
<PAGE>
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY PARENT.
(a) Parent shall indemnify and hold the BII Shareholders and BII's
directors, officers and employees (collectively, the "BII Indemnified Parties")
harmless from and against, and agree promptly to defend each of the BII
Indemnified Parties from and reimburse each of the BII Indemnified Parties for,
any and all losses, damages, costs, expenses, liabilities, obligations and
claims of any kind (including, without limitation, reasonable attorney fees and
other legal costs and expenses) (collectively a "BII Loss") that any of the BII
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(i) any breach or inaccuracy of any of the representations
and warranties made by Parent or Sub in or pursuant to this Agreement, or in any
instrument, certificate or affidavit delivered by Parent at the Closing in
accordance with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform, satisfy
and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the documents
and materials delivered by Parent pursuant to this Agreement; and
(iii) any suit, action or other proceeding arising out of, or in
any way related to, any of the matters referred to in this Section 8.1.
(b) Notwithstanding any other provision to the contrary Parent shall
not have any liability under Section 8.1(a) above (i) unless the aggregate of
all BII Losses for which Parent would be liable but for this sentence exceeds,
on a cumulative basis, an amount equal to $200,000, and then only to the extent
of such excess, (ii) for amounts in excess of $14,000,000 in the aggregate, and
(iii) unless the BII Shareholders have asserted a claim with respect to the
matters set forth in Section 8.1(a)(i), or 8.1(a)(iii) to the extent applicable
to Section 8.1(a)(i), within two years of the Effective Time, except with
respect to the matters arising under Sections 5.19, 5.20, 5.21 or 5.24 hereof,
in which event Parent must have asserted a claim within the applicable statute
of limitations. Notwithstanding any implication to the contrary contained
herein, the parties acknowledge and agree that a decrease in the value of Parent
Stock would not, by itself, constitute a BII Loss, unless and to the extent a
decrease in the value of Parent Stock has been demonstrated to be as a result
of, or in connection with, any event described in Sections 8.1(a)(i), (ii) or
(iii) above.
37
<PAGE>
8.2 INDEMNIFICATION BY THE BII SHAREHOLDERS.
(a) Wall and Wyler (the "Controlling Shareholders") shall jointly and
severally, and the BII shareholders shall severally and not jointly, indemnify
and hold Parent, Sub, Surviving Corporation and their respective shareholders,
directors, officers and employees (collectively, the "Parent Indemnified
Parties") harmless from and against, and agree to promptly defend each of the
Parent Indemnified Parties from and reimburse each of the Parent Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including, without limitation, reasonable
attorney fees (collectively, a "Parent Loss") that any of the Parent Indemnified
Parties may at any time suffer or incur, or become subject to, as a result of or
in connection with:
(i) in the case of the Controlling Shareholders, any breach
or inaccuracy of any representations and warranties made by BII, Wall or Wyler
in or pursuant to this Agreement, or in any certificate or affidavit delivered
by the same at the Closing in accordance with the provisions hereof;
(ii) in the case of each BII Shareholder (including Wall and
Wyler individually), any breach or inaccuracy of any representations and
warranties made by such BII Shareholder in or pursuant to this Agreement
(specifically, the representations and warranties contained in Sections 4.3(b),
4.29, 4.31, 4.32, 4.33 and 4.34), or in any certificate or affidavit delivered
by the same at the Closing in accordance with the provisions hereof;
(iii) in the case of the Controlling Shareholders and, as
applicable, each BII Shareholder, any failure by BII or such BII Shareholder, as
applicable, to carry out, perform, satisfy and discharge any of their respective
covenants, agreements, undertakings, liabilities or obligations under this
Agreement or under any of the documents and materials delivered by BII pursuant
to this Agreement; and
(iv) any suit, action or other proceeding arising out of, or in
any way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above, the BII Shareholders (including Wall
and Wyler individually and as Controlling Shareholders) shall riot have any
liability under Section 8.2(a) above (i) unless the aggregate of all Parent
Losses for which the BII Shareholders would be liable but for this sentence
exceeds, on a cumulative basis, an amount equal to $200,000, and then only to
the extent of such excess, (ii) for amounts in excess of $14,000,000 in the
aggregate, and (iii) unless Parent has asserted a claim with respect to the
matters set forth in Section 8.2(a)(i) or 8.2(a)(iii) (to the extent applicable
to Section
38
<PAGE>
8.2(a)(i)) within two years of the Effective Time, except with respect to the
matters arising under Sections 4.18, 4.19, 4.20 or 4.24 hereof, in which event
Parent must have asserted a claim within the applicable statute of limitations.
8.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND.
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification under this Agreement. Subject
to the Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15 per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section 8.1 or 8.2 hereof, as the case may
be, the Indemnifying Party shall have the right, at its sole cost and expense,
to employ counsel of its own choosing to defend any such Claim asserted against
the Indemnified Party; provided, however, that if the Indemnified Party (i)
-------- -------
reasonably believes that its interests with respect to a Claim (or any material
portion thereof) are in conflict with the interests of the Indemnifying Party
with respect to such Claim (or portion thereof), and (ii) promptly notifies the
Indemnifying Party, in writing, of the nature of such conflict, then the
Indemnified Party shall be entitled to choose, at the sole cost AND EXPENSE of
the Indemnifying Party, independent counsel to DEFEND such Claim (or the
conflicting portion thereof). The Indemnified Party shall have the right to
participate in the defense of any such Claim at its own expense (except to the
extent provided in the foregoing sentence), but the Indemnifying Party shall
retain control over such litigation (except as provided in the foregoing
sentence). The Indemnifying Party shall notify the Indemnified Party in writing,
as promptly as possible (but in any case before the due date for the answer or
response to a claim) after the date of the notice of claim given by the
Indemnified Party to the Indemnifying Party under Section 8.3(a) hereof of its
election to defend in good faith any such third party Claim. So long as the
Indemnifying Party is
39
<PAGE>
defending in good faith any such Claim asserted by a third party against the
Indemnified Party, the Indemnified Party shall not settle or compromise such
Claim without the prior written consent of the Indemnifying Party. The
Indemnified Party shall cooperate with the Indemnifying Party in connection with
any such defense and shall make available to the Indemnifying Party or its
agents all records and other materials in the Indemnified Party's possession
reasonably required by it for its use in contesting any third party Claim;
provided, however, that the Indemnifying Party shall have agreed, in writing, to
- -------- -------
keep such records and other materials confidential expect to the extent
required for defense of the relevant Claim. Whether or not the Indemnifying
Party elects to defend any such Claim, the Indemnified Party shall have no
obligations to do so. Within 30 days after a final determination (including,
without limitation, a settlement) has been reached with respect to any Claim
contested pursuant to this Section 8.2(b), the Indemnifying Party shall satisfy
its obligations with respect thereto. Any amounts paid thereafter shall include
interest thereon for the period commencing at the end of such 30-day period and
ending on the actual date of payment, at a rate of 15% per annum, or, if lower,
at the highest rate of interest permitted by applicable law at the time of such
payment.
ARTICLE IX
GENERAL PROVISIONS
9.1 SURVIVAL; RECOURSE. None of the agreements contained in this Agreement
shall survive the Merger, except that (i) the agreements contained in Section
2.3 hereof, Article III hereof and Section 6.4 hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 9.10 and 9.11 hereof, shall survive the
Merger indefinitely (except to the extent a shorter period of time is explicitly
specified therein) and (ii) the representations and warranties made in Articles
IV and V of this Agreement shall survive the Merger, and shall survive any
independent investigation by the parties, and any dissolution, merger or
consolidation of BII or Parent, and shall bind the legal representatives,
assigns and successors of BII, the BII Shareholders, Parent, for a period of two
years after the Closing Date (other than the representations and warranties
contained in Sections 4.18, 4.19, 4.20, 4.24, 5.19, 5.20, 5.21 and 5.24 hereof,
which shall survive for the applicable statute of limitations).
9.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in Person, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
40
<PAGE>
If to BII: BoxTop Interactive, Inc.
10960 Wilshire Boulevard
Suite 1550
Los Angeles, California 90024
Attention: Kevin Wall, President
Telecopy: 310/235-3999
with copies to: Weissmann, Wolff, Bergman, Coleman &
Silverman, LLP
9665 Wilshire Boulevard
Suite 900
Beverly Hills, California 90212
Attention: Alan L. Grodin, Esq.
Telecopy: 310/550-7191
If to the BII To the address listed under the
Shareholders: signature line of the applicable BII
Shareholder
With copies to: Weissmann, Wolff, Bergman, Coleman &
Silverman, LLP
9665 Wilshire Boulevard
Suite 900
Beverly Hills, California 90212
Attention: Alan L. Grodin, Esq.
Telecopy: 310/550-7191
If to Parent: IXL Holdings, Inc.
1465 Northside Drive
Suite 110
Atlanta, Georgia 30318
Attention: James V. Sandry
Telecopy: 404/350-9823
With copies to: Minkin & Snyder, A Professional
Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
and to: Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
41
<PAGE>
If to Sub/Surviving
Corporation: IXL Merger Corp. III, Inc.
1465 Northside Drive
Suite 110
Atlanta, Georgia 30318
Attention: James V. Sandry
Telecopy: 404/350-9823
With copies to: Minkin & Snyder, A Professional
Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
and to: Kelso & Company
320 Park Avenue
New York, New York 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
9.3 ENTIRE AGREEMENT. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between,the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof. There are no other representations or warranties, whether written
or oral, between the parties in connection the subject matter hereof, except as
expressly set forth herein or made pursuant hereto.
9.4 ASSIGNMENTS; PARTIES IN INTEREST. Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests, and
obligations of Sub hereunder may be assigned to any wholly owned Delaware
subsidiary of Parent without such prior consent. Subject to the preceding
sentence, this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any Person not a party hereto any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement,
except as otherwise provided herein.
42
<PAGE>
9.5 FEES AND EXPENSES. All reasonable fees and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such fees or expenses; provided,
--------
however, that the reasonable fees and expenses of BII and the BII Shareholders
- -------
shall be paid by Parent.
9.6 GOVERNING LAW. This Agreement, except to the extent that the CCC or
the DGCL is mandatorily applicable to the Merger or the rights of the
shareholders of BII or the other parties hereto with respect to the Merger,
shall be governed in all respects by the laws of the State of Georgia (without
giving effect to the provisions thereof relating to conflicts of law).
9. HEADINGS. The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
9.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
9.9 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economics or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon determination that any term or other provision hereof
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
9.10 POST-CLOSING ACCESS. For a period of at least three years after the
Closing Date, the BII Shareholders and their agents and representatives shall
have reasonable access to the books and records of BII.
9.11 POST-CLOSING NOTICE. To the extent the Surviving Corporation receives
written notice of any event or circumstance that materially affects any of the
BII Shareholders, the Surviving Corporation shall promptly notify the affected
BII Shareholder of such matter, information, or event and shall provide them
with copies of all relevant documentation or correspondence in connection
thereto.
9.12 CERTAIN DEFINITIONS. As used in this Merger Agreement (a) the term
"Subsidiary" or "Subsidiaries" means, with respect to Parent, any Entity of
which Parent (either alone or through or
43
<PAGE>
together with any other Subsidiary) owns, directly or indirectly, stock or other
equity interests the holders of which are generally entitled to more than 50* of
the vote for the election of the board of directors or other governing body of
such corporation or other legal entity (including, without limitation, Sub);
provided, however, that the terms "Subsidiary" and "Subsidiaries" shall not
- -------- -------
include (i) University Netcasting, Inc., or (ii) BII; and (b) any representation
or warranty stated to be made "to the knowledge" of a party shall refer to such
party's knowledge following reasonable inquiry as to the matter in question;
provided, however, that the "knowledge of BII" shall mean the knowledge of
Wall, Wyler or Jeff Demma following reasonable inquiry.
- SIGNATURES ON THE FOLLOWING PAGE -
44
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and BII have caused this Agreement to be
signed by their respective officers thereunder duly authorized, and each BII
Shareholder has signed this Agreement, all as of the date first written above.
"BII"
BOXTOP INTERACTIVE, INC., a California
corporation
By: /s/ Kevin Wall
------------------------------------------
Title: President
---------------------------------------
(Corporate Seal]
"PARENT"
IXL HOLDINGS, INC., a Delaware corporation
By: /s/ James V. Sandry
-----------------------------------------
James V. Sandry, Executive Vice President
[Corporate Seal]
"SUB"
IXL MERGER CORP. III, INC., a Delaware
corporation
By: /s/ James V. Sandry
-----------------------------------------
James V. Sandry, Executive Vice President
[Corporate Seal]
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
45
<PAGE>
"BII Shareholder"
By: /s/ Kevin Wall
-------------------------------
Kevin Wall
Address: 1670 N. Dolteny Dr
--------------------------
LA 90069
--------------------------
__________________________
By /s/ David Wyler
-------------------------------
David Wyler
Address: 989 Moraga Dr.
--------------------------
Los Angeles, CA, 90049
--------------------------
__________________________
By: /s/ Lisa Janzen
-------------------------------
Lisa Janzen
Address: 6256 Crebs Ave
--------------------------
Reseda CA 91335
--------------------------
__________________________
By: /s/ Jeff Demma
-------------------------------
Jeff Demma
Address: 1647 N. Martez Ave
--------------------------
Los Angeles CA 90046
--------------------------
__________________________
By: /s/ Glen Golenberg
------------------------------
Glen Golenberg
Address: 11100 Santa Monica Blvd
--------------------------
Suite 990
--------------------------
Los Angeles CA 90025
--------------------------
By: /s/ Philip Gustlin
-------------------------------
Philip Gustlin
Address: 12021 Wilshire Blvd.
--------------------------
Suite 865
--------------------------
Los Angeles, CA 90025
--------------------------
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
46
<PAGE>
By: /s/ Mark Guren, trustee
--------------------------------
Marc Guren
Address: 12720 Hanover Street
---------------------------
Los Angeles, CA 90049
---------------------------
___________________________
By: /s/ Glen Golenberg, atty-in-fact
-------------------------------
Stephen D. Silbert
Address: 2121 Avenue of the Stars
--------------------------
Los Angeles, CA 90067
--------------------------
18th Floor
__________________________
By: /s/ Marc Gruen, atty-in-fact
-------------------------------
David V. Karney
Address: 12011 San Vicente Blvd
--------------------------
Suite 606
--------------------------
Los Angeles CA 90049
--------------------------
By: /s/ Katherine Noto
-------------------------------
Katherine Noto
Address: 168 West 86th St
--------------------------
N.Y 10024
--------------------------
__________________________
47
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate.................................... Exhibit A-1
Sub's Closing Certificate....................................... Exhibit A-2
Option Agreement................................................ Exhibit B-1
Option Agreement................................................ Exhibit B-2
Warrant Agreement............................................... Exhibit C
Stockholders' Agreement Amendment............................... Exhibit D
Agreement to Be Bound to Registration Rights Agreement.......... Exhibit E
Parent's Opinion of Counsel..................................... Exhibit F
BII's Closing Certificate....................................... Exhibit G
BII's Opinion of Counsel........................................ Exhibit H
<PAGE>
SCHEDULE 4.1
ARTICLES OF INCORPORATION AND BYLAWS OF BII
SCHEDULE 4.3
HOLDERS OF BII STOCK AND BII STOCK RIGHTS
SCHEDULE 4.5
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF BII
SCHEDULE 4.6
FINANCIAL STATEMENTS OF BII
SCHEDULE 4.7
EXCEPTIONS TO ABSENCE OF CHANGES OF BII
SCHEDULE 4.8
UNDISCLOSED LIABILITIES OF BII
<PAGE>
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF BII
SCHEDULE 4.10
-------------
BAD EQUIPMENT OF BII
SCHEDULE 4.12
-------------
LIENS ON REAL PROPERTY OF BII
SCHEDULE 4.13
-------------
LEASES OF BII
SCHEDULE 4.14
-------------
CONTRACTS OF BII
SCHEDULE 4.15
-------------
LIST OF DIRECTORS AND OFFICERS OF BII
2
<PAGE>
SCHEDULE 4.16
-------------
PAYROLL INFORMATION OF BII
SCHEDULE 4.17
-------------
LITIGATION OF BII
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF BII
SCHEDULE 4.19
-------------
ERISA ISSUES OF BII
SCHEDULE 4.21
-------------
PERMITS OF BII
SCHEDULE 4.23
-------------
BROKERS OF BII
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS & COMPETITORS OF BII
3
<PAGE>
SCHEDULE 4.26
-------------
ACCOUNTS RECEIVABLE AGING REPORT OF BII
SCHEDULE 4.27
-------------
ACCOUNTS PAYABLE AGING REPORT OF BII
SCHEDULE 4.28
-------------
INSURANCE OF BII
SCHEDULE 5.1
------------
CERTIFICATE OF INCORPORATION AND BYLAWS OF PARENT AND SUB
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
4
<PAGE>
SCHEDULE 5.6(A)
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PARENT STOCK, OPTIONS, WARRANTS, ETC.
SCHEDULE 5.6(B)
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PARENT STOCK - STOCKHOLDERS AS OF THE EFFECTIVE DATE
SCHEDULE 5.7
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SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF PARENT OR SUB
SCHEDULE 5.10
-------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.11
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PARENT EXCEPTIONS TO TITLE TO PROPERTIES
SCHEDULE 5.12
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BAD PARENT EQUIPMENT
5
<PAGE>
SCHEDULE 5.13
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EXCEPTIONS TO PARENT INTELLECTUAL PROPERTY RIGHTS/SOFTWARE
SCHEDULE 5.14
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TITLE POLICIES FOR & LIENS ON PARENT REAL PROPERTY
SCHEDULE 5.15
-------------
PARENT LEASES
SCHEDULE 5.16
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CONTRACTS OF PARENT
SCHEDULE 5.17
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PARENT DIRECTORS AND OFFICERS
SCHEDULE 5.19
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PARENT EMPLOYEE BENEFIT PLANS
SCHEDULE 5.20
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EFFECT OF TRANSACTION ON PARENT BENEFIT PLANS UNDER ERISA
6
<PAGE>
SCHEDULE 5.21
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EXCEPTION TO FILING OF TAX RETURNS OF PARENT
SCHEDULE 5.22
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PARENT PERMITS
SCHEDULE 5.25
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PARENT INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS
SCHEDULE 5.26
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PARENT ACCOUNTS RECEIVABLE AGING REPORT
SCHEDULE 5.27
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PARENT ACCOUNTS PAYABLE AGING REPORT
SCHEDULE 5.28
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PARENT INSURANCE
SCHEDULE 6.4(B)
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OPTIONS/WARRANTS OF PARENT ISSUED TO HOLDER OF BII STOCK RIGHTS
7
<PAGE>
SCHEDULE 6.4(C)
---------------
OPTIONS/WARRANTS OF PARENT ISSUED TO PERSONS NOT LISTED IN SCHEDULE 6.4(B)
SCHEDULE 7.1(B)
---------------
PARENT CONSENTS
SCHEDULE 7.1(C)
---------------
PERSONS TO SIGN AN OPTION AGREEMENT
SCHEDULE 7.1(D)
---------------
PERSONS TO SIGN A WARRANT AGREEMENT
SCHEDULE 7.2(B)
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CONSENTS OF BII
8
<PAGE>
EXHIBIT 2.10
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
IXL HOLDINGS, INC.,
IXL MERGER CORP. IV, INC.
SWAN INTERACTIVE MEDIA, INC.,
MARK SWANSON,
MARC SIRKIN,
N. BLAKE PATTON
ESTATE OF ROBERT H. KRIEBEL
AND
EDWIN DAVIS
DATED AS OF JULY 28, 1997
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into this 28th day of July,
1997, by and between SWAN INTERACTIVE MEDIA, INC., a Georgia corporation
("Swan"), IXL HOLDINGS, INC., a Delaware corporation ("Parent"), IXL MERGER
CORP. IV, INC., a Delaware corporation, or its successors or assigns ("Sub"),
and the shareholders of Swan as listed on the signature page hereto (the "Swan
Shareholders").
R E C I T A L S:
- - - - - - - -
A. Swan is engaged in the business of multimedia production and designing
and maintaining web pages for customers (the "Swan Business").
B. Swan and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The Swan Shareholders collectively own 100% of the issued and
outstanding capital stock of Swan (the "Swan Stock").
D. The respective Boards of Directors and stockholders of Parent, Sub and
Swan have approved the Merger, upon the terms and subject to the conditions set
forth herein.
E. The parties hereto intend for the Merger to qualify, for federal
income tax purposes, as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, at
the Effective Time (as defined in Section 1.3 hereof), (a) Swan shall be merged
with and into Sub, (b) the separate existence of Swan shall cease, and (c) Sub
shall continue as the surviving corporation in the Merger under the laws of the
State of Delaware under the name Swan Interactive Media, Inc. For purposes of
this Agreement, Sub shall be referred to, for the period commencing on the
Effective Time, as the "Surviving Corporation".
<PAGE>
1.2 CLOSING. Subject to the satisfaction or waiver of the conditions set
forth in Article VII hereof, the closing of the Merger (the "Closing") will take
place at the offices of Minkin & Snyder, A Professional Corporation, One
Buckhead Plaza, 3060 Peachtree Road, Suite 1100, Atlanta, Georgia 30305.
1.3 EFFECTIVE TIME OF THE MERGER. At the Closing, the parties hereto
shall cause (a) a certificate of merger (the "Delaware Certificate of Merger")
to be filed with the office of the Secretary of State of the State of Delaware
in accordance with the provisions of the Delaware General Corporation Law, as
amended (the "DGCL"); and (b) a certificate of merger (the "Georgia Certificate
of Merger") to be filed with the office of the Secretary of State of the State
of Georgia in accordance with the provisions of the Georgia Business
Corporations Code, as amended (the "GBCC"). When used in this Agreement, the
term "Effective Time" shall mean the time when the Delaware Certificate of
Merger and the Georgia Certificate of Merger (collectively herein referred to as
the "Certificate of Merger") have been accepted for filing by the Secretary of
State of the State of Delaware and Georgia, respectively, or such time as
otherwise specified in the Certificate of Merger.
1.4 EFFECT OF THE MERGER. The Merger shall, from and after the Effective
Time, have all the effects provided by the DGCL and GBCC. If at any time after
the Effective Time, any further action is deemed necessary or desirable to carry
out the purposes of this Agreement, the parties hereto agree that the Surviving
Corporation and its proper officers and directors shall be authorized to take,
and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Amended and Restated Certificate of
Incorporation of Sub, a form of which is attached hereto as Schedule 2.1, shall
------------
be the Certificate of Incorporation of the Surviving Corporation after the
Effective Time, until thereafter changed or amended as provided therein or by
applicable law.
2.2 BYLAWS. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law.
2.3 BOARD OF DIRECTORS; OFFICERS. The Board of Directors and officers of
Sub immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified.
2
<PAGE>
ARTICLE III
CONVERSION OF SHARES
3.1 MERGER CONSIDERATION. As of the Effective Time, by virtue of the
Merger and without any action on the part of any stockholder of Swan or Sub:
(a) All shares of Swan Stock owned by Swan shall be canceled and
retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(b) Each issued and outstanding share of Swan Stock shall be
converted into, and become exchangeable for, (i) 2.696104044 shares of validly
issued, fully paid and nonassessable Class B Common Stock of Parent, $.01 par
value (the "Parent Stock"); and (ii) $290.63489 in cash.
(c) Each issued and outstanding share of common stock of Sub shall
be converted into and become one fully paid and nonassessable share of common
stock of the Surviving Corporation.
3.2 NO FURTHER RIGHTS. From and after the Effective Time, holders of
certificates theretofore evidencing Swan Stock shall cease to have any rights as
stockholders of Swan, except as provided herein or by law.
3.3 CLOSING OF THE SWAN'S TRANSFER BOOKS. At the Effective Time, the
stock transfer books of Swan shall be closed and no transfer of Swan Stock shall
be made thereafter. If after the Effective Time, certificates for Swan Stock
are presented to Parent or the Surviving Corporation, they shall be canceled and
exchanged for an amount of Parent Stock as set forth in Section 3.1 hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SWAN
Swan and the Swan Shareholders, jointly and severally, represent and
warrant to Parent and Sub, which representations and warranties shall survive
the Closing in accordance with Section 9.1 of this Agreement, as follows (except
that the Minority Shareholders (as defined in Section 9.12 hereof) hereby make
only those representations and warranties that specifically pertain to the
them):
4.1 ORGANIZATION AND QUALIFICATION. Swan is a corporation duly organized,
validly existing and in good standing under the laws of the State of Georgia.
Swan has the requisite corporate power and authority to carry on the Swan
Business as it is now being conducted and is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary. Complete and correct copies of the Articles of
Incorporation and Bylaws
3
<PAGE>
of Swan as in effect on the date hereof are attached as Schedule 4.1 hereto. The
------------
minute book of Swan, a true and complete copy of which has been delivered to
Parent, (a) accurately reflects all action taken by the directors and
shareholders of Swan at meetings of Swan's Board of Directors or shareholders,
as the case may be at which minutes were taken; and (b) contains true and
complete copies of, or originals of, the respective minutes of all meetings or
consent actions of the directors or shareholders at which minutes were taken.
4.2 AUTHORITY. Swan has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Swan have been duly and
validly authorized and approved by Swan's Board of Directors and the Swan
Shareholders, and no other corporate or shareholder proceedings on the part of
Swan, its Board of Directors or the Swan Shareholders is necessary to authorize
or approve this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Swan and each Swan
Shareholder, and assuming the due authorization, execution and delivery by
Parent and Sub, constitutes the valid and binding obligation of Swan and each
Swan Shareholder, enforceable against Swan and each Swan Shareholder in
accordance with its terms.
4.3 CAPITALIZATION.
(a) The authorized capital stock of Swan consists of 10,000 shares of
common stock, no par value, of which 1,052.63 shares are validly issued and
outstanding, fully paid and nonassessable. All outstanding capital stock of
Swan was issued in accordance with applicable federal and state securities laws.
There are no classes of or series of capital stock of Swan outstanding other
than the Swan Stock, and no options, warrants, calls, agreements, commitments or
other rights presently outstanding that would obligate Swan or the any of the
Swan Shareholders to issue, deliver or sell shares of its capital stock, or to
grant, extend or enter into any such option, warrant, call, agreement,
commitment or other right. In addition to the foregoing, as of the date hereof,
Swan has no bonds, debentures, notes or other indebtedness issued or outstanding
that have voting rights in Swan.
(b) Except as set forth on Schedule 4.3(b), All of the issued and
---------------
outstanding shares of capital stock of Swan are validly issued, fully paid and
nonassessable and owned by the Swan Shareholders, free and clear of any lien,
charge, security interest, pledge, option, right of first refusal, voting
proxies or other voting agreements, or encumbrance of any kind or nature (any of
the foregoing, a "Lien").
4.4 SUBSIDIARIES. Swan has no subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest in, or any security
convertible into an equity interest in, any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 4.5 hereto, none of the execution and delivery of this Agreement by
- ------------
Swan or the Swan
4
<PAGE>
Shareholders, the consummation by Swan and the Swan Shareholders of the
transactions contemplated hereby or compliance by Swan with any of the
provisions hereof will:
(a) conflict with or violate the Articles of Incorporation or Bylaws
of Swan;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Swan or the Swan Shareholders, or by
which Swan or its properties or assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Swan is a party or by which Swan or its
properties may be bound or affected (collectively, for purposes of this Section
4.5, a "Swan Agreement");
(d) result in the creation of any Lien on any of the property or
assets of Swan; or
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), of (i) any government or subdivision thereof,
whether domestic, foreign or multinational, or any administrative, governmental,
or regulatory authority, agency, commission, court, tribunal or body, whether
domestic, foreign or multinational (a "Governmental Entity"), except for the
filing of the Certificate of Merger pursuant to the DGCL and GBCC; or (ii) any
other individual or Entity (collectively, a "Person") pursuant to any Swan
Agreement.
4.6 FINANCIAL STATEMENTS. Swan has heretofore furnished Parent with a
true and complete copy of (a) the unaudited financial statements of Swan for the
period ending December 31, 1995, and 1996; and (b) the unaudited financial
statements of Swan for the six-month period ending June 30, 1997, a copy of each
of which is attached hereto as Schedule 4.6 (collectively herein referred to as
------------
the "Swan Financial Statements"). The Swan Financial Statements have been
prepared in accordance with generally accepted accounting principles (except for
the absence of footnotes and normal year-end adjustments in the case of the Swan
Financial Statements for the period ending June 30, 1997) consistently followed
throughout the period indicated, and present fairly, in all material respects,
the financial position and operating results of Swan as of the dates, and during
the periods, indicated therein.
4.7 ABSENCE OF CHANGES. Except as provided in Schedule 4.7 hereto and
------------
except as contemplated by this Agreement, since June 30, 1997, (a) Swan has not
entered into any transaction that was not in the ordinary course of business;
(b) except for sales of services and licenses of software in the ordinary course
of business, there has been no sale, assignment, transfer, mortgage, pledge,
encumbrance or lease of any material assets or properties of Swan; (c) there has
been (i) no declaration or payment of a dividend, or any other declaration,
payment
5
<PAGE>
or distribution of any type or nature to any shareholder of Swan in respect of
its stock, whether in cash or property, and (ii) no purchase or redemption of
any shares of the capital stock of Swan; (d) there has been no declaration,
payment, or commitment for the payment, by Swan, of a bonus or other additional
salary, compensation, or benefit to any employee of Swan that was not in the
ordinary course of business; (e) there has been no release, compromise, waiver
or cancellation of any debts to or claims by Swan, or waiver of any rights of
Swan, in each case having a value in excess of $10,000; (f) there have been no
capital expenditures in excess of $10,000 for any single item, or $25,000 in the
aggregate; (g) there has been no change in accounting methods or practices or
revaluation of any assets of Swan (other than Swan Accounts Receivable (as
defined in Section 4.25 hereof) written down in the ordinary course of business
that are not in excess of $10,000 for any single Swan Account Receivable and
$25,000 in the aggregate); (h) there has been no material damage, destruction or
loss of physical property (whether or not covered by insurance) adversely
affecting the Swan Business or the operations of Swan; (i) there has been no
loan by Swan, or guaranty by Swan of any loan, to any employee of Swan or to any
Person related to the Swan Business; (j) Swan has not ceased to transact
business with any customer that, as of the date of such cessation, represented
more than 5% of the annual gross revenues of Swan; (k) there has been no
termination or resignation of any key employee or officer of Swan, and to the
knowledge of Swan and the Swan Shareholders, no such termination or resignation
is threatened; (l) there has been no amendment or termination of any material
oral or written contract, agreement or license related to the Swan Business, to
which Swan is a party or by which it is bound, except in the ordinary course of
business, or except as expressly contemplated by this Agreement; (m) Swan has
not failed to satisfy any of its debts, obligations or liabilities related to
the Swan Business or the assets of Swan as the same become due and owing (except
for Swan Accounts Payable (as defined in Section 4.26 hereof), payable in
accordance with past practices and in the ordinary course of business); (n)
there has been no agreement or commitment by Swan to do any of the foregoing;
and (o) there has been no other event or condition of any character pertaining
to and materially affecting the assets, Business or financial condition of Swan.
4.8 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.8 hereto,
------------
neither Swan nor the Swan Business has any debt, liability or obligation of any
kind, whether accrued, absolute or otherwise, including, without limitation, any
liability or obligation on account of taxes or any governmental charges or
penalty, interest or fines, except (a) liabilities not in excess of $50,000
(whether individually or in the aggregate) incurred in the ordinary course of
business after June 30, 1997; (b) liabilities reflected on the Swan Financial
Statements; and (c) liabilities incurred as a result of the transactions
contemplated by this Agreement.
4.9 TITLE TO PROPERTIES. Except as set forth on Schedule 4.9 hereto,
------------
Swan has good and marketable title to all tangible property and assets used in
the Swan Business (other than Swan Real Property (as defined in Section 4.12
hereof)), and good title to all of its leasehold interests, in each case, free
and clear of any and all Liens other than liens for taxes not yet due and
payable.
4.10 EQUIPMENT. Schedule 4.10 hereto sets forth a true and correct list
-------------
of all items of tangible personal property (including, without limitation,
computer hardware) necessary for or
6
<PAGE>
used in the operation of the Swan Business in the manner in which it has been
and is now operated by Swan ("the Swan Equipment"), except for personal property
having a net book value of less than $5,000. Except as set forth on Schedule
--------
4.10, each material item of Swan Equipment is in good condition and repair,
- ----
ordinary wear and tear excepted.
4.11 INTELLECTUAL PROPERTY.
(a) Except as set forth on Schedule 4.11 hereto, Swan owns, or is
-------------
validly licensed or otherwise has the right to use or exploit, as currently used
or exploited, all Swan Intellectual Property Rights (as hereinafter defined),
free of any obligation to make any payment (whether of a royalty, license fee,
compensation or otherwise). No claims are pending or, to the knowledge of Swan,
threatened, that Swan is infringing or otherwise adversely affecting the rights
of any Person with regard to any Swan Intellectual Property Right. Except as
set forth on Schedule 4.11, Swan has used commercially reasonable efforts to
-------------
protect the Swan Intellectual Property Rights, and, to the knowledge of Swan, no
Person is infringing the rights of Swan with respect to any Swan Intellectual
Property Right. To the knowledge of Swan, neither Swan nor any employee, agent
or independent contractor of Swan has used, appropriated or disclosed, directly
or indirectly, any trade secrets or other proprietary or confidential
information of any other Person, or otherwise violated any confidential
relationship with any other Person. To the knowledge of Swan, use of the name
"Swan Interactive Media, Inc." does not infringe upon the rights of any Person.
For purposes of this Section 4.11(a), the term "Swan Intellectual Property
Right(s)" shall mean all material proprietary technology, trade secrets, know-
how, patents, patent rights, trademarks, trademark rights, trade names, trade
name rights, service marks, service mark rights, and copyrights used or required
to be used by Swan in the conduct of the Swan Business.
(b) Swan currently licenses, or otherwise has the legal right to
use, at least one copy of all of the Swan Software (as hereinafter defined)
(including any upgrades, alterations or enhancements with respect thereto), and
each such copy of the Swan Software is being used in compliance with any
applicable licenses or other agreements. For purposes of this Section 4.11(b),
the term "Swan Software" shall mean all material computer software used or
required to be used by Swan in the conduct of the Swan Business.
4.12 REAL PROPERTY. Swan owns no real property, and has a month-to-month
lease to use its current premises.
4.13 LEASES. Schedule 4.13 hereto sets forth a list of all leases
-------------
pursuant to which Swan leases, as lessor or lessee, real or personal property
used in operating the Swan Business or otherwise (the "Swan Leases"). Copies of
the Swan Leases, which have previously been provided to Parent, are true and
complete copies thereof. All of the Swan Leases are valid, binding and
enforceable in accordance with their respective terms, and there is not under
any such Swan Lease any existing default by Swan, or, to the knowledge of Swan
and the Swan Shareholders, by any other party thereto, or any condition or event
of that, with notice or lapse of time or both, would constitute a default. Swan
has not received notice that the lessor of any of the Swan Leases intends to
cancel, suspend or terminate the Swan Leases or to exercise or not exercise any
options under any of the Swan Leases.
7
<PAGE>
4.14 CONTRACTS. Schedule 4.14 hereto sets forth a complete and accurate
-------------
list of all material contracts, agreements and commitments (whether written or
oral) to which Swan is, directly or indirectly, a party (in its own name or as a
successor in interest), or by which it is otherwise bound, including, without
limitation, any service agreements, customer agreements, supplier agreements,
agreements to lend or borrow money, shareholder agreements, employment
agreements, agreements relating to Swan Intellectual Property and the like
(collectively, the "Swan Contracts").
Except as set forth on Schedule 4.14 hereto, true and complete copies of
-------------
each Swan Contract (or a true and complete narrative description of any oral
Swan Contract) have previously been provided to Parent. Neither Swan nor, to
the knowledge of Swan and the Swan Shareholders, any other party to any of the
Swan Contracts, (x) is in default under (nor does there exist any condition
that, with notice or lapse of time or both, would cause such a default under)
any of the Swan Contracts, or (y) has waived any right it may have under any of
the Swan Contracts, the waiver of which would have a material adverse effect on
the business, assets or financial condition of Swan. Swan and Swanson hereby
jointly and severally represent and warrant that all of the Swan Contracts
constitute the valid and binding obligation of Swan, and, to the knowledge of
Swan and the Swan Shareholders, the other parties thereto.
4.15 DIRECTORS AND OFFICERS. Schedule 4.15 hereto sets forth a list, as
-------------
of the date of this Agreement, of the name of each director and officer of Swan
and the offices held by each.
4.16 PAYROLL INFORMATION. Schedule 4.16 hereto sets forth a true and
-------------
complete copy of the most recent payroll report of Swan, showing all current
employees of Swan and their current levels of compensation, other than bonuses
and other extraordinary compensation. Swan has paid all compensation required
to be paid to employees of Swan on or prior to the date hereof.
4.17 LITIGATION. Except as set forth on Schedule 4.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Swan, threatened against or affecting Swan, the Swan Business, or the Swan
Shareholders, nor is there any judgment, decree, injunction or order of any
applicable Governmental Entity or arbitrator outstanding against Swan that,
either individually or in the aggregate, would have a material adverse effect on
the assets, business or financial condition of Swan.
4.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 4.18 hereto, there are no
-------------
employee benefit plans, agreements or arrangements maintained by Swan,
including, without limitation, (i) "employee benefit plans," within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"); (ii) affirmative action plans; (iii) current or deferred
compensation, pension, profit sharing, vacation or severance plans or programs;
or (iv) medical, hospital, accident, disability or death benefit plans
(collectively, "Swan Benefit Plans"). All Swan Benefit Plans are administered in
accordance with, and are in material compliance with,
8
<PAGE>
all applicable laws and regulations. No default exists with respect to the
obligations of Swan under any Swan Benefit Plans.
(b) Swan is not a party to any collective bargaining agreement, no
collective bargaining agent has been certified as a representative of any of the
employees of Swan, no representation campaign or election is now in progress
with respect to any employee of Swan and there are no labor disputes,
grievances, controversies, strikes or requests for union representation pending,
or, to the knowledge of Swan and the Swan Shareholders, threatened, relating to
or affecting the Swan Business. To the knowledge of Swan and the Swan
Shareholders, no event has occurred that could give rise to any such dispute,
controversy, strike or request for representation.
4.19 ERISA.
(a) All Swan Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of Swan Benefit Plans that is intended to
meet the requirements of Section 401(a) of the Code has been determined by the
Internal Revenue Service to meet such requirements within the meaning of such
provision. No Swan Benefit Plan is subject to Title IV of ERISA or Section 412
of the Code. Swan has not engaged in any non-exempt "prohibited transactions,"
as such term is defined in Section 4975 of the Code or Section 406 of ERISA,
involving Swan Benefit Plans that would subject Swan to the penalty or tax
imposed under Section 502(i) of ERISA or Section 4975 of the Code. Swan has not
engaged in any transaction described in Section 4069 of ERISA within the last
five years. Except as disclosed in Schedule 4.19 hereto or pursuant to the
-------------
terms of Swan Benefit Plans, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation or golden parachute) becoming due to any director or other employee
of Swan, (ii) increase any benefits otherwise payable under any Swan Benefit
Plan or (iii) result in the acceleration of the time of payment or vesting of
any such benefits to any extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Swan Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code, or by any
entity that is considered one employer with Swan under Section 4001 of ERISA or
Section 414 of the Code (an "ERISA Affiliate"), within the 12-month period
ending on the date hereof. Swan has not incurred any liability to the Pension
Benefit Guaranty Corporation in respect of any Swan Benefit Plan that remains
unpaid.
4.20 TAXES.
(a) Swan has duly and timely filed all federal, state and local
income, franchise, excise, real and personal property and other tax returns and
reports, including extensions, required to have been filed by Swan on or prior
to the date hereof. Swan has duly
9
<PAGE>
and timely paid all taxes and other governmental charges, and all interest and
penalties with respect thereto, required to be paid by Swan (whether by way of
withholding or otherwise) to any federal, state, local or other taxing authority
(except to the extent the same are being contested in good faith, and adequate
reserves therefore have been provided in the Swan Financial Statements). As of
the date hereof, all deficiencies proposed as a result of any audits have been
paid or settled.
(b) Swan is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) Swan has not consented to have the provisions of Section
341(f)(2) of the Code (or comparable state law provisions) apply to it, and Swan
has not agreed or been requested to make any adjustment under Section 481(c) of
the Code by reason of a change in accounting method or otherwise.
4.21 COMPLIANCE WITH APPLICABLE LAWS. Swan holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
Swan, as appropriate, and to carry on the Swan Business as now conducted (the
"Swan Permits"). To the knowledge of Swan, Swan is in material compliance with
all applicable laws, ordinances and regulations and the terms of the Swan
Permits. Schedule 4.21 hereto sets forth a list of the Swan Permits, a true and
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correct copy of each of which has been provided to Parent.
4.22 BOARD OF DIRECTOR/SHAREHOLDER CONSENT. Both the Board of Directors
of Swan and the Swan Shareholders have, by unanimous written consent, adopted
and approved this Agreement and the transactions contemplated hereby (including,
without limitation, the Merger).
4.23 BROKERS. Except as set forth on Schedule 4.23 hereto, no broker or
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finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated by this Agreement as a result of
arrangements made by or on behalf of Swan.
4.24 ENVIRONMENTAL MATTERS.
(a) To the knowledge of Swan and the Swan Shareholders, no real
property currently or formerly owned or operated by Swan is contaminated with
any Hazardous Substances (as hereinafter defined);
(b) Swan is not a party to any litigation or administrative
proceeding nor, to the knowledge of Swan and the Swan Shareholders, is any
litigation or administrative proceeding threatened against it, that, in either
case, asserts or alleges that Swan (i) violated any Environmental Laws (as
hereinafter defined); (ii) is required to clean up, remove or take remedial or
other response action due to the disposal, deposit, discharge, leak or other
release of any Hazardous Substances; or (iii) is required to pay all or a
portion of the cost of any past, present or future cleanup, removal or remedial
or other action that arises out of or is related to the disposal, deposit,
discharge, leak or other release of any Hazardous Substances.
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(c) To the knowledge of Swan and the Swan Shareholders, there are no
conditions existing currently that would subject Swan or the Swan Shareholders
(as owners of Swan) to damages, penalties, injunctive relief or cleanup costs
under any Environmental Laws, or that would require cleanup, removal, remedial
action or other response pursuant to Environmental Laws.
(d) To the knowledge of Swan and the Swan Shareholders, Swan is not
subject to any judgment, order or citation related to or arising out of any
Environmental Laws and has not been named or listed as a potentially responsible
party by any Governmental Entity in a matter related to or arising out of any
Environmental Laws.
(e) For purposes of this Agreement, (i) the term "Environmental Law"
means any federal, state or local law (including statutes, regulations,
ordinances, codes, rules, judicial opinions and other governmental restrictions
and requirements), relating to the discharge of air pollutants, water
pollutants, noise, odors or process waste water, or otherwise relating to the
environment or hazardous or toxic substances; and (ii) the term "Hazardous
Substance" means any toxic or hazardous substance that is regulated by or under
authority of any Environmental Law, including, without limitation, any petroleum
products, asbestos or polychlorinated biphenyls.
4.25 ACCOUNTS RECEIVABLE. All accounts, notes, contracts and other
receivables of Swan (collectively, "Swan Accounts Receivable") were acquired by
Swan in the ordinary course of business arising from bona fide transactions
completed in accordance with the terms and provisions related thereto. To the
knowledge of Swan and the Swan Shareholders, there are no set-offs,
counterclaims or disputes asserted with respect to any Swan Accounts Receivable
that would result in claims in excess of the reserve for bad debts set forth on
the Swan Financial Statements and, to the knowledge of Swan and the Swan
Shareholders, subject to such reserve, all Swan Accounts Receivable are
collectible in full. Schedule 4.25 hereto is a true and complete aging report
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prepared as of June 26, 1997, which shows the time elapsed since invoice date
for all Swan Accounts Receivable.
4.26 ACCOUNTS PAYABLE. Except as set forth on Schedule 4.26 hereto, all
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material accounts, notes, contracts and other amounts payable of Swan
(collectively, "Swan Accounts Payable") are currently within their respective
terms, and are neither in default nor otherwise past due by more than 90 days.
Schedule 4.26 hereto is a true and complete aging report prepared as of June 25,
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1997, which shows the time elapsed since invoice date for all Swan Accounts
Payable.
4.27 INSURANCE. Swan currently maintains, in full force and effect, all
insurance policies that are either (a) required to be maintained for the conduct
of the Swan Business or the ownership of Swan's property (both real and
personal); or (b) otherwise maintained by companies engaged in a business
comparable to the Swan Business (collectively, the "Swan Insurance Policies");
provided, however, that Swan makes no representation or warranty as to the
adequacy of such Insurance Policies for the Surviving Corporation. The Swan
Insurance Policies are listed on Schedule 4.27 hereto, and true and compete
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copies of all Swan Insurance Policies have previously been provided to Parent.
Swan (i) is not in default regarding the provisions of any
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Swan Insurance Policy; (ii) has paid all premiums due thereunder; and (iii) has
not failed to present any notice or present any material claim thereunder in a
due and timely fashion.
4.28 BANKRUPTCY. Neither Swan nor any of the Swan Shareholders has filed
a petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
4.29 SWAN DEBT. Except as set forth on Schedule 4.29 hereto, as of the
-------------
date hereof, Swan has no outstanding indebtedness (including, without
limitation, debt for borrowed money (including any bank overdrafts), deferred
income and capitalized leases of Swan, and accrued interest on any of the
foregoing) other than Swan Accounts Payable, which are not in excess of $64,724.
4.30 ACCREDITED INVESTORS; INVESTMENT PURPOSE. Each Swan Shareholder
represents that he is either (i) an "accredited investor" as such term is
defined in Rule 501 of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act");
or (ii) an employee of Swan. Each Swan Shareholder further represents that he
is acquiring the Parent Stock solely for his own account for investment and not
with a view to, or for sale in connection with, any distribution thereof, except
as provided in the Stockholders' Agreement (as defined in Section 7.2(c)
hereof). Each Swan Shareholder agrees that he will not, directly or indirectly,
offer, transfer, sell, pledge, hypothecate or otherwise dispose of any Parent
Stock (or solicit any offers to buy, purchase or other acquire or take a pledge
of any such shares) except in compliance with the Securities Act and the rules
and regulations thereunder, other applicable laws, rules and regulations, and
the Stockholders' Agreement.
4.31 RESTRICTIONS ON TRANSFER. Each Swan Shareholder acknowledges that
(a) the Parent Stock received by him hereunder has not been registered under the
Securities Act; (b) the Parent Stock may be required to be held indefinitely,
and each Swan Shareholder must continue to bear the economic risk of the
investment in such shares unless such shares are subsequently registered under
the Securities Act or an exemption from such registration is available; (c)
there may not be any public market for the Parent Stock in the foreseeable
future; (d) Rule 144 promulgated under the Securities Act is not presently
available with respect to sales of any securities of Parent, and such Rule is
not anticipated to be available in the foreseeable future; (e) when and if
Parent Stock may be disposed of without registration in reliance upon Rule 144,
such disposition can be made only in limited amounts and in accordance with the
terms and conditions of such Rule; (f) if the exemption afforded by Rule 144 is
not available, public sale without registration will require the availability of
an exemption under the Securities Act; (g) the Parent Stock is subject to the
terms and conditions of the Stockholders' Agreement; (h) restrictive legends
shall be placed on the certificates representing Parent Stock; and (i) a
notation shall be made in the appropriate records of Parent indicating that
Parent Stock is subject to restrictions on transfer and, if Parent should in the
future engage the services of a stock transfer agent,
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appropriate stop-transfer instructions will be issued to such transfer agent
with respect to Parent Stock.
4.32 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION. Each
Swan Shareholder represents and warrants that (a) his financial situation is
such that he can afford to bear the economic risk of holding Parent Stock
acquired by him hereunder for an indefinite period; (b) he can afford to suffer
the complete loss of such Parent Stock; (c) he has been granted the opportunity
to ask questions of, and receive answers from, representatives of Sub and Parent
concerning the terms and conditions of the Parent Stock and to obtain any
additional information that he deems necessary; (d) his knowledge and experience
in financial business matters is such that he is capable of evaluating the
merits and risk of ownership of the Parent Stock; and (e) he has carefully
reviewed the terms of the Stockholders' Agreement and has evaluated the
restrictions and obligations contained therein.
4.33 DISCLOSURE. No statement of fact by Swan contained in this
Agreement and no written statement of fact furnished by Swan to Parent or Sub
pursuant to or in connection with this Agreement contains contain any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein contained not materially
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to
Swan and the Swan Shareholders, which representations and warranties shall
survive the Closing in accordance with Section 9.1 of this Agreement, as
follows:
5.1 ORGANIZATION AND QUALIFICATION. Each of Parent and its Subsidiaries
(as defined in Section 9.12 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached as Schedule 5.1 hereto. The minute
------------
books of Parent and Sub, a true and complete copy of each of which has been made
available to Swan, (a) accurately reflects all action taken by the directors and
shareholders of Parent at meetings of Parent's Board of Directors or
shareholders, as the case may be; and (b) contains true and complete copies of,
or originals of, the respective minutes of all meetings or consent actions of
the directors or shareholders.
5.2 AUTHORITY. Each of Parent and Sub has the necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions
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contemplated hereby by each of Parent and Sub have been duly and validly
authorized and approved by their respective Board of Directors and shareholders,
and no other corporate or shareholder proceedings on the part of either Parent
or Sub, or their respective boards of directors or shareholders, are necessary
to authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
of Parent and Sub, and assuming the due authorization, execution and delivery by
Swan and the Swan Shareholders, constitutes the valid and binding obligation of
each of Parent and Sub, enforceable against each of Parent and Sub in accordance
with its terms.
5.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby or compliance by Parent and Sub with any of the provisions
hereof will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Parent or Sub, or the organizational documents of any other
Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected (collectively, for purposes of this Section 5.3, an
"IXL Agreement");
(d) result in the creation of any Lien on any of the property or
assets of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for (x)
compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL and GBCC;
or (ii) any other Person.
5.4 LITIGATION. Except as set forth on Schedule 5.4 hereto, there is no
------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
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5.5 BROKERS. Except as disclosed on Schedule 5.5 hereto, No broker or
------------
finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Sub.
5.6 PARENT STOCK.
(a) As of the date hereof the authorized capital stock of Parent
consists of (i) (A) 250,000 shares of Class A Common Stock, $.01 par value (the
"Class A Common Stock"), of which no shares are validly issued and outstanding,
and (B) 1,000,000 shares of Class B Common Stock, $.01 par value, of which
79,459 shares are validly issued and outstanding (without taking into account
any shares of Parent Stock to be issued pursuant to this Agreement), fully paid
and nonassessable; and (ii) 250,000 shares of Class A Convertible Preferred
stock, of which 157,760 shares are validly issued and outstanding, fully paid
and nonassessable. All outstanding capital stock of Parent was issued in
accordance with applicable federal and state securities laws. Except as set
forth on Schedule 5.6(a) hereto, there are no options, warrants, calls,
---------------
agreements, commitments or other rights presently outstanding that would
obligate Parent to issue, deliver or sell shares of its capital stock, or to
grant, extend or enter into any such option, warrant, call, agreement,
commitment or other right. In addition to the foregoing, as of the date hereof,
Parent has no bonds, debentures, notes or other indebtedness issued or
outstanding that have voting rights in Parent.
(b) The holders of record as of the Effective Time of the outstanding
shares of capital stock of Parent, together with the number of shares of capital
stock then outstanding, are set forth on a pro forma basis on Schedule 5.6(b)
---------------
hereto.
(c) When delivered to the Swan Shareholders in accordance with the
terms hereof, the Parent Stock will (i) be duly authorized, fully paid and
nonassessable, and (ii) be free and clear of all Liens.
5.7 SUBSIDIARIES. Except as set forth on Schedule 5.7 hereto, Parent has
------------
no subsidiaries and does not otherwise own or control, directly or indirectly,
any equity interest in, or any security convertible into an equity interest in,
any Entity. Schedule 5.7 hereto lists the name of each of the Subsidiaries of
------------
Parent, and indicates their respective jurisdictions of incorporation and
authorized and outstanding capitalization.
5.8 FINANCIAL STATEMENTS. Parent has heretofore furnished Swan with a
true and complete copy of (a) the audited financial statements of iXL
Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31,
1993, 1994 and 1995, and for the four-month period ending April 30, 1996; (b)
audited combined financial statements for Creative Video, Inc. (n/k/a iXL,
Inc.), Creative Video Library, Inc. and Entrepreneur Television, Inc. for the
years ending December 31, 1993, 1994 and 1995, and for the four-month period
ending April 30, 1996; (c) the audited consolidated financial statements for
Parent and its Subsidiaries for the eight months ended December 31, 1996; and
(d) the unaudited consolidated financial statements for Parent and its
Subsidiaries, dated May 31, 1997 ((a) through (d) collectively herein referred
to as the "Parent Financial Statements"). The Parent Financial Statements have
been prepared in accordance with
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generally accepted accounting principles (except, in the case of the unaudited
financial statements, for the exclusion of footnotes and normal year-end
adjustments) consistently followed throughout the period indicated, and present
fairly, in all material respects, the financial position and operating results
of Parent and its Subsidiaries as of the dates, and during the periods,
indicated therein.
5.9 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 5.9 hereto,
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neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including, without
limitation, any liability or obligation on account of taxes or any governmental
charges or penalty, interest or fines, except (a) liabilities not in excess of
$300,000 (whether individually or in the aggregate) incurred in the ordinary
course of business after May 31, 1997; (b) liabilities reflected on the Parent
Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated by this Agreement.
5.10 COMPLIANCE WITH APPLICABLE LAWS. Parent or its Subsidiaries holds
all material permits, licenses, variances, exemptions, orders and approvals of
all Governmental Entities necessary to own, lease or operate all of the assets
and properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's Business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
Schedule 5.10 hereto sets forth a list of the Parent Permits, a true and correct
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copy of each of which has been made available to Swan.
5.11 BOARD OF DIRECTOR CONSENT. Both the Board of Directors of Parent and
Sub have, by unanimous written consent, adopted and approved this Agreement and
the transactions contemplated hereby (including, without limitation, the
Merger).
5.12 BANKRUPTCY. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 DISCLOSURE. No statement of fact by Parent or Sub contained in this
Agreement and no written statement of fact furnished or to be furnished by
Parent or Sub to Swan pursuant to or in connection with this Agreement contains
or will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements herein or
therein contained not misleading.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 PUBLIC ANNOUNCEMENTS. The parties agree that, except as may
otherwise be required to comply with applicable laws and regulations (including,
without limitation, applicable securities laws) or to obtain consents required
hereunder, public disclosure of the transactions contemplated by this Agreement
shall be made only upon or after the consummation of the Merger. Any such
disclosure shall be coordinated between the parties, and no party shall make any
such disclosure without the prior consent of the other parties, which consent
shall not be unreasonably withheld or delayed.
6.2 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND EXPENSES.
Parent agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.3 FURTHER ASSURANCES. From time to time after the Effective Time, upon
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions of this Agreement.
6.4 OPTIONS. Parent hereby covenants and agrees that, as soon as
reasonably practicable after the Effective Time, each of the Persons listed on
Schedule 6.4 shall receive options to purchase that number shares of validly
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issued, fully paid and nonassessable Parent Stock, at an exercise price of $75
per share, all of which shall be issued pursuant to (i) the IXL Holdings, Inc.
1996 Stock Option Plan, as amended (the "Parent Stock Option Plan") set forth
opposite the name of such Person, and (ii) a Stock Option Agreement
substantially in the form of Exhibit "C" hereto.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATION OF SWAN AND THE SWAN SHAREHOLDERS TO EFFECT
THE MERGER. The obligation of Swan and the Swan Shareholders to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) (i) the appropriate officers of Parent shall have executed and
delivered to Swan at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-1" hereto (collectively
-------------
"Parent's Closing Certificate"), and (ii) the appropriate officers of Sub shall
have executed and delivered to Swan at the Closing, a closing certificate and
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incumbency certificate, substantially in the form of Exhibit "A-2" hereto
-------------
(collectively "Sub's Closing Certificate");
(b) Parent shall have obtained all of the Consents listed on Schedule
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7.1(b) hereto;
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(c) Swan shall have received a corporate certificate of good standing
for Parent and Sub, and a copy of the Certificate of Incorporation for Parent
and Sub, both as certified by the Secretary of State of Delaware;
(d) there shall have been delivered to each of the Swan Shareholders
at the Closing, duly executed by Parent, an Agreement to be Bound to the
Registration Rights Agreement of Parent, dated as of the hereof (the "Agreement
to be Bound to the Registration Rights Agreement"), substantially in the form of
Exhibit "B" hereto;
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(e) Parent shall have executed and delivered at the Closing that
certain Side Letter, dated of even date herewith, addressed to the Swan
Shareholders (the "Side Letter"); and
(f) Swan shall have received from Parent such other documents as
Swan's counsel shall have reasonably requested, in form and substance reasonably
satisfactory to Swan's counsel.
7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER.
The obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time of the following conditions:
(a) the appropriate officers of Swan shall have executed and delivered
to Parent at the Closing, a closing certificate, substantially in the form of
Exhibit "D" hereto ("Swan's Closing Certificate");
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(b) Swan and the Swan Shareholders shall have obtained or caused to be
obtained all of the Consents listed on Schedule 7.2(b) hereto;
---------------
(c) there shall have been delivered to Parent at the Closing, duly
executed by each of the Swan Shareholders, (i) an Agreement to be Bound to the
First Amended and Restated Stockholders' Agreement of Parent, as amended
effective May 31, 1997 (the "Stockholders' Agreement"), substantially in the
form of Exhibit "E" hereto; and (ii) an Agreement to be Bound by the
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Registration Rights Agreement;
(d) Parent shall have received a corporate certificate of good
standing for Swan, and a copy of the Articles of Incorporation of Swan, both as
certified by the Secretary of State of Georgia;
(e) as of the Closing the Swan Accounts Payable shall be no greater
than $64,724;
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(f) Parent shall have received, duly executed and acknowledged by each
of the Swan Shareholders, the Side Letter; and
(g) Parent shall have received from Swan or the Swan Shareholders, as
the case may be, such other documents as Parent's counsel shall have reasonably
requested, in form and substance reasonably satisfactory to Parent's counsel.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY PARENT.
(a) Parent shall indemnify and hold Swan, the Swan Shareholders and
Swan's directors, officers and employees (collectively, the "Swan Indemnified
Parties") harmless from and against, and agree promptly to defend each of the
Swan Indemnified Parties from and reimburse each of the Swan Indemnified Parties
for, any and all losses, damages, costs, expenses, liabilities, obligations and
claims of any kind (including, without limitation, reasonable attorney fees and
other legal costs and expenses) (collectively a "Swan Loss") that any of the
Swan Indemnified Parties may at any time suffer or incur, or become subject to,
as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant to this Agreement, or in any
instrument, certificate or affidavit delivered by Parent at the Closing in
accordance with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform, satisfy
and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the documents
and materials delivered by Parent pursuant to this Agreement; and
(iii) any suit, action or other proceeding arising out of, or in
any way related to, any of the matters referred to in this Section 8.1.
(b) Notwithstanding any other provision to the contrary Parent shall
not have any liability under Section 8.1(a) above (i) unless the aggregate of
all Swan Losses for which Parent would be liable but for this sentence exceeds,
on a cumulative basis, an amount equal to $100,000, and then only to the extent
of such excess, (ii) for amounts in excess of $1,000,000 in the aggregate, and
(iii) unless the Swan Shareholders have asserted a claim with respect to the
matters set forth in Section 8.1(a)(i), or 8.1(a)(iii) to the extent applicable
to Section 8.1(a)(i), within two years of the Effective Time. Notwithstanding
any implication to the contrary contained herein, the parties acknowledge and
agree that a decrease in the value of Parent Stock would not, by itself,
constitute a Swan Loss, unless and to the extent a decrease in the value of
Parent Stock has been demonstrated to be as a result of any event described in
Sections 8.1(a)(i), (ii) or (iii) above.
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8.2 INDEMNIFICATION BY THE SWAN SHAREHOLDERS.
(a) The Swan Shareholders shall severally but not jointly (in the
case of the Minority Shareholders, in proportion to their respective share of
the Merger consideration) indemnify and hold Parent, Sub, Surviving Corporation
and their respective shareholders, directors, officers and employees
(collectively, the "Parent Indemnified Parties") harmless from and against, and
agree to promptly defend each of the Parent Indemnified Parties from and
reimburse each of the Parent Indemnified Parties for, any and all losses,
damages, costs, expenses, liabilities, obligations and claims of any kind
(including, without limitation, reasonable attorney fees (collectively, a
"Parent Loss") that any of the Parent Indemnified Parties may at any time suffer
or incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any representations and
warranties made by Swan or the Swan Shareholders in or pursuant to this
Agreement, or in any certificate or affidavit delivered by the same at the
Closing in accordance with the provisions hereof;
(ii) any failure by Swan or the Swan Shareholders to carry out,
perform, satisfy and discharge any of their respective covenants, agreements,
undertakings, liabilities or obligations under this Agreement or under any of
the documents and materials delivered by Swan pursuant to this Agreement; and
(iii) any suit, action or other proceeding arising out of, or in
any way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above, (i) the Minority Shareholders shall not
have any liability under Section 8.2(a) above except to the extent such
liability results from a breach, inaccuracy, failure, suit or other action made
or caused by such Minority Shareholder; and (ii) none of the Swan Shareholders
shall have any liability under Section 8.2(a) above (A) unless the aggregate of
all Parent Losses for which the Swan Shareholders would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $100,000, and then
only to the extent of such excess, (B) for amounts in excess of $1,000,000 in
the aggregate, and (C) unless Parent has asserted a claim with respect to the
matters set forth in Section 8.2(a)(i) or 8.2(a)(iii) (to the extent applicable
to Section 8.2(a)(i)) within two years of the Effective Time, except with
respect to the matters arising under Sections 4.18, 4.19, 4.20 or 4.24 hereof,
in which event Parent must have asserted a claim within the applicable statute
of limitations. Notwithstanding any implication to the contrary contained
herein, the parties acknowledge and agree that a decrease in the value of Parent
Stock would not, by itself, constitute a Parent Loss, unless and to the extent a
decrease in the value of Parent Stock has been demonstrated to be as a result of
any event described in Sections 8.2(a)(i), (ii) or (iii) above.
8.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND.
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that
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the Indemnified Party has determined has given or could give rise to a right of
indemnification under this Agreement. Subject to the Indemnifying Party's right
to defend in good faith third party claims as hereinafter provided, the
Indemnifying Party shall satisfy its obligations under this Article VIII within
30 days after the receipt of written notice thereof from the Indemnified Party.
Any amounts paid thereafter shall include interest thereon for the period
commencing at the end of such 30-day period and ending on the actual date of
payment, at a rate of 15% per annum, or, if lower, at the highest rate of
interest permitted by applicable law at the time of such payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section 8.1 or 8.2 hereof, as the case may
be, the Indemnifying Party shall have the right, at its sole cost and expense,
to employ counsel of its own choosing to defend any such Claim asserted against
the Indemnified Party; provided, however, that if the Indemnified Party (i)
-------- -------
reasonably believes that its interests with respect to a Claim (or any material
portion thereof) are in conflict with the interests of the Indemnifying Party
with respect to such Claim (or portion thereof), and (ii) promptly notifies the
Indemnifying Party, in writing, of the nature of such conflict, then the
Indemnified Party shall be entitled to choose, at the sole cost and expense of
the Indemnifying Party, independent counsel to defend such Claim (or the
conflicting portion thereof). The Indemnified Party shall have the right to
participate in the defense of any such Claim at its own expense (except to the
extent provided in the foregoing sentence), but the Indemnifying Party shall
retain control over such litigation (except as provided in the foregoing
sentence). The Indemnifying Party shall notify the Indemnified Party in writing,
as promptly as possible (but in any case before the due date for the answer or
response to a claim) after the date of the notice of claim given by the
Indemnified Party to the Indemnifying Party under Section 8.3(a) hereof of its
election to defend in good faith any such third party Claim. So long as the
Indemnifying Party is defending in good faith any such Claim asserted by a third
party against the Indemnified Party, the Indemnified Party shall not settle or
compromise such Claim without the prior written consent of the Indemnifying
Party. The Indemnified Party shall cooperate with the Indemnifying Party in
connection with any such defense and shall make available to the Indemnifying
Party or its agents all records and other materials in the Indemnified Party's
possession reasonably required by it for its use in contesting any third party
Claim; provided, however, that the Indemnifying Party shall have agreed, in
-------- -------
writing, to keep such records and other materials confidential expect to the
extent required for defense of the relevant Claim. Whether or not the
Indemnifying Party elects to defend any such Claim, the Indemnified Party shall
have no obligations to do so. Within 30 days after a final determination
(including, without limitation, a settlement) has been reached with respect to
any Claim contested pursuant to this Section 8.2(b), the Indemnifying Party
shall satisfy its obligations with respect thereto. Any amounts paid thereafter
shall include interest thereon for the period commencing at the end of such 30-
day period and ending on the actual date of payment, at a rate of 15% per annum,
or, if lower, at the highest rate of interest permitted by applicable law at the
time of such payment.
8.4 INDEMNITIES AS SOLE REMEDY. Notwithstanding any implication to the
contrary contained herein, the parties hereby agree and acknowledge that the
indemnities provided in this
21
<PAGE>
Article VIII shall be the sole remedy for breaches or inaccuracies of the
representations and warranties set forth in Articles IV and V hereof.
ARTICLE IX
GENERAL PROVISIONS
9.1 SURVIVAL; RECOURSE. None of the agreements contained in this
Agreement shall survive the Merger, except that (i) the agreements contained in
Articles III and VI hereof, the obligations to indemnify contained in Article
VIII hereof and the agreements of the Surviving Corporation referred to in
Sections 9.10 and 9.11 hereof, shall survive the Merger (except to the extent a
shorter period of time is explicitly specified therein) and (ii) the
representations and warranties made in Articles IV and V of this Agreement shall
survive the Merger, and shall survive any independent investigation by the
parties, and any dissolution, merger or consolidation of Swan or Parent, and
shall bind the legal representatives, assigns and successors of Swan, the Swan
Shareholders, Parent, for a period of two years after the Closing Date (other
than the representations and warranties contained in Sections 4.19, 4.20 and
4.24 hereof, which shall survive for the applicable statute of limitations).
9.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in Person, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Swan: Swan Interactive Media, Inc.
887 West Marietta Street
Studio T-103
Atlanta, Georgia 30318
Attention: Mark Swanson
Telephone: 404/815-8152
Telecopy: 404/817-3534
E-mail: [email protected]
With copies to: Troutman Sanders, LLP
600 Peachtree Street
Atlanta, Georgia 30308
Attention: Richard Keck
Telecopy: 404/885-3995
Telephone: 404/885-3236
If to the Swan To the address listed under the signature
Shareholders: line of the applicable Swan Shareholder
22
<PAGE>
If to Parent: IXL Holdings, Inc.
Two Park Place
1888 Emery Street
2nd Floor
Atlanta, Georgia 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
If to Sub/Surviving
Corporation: IXL Merger Corp. IV, Inc.
1888 Emery Street
2nd Floor
Atlanta, Georgia 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
23
<PAGE>
and to: Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
9.3 ENTIRE AGREEMENT. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof. There are no other representations or warranties, whether
written or oral, between the parties in connection the subject matter hereof,
except as expressly set forth herein.
9.4 ASSIGNMENTS; PARTIES IN INTEREST. Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests, and
obligations of Sub hereunder may be assigned to any direct wholly owned Delaware
subsidiary of Parent without such prior consent. Subject to the preceding
sentence, this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any Person not a party hereto any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement,
except as otherwise provided herein.
9.5 FEES AND EXPENSES. All reasonable fees and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such fees or expenses; provided,
--------
however, that the expenses of Swan shall be paid by the Swan Shareholders.
- -------
9.6 GOVERNING LAW. This Agreement, except to the extent that the GBCC or
the DGCL is mandatorily applicable to the Merger or the rights of the
shareholders of Swan or the other parties hereto with respect to the Merger,
shall be governed in all respects by the laws of the State of Georgia (without
giving effect to the provisions thereof relating to conflicts of law).
9.7 HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
9.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
24
<PAGE>
9.9 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economics or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon determination that any term or other provision
hereof is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
9.10 POST-CLOSING ACCESS. For a period of five years after the Closing
Date, the Swan Shareholders and their agents and representatives shall have
reasonable access to the books and records of Swan.
9.11 POST-CLOSING NOTICE. To the extent the Surviving Corporation
receives written notice of any event or circumstance that materially affects any
of the Swan Shareholders, the Surviving Corporation shall promptly notify the
affected Swan Shareholder of such matter, information, or event and shall
provide them with copies of all relevant documentation or correspondence in
connection thereto.
9.12 CERTAIN DEFINITIONS. As used in this Merger Agreement:
(a) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of that are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including, without limitation, Sub);
provided, however, that with respect to the Parent, the terms "Subsidiary" and
- -------- -------
"Subsidiaries" shall not include (i) University Netcasting, Inc., or (ii) Swan;
(b) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and
(c) the term "Minority Shareholders" shall mean and include all Swan
Shareholders other than Mark Swanson.
- SIGNATURES ON THE FOLLOWING PAGE -
25
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and Swan have caused this Agreement to be
signed by their respective officers thereunder duly authorized, and each Swan
Shareholder has signed this Agreement, all as of the date first written above.
"SWAN"
SWAN INTERACTIVE MEDIA, INC., a Georgia corporation
By: /s/ Mark Swanson
---------------------------------------------------
President
Title: ---------------------------------------------------
"PARENT"
IXL HOLDINGS, INC., a Delaware corporation
By: /s/ James V. Sandry
---------------------------------------------------
Executive Vice President
Title: ---------------------------------------------------
"SUB"
IXL MERGER CORP. IV, INC., a Delaware corporation
By: /s/ James V. Sandry
---------------------------------------------------
Executive Vice President
Title: ---------------------------------------------------
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
26
<PAGE>
"SWAN SHAREHOLDERS"
By: /s/ Mark Swanson
----------------------------------------------
MARK SWANSON
Address:
___________________________________
___________________________________
___________________________________
By: /s/ N. Blake Patton
----------------------------------------------
N. BLAKE PATTON
Address: 878 BRIARCLIFF RD # B-1
-----------------------------------
ATLANTA, GA 30306
-----------------------------------
___________________________________
By: /s/ Marc Sirkin
-----------------------------------------------
MARC SIRKIN
Address: 4215 Nora La,
-----------------------------------
Duluth, GA 30096
-----------------------------------
___________________________________
By: /s/ Edwin Davis
----------------------------------------------
EDWIN DAVIS
Address: PO BOX 20221
-----------------------------------
ATLANTA GA 30325
-----------------------------------
___________________________________
By:_______________________________________________
_________________________________
Address: ___________________________________
___________________________________
___________________________________
27
<PAGE>
"SWAN SHAREHOLDERS"
By: ______________________________________________
MARK SWANSON
Address:
___________________________________
___________________________________
___________________________________
By: ______________________________________________
N. BLAKE PATTON
Address:
___________________________________
___________________________________
___________________________________
By: _______________________________________________
MARC SIRKIN
Address:
___________________________________
___________________________________
___________________________________
By: ______________________________________________
EDWIN DAVIS
Address:
___________________________________
___________________________________
___________________________________
By:
/s/ Nancy B. Krieble
----------------------------------------------
NANCY B. KRIEBLE
Address: ___________________________________
___________________________________
___________________________________
28
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate................................ Exhibit A-1
Sub's Closing Certificate................................... Exhibit A-2
Agreement to be Bound to Registration
Rights Agreement.......................................... Exhibit B
Option Agreement............................................ Exhibit C
Swan's Closing Certificate.................................. Exhibit D
Agreement to be Bound to Stockholders' Agreement............ Exhibit E
<PAGE>
SCHEDULE 2.1
------------
CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION
SCHEDULE 4.1
------------
ARTICLES OF INCORPORATION AND BYLAWS OF SWAN
SCHEDULE 4.3(B)
---------------
LIENS ON SWAN STOCK
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF SWAN
SCHEDULE 4.6
------------
FINANCIAL STATEMENTS OF SWAN
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF SWAN
<PAGE>
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF SWAN
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF SWAN
SCHEDULE 4.10
-------------
EQUIPMENT OF SWAN
SCHEDULE 4.11
-------------
EXCEPTIONS TO TITLE OF INTELLECTUAL PROPERTY OF SWAN
SCHEDULE 4.13
-------------
LEASES OF SWAN
SCHEDULE 4.14
-------------
CONTRACTS OF SWAN
<PAGE>
SCHEDULE 4.15
-------------
LIST OF DIRECTORS AND OFFICERS OF SWAN
SCHEDULE 4.16
-------------
PAYROLL INFORMATION OF SWAN
SCHEDULE 4.17
-------------
LITIGATION OF SWAN
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF SWAN
SCHEDULE 4.19
-------------
ERISA ISSUES OF SWAN
SCHEDULE 4.21
-------------
PERMITS OF SWAN
SCHEDULE 4.23
-------------
BROKERS OF SWAN
<PAGE>
SCHEDULE 4.25
-------------
ACCOUNTS RECEIVABLE OF SWAN
SCHEDULE 4.26
-------------
ACCOUNTS PAYABLE OF SWAN
SCHEDULE 4.27
-------------
INSURANCE OF SWAN
SCHEDULE 4.29
-------------
SWAN DEBT
SCHEDULE 5.1
------------
CERTIFICATE OF INCORPORATION AND BYLAWS OF PARENT AND SUB
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
<PAGE>
SCHEDULE 5.5
------------
PARENT BROKERS
SCHEDULE 5.6(A)
---------------
PARENT STOCK, OPTIONS, WARRANTS, ETC.
SCHEDULE 5.6(B)
---------------
PARENT STOCK - STOCKHOLDERS AS OF THE EFFECTIVE DATE
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.9
------------
PARENT PERMITS
SCHEDULE 6.4
------------
RECIPIENTS OF OPTIONS/WARRANTS OF PARENT
<PAGE>
SCHEDULE 7.1(B)
---------------
PARENT CONSENTS
SCHEDULE 7.2(B)
---------------
CONSENTS OF SWAN
<PAGE>
EXHIBIT 2.11
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
IXL HOLDINGS, INC.,
IXL-NEW YORK, INC.
SMALL WORLD SOFTWARE, INC.,
AND
THE SHAREHOLDERS OF SMALL WORLD
DATED AS OF JANUARY 23, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into this 23rd day of
January, 1998, by and between SMALL WORLD SOFTWARE, INC., a New York corporation
("Small World"), IXL HOLDINGS, INC., a Delaware corporation ("Parent"), iXL-NEW
YORK, INC., a Delaware corporation, or its successors or assigns ("Sub"), and
the shareholders of Small World as listed on the signature page hereto (the
"Small World Shareholders").
R E C I T A L S:
- - - - - - - -
A. Small World is engaged in the business of web page design and web
site hosting (the "Small World Business").
B. Small World and Sub each desire to merge their respective
companies and business operations, all on the terms and subject to the
conditions set forth herein (the "Merger").
C. The Small World Shareholders collectively own 100% of the issued
and outstanding capital stock of Small World (the "Small World Stock").
D. The respective Boards of Directors and stockholders of Parent,
Sub and Small World have approved the Merger, upon the terms and subject to the
conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal
income tax purposes, as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof,
at the Effective Time (as defined in Section 1.3 hereof), (a) Small World shall
be merged with and into Sub, (b) the separate existence of Small World shall
cease, and (c) Sub shall continue as the surviving corporation in the Merger
under the laws of the State of Delaware under the name iXL-New York, Inc. For
purposes of this Agreement, Sub shall be referred to, for the period commencing
on the Effective Time, as the "Surviving Corporation".
1.2 CLOSING. Subject to the satisfaction or waiver of the conditions
set forth in Article VII hereof, the closing of the Merger (the "Closing") will
take place at the offices of Kelso & Company, 320 Park Avenue, 24/th/ Floor, New
York, New York 10032, or at such other place as the
<PAGE>
parties may agree.
1.3 EFFECTIVE TIME OF THE MERGER. At the Closing, the parties hereto
shall cause (a) a certificate of merger (the "Delaware Certificate of Merger")
to be filed with the office of the Secretary of State of the State of Delaware
in accordance with the provisions of the Delaware General Corporation Law, as
amended (the "DGCL"); and (b) a certificate of merger (the "New York Certificate
of Merger") to be filed with the office of the Secretary of State of the State
of New York in accordance with the provisions of the New York Business
Corporation Law (the "BCL"). When used in this Agreement, the term "Effective
Time" shall mean the time when the Delaware Certificate of Merger and the New
York Certificate of Merger (collectively herein referred to as the "Certificate
of Merger") have been accepted for filing by the Secretary of State of the State
of Delaware and New York, respectively, or such time as otherwise specified in
the Certificate of Merger.
1.4 EFFECT OF THE MERGER. The Merger shall, from and after the
Effective Time, have all the effects provided by the DGCL and BCL. If at any
time after the Effective Time, any further action is deemed necessary or
desirable to carry out the purposes of this Agreement, the parties hereto agree
that the Surviving Corporation and its proper officers and directors shall be
authorized to take, and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Amended and Restated
Certificate of Incorporation of Sub, a form of which is attached hereto as
Schedule 2.1, shall be the Certificate of Incorporation of the Surviving
- ------------
Corporation after the Effective Time, until thereafter changed or amended as
provided therein or by applicable law.
2.2 BYLAWS. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law.
2.3 BOARD OF DIRECTORS; OFFICERS. The Board of Directors and officers
of Sub immediately prior to the Effective Time shall be the Board of Directors
and officers, respectively, of the Surviving Corporation, until the earlier of
their respective resignations or the time that their respective successors are
duly elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
3.1 MERGER CONSIDERATION. As of the Effective Time, by virtue of the
Merger and without any action on the part of any stockholder of Small World or
Sub:
(a) All shares of Small World Stock owned by Small World shall
be canceled
2
<PAGE>
and retired and shall cease to exist, and no consideration shall be delivered
in exchange therefor.
(b) Each issued and outstanding share of Small World Stock shall
be converted into, and become exchangeable for, a number of shares of validly
issued, fully paid and nonassessable Class B Common Stock of Parent, $.01 par
value (the "Parent Stock") based on the following equation:
SWD
---
PS = 450,000 - $5
-------------------------
X
where:
PS = the number of shares of Parent Stock for which each
share of Small World Stock shall be exchanged pursuant
to the Merger
X = the number of shares of issued and outstanding Small
World Stock on the date hereof
SWD = the outstanding indebtedness of Small World (including,
without limitation, debt for borrowed money and accrued
interest thereon) as of the date one day prior to the
Closing (the "Small World Debt"), as set forth on
Schedule 4.29 hereto
-------------
$5 = the per share value of the Parent Stock, subject to
Section 3.1(d) below
(c) Each issued and outstanding share of common stock of Sub
shall be converted into and become one fully paid and nonassessable share of
common stock of the Surviving Corporation.
(d) The parties hereby agree and acknowledge that the per
share value of Parent Stock described in Section 3.1(b) above has been
determined in part by taking into account a 100 to 1 stock split of Parent
Stock that is expected to be effective on February 15, 1998 for all holders of
record of Parent Stock as of January 9, 1998. If the aforementioned stock split
does not occur for any reason, the parties agree that the per share value of
Parent Stock shall be $500, and that the provisions of this Agreement, including
without limitation the equation set forth in Section 3.1(b) above, shall be
adjusted accordingly.
3.2 NO FURTHER RIGHTS. From and after the Effective Time, holders of
certificates theretofore evidencing Small World Stock shall cease to have any
rights as stockholders of Small World, except as provided herein or by law.
3.3 CLOSING OF THE SMALL WORLD'S TRANSFER BOOKS. At the Effective
Time, the stock transfer books of Small World shall be closed and no transfer of
Small World Stock shall be made
3
<PAGE>
thereafter. If after the Effective Time, certificates for Small World Stock are
presented to Parent or the Surviving Corporation, they shall be canceled and
exchanged for an amount of Parent Stock as set forth in Section 3.1 hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SMALL WORLD
Small World and the Small World Shareholders, jointly and severally,
represent and warrant to Parent and Sub, which representations and warranties
shall survive the Closing in accordance with Section 9.1 of this Agreement, as
follows:
4.1 ORGANIZATION AND QUALIFICATION. Small World is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. Small World has the requisite corporate power and authority to carry
on the Small World Business as it is now being conducted and is duly qualified
or licensed to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary. Complete and correct copies of
the Certificate of Incorporation and Bylaws of Small World as in effect on the
date hereof are attached as Schedule 4.1 hereto. The minute book of Small World,
------------
a true and complete copy of which has been delivered to Parent, (a) accurately
reflects all action taken by the directors and shareholders of Small World at
meetings of Small World's Board of Directors or shareholders, as the case may be
at which minutes were taken; and (b) contains true and complete copies of, or
originals of, the respective minutes of all meetings or consent actions of the
directors or shareholders at which minutes were taken.
4.2 AUTHORITY. Small World has the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by Small World have
been duly and validly authorized and approved by Small World's Board of
Directors and the Small World Shareholders, and no other corporate or
shareholder proceedings on the part of Small World, its Board of Directors or
the Small World Shareholders is necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Small World and each Small World Shareholder, and
assuming the due authorization, execution and delivery by Parent and Sub,
constitutes the valid and binding obligation of Small World and each Small World
Shareholder, enforceable against Small World and each Small World Shareholder in
accordance with its terms.
4.3 CAPITALIZATION.
(a) The authorized capital stock of Small World consists of
2,000,000 shares of common stock, $.01 par value per share, of which 1,530,000
shares are validly issued and outstanding, fully paid and nonassessable (without
taking into account the transactions contemplated by the Stock Purchase and
Release Agreement (as defined in Section 7.2(g) hereof)). All outstanding
capital stock of Small World was issued in accordance with applicable federal
and state securities laws. Except as set forth on Schedule 4.3(a) hereto, there
---------------
are no options, warrants,
4
<PAGE>
calls, agreements, commitments or other rights presently outstanding that would
obligate Small World or the any of the Small World Shareholders to issue,
deliver or sell shares of its capital stock, or to grant, extend or enter into
any such option, warrant, call, agreement, commitment or other right. In
addition to the foregoing, as of the date hereof, Small World has no bonds,
debentures, notes or other indebtedness issued or outstanding that have voting
rights in Small World.
(b) All of the issued and outstanding shares of capital stock
of Small World are validly issued, fully paid and nonassessable and owned by the
Small World Shareholders, free and clear of any lien, charge, security interest,
pledge, option, right of first refusal, voting proxies or other voting
agreements, or encumbrance of any kind or nature, other than restrictions on
transfer imposed by federal and state securities laws (any of the foregoing, a
"Lien").
4.4 SUBSIDIARIES. Small World has no subsidiaries and does not
otherwise own or control, directly or indirectly, any equity interest in, or any
security convertible into an equity interest in, any corporation, partnership,
limited liability company, joint venture, association or other business entity
(any of the foregoing, an "Entity").
4.5 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth
on Schedule 4.5 hereto, none of the execution and delivery of this Agreement by
------------
Small World or the Small World Shareholders, the consummation by Small World and
the Small World Shareholders of the transactions contemplated hereby or
compliance by Small World with any of the provisions hereof will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Small World;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to Small World or the Small
World Shareholders, or by which Small World or its properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default
(or an event that, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Small World is a party or by which Small
World or its properties may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Small World; or
(e) require any consent, waiver, license, approval,
authorization, order, permit, registration or filing with, or notification to
(any of the foregoing being a "Consent"), of (i) any government or subdivision
thereof, whether domestic, foreign or multinational, or any administrative,
governmental, or regulatory authority, agency, commission, court, tribunal or
body, whether domestic, foreign or multinational (a "Governmental Entity"),
except for the filing of the Certificate of Merger pursuant to the DGCL and BCL;
or (ii) any other individual or Entity
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(collectively, a "Person").
4.6 FINANCIAL STATEMENTS. Small World has heretofore furnished Parent
with a true and complete copy of (a) the unaudited (compiled) financial
statements of Small World for the years ending December 31, 1995 and 1996; and
(b) the unaudited financial statements of Small World for the period ending
December 10, 1997, (collectively herein referred to as the "Small World
Financial Statements"). The Small World Financial Statements fairly and
consistently present, in all material respects, the financial position and
operating results of Small World as of the dates, and during the periods,
indicated therein.
4.7 ABSENCE OF CHANGES. Except as provided in Schedule 4.7 hereto and
------------
except as contemplated by this Agreement, since December 10, 1997, (a) Small
World has not entered into any transaction that was not in the ordinary course
of business; (b) except for sales of services and licenses of software in the
ordinary course of business, there has been no sale, assignment, transfer,
mortgage, pledge, encumbrance or lease of any material assets or properties of
Small World; (c) there has been (i) no declaration or payment of a dividend, or
any other declaration, payment or distribution of any type or nature to any
shareholder of Small World in respect of its stock, whether in cash or property,
and (ii) no purchase or redemption of any shares of the capital stock of Small
World except as provided in Section 7.2(g) hereof; (d) there has been no
declaration, payment, or commitment for the payment, by Small World, of a bonus
or other additional salary, compensation, or benefit to any employee of Small
World that was not in the ordinary course of business; (e) there has been no
release, compromise, waiver or cancellation of any debts to or claims by Small
World, or waiver of any rights of Small World; (f) there have been no capital
expenditures in excess of $10,000 for any single item, or $25,000 in the
aggregate; (g) there has been no change in accounting methods or practices or
revaluation of any assets of Small World (other than Small World Accounts
Receivable (as defined in Section 4.25 hereof) written down in the ordinary
course of business that are not in excess of $10,000 for any single Small World
Account Receivable and $25,000 in the aggregate); (h) there has been no
material damage, destruction or loss of physical property (whether or not
covered by insurance) adversely affecting the Small World Business or the
operations of Small World; (i) there has been no loan by Small World, or
guaranty by Small World of any loan, to any employee of Small World or to any
Person related to the Small World Business; (j) Small World has not ceased to
transact business with any customer that, as of the date of such cessation,
represented more than 5% of the annual gross revenues of Small World; (k) there
has been no termination or resignation of any key employee or officer of Small
World, and to the knowledge of Small World and the Small World Shareholders, no
such termination or resignation is threatened; (l) there has been no amendment
or termination of any material oral or written contract, agreement or license
related to the Small World Business, to which Small World is a party or by which
it is bound, except in the ordinary course of business, or except as expressly
contemplated by this Agreement; (m) Small World has not failed to satisfy any of
its debts, obligations or liabilities related to the Small World Business or the
assets of Small World as the same become due and owing (except for Small World
Accounts Payable (as defined in Section 4.26 hereof), payable in accordance with
past practices and in the ordinary course of business); (n) there has been no
agreement or commitment by Small World to do any of the foregoing; and (o) there
has been no other event or condition of any character pertaining to and
materially affecting the assets, Business or financial condition of Small World.
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4.8 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.8
------------
hereto, Small World has no debt, liability or obligation of any kind, whether
accrued, absolute or otherwise, including, without limitation, any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after December 10, 1997, that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Small World; (b) liabilities reflected on the Small World Financial
Statements; and (c) liabilities incurred as a result of the transactions
contemplated by this Agreement
4.9 TITLE TO PROPERTIES. Except as set forth on Schedule 4.9 hereto,
------------
Small World has good and marketable title to all tangible property and assets
used in the Small World Business, and good title to all of its leasehold
interests, in each case, free and clear of any and all Liens other than liens
for taxes not yet due and payable.
4.10 EQUIPMENT. Small World has heretofore furnished Parent with a
true and correct list of all items of tangible personal property (including,
without limitation, computer hardware) necessary for or used in the operation of
the Small World Business in the manner in which it has been and is now operated
by Small World ("the Small World Equipment"), except for personal property
having a net book value of less than $1,000. Except as set forth on Schedule
--------
4.10, each material item of Small World Equipment is in good condition and
- ----
repair, ordinary wear and tear excepted.
4.11 INTELLECTUAL PROPERTY. Except as set forth on Schedule 4.11,
-------------
hereto,
(a) Small World has heretofore furnished Parent with a true and
complete list of all material proprietary technology, trade secrets, know-how,
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, service marks, service mark rights, and copyrights used or required to
be used by Small World in the conduct of the Small World Business (the "Small
World Intellectual Property Rights"). Small World owns, or is validly licensed
or otherwise has the right to use or exploit, as currently used or exploited,
all of the Small World Intellectual Property Rights, free of any obligation to
make any payment (whether of a royalty, license fee, compensation or otherwise).
No claims are pending or, to the knowledge of Small World, threatened, that
Small World is infringing or otherwise adversely affecting the rights of any
Person with regard to any Small World Intellectual Property Right. Small World
has used commercially reasonable efforts to protect the Small World Intellectual
Property Rights, and, to the knowledge of Small World, no Person is infringing
the rights of Small World with respect to any Small World Intellectual Property
Right. To the knowledge of Small World, neither Small World nor any employee,
agent or independent contractor of Small World has used, appropriated or
disclosed, directly or indirectly, any trade secrets or other proprietary or
confidential information of any other Person, or otherwise violated any
confidential relationship with any other Person. To the knowledge of Small
World, use of the name "Small World Software, Inc." does not infringe upon the
rights of any Person.
(b) Small World has heretofore furnished Parent with a true and
complete list of all material computer software used or required to be used by
Small World in the conduct of the Small World Business (the "Small World
Software"). Small World currently licenses, or otherwise has the legal right to
use, all of the Small World Software (including any upgrades, alterations or
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enhancements with respect thereto), and all of the Small World Software is being
used in compliance with any applicable licenses or other agreements.
4.12 REAL PROPERTY. Small World owns no real property.
4.13 LEASES. Schedule 4.13 hereto sets forth a list of all leases
-------------
pursuant to which Small World leases, as lessor or lessee, real or personal
property used in operating the Small World Business or otherwise (the "Small
World Leases"). Copies of the Small World Leases, which have previously been
provided to Parent, are true and complete copies thereof. All of the Small World
Leases are valid, binding and enforceable in accordance with their respective
terms, and there is not under any such Small World Lease any existing default by
Small World, or, to the knowledge of Small World and the Small World
Shareholders, by any other party thereto, or any condition or event of that,
with notice or lapse of time or both, would constitute a default. Small World
has not received notice that the lessor of any of the Small World Leases intends
to cancel, suspend or terminate the Small World Leases or to exercise or not
exercise any options under any of the Small World Leases.
4.14 CONTRACTS. Schedule 4.14 hereto sets forth a true and complete
-------------
list of all material contracts, agreements and commitments (whether written or
oral) to which Small World is, directly or indirectly, a party (in its own name
or as a successor in interest); or by which it is otherwise bound, including,
without limitation, any service agreements, customer agreements, supplier
agreements, agreements to lend or borrow money, shareholder agreements,
employment agreements, agreements relating to Small World Intellectual Property
and the like (collectively, the "Small World Contracts").
True and complete copies of each Small World Contract (or a true and
complete narrative description of any oral Small World Contract) have previously
been provided to Parent. Neither Small World nor, to the knowledge of Small
World and the Small World Shareholders, any other party to any of the Small
World Contracts, (x) is in default under (nor does there exist any condition
that, with notice or lapse of time or both, would cause such a default under)
any of the Small World Contracts, or (y) has waived any right it may have under
any of the Small World Contracts, the waiver of which would have a material
adverse effect on the business, assets or financial condition of Small World.
All of the Small World Contracts constitute the valid and binding obligation of
Small World, enforceable in accordance with their respective terms, and, to the
knowledge of Small World and the Small World Shareholders, the other parties
thereto.
4.15 DIRECTORS AND OFFICERS. Schedule 4.15 hereto sets forth a list,
-------------
as of the date of this Agreement, of the name of each director and officer of
Small World and the offices held by each.
4.16 PAYROLL INFORMATION. Small World has previously provided Parent
with a true and complete copy of the most recent payroll report of Small World,
showing all current employees of Small World and their current levels of
compensation, other than bonuses and other extraordinary compensation. Small
World has paid all compensation required to be paid to employees of Small World
on or prior to the date hereof, except for payments owed in respect of the
current pay period (for which the applicable pay day has not yet occurred).
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4.17 LITIGATION. Except as set forth on Schedule 4.17 hereto, there is
-------------
no suit, action, claim, investigation or proceeding pending or, to the knowledge
of Small World and the Small World Shareholders, threatened against or affecting
Small World, the Small World Business, or the Small World Shareholders, nor is
there any judgment, decree, injunction or order of any applicable Governmental
Entity or arbitrator outstanding against Small World.
4.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 4.18 hereto, there are no
-------------
employee benefit plans, agreements or arrangements maintained by Small World,
including, without limitation, (1) "employee benefit plans," within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"); (2) affirmative action plans; (3) current or deferred
compensation, pension, profit sharing, vacation or severance plans or programs;
or (4) medical, hospital, accident, disability or death benefit plans
(collectively, "Small World Benefit Plans"). All Small World Benefit Plans are
administered in accordance with, and are in material compliance with, all
applicable laws and regulations. No default exists with respect to the
obligations of Small World under any Small World Benefit Plans.
(b) Small World is not a party to any collective bargaining
agreement, no collective bargaining agent has been certified as a representative
of any of the employees of Small World, no representation campaign or election
is now in progress with respect to any employee of Small World and there are no
labor disputes, grievances, controversies, strikes or requests for union
representation pending, or, to the knowledge of Small World and the Small World
Shareholders, threatened, relating to or affecting the Small World Business. To
the knowledge of Small World and the Small World Shareholders, no event has
occurred that could give rise to any such dispute, controversy, strike or
request for representation.
4.19 ERISA.
(a) All Small World Benefit Plans that are subject to ERISA
have been administered in accordance with, and are in material compliance with,
the applicable provisions of ERISA. Each of Small World Benefit Plans that is
intended to meet the requirements of Section 401(a) of the Code has been
determined by the Internal Revenue Service to meet such requirements within the
meaning of such provision. No Small World Benefit Plan is subject to Title IV of
ERISA or Section 412 of the Code. Small World has not engaged in any non-exempt
"prohibited transactions," as such term is defined in Section 4975 of the Code
or Section 406 of ERISA, involving Small World Benefit Plans that would subject
Small World to the penalty or tax imposed under Section 502(i) of ERISA or
Section 4975 of the Code. Small World has not engaged in any transaction
described in Section 4069 of ERISA within the last five years. Except as
disclosed in Schedule 4.19 hereto or pursuant to the terms of Small World
-------------
Benefit Plans, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (1) result in any
payment (including, without limitation, severance, unemployment compensation or
golden parachute) becoming due to any director or other employee of Small World,
(2) increase any benefits otherwise payable under any Small World Benefit Plan
or (3) result in the acceleration of the time of payment or vesting of any such
benefits to any extent.
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(b) No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Small World Benefit Plan that is
an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA
and that is intended to meet the requirements of Section 401(a) of the Code, or
by any entity that is considered one employer with Small World under Section
4001 of ERISA or Section 414 of the Code, within the 12-month period ending on
the date hereof. Small World has not incurred any liability to the Pension
Benefit Guaranty Corporation in respect of any Small World Benefit Plan that
remains unpaid.
4.20 TAXES.
(a) Small World has duly and timely filed all federal, state
and local income, franchise, excise, real and personal property and other tax
returns and reports, including extensions, required to have been filed by Small
World on or prior to the date hereof. Small World has duly and timely paid all
taxes and other governmental charges, and all interest and penalties with
respect thereto, required to be paid by Small World (whether by way of
withholding or otherwise) to any federal, state, local or other taxing authority
(except to the extent the same are being contested in good faith, and adequate
reserves therefore have been provided in the Small World Financial Statements).
As of the date hereof, all deficiencies proposed as a result of any audits have
been paid or settled.
(b) Small World is not a party to, or bound by, or otherwise in
any way obligated under, any tax sharing or similar agreement.
(c) Small World has not consented to have the provisions of
Section 341(f)(2) of the Code (or comparable state law provisions) apply to it,
and Small World has not agreed or been requested to make any adjustment under
Section 481(c) of the Code by reason of a change in accounting method or
otherwise.
(d) Small World is an "S corporation" within the meaning of
Section 1361(a) of the Code.
4.21 COMPLIANCE WITH APPLICABLE LAWS. Small World holds all material
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Small World, as appropriate, and to carry on the Small World
Business as now conducted (the "Small World Permits"). To the knowledge of Small
World, Small World is in material compliance with all applicable laws,
ordinances and regulations and the terms of the Small World Permits. Except as
set forth on Schedule 4.21, all of the Small World Permits are fully assignable
-------------
by Small World in connection with the Merger. Schedule 4.21 hereto sets forth a
-------------
true and complete list of all Small World Permits, true and complete copies of
which have previously been provided to Parent.
4.22 BOARD OF DIRECTOR/SHAREHOLDER CONSENT. Both the Board of
Directors of Small World and the Small World Shareholders have, by unanimous
written consent, adopted and approved this Agreement and the transactions
contemplated hereby (including, without limitation, the Merger).
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4.23 BROKERS. Except as set forth on Schedule 4.23 hereto, no broker
-------------
or finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated by this Agreement as a result of
arrangements made by or on behalf of Small World.
4.24 ENVIRONMENTAL MATTERS.
(a) To the knowledge of Small World and the Small World
Shareholders, no real property currently or formerly owned or operated by Small
World is contaminated with any Hazardous Substances (as hereinafter defined);
(b) Small World is not a party to any litigation or
administrative proceeding nor, to the knowledge of Small World and the Small
World Shareholders, is any litigation or administrative proceeding threatened
against it, that, in either case, asserts or alleges that Small World (i)
violated any Environmental Laws (as hereinafter defined); (ii) is required to
clean up, remove or take remedial or other response action due to the disposal,
deposit, discharge, leak or other release of any Hazardous Substances; or (iii)
is required to pay all or a portion of the cost of any past, present or future
cleanup, removal or remedial or other action that arises out of or is related to
the disposal, deposit, discharge, leak or other release of any Hazardous
Substances.
(c) To the knowledge of Small World and the Small World
Shareholders, there are not now nor have there previously been tanks or other
facilities on, under, or at any real property owned, leased, used or occupied by
Small World containing materials that, if known to be present in soils or ground
water, would require cleanup, removal or other remedial action under
Environmental Laws.
(d) To the knowledge of Small World and the Small World
Shareholders, Small World is not subject to any judgment, order or citation
related to or arising out of any Environmental Laws and has not been named or
listed as a potentially responsible party by any Governmental Entity in a matter
related to or arising out of any Environmental Laws.
(e) For purposes of this Agreement, (i) the term "Environmental
Law" means any federal, state or local law (including statutes, regulations,
ordinances, codes, rules, judicial opinions and other governmental restrictions
and requirements), relating to the discharge of air pollutants, water
pollutants, noise, odors or process waste water, or otherwise relating to the
environment or hazardous or toxic substances; and (ii) the term "Hazardous
Substance" means any toxic or hazardous substance that is regulated by or under
authority of any Environmental Law, including, without limitation, any petroleum
products, asbestos or polychlorinated biphenyls.
4.25 ACCOUNTS RECEIVABLE. All accounts, notes, contracts and other
receivables of Small World (collectively, "Small World Accounts Receivable")
were acquired by Small World in the ordinary course of business arising from
bona fide transactions completed in accordance with the terms and provisions
related thereto. To the knowledge of Small World and the Small World
Shareholders, there are no set-offs, counterclaims or disputes asserted with
respect to any Small World Accounts Receivable that would result in claims in
excess of the reserve for bad debts set forth on the Small World Financial
Statements and, to the knowledge of Small World and the Small
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World Shareholders, subject to such reserve, all Small World Accounts Receivable
are collectible in full. Small World has previously provided Parent true and
complete aging reports prepared as of December 10, 1997, and December 31, 1996,
both of which show the time elapsed since invoice date for all Small World
Accounts Receivable as of the relevant dates.
4.26 ACCOUNTS PAYABLE. Except as set forth on Schedule 4.26 hereto,
-------------
all material accounts, notes, contracts and other amounts payable of Small World
(collectively, "Small World Accounts Payable") are currently within their
respective terms, and are neither in default nor otherwise past due by more than
90 days. Small World has previously provided Parent with a true and complete
aging report prepared as of December 10, 1997, and December 31, 1996, both of
which show the time elapsed since invoice date for all Small World Accounts
Payable as of the relevant dates.
4.27 INSURANCE. Small World currently maintains, in full force and
effect, all insurance policies that are either (a) required to be maintained for
the conduct of the Small World Business or the ownership of Small World's
property (both real and personal); or (b) otherwise maintained by companies
engaged in a business comparable to the Small World Business (collectively, the
"Small World Insurance Policies"). The Small World Insurance Policies are listed
on Schedule 4.27 hereto, and true and complete copies of all Small World
-------------
Insurance Policies have previously been provided to Parent. Small World (i) is
not in default regarding the provisions of any Small World Insurance Policy;
(ii) has paid all premiums due thereunder; and (iii) has not failed to present
any notice or present any material claim thereunder in a due and timely fashion.
4.28 BANKRUPTCY. Neither Small World nor any of the Small World
Shareholders has filed a petition or request for reorganization or protection or
relief under the bankruptcy laws of the United States or any state or territory
thereof, made any general assignment for the benefit of creditors, or consented
to the appointment of a receiver or trustee, including a custodian under the
United States bankruptcy laws, whether such receiver or trustee is appointed in
a voluntary or involuntary proceeding.
4.29 SMALL WORLD DEBT. As of the date hereof, the Small World Debt
(including, without limitation, that certain Promissory Note to Seth Aron, dated
as of January 23, 1998, in the principal amount of $722,145.72 (the "Aron
Note")), is not in excess of $936,979.34. The Small World Debt is more
particularly described on Schedule 4.29 hereto.
-------------
4.30 SMALL WORLD SPORTS. Small World has previously provided Parent
with true and complete copies of all documentation evidencing the spin off of
Small World Sports, Inc. from Small World (the "Small World Spin Off").
4.31 INVESTMENT PURPOSE. Each Small World Shareholder represents that
he is acquiring the Parent Stock solely for his own account for investment and
not with a view to, or for sale in connection with, any distribution thereof.
Each Small World Shareholder agrees that he will not, directly or indirectly,
offer, transfer, sell, pledge, hypothecate or otherwise dispose of any Parent
Stock (or solicit any offers to buy, purchase or other acquire or take a pledge
of any such shares) except in compliance with the Securities Act of 1933, as
amended (the "Securities Act") and the rules and regulations thereunder, other
applicable laws, rules and regulations, and the
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Stockholders' Agreement (as defined in Section 7.2(c) hereof).
4.32 RESTRICTIONS ON TRANSFER. Each Small World Shareholder
acknowledges that (a) the Parent Stock received by him hereunder has not been
registered under the Securities Act; (b) neither Parent nor any Person acting on
its behalf has offered to sell the Parent Stock in any form of general
solicitation or general advertising within the meaning of Rule 502 of Regulation
D promulgated by the Securities and Exchange Commission under the Securities
Act; (c) the Parent Stock may be required to be held indefinitely, and each
Small World Shareholder must continue to bear the economic risk of the
investment in such shares unless such shares are subsequently registered under
the Securities Act or an exemption from such registration is available; (d)
there may not be any public market for the Parent Stock in the foreseeable
future; (e) Rule 144 promulgated under the Securities Act is not presently
available with respect to sales of any securities of Parent, and such Rule is
not anticipated to be available in the foreseeable future; (f) when and if
Parent Stock may be disposed of without registration in reliance upon Rule 144,
such disposition can be made only in limited amounts and in accordance with the
terms and conditions of such Rule; (g) if the exemption afforded by Rule 144 is
not available, public sale without registration will require the availability of
an exemption under the Securities Act; (h) the Parent Stock is subject to the
terms and conditions of the Stockholders' Agreement; (i) restrictive legends
shall be placed on the certificates representing Parent Stock; and (j) a
notation shall be made in the appropriate records of Parent indicating that
Parent Stock is subject to restrictions on transfer and, if Parent should in the
future engage the services of a stock transfer agent, appropriate stop-transfer
instructions will be issued to such transfer agent with respect to Parent Stock.
4.33 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION. Each
Small World Shareholder represents and warrants that (a) his financial situation
is such that he can afford to bear the economic risk of holding Parent Stock
acquired by him hereunder for an indefinite period; (b) he can afford to suffer
the complete loss of such Parent Stock; (c) he has been granted the opportunity
to ask questions of, and receive answers from, representatives of Sub and Parent
concerning the terms and conditions of the Parent Stock and to obtain any
additional information that he deems necessary; (d) his knowledge and experience
in financial business matters is such that he is capable of evaluating the
merits and risk of ownership of the Parent Stock; and (e) he has carefully
reviewed the terms of the Stockholders' Agreement and has evaluated the
restrictions and obligations contained therein.
4.34 DISCLOSURE. No statement of fact by Small World contained in this
Agreement and no written statement of fact furnished by Small World to Parent or
Sub pursuant to or in connection with this Agreement contains or will contain
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements herein or therein contained not
materially misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to
Small World and the Small World Shareholders, which representations and
warranties shall survive the Closing in
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accordance with Section 9.1 of this Agreement, as follows:
5.1 ORGANIZATION AND QUALIFICATION. Each of Parent and its
Subsidiaries (as defined in Section 9.12 hereof) is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. Each of Parent and its Subsidiaries has the requisite
corporate power and authority to carry on its business as it is now being
conducted and is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary. Complete and correct copies of the Certificates of Incorporation and
Bylaws of Parent and Sub as in effect on the date hereof are attached as
Schedule 5.1 hereto.
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5.2 AUTHORITY. Each of Parent and Sub has the necessary corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by each of Parent
and Sub have been duly and validly authorized and approved by their respective
Board of Directors and shareholders, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective boards of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by Small World and the Small World
Shareholders, constitutes the valid and binding obligation of each of Parent and
Sub, enforceable against each of Parent and Sub in accordance with its terms.
5.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth
on Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
------------
Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby or compliance by Parent and Sub with any of the provisions
hereof will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Parent or Sub, or the organizational documents of any other
Subsidiaries;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to Parent or its Subsidiaries,
or by which Parent, any of its Subsidiaries, or their respective properties or
assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default
(or an event that, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except
for (x)
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compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL and BCL);
or (ii) any other Person.
5.4 LITIGATION. Except as set forth on Schedule 5.4 hereto, there is no
------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 BROKERS. Except as disclosed on Schedule 5.5 hereto, no broker or
------------
finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Sub.
5.6 PARENT STOCK.
(a) As of the date hereof the authorized capital stock of Parent
consists of (i) (A) 50,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 8,172,000 shares are
validly issued and outstanding (taking into account the stock split described in
Section 3.1(d) hereof, but without taking into account any shares of Parent
Stock to be issued pursuant to this Agreement), fully paid and nonassessable;
(ii) 500,000 shares of blank check preferred stock, (A) 250,000 of which have
been designated as Class A Convertible Preferred Stock, of which 169,260 shares
are validly issued and outstanding, fully paid and nonassessable, (B) 100,000 of
which have been designated as Class B Convertible Preferred Stock, of which
83,075 shares are validly issued and outstanding, fully paid and nonassessable,
and (C) 15,000 of which have been designated as Class C Convertible Preferred
Stock, of which 9,232 shares are validly issued and outstanding, fully paid and
nonassessable. All outstanding capital stock of Parent was issued in accordance
with applicable federal and state securities laws. Except as set forth on
Schedule 5.6 hereto, there are no options, warrants, calls, agreements,
- ------------
commitments or other rights presently outstanding that would obligate Parent to
issue, deliver or sell shares of its capital stock, or to grant, extend or enter
into any such option, warrant, call, agreement, commitment or other right. In
addition to the foregoing, as of the date hereof, Parent has no bonds,
debentures, notes or other indebtedness issued or outstanding that have voting
rights in Parent.
(b) The holders of record as of the Effective Time of the outstanding
shares of capital stock of Parent, together with the number of shares of capital
stock then outstanding, are set forth on a pro forma basis on Schedule 5.6
------------
hereto.
(c) When delivered to the Small World Shareholders in accordance with
the terms hereof, the Parent Stock will (i) be duly authorized, fully paid and
nonassessable, and (ii) be free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
5.7 SUBSIDIARIES. Except as set forth on Schedule 5.7 hereto, Parent has
------------
no subsidiaries and does not otherwise own or control, directly or indirectly,
any equity interest in, or any security
15
<PAGE>
convertible into an equity interest in, any Entity. Schedule 5.7 hereto lists
------------
the name of each of the Subsidiaries of Parent, and indicates their respective
jurisdictions of incorporation.
5.8 FINANCIAL STATEMENTS. Parent has heretofore furnished Small World with
a true and complete copy of (a) the audited financial statements of iXL
Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31,
1993, 1994 and 1995, and for the four-month period ending April 30, 1996; (b)
audited combined financial statements for Creative Video, Inc. (n/k/a iXL,
Inc.), Creative Video Library, Inc. and Entrepreneur Television, Inc. for the
years ending December 31, 1993, 1994 and 1995, and for the four-month period
ending April 30, 1996; (c) the audited consolidated financial statements for
Parent and its Subsidiaries for the eight months ended December 31, 1996; and
(iv) the unaudited consolidated financial statements for Parent and its
Subsidiaries, dated November 30, 1997. Such financial statements present fairly
in all material respects the consolidated financial position, results of
operations, shareholders' equity and cash flows of Parent at the respective
dates or for the respective periods to which they apply. Except as disclosed
therein, such statements and related notes have been prepared each in accordance
with GAAP consistently applied throughout the periods involved (except, in the
case of the unaudited financial statements, for the exclusion of footnotes and
normal year end adjustments).
5.9 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including, without
limitation, any liability or obligation on account of taxes or any governmental
charges or penalty, interest or fines, except (a) liabilities incurred in the
ordinary course of business after November 30, 1997 that would not, whether
individually or in the aggregate, have a material adverse impact on the business
or financial condition of the Parent and its Subsidiaries, taken as a whole; (b)
liabilities reflected on the Parent Financial Statements; and (c) liabilities
incurred as a result of the transactions contemplated by this Agreement.
5.10 COMPLIANCE WITH APPLICABLE LAWS. Parent or its Subsidiaries holds all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
5.11 BOARD OF DIRECTOR CONSENT. Both the Board of Directors of Parent and
Sub have, by unanimous written consent, adopted and approved this Agreement and
the transactions contemplated hereby (including, without limitation, the
Merger).
5.12 BANKRUPTCY. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 DISCLOSURE. No statement of fact by Parent or Sub contained in this
Agreement and
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no written statement of fact furnished or to be furnished by Parent or Sub to
Small World pursuant to or in connection with this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements herein or therein
contained not misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 PUBLIC ANNOUNCEMENTS. The parties agree that, except as may otherwise
be required to comply with applicable laws and regulations (including, without
limitation, applicable securities laws) or to obtain consents required
hereunder, public disclosure of the transactions contemplated by this Agreement
shall be made only upon or after the consummation of the Merger. Any such
disclosure shall be coordinated by Parent, and none of Small World nor the Small
World Shareholders shall make any such disclosure without the prior written
consent of Parent.
6.2 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND EXPENSES. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.3 FURTHER ASSURANCES. From time to time after the Effective Time, upon
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions of this Agreement.
6.4 SMALL WORLD OPTIONS.
(a) Small World hereby covenants and agrees that, at the Effective
Time, there shall be no outstanding options, warrants and other rights to
acquire Small World Stock. Prior to the Effective Time, Small World shall have
obtained, and shall have delivered to Parent, releases reasonably acceptable to
Parent from any employee of Small World who had been told that he or she would
receive any such options, warrants or other rights.
(b) Parent hereby covenants and agrees that, at the Effective Time,
each of the individuals listed on Schedule 6.4(b) hereto shall receive options
---------------
to purchase that number shares of validly issued, fully paid and nonassessable
Parent Stock, at an exercise price per share, as is set forth on Schedule
--------
6.4(b), all of which shall have been issued pursuant to the IXL Holdings, Inc.
- ------
1996 Stock Option Plan, as amended (the "Parent Stock Option Plan").
(c) In addition to the foregoing, at the Effective Time, Parent shall
issue options to purchase 50,000 shares of validly issued, fully paid and
nonassessable Parent Stock, at an exercise price of $5.00 per share (in each
case, subject to the stock split described in Section 3.1(d) hereof), to those
Persons listed on Schedule 6.4(c) hereto (or to such other individuals as are
--------------
17
<PAGE>
selected by Small World and approved by Parent), pursuant to the Parent Stock
Option Plan.
(d) Notwithstanding anything to the contrary contained in this
Section 6.4, Seth Aron shall not be treated as a Small World Shareholder under,
and shall have no liability under, this Section 6.4; provi
6.5 SMALL WORLD DEBT. Parent hereby agrees that, contemporaneously with
the execution and delivery of this Agreement, Parent shall acquire, and assume
all obligations under, the Small World Debt (including, without limitation, the
Aron Note). Parent shall pay all amounts due in respect of the Small World Debt
at the Closing; provided, however, that Small World shall have provided Parent
at least two days prior to the Closing with complete and accurate pay-off
letters for all amounts owed as part of the Small World Debt.
6.6 SUBLEASE TO SMALL WORLD SPORTS, INC. Parent hereby agrees and
acknowledges that Small World will sublease office space to Small World Sports,
Inc. on such terms as are reasonably acceptable to Parent, Small World and Small
World Sports, Inc.
6.7 SECTION 338 ELECTION; TAX-FREE MERGER.
(a) The parties agree and acknowledge that the Merger is intended to
qualify, for federal income tax purposes, as a reorganization within the meaning
of Section 368(a) of the Code. Accordingly, none of the parties hereto shall
attempt to file a Section 338 election without the prior written consent of the
other parties hereto.
(b) Parent hereby agrees that it will continue to maintain its
ownership of Sub so as not to violate the continuity of interest requirements
under Section 368 of the Code and the regulations thereunder. If Parent (i)
fails to continue its ownership in accordance with the foregoing sentence, or
(ii) takes any action, or fails to take any reasonable action, and, as a result
of any thereof, the Internal Revenue Service (the "IRS") determines that the
Merger constitutes a taxable event for the Small World Shareholders, then Parent
shall loan to the Small World Shareholders, on an interest-free basis for a
period to be agreed upon by the parties, an amount equal to the federal income
tax imposed on the Small World Shareholders in connection with the Merger as a
result of such determination; provided, however, that (1) each Small World
Shareholder shall promptly (and in any event with five days of his receipt
thereof) deliver to Parent a copy of any notice received from the IRS relating
to the taxability of the Merger; and (2) Parent shall have the right, at its
sole cost, expense and determination, to defend against and/or settle any claim
by the IRS to the effect that the Merger constitutes a taxable event.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATION OF SMALL WORLD AND THE SMALL WORLD
SHAREHOLDERS TO EFFECT THE MERGER. The obligation of Small World and the Small
World Shareholders to effect the Merger shall be subject to the fulfillment at
or prior to the Effective Time of the following conditions:
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(a) (i) the appropriate officers of Parent shall have executed and
delivered to Small World at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-1" hereto, and (ii) the
------------
appropriate officers of Sub shall have executed and delivered to Small World at
the Closing, a closing certificate and incumbency certificate, substantially in
the form of Exhibit "A-2" hereto;
------------
(b) Parent shall have obtained all of the Consents listed on Schedule
--------
7.1(b) hereto;
- ------
(c) Small World shall have received a corporate certificate of good
standing for Parent and Sub, and a copy of the Certificate of Incorporation for
Parent and Sub, both as certified by the Secretary of State of Delaware;
(d) there shall have been delivered to each of the Small World
Shareholders at the Closing, duly executed by Parent, an Agreement to be Bound
to the Registration Rights Agreement of Parent, dated as of the hereof (the
"Agreement to be Bound to the Registration Rights Agreement"), substantially in
the form of Exhibit "B" hereto;
-----------
(e) Parent shall have executed and delivered at the Closing an Option
Agreement for each of the Persons listed on Schedule 6.4(b) and Schedule 6.4(c)
--------------- ---------------
hereto, substantially in the form of Exhibit "C" hereto;
----------
(f) Parent shall have complied with its obligations under Section 6.5
hereof;
(g) Parent shall have delivered to Small World that certain side
letter, dated of even date herewith, a form of which is attached hereto as
Exhibit "D" hereto;
- -----------
(h) Small World shall have received, at the Closing, a duly executed
opinion of counsel to Parent, substantially in the form of Exhibit "E" hereto;
-----------
and
(i) Small World shall have received from Parent such other documents
as Small World's counsel shall have reasonably requested, in form and substance
reasonably satisfactory to Small World's counsel.
7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time of the following conditions.
(a) the appropriate officers of Small World shall have executed and
delivered to Parent at the Closing, a closing certificate, substantially in the
form of Exhibit "F" hereto;
-----------
(b) Small World and the Small World Shareholders shall have obtained
or caused to be obtained all of the Consents listed on Schedule 7.2(b) hereto;
---------------
(c) there shall have been delivered to Parent at the Closing, duly
executed by
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each of the Small World Shareholders, (i) an Agreement to be Bound to the Second
Amended and Restated Stockholders' Agreement of Parent, dated December 17, 1997
(the "Stockholders' Agreement"), substantially in the form of Exhibit "G"
-----------
hereto; and (ii) an Agreement to be Bound by the Registration Rights Agreement;
(d) Parent shall have received a corporate certificate of good
standing for Small World, and a copy of the Certificate of Incorporation of
Small World, both as certified by the Secretary of State of New York;
(e) as of the Closing the Small World Debt shall be no greater than
$936,976.34, and Parent shall have received pay-off letters with respect thereto
in accordance with Section 6.5 hereto;
(f) Small World shall have complied with its obligations under
Section 6.4(a) hereof;
(g) Small World shall have purchased all of Seth Aron's right, title
and interest in and to a certain number of shares of the capital stock of Small
World owned by him, and any rights he may have had in respect thereof (in each
case, as determined in accordance with the terms of that certain Stock Purchase
Agreement between Small World and Seth Aron, dated of even date herewith), in
exchange for the Aron Note, a form of which is attached hereto as Exhibit "H";
-----------
(h) Small World shall have delivered to Parent a release, fully
executed by Seth Aron, substantially in the form of Exhibit "I" hereof;
-----------
(i) Parent shall have received, at the Closing, a duly executed
opinion of counsel to Small World and the Small World Shareholders,
substantially in the form of Exhibit "J" hereto; and
-----------
(j) Parent shall have received from Small World or the Small World
Shareholders, as the case may be, such other documents as Parent's counsel shall
have reasonably requested, in form and substance reasonably satisfactory to
Parent's counsel.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY PARENT.
(a) Parent shall indemnify and hold the Small World Shareholders and
Small World's directors, officers and employees (collectively, the "Small World
Indemnified Parties") harmless from and against, and agree promptly to defend
each of the Small World Indemnified Parties from and reimburse each of the Small
World Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including, without limitation,
reasonable attorney fees and other legal costs and expenses) (collectively a
"Small World Loss") that any of the Small World Indemnified Parties may at any
time suffer or incur, or
20
<PAGE>
become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations
and warranties made by Parent or Sub in or pursuant to this Agreement, or in any
instrument, certificate or affidavit delivered by Parent or Sub at the Closing
in accordance with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform,
satisfy and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the documents
and materials delivered by Parent pursuant to this Agreement; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.1.
(b) Notwithstanding any other provision to the contrary Parent shall
not have any liability under Section 8.1(a) above (i) unless the aggregate of
all Small World Losses for which Parent would be liable but for this sentence
exceeds, on a cumulative basis, an amount equal to $50,000, and then only to the
extent of such excess, (ii) for amounts in excess of $2,250,000 in the
aggregate, and (iii) unless the Small World Shareholders have asserted a claim
with respect to the matters set forth in Section 8.1(a)(i), or 8.1(a)(iii) to
the extent applicable to Section 8.1(a)(i), within 18 months of the Effective
Time. Notwithstanding any implication to the contrary contained herein, the
parties acknowledge and agree that a decrease in the value of Parent Stock would
not, by itself, constitute a Small World Loss, unless and to the extent a
decrease in the value of Parent Stock has been demonstrated to be as a result of
any event described in Sections 8.1(a)(i), (ii) or (iii) above.
8.2 INDEMNIFICATION BY THE SMALL WORLD SHAREHOLDERS.
(a) The Small World Shareholders shall jointly and severally
indemnify and hold Parent, Sub, Surviving Corporation and their respective
shareholders, directors, officers and employees (collectively, the "Parent
Indemnified Parties") harmless from and against, and agree to promptly defend
each of the Parent Indemnified Parties from and reimburse each of the Parent
Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claim of any kind (including, without limitation,
reasonable attorney fees (collectively, a "Parent Loss") that any of the Parent
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(i) any breach or inaccuracy of any representations and
warranties made by Small World or the Small World Shareholders in or pursuant to
this Agreement, or in any instrument, certificate or affidavit delivered by the
same at the Closing in accordance with the provisions hereof;
(ii) any failure by Small World or the Small World
Shareholders to carry out, perform, satisfy and discharge any of their
respective covenants, agreements, undertakings, liabilities or obligations under
this Agreement or under any of the documents and materials delivered by Small
World pursuant to this Agreement;
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<PAGE>
(iii) the Small World Spin Off; and
(iv) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above, none of the Small World Shareholders
shall have any liability under Section 8.2(a) above (i) unless the aggregate of
all Parent Losses for which the Small World Shareholders would be liable but for
this sentence exceeds, on a cumulative basis, an amount equal to $50,000, and
then only to the extent of such excess, (ii) in the case of Parent Losses
described in Sections 8.2(a)(i) and 8.2(a)(ii), and in Section 8.2(a)(iv) to the
extent attributable to Section 8.2(a)(i) or (ii), for amounts in excess of
$2,250,000 in the aggregate (it being understood that the provisions of this
clause (ii) shall not limit the liability of Small World Shareholders under
Section 8.2(a)(iii) hereof), and (iii) unless Parent has asserted a claim with
respect to the matters set forth in Section 8.2(a)(i) or 8.2(a)(iv) (to the
extent applicable to Section 8.2(a)(i)) within 18 months of the Effective Time,
except with respect to the matters arising under Sections 4.18, 4.19, 4.20 or
4.24 hereof, or in connection with the Small World Spin Off, in which event
Parent must have asserted a claim within the applicable statute of limitations.
Notwithstanding any implication to the contrary contained herein, the parties
acknowledge and agree that a decrease in the value of Parent Stock would not, by
itself, constitute a Parent Loss, unless and to the extent a decrease in the
value of Parent Stock has been demonstrated to be as a result of any event
described in Sections 8.2(a)(i), (ii) or (iii) above.
(c) Notwithstanding anything to the contrary contained herein, if there
has been a public offering of Parent Stock registered under the Securities Act,
any claims under this Section 8.2 in respect of the shareholders of Parent shall
be made only through Parent, Small World, or the officers or directors of either
of the foregoing.
8.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND.
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification under this Agreement. Subject
to the Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the indemnifying Party shall satisfy its obligations under
this Article VIII within 60 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 60-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section 8.1 or 8.2 hereof, as the case may
be, the Indemnifying Party shall have the right, at its sole cost and expense,
to employ counsel
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<PAGE>
of its own choosing to defend any such Claim asserted against the Indemnified
Party; provided, however, that if the Indemnified Party (i) reasonably believes
-------- -------
that its interests with respect to a Claim (or any material portion thereof) are
in conflict with the interests of the Indemnifying Party with respect to such
Claim (or portion thereof), and (ii) promptly notifies the Indemnifying Party,
in writing, of the nature of such conflict, then the Indemnified Party shall be
entitled to choose, at the sole cost and expense of the Indemnifying Party,
independent counsel to defend such Claim (or the conflicting portion thereof).
The lndemnified Party shall have the right to participate in the defense of any
such Claim at its own expense (except to the extent provided in the foregoing
sentence), but the Indemnifying Party shall retain control over such litigation
(except as provided in the foregoing sentence). The Indemnifying Party shall
notify the Indemnified Party in writing, as promptly as possible (but in any
case before the due date for the answer or response to a claim) after the date
of the notice of claim given by the Indemnified Party to the Indemnifying Party
under Section 8.3(a) hereof of its election to defend in good faith any such
third party Claim. So long as the Indemnifying Party is defending in good faith
any such Claim asserted by a third party against the Indemnified Party (or has
been relieved of the obligation to defend such Claim in accordance with this
Section 8.3(b) as a result of a conflict of interest between the Indemnified
Party and the Indemnifying Party), the Indemnified Party shall not settle or
compromise such Claim without the prior written consent of the Indemnifying
Party. The Indemnified Party shall cooperate with the Indemnifying Party in
connection with any such defense and shall make available to the Indemnifying
Party or its agents all records and other materials in the Indemnified Party's
possession reasonably required by it for its use in contesting any third party
Claim; provided, however, that the Indemnifying Party shall have agreed, in
-------- -------
writing, to keep such records and other materials confidential expect to the
extent required for defense of the relevant Claim. Whether or not the
Indemnifying Party elects to defend any such Claim, the Indemnified Party shall
have no obligations to do so. Within 30 days after a final determination
(including, without limitation, a settlement) has been reached with respect to
any Claim contested pursuant to this Section 8.3(b), the Indemnifying Party
shall satisfy its obligations with respect thereto. Any amounts paid thereafter
shall include interest thereon for the period commencing at the end of such 30-
day period and ending on the actual date of payment, at a rate of 15% per annum,
or, if lower, at the highest rate of interest permitted by applicable law at the
time of such payment.
ARTICLE IX
GENERAL PROVISIONS
9.1 SURVIVAL; RECOURSE. None of the agreements contained in this Agreement
shall survive the Merger, except that (i) the agreements contained in Article
III hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 9.10 and 9.11 hereof, shall survive the
Merger (except to the extent a shorter period of time is explicitly specified
therein) and (ii) the representations and warranties made in Articles IV and V
of this Agreement shall survive the Merger, and shall survive any independent
investigation by the parties, and any dissolution, merger or consolidation of
Small World or Parent, and shall bind the legal representatives, assigns and
successors of Small World, the Small World Shareholders, Parent, for a period of
18 months after the Closing Date (other than the representations and warranties
contained in Sections 4.18, 4.19, 4.20 and 4.24 hereof, which shall survive for
the applicable statute of limitations).
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9.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in Person, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Small World: Small World Software, Inc.
171 West 85th
New York, NY 10024
Attention: Scott Murphy
Telecopy: 212/501-9816
Telephone: 212/501-9800
With copies to: Adair Law Firm
30 Corporate Woods, Suite 280
Rochester, New York 14623
Attention: Donald Adair, Esq.
Telecopy: 716/272-8280
Telephone: 716/272-7820
If to the Small World To the address listed under the signature
Shareholders: line of the applicable Small World Shareholder
In the case of a
notice to Seth Aron,
with copies to: Ellis Funk Eidman Blumenthal & Bedke P.C.
1370 Avenue of the Americas
New York, New York 10019
Attention: Ronald P. Funk, Esq.
Telecopy: 212/757-2010
Telephone: 212/489-0500
If to Parent: IXL Holdings, Inc.
Two Park Place
1888 Emery Street
2nd Floor
Atlanta, Georgia 30318
Attention James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
24
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With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
If to Sub/Surviving
Corporation: iXL-New York, Inc.
1888 Emery Street
2nd Floor
Atlanta, Georgia 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
9.3 ENTIRE AGREEMENT. This Agreement and the documents, schedules and
instruments
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<PAGE>
referred to herein and to be delivered pursuant hereto constitute the entire
agreement between the parties pertaining to the subject matter hereof, and
supersede all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof.
There are no other representations or warranties, whether written or oral,
between the parties in connection the subject matter hereof, except as expressly
set forth herein.
9.4 ASSIGNMENTS; PARTIES IN INTEREST. Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests, and
obligations of Sub hereunder may be assigned to any direct wholly owned Delaware
subsidiary of Parent without such prior consent. Subject to the preceding
sentence, this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any Person not a party hereto any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement,
except as otherwise provided herein.
9.5 FEES AND EXPENSES. All reasonable fees and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such fees or expenses; provided,
--------
however, that the expenses of the Small World Shareholders shall be paid by
- -------
Small World.
9.6 GOVERNING LAW. This Agreement, except to the extent that the BCL or
the DGCL is mandatorily applicable to the Merger or the rights of the
shareholders of Small World or the other parties hereto with respect to the
Merger, shall be governed in all respects by the laws of the State of Georgia
(without giving effect to the provisions thereof relating to conflicts of law).
9.7 HEADINGS. The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
9.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
9.9 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economics or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon determination that any term or other provision hereof
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
9.10 POST-CLOSING ACCESS. For a period of three years after the Closing
Date, the Small World Shareholders and their agents and representatives shall
have reasonable access to the books
26
<PAGE>
and records of Small World.
9.11 POST-CLOSING NOTICE. To the extent the Surviving Corporation receives
written notice of any event or circumstance that materially affects any of the
Small World Shareholders, the Surviving Corporation shall promptly notify the
affected Small World Shareholder of such matter, information, or event and shall
provide them with copies of all relevant documentation or correspondence in
connection thereto.
9.12 CERTAIN DEFINITIONS. As used in this Agreement:
(a) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of that are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including, without limitation, Sub);
provided, however, that with respect to the Parent, the terms "Subsidiary" and
- -------- -------
"Subsidiaries" shall not include (i) University Netcasting, Inc., or (ii) Small
World; and
(b) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question.
- SIGNATURES ON THE FOLLOWING PAGE -
27
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and Small World have caused this Agreement
to be signed by their respective officers thereunder duly authorized, and each
Small World Shareholder has signed this Agreement, all as of the date first
written above.
"SMALL WORLD"
SMALL WORLD SOFTWARE, INC., a New York corporation
By: /s/ Mark Jacobstein
---------------------------------------------
Title: President
-------------------------------------------
"PARENT"
IXL HOLDINGS, INC., a Delaware corporation
By: /s/ James V. Sandry
---------------------------------------------
Title: Executive Vice President
-------------------------------------------
"SUB"
iXL-NEW YORK, INC., a Delaware corporation
By: /s/ James V. Sandry
---------------------------------------------
Title: Executive Vice President
-------------------------------------------
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
28
<PAGE>
"SMALL WORLD SHAREHOLDERS"
By: /s/ Mark Jacobstein
---------------------------------------------
Mark Jacobstein
Address: 108 Mac Dougal St, Apt 3B
---------------------------------------
New York, NY 10012
---------------------------------------
---------------------------------------
By: /s/ M. Scott Murphy
---------------------------------------------
Scott Murphy
Address: 200 W, 79th #2g
---------------------------------------
NYC, NY 10024
---------------------------------------
---------------------------------------
By: /s/ Seth Aron
---------------------------------------------
Seth Aron
Address: 339 W 88 #10
---------------------------------------
NYC, NY 10024
---------------------------------------
---------------------------------------
29
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate....................................... Exhibit A-1
Sub's Closing Certificate.......................................... Exhibit A-2
Agreement to be Bound to Registration Rights Agreement............. Exhibit B
Option Agreement................................................... Exhibit C
Side Letter Agreement.............................................. Exhibit D
Opinion of Counsel to Parent....................................... Exhibit E
Small World Closing Certificate.................................... Exhibit F
Agreement to be Bound to Stockholders' Agreement................... Exhibit G
Stock Purchase Agreement between Small World and Seth Aron......... Exhibit H
Release Agreement.................................................. Exhibit I
Opinion of Counsel to Small World.................................. Exhibit J
<PAGE>
SCHEDULE 4.1
------------
CERTIFICATE OF INCORPORATION AND
BYLAWS OF SMALL WORLD
SCHEDULE 4.3(A)
---------------
OUTSTANDING OBLIGATIONS OF SMALL WORLD
TO ISSUE SMALL WORLD OPTION,
WARRANTS OR OTHER STOCK RIGHTS
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF SMALL WORLD
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF SMALL WORLD
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF SMALL WORLD
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF SMALL WORLD
SCHEDULE 4.10
-------------
EXCEPTIONS TO GOOD CONDITION OF EQUIPMENT OF SMALL WORLD
SCHEDULE 4.11
-------------
INTELLECTUAL PROPERTY OF SMALL WORLD
SCHEDULE 4.13
-------------
LEASES OF SMALL WORLD
<PAGE>
SCHEDULE 4.14
-------------
CONTRACTS OF SMALL WORLD
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF SMALL WORLD
SCHEDULE 4.17
-------------
LITIGATION OF SMALL WORLD
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF SMALL WORLD
SCHEDULE 4.19
-------------
ERISA ISSUES OF SMALL WORLD
SCHEDULE 4.21
-------------
SMALL WORLD PERMITS
SCHEDULE 4.23
-------------
SMALL WORLD BROKERS
SCHEDULE 4.26
-------------
EXCEPTIONS TO CURRENT STATUS OF ACCOUNTS PAYABLE OF SMALL WORLD
<PAGE>
SCHEDULE 4.27
-------------
INSURANCE POLICIES OF SMALL WORLD
SCHEDULE 4.29
-------------
SMALL WORLD DEBT
SCHEDULE 5.1
------------
CERTIFICATE OF INCORPORATION AND BYLAWS OF PARENT AND SUB
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
<PAGE>
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
CAPITALIZATION OF PARENT
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 6.4(B) & (C)
---------------------
OPTIONS TO PURCHASE CLASS B COMMON STOCK
SCHEDULE 7.1(B)
---------------
PARENT CONSENTS
SCHEDULE 7.2(B)
---------------
SMALL WORLD CONSENTS
<PAGE>
EXHIBIT 2.12
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
IXL HOLDINGS, INC.,
IXL-SAN FRANCISCO, INC.
GREEN ROOM PRODUCTIONS, L.L.C.,
AND
THE CONTROLLING MEMBERS
DATED AS OF FEBRUARY 5, 1998
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT is entered into this 5th day of February,
1998, by and between GREEN ROOM PRODUCTIONS, L.L.C., a Virginia limited
liability company ("Seller"), IXL-SAN FRANCISCO, INC., a Delaware corporation
("Buyer"), IXL HOLDINGS, INC., a Delaware corporation ("IXL"), and certain of
the members of Seller listed on the signature page hereto (the "Controlling
Members").
R E C I T A L S:
- - - - - - - -
A. Seller is engaged in the business of web page design and internet
hosting (the "Business").
B. The Controlling Members own 62.88% of the issued and outstanding
membership interests of Seller.
C. Seller is willing to sell to Buyer and Buyer is willing to purchase
from Seller, substantially all of the assets, business, properties and rights of
Seller related to the conduct of the Business on the terms and subject to the
conditions set forth herein.
D. Buyer is a wholly owned subsidiary of IXL.
E. It is anticipated that following the Closing (as herein defined) the
Controlling Members will liquidate the Seller and distribute the consideration
received pursuant to this Agreement to its members (the "Green Room Members")
who will became stockholders in IXL.
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
PURCHASE AND SALE
-----------------
1.1 Purchase and Sale. Contemporaneously with the execution and delivery
-----------------
of this Agreement, and upon the terms and conditions hereof, Seller shall sell
and deliver to Buyer, and Buyer shall purchase, all of Seller's right, title and
interest in and to the Equipment (as defined in Section 2.11 hereof), the
Intellectual Property (as defined in Section 2.12(a) hereof), the Software (as
defined in Section 2.12(b) hereof), the Leases (as defined in Section 2.14
hereof), the Contracts (as defined in Section 2.15 hereof), the Permits (as
defined in Section 2.21 hereof), the Accounts Receivable (as defined in Section
2.23 hereof), all moneys of Seller relating to the Business, whether in the form
of cash, cash equivalents, marketable securities, short term investments or
deposits in bank of other financial institution accounts of any kind (the
"Cash"), and all other assets, tangible and intangible, used or useable in the
operation of the Business and not otherwise
-1-
<PAGE>
specifically referred to in this Agreement (the "Miscellaneous Assets"),
excepting only those assets listed on Schedule 1.1 (the "Retained Assets"). The
------------
Equipment, the Intellectual Property, the Software, the Leases, the Contracts,
the Permits, the Accounts Receivable, the Cash and the Miscellaneous Assets are
collectively referred to herein as the "Purchased Assets." Seller shall not
transfer, convey or assign to Buyer, but shall retain, all of its right, title
and interest in and to the Retained Assets.
1.2 The Closing. The closing of the aforementioned purchase and sale (the
-----------
"Closing") shall take place at the offices of Minkin & Snyder, A Professional
Corporation, One Buckhead Plaza, 3060 Peachtree Road, Suite 1100, Atlanta,
Georgia 30305, or at such other place as the parties may mutually agree. The
date upon which the Closing occurs is hereinafter referred to as the "Closing
Date."
1.3 Purchase Price. As consideration for the purchase of the Purchased
--------------
Assets, Buyer shall pay to Seller an amount equal to $1,800,000, (the "Purchase
Price"), payable as follows:
(a) 344,270 shares of validly issued, fully paid and nonassessable
Class B Common Stock of IXL, $.01 par value (the "IXL Stock"), valued at $5.00
per share as of the date hereof (subject to Section 7.9 hereof) to be delivered
to Buyer at the Closing; and
(b) cash in the amount of $78,649.
1.4 Assumption of Liabilities. In addition to the payment of the Purchase
-------------------------
Price, as additional consideration for the purchase of the Purchased Assets,
Buyer shall assume: (a) the liabilities of Seller listed on Schedule 1.4 hereto;
------------
and (b) the obligations of Seller under the Contracts and the Leases, in each
case arising from and accruing with respect to the operation of the Business
after the Closing Date, except any Contracts or Leases included in the Retained
Assets (the "Assumed Liabilities"). Seller shall be responsible for all the
obligations and liabilities of Seller whether now existing or previously or
hereafter incurred other than the Assumed Liabilities, including but not be
limited to (a) all taxes that result from or have accrued in connection with the
operation of the Business prior to the Closing Date except to the extent any
such liabilities are listed on Schedule 1.4; (b) liabilities and obligations
-------------
arising under Contracts and Leases transferred to Buyer in accordance with this
Agreement to the extent such liabilities and obligations arise during or relate
to or have accrued in connection with any period prior to the Closing except to
the extent any such liabilities are listed on Schedule 1.4; (c) all liabilities
------------
and obligations accruing with respect to the operation of the Business prior to
the Closing except to the extent any such liabilities are listed on Schedule
--------
1.4; (d) all liabilities related to the Green Room Benefit Plans; and (e) all
- ---
liabilities and obligations of Seller under this Agreement and any other
agreement entered into in connection herewith (collectively, the "Retained
Liabilities").
1.5 Allocation of Purchase Price. The Purchase Price will be allocated
----------------------------
among the items of Equipment in accordance with their respective net book
values, as reflected on the most recent Seller Financial Statement (as defined
in Section 2.6 hereof). The remainder of the Purchase Price will be allocated
to goodwill and other intangible assets. Each of the parties hereto agrees to
report the federal, state and local income and other tax consequences of the
transactions contemplated by this Agreement in a manner consistent with such
allocation.
-2-
<PAGE>
1.6 Other Deliveries. In addition to the foregoing, at the Closing, each
----------------
of Buyer, IXL, and Seller shall make the deliveries described in Article V
hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller and the Controlling Members, jointly and severally, represent and
warrant to Buyer, which representations and warranties shall survive the Closing
in accordance with Section 7.1 of this Agreement, as follows:
2.1 Organization and Qualification. Seller is a limited liability company
------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Virginia. Seller has the requisite power and authority to carry on the
Business as it is now being conducted and is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified or
licensed would not be reasonably expected to have a material adverse effect on
the Seller's operations, assets or financial condition. True and complete
copies of (x) the Articles of Organization, and (y) the Amended and Restated
Operating Agreement of the Seller, dated as of April 1, 1997 (the "Operating
Agreement"), both as in effect on the date hereof, are attached as Schedule 2.1
------------
hereto.
2.2 Authority. Seller has the necessary power and authority to execute
---------
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby by Seller have been duly and validly
authorized and approved by the Controlling Members in accordance with the terms
of the Operating Agreement and applicable law, and no other proceedings on the
part of Seller or the Controlling Members are necessary to authorize or approve
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Seller and each Controlling
Member, and assuming the due authorization, execution and delivery by Buyer and
IXL, constitutes the valid and binding obligation of Seller and each Controlling
Member, enforceable against Seller and each Controlling Member in accordance
with its terms subject, in each case, to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application relating to or affecting
creditors' rights and to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing.
2.3 Membership of Seller. The membership interests of Seller are owned by
--------------------
the Green Room Members as set forth on Schedule 2.3 hereto.
------------
2.4 Subsidiaries. Seller has no subsidiaries and does not otherwise own
------------
or control, directly or indirectly, any equity interest in, or any security
convertible into an equity interest in, any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
-3-
<PAGE>
2.5 No Conflicts, Required Filings and Consents. Except as set forth on
-------------------------------------------
Schedule 2.5 hereto, none of the execution and delivery of this Agreement by
- ------------
Seller or the Controlling Members, the consummation by Seller and the
Controlling Members of the transactions contemplated hereby or compliance by
Seller with any of the provisions hereof will:
(a) conflict with or violate the Articles of Organization of Seller or
the Operating Agreement;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Seller or the Purchased Assets;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, contract, agreement,
arrangement, lease, license, permit, judgment, decree, franchise or other
instrument or obligation to which Seller is a party or by which the Purchased
Assets may be bound or affected;
(d) result in the creation of any lien, charge, security interest,
pledge, option, right of first refusal, voting proxies or other voting agreement
or encumbrance of any kind or nature (any of the foregoing, a "Lien") on any of
the Purchased Assets; or
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), of (i) any government or subdivision thereof,
whether domestic, foreign or multinational, or any administrative, governmental,
or regulatory authority, agency, commission, court, tribunal or body, whether
domestic, foreign or multinational (a "Governmental Entity"); or (ii) any other
individual, corporation, trust, partnership, limited liability company or other
entity (collectively, a "Person").
2.6 Financial Statements. Seller has heretofore furnished Buyer with a
--------------------
true and complete copy of the unaudited financial statements of Seller for the
years ending December 31, 1996 and 1997, (collectively herein referred to as the
"Seller Financial Statements"). The Seller Financial Statements present fairly
the financial position and operating results of Seller as of the dates, and
during the periods, indicated therein and have been prepared on a consistent
basis.
2.7 Absence of Changes. Except as provided in Schedule 2.7 hereto, since
------------------ ------------
December 31, 1997, (a) Seller has not entered into any transaction affecting the
Purchased Assets that was not in the ordinary course of business; (b) there has
been no material damage, destruction or loss of any of the Purchased Assets
(whether or not covered by insurance); (c) there has been no distribution to any
member of Seller in respect of his membership interest, whether in cash or
property, and no purchase or redemption of the membership interest of any member
of Seller; (d) Seller has not failed to satisfy any of its debts, obligations or
liabilities related to the Business or the Purchased Assets as the same become
due and owing; (e) there have been no capital expenditures in excess of $10,000
for any single item, or $25,000 in the aggregate; (f) Seller has not ceased to
transact business with any customer that, as of the date of such cessation,
represented more than 5% of the annual gross revenues of Seller; (g) there has
been no termination or resignation of any key
-4-
<PAGE>
employee or officer of Seller, and to the knowledge of Seller and the Green Room
Members, no such termination or resignation is threatened; (h) there has been no
change in accounting methods or practices or Seller, or revaluation of any of
the Purchased Assets (other than Accounts Receivable (as defined in Section 2.23
hereof) written down in the ordinary course of business that are not in excess
of $10,000 for any single Seller Account Receivable and $25,000 in the
aggregate); (i) there has been no amendment or termination of any material oral
or written contract, agreement or license related to the Business, to which
Seller is a party or by which it is bound, except in the ordinary course of
business, or except as expressly contemplated by this Agreement; (j) there has
been no agreement or commitment to do any of the foregoing; and (k) there has
been no other event or condition pertaining to and materially affecting the
Purchased Assets or the ability of Seller to consummate the transactions
contemplated by this Agreement.
2.8 Undisclosed Liabilities. Seller does not have any debt, liability or
-----------------------
obligation of any kind, whether accrued, absolute or otherwise, including,
without limitation, any liability or obligation on account of taxes or any
governmental charges or penalty, interest or fines, except (a) liabilities
incurred in the ordinary course of business after December 31, 1997 that would
not, whether individually or in the aggregate, have a material adverse impact on
the business or financial condition of the Seller; (b) liabilities reflected on
the Seller Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated by this Agreement.
2.9 Purchased Assets. The Purchased Assets include all of the assets,
----------------
properties and rights of every type and description, real, personal and mixed,
tangible and intangible, that are necessary for, or used in, the conduct of the
Business as conducted by Seller.
2.10 Title to Properties. Except as set forth on Schedule 2.10 hereto,
------------------- -------------
Seller has good and marketable title to all of the Purchased Assets (other than
leasehold interests), and good title to all leasehold interests included as part
of the Purchased Assets, in each case, free and clear of any and all Liens other
than liens for taxes not yet due and payable.
2.11 Equipment. Seller has heretofore furnished IXL with a true and
---------
correct list of all items of tangible personal property (including, without
limitation, computer hardware) necessary for or used in the operation of the
Business in the manner in which it has been and is now operated by Seller (the
"Equipment"), except for personal property having a net book value of less than
$10,000, all of which is included as part of the Purchased Assets. Each item of
Equipment included in the Purchased Assets is in good condition and repair,
ordinary wear and tear excepted.
2.12 Intellectual Property.
---------------------
(a) Seller has heretofore furnished IXL with a true and complete list
of all proprietary technology, trade secrets, know-how, patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights, and copyrights used or required to be used by Seller in the
operation of the Business (the "Intellectual Property"), except for any
Intellectual Property which is not material to the Business, all of which is
included as part of the Purchased Assets. Seller owns, or is validly licensed
or otherwise has the right to use or exploit, all of the Intellectual Property,
free of any obligation to make any payment (whether of a royalty, license fee,
compensation or otherwise). No claims are pending or, to the knowledge of
-5-
<PAGE>
Seller, threatened, that Seller is infringing or otherwise adversely affecting
the rights of any Person with regard to any of the Intellectual Property. Seller
has used its reasonable best efforts to protect its rights in the Intellectual
Property and, to the knowledge of Seller, no Person is infringing the rights of
Seller with respect to any Intellectual Property. No intangible property is
required for the conduct of the Business other than the Intellectual Property.
To the knowledge of Seller, use of the name "Green Room Productions, Inc." does
not infringe upon the rights of any Person.
(b) Seller has heretofore furnished IXL with a true and complete list
of all computer software used or required to be used by Seller in the conduct
of the Business (the "Software"), except for Software which is not material to
the Business, all of which is included as part of the Purchased Assets. Except
as set forth on Schedule 2.12 hereto, Seller currently licenses, or otherwise
-------------
has the legal right to use, all of the Software (including any upgrades,
alterations or enhancements with respect thereto), and all of the Software is
being used in compliance with any applicable licenses or other agreements.
2.13 Real Property. Seller owns no real property.
-------------
2.14 Leases. Schedule 2.14 hereto sets forth a list of all leases pursuant
------ -------------
to which Seller leases, as lessor or lessee, real or personal property used in
operating the Business or otherwise (the "Leases"), all of which are included as
part of the Purchased Assets. Copies of the Leases, which have previously been
provided to IXL, are true and complete copies thereof. All of the Leases are
valid, binding and enforceable in accordance with their respective terms, and
there is not under any such Lease any existing default by Seller, or, to the
knowledge of Seller by any other party thereto, or any condition or event of
that, with notice or lapse of time or both, would constitute a default. Seller
has not received notice that the lessor of any of the Leases intends to cancel,
suspend or terminate the Leases or to exercise or not exercise any options under
any of the Leases. Except as set forth on Schedule 2.14, all of the Leases are
-------------
assignable to Buyer without the consent or approval of any other person in
connection with the transactions contemplated by this Agreement.
2.15 Contracts. Schedule 2.15 hereto sets forth a true and complete list
--------- -------------
of all contracts, agreements and commitments (whether written or oral) to which
Seller is, directly or indirectly, a party (in its own name or as a successor in
interest), or by which it or the Purchased Assets are otherwise bound,
including, without limitation, any service agreements, customer agreements,
supplier agreements, agreements to lend or borrow money, shareholder agreements,
employment agreements, agreements relating to the Intellectual Property and the
like (collectively, the "Contracts"), except only those Contracts which involve
less than $10,000 and are cancelable , without penalty, on no more than 90 days
notice, all of which are included as part of the Purchased Assets.
True and complete copies of each Contract required to be listed on Schedule
--------
2.15 (or a true and complete narrative description of any oral Contract) have
- ----
previously been provided to IXL. Neither Seller nor, to the knowledge of
Seller, any other party to any of the Contracts, (x) is in default under (nor
does there exist any condition that, with notice or lapse of time or both, would
cause such a default under) any of the Contracts, or (y) has waived any right it
may have under any of the Contracts, the waiver of which would have a material
adverse effect on the business, assets or financial condition of Seller. All of
the Contracts constitute the valid and binding obligation of
-6-
<PAGE>
Seller, enforceable in accordance with their respective terms, and, to the
knowledge of Seller and the other parties thereto. Except as set forth on
Schedule 2.15 all of the Contracts are assignable to Buyer without the consent
- -------------
or approval of any other Person in connection with the transactions contemplated
by this Agreement.
2.16 Payroll Information. Seller has previously provided IXL with a true
-------------------
and complete copy of the most recent payroll report of Seller, showing all
current employees of Seller and their current levels of compensation, other than
bonuses and other extraordinary compensation. Seller has paid all compensation
required to be paid to employees of Seller on or prior to the date hereof.
2.17 Litigation. Except as set forth on Schedule 2.17 hereto, there is no
---------- -------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Seller, threatened against or affecting Seller or the Purchased Assets, nor is
there any judgment, decree, injunction or order of any applicable Governmental
Entity or arbitrator outstanding against Seller that, either individually or in
the aggregate, would have a material adverse effect on the Purchased Assets or
the financial condition of Seller.
2.18 Employee Benefit Plans/Labor Relations.
--------------------------------------
(a) Except as disclosed in Schedule 2.18 hereto, there are no employee
-------------
benefit plans, agreements or arrangements maintained by Seller, including,
without limitation, (i) "employee benefit plans," within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"); (ii) affirmative action plans; (iii) current or deferred
compensation, pension, profit sharing, vacation or severance plans or programs;
or (iv) medical, hospital, accident, disability or death benefit plans
(collectively, "Green Room Benefit Plans"). All Green Room Benefit Plans are
administered in accordance with, and are in compliance with, all applicable laws
and regulations. No default exists with respect to the obligations of Seller
under any Green Room Benefit Plans.
(b) Seller is not a party to any collective bargaining agreement, no
such agreement determines the terms and conditions of employment of any employee
of Seller, no collective bargaining agent has been certified as a representative
of any of the employees of Seller, no representation campaign or election is now
in progress with respect to any employee of Seller and there are no labor
disputes, grievances, controversies, strikes or requests for union
representation pending, or, to the knowledge of Seller, threatened, relating to
or affecting the Business. To the knowledge of Seller, no event has occurred
that could give rise to any such dispute, controversy, strike or request for
representation.
2.19 ERISA.
-----
(a) All Green Room Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in compliance with, the applicable
provisions of ERISA. Each of Green Room Benefit Plans that is intended to meet
the requirements of Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), has been determined by the Internal Revenue Service to
meet such requirements within the meaning of such provision. No Green Room
Benefit Plan is subject to Title IV of ERISA or Section 412 of the Code. Seller
has not
-7-
<PAGE>
engaged in any non-exempt "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, involving Green Room Benefit
Plans that would subject Seller to the penalty or tax imposed under Section
502(i) of ERISA or Section 4975 of the Code. Seller has not engaged in any
transaction described in Section 4069 of ERISA within the last five years.
Except as disclosed in Schedule 2.19 hereto, neither the execution and delivery
-------------
of this Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including, without limitation, severance,
unemployment compensation or golden parachute) becoming due to any director or
other employee of Seller, (ii) increase any benefits otherwise payable under any
Green Room Benefit Plan or (iii) result in the acceleration of the time of
payment or vesting of any such benefits to any extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Green Room Benefit Plan that is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA and
that is intended to meet the requirements of Section 401(a) of the Code (a
"Pension Plan"), or by any entity that is considered one employer with Seller
under Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate"),
within the 12-month period ending on the date hereof. Seller has not incurred
any liability to the Pension Benefit Guaranty Corporation in respect of any
Green Room Benefit Plan that remains unpaid.
2.20 Taxes. Seller has duly and timely filed all federal, state and local
-----
income, franchise, excise, real and personal property and other tax returns and
reports, including extensions, required to have been filed by Seller on or prior
to the date hereof. Seller has duly and timely paid all taxes and other
governmental charges, and all interest and penalties with respect thereto,
required to be paid by Seller (whether by way of withholding or otherwise) to
any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefore have
been provided in the applicable Seller Financial Statement). As of the date
hereof, all deficiencies proposed as a result of any audits have been paid or
settled. There are, and after the date of this Agreement will be, no tax
deficiencies (including penalties and interest) of any kind assessed against or
relating to Seller with respect to any taxable periods ending on or before, or
including, the Closing Date of a character or nature that would result in Liens
or claims on any of the Purchased Assets or on Buyer's title or use of the
Purchased Assets or that would result in any claim against Buyer.
2.21 Compliance with Applicable Laws. Seller holds all permits, licenses,
-------------------------------
variances, exemptions, orders and approvals of all Governmental Entities
necessary to own, lease or operate all of the Purchased Assets, as appropriate,
and to carry on the Business as now conducted (the "Permits"), except for such
permits which are not material to the Business. To the knowledge of Seller,
Seller is in material compliance with all applicable laws, ordinances and
regulations and the terms of the Permits, and all such Permits are assignable to
Buyer in connection with the transactions contemplated by this Agreement.
Schedule 2.21 hereto sets forth a list of the Permits, a true and correct copy
- -------------
of each of which has been provided to IXL.
2.22 Brokers. Except as set forth on Schedule 2.22 hereto, no broker or
------- -------------
finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated by this Agreement as a result of
arrangements made by or on behalf of Seller.
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<PAGE>
2.23 Accounts Receivable. All accounts, notes, contracts and other
-------------------
receivables of Seller included in the Purchased Assets (collectively, "Accounts
Receivable") were acquired by Seller in the ordinary course of business arising
from bona fide transactions completed in accordance with the terms and
provisions contained in any documents related thereto. To the knowledge of
Seller, there are no set-offs, counterclaims or disputes asserted with respect
to any Accounts Receivable that would result in claims in excess of the reserve
for bad debts set forth on the Seller Financial Statements and, subject to such
reserve, all Accounts Receivable are collectible in full.
2.24 Accounts Payable. All accounts, notes, contracts and other amounts
----------------
payable of Seller included in the Assumed Liabilities are currently within their
respective terms, and are neither in default nor otherwise past due by more than
90 days.
2.25 Insurance. Seller currently maintains, and has for at least the past
---------
year maintained, in full force and effect, all insurance policies that are
required to be maintained for the conduct of the Business (collectively, the
"Insurance Policies"). All of the Insurance Policies are listed on Schedule
--------
2.25 hereto, and true and compete copies of all Insurance Policies have
- ----
previously been provided to Buyer. Seller (i) is not in default regarding the
provisions of any Insurance Policy; (ii) has paid all premiums due thereunder;
and (iii) has not failed to present any notice or present any material claim
thereunder in a due and timely fashion.
2.26 Bankruptcy. Neither Seller, the Controlling Members, nor any entities
----------
affiliated, related or controlled by any of such parties, has filed a petition
or request for reorganization or protection or relief under the bankruptcy laws
of the United States or any state or territory thereof, made any general
assignment for the benefit of creditors, or consented to the appointment of a
receiver or trustee, including a custodian under the United States bankruptcy
laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
2.27 Disclosure. No statement of fact by Seller contained in this
----------
Agreement and no written statement of fact furnished or to be furnished by
Seller to Buyer pursuant to or in connection with this Agreement contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements herein or
therein contained not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF IXL AND BUYER
-----------------------------------------------
Each of IXL and Buyer jointly and severally represents and warrants to
Seller which representations and warranties shall survive the Closing in
accordance with Section 7.1 of this Agreement, as follows:
3.1 Organization and Qualification. Each of IXL and its Subsidiaries (as
------------------------------
defined in Section 7.10 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of IXL and its Subsidiaries has the requisite
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<PAGE>
corporate power and authority to carry on its business as it is now being
conducted and is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary. Complete and correct copies of the Certificates of Incorporation and
Bylaws of IXL and Buyer as in effect on the date hereof are attached as Schedule
--------
3.1 hereto.
- ---
3.2 Authority. Each of IXL and Buyer has the necessary corporate power
---------
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by each of IXL and
Buyer have been duly and validly authorized and approved by their respective
Board of Directors and shareholders, and no other corporate or shareholder
proceedings on the part of either IXL or Buyer, or their respective boards of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of IXL and Buyer, and assuming the due
authorization, execution and delivery by Seller and the Controlling Members,
constitutes the valid and binding obligation of each of IXL and Buyer,
enforceable against each of IXL and Buyer in accordance with its terms.
3.3 No Conflicts, Required Filings and Consents. Except as set forth on
-------------------------------------------
Schedule 3.3 hereto, none of the execution and delivery of this Agreement by IXL
- ------------
or Buyer, the consummation by IXL and Buyer of the transactions contemplated
hereby or compliance by IXL and Buyer with any of the provisions hereof will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of IXL or Buyer, or the organizational documents of any other
Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to IXL or its Subsidiaries, or by which
IXL, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which IXL or any of its Subsidiaries is a
party or by which IXL, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of IXL or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for
compliance with any applicable requirements of any applicable securities laws),
or (ii) any other Person.
3.4 Litigation. Except as set forth on Schedule 3.4 hereto, there is no
---------- ------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
IXL, threatened against or affecting IXL or its Subsidiaries, nor is there any
judgment, decree, injunction or order of any applicable
-10-
<PAGE>
Governmental Entity or arbitrator outstanding against IXL or its Subsidiaries
that, either individually or in the aggregate, would have a material adverse
effect on the assets, business or financial condition of IXL and its
Subsidiaries, taken as a whole.
3.5 Brokers. Except as disclosed on Schedule 3.5 hereto, no broker or
------- ------------
finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of IXL or Buyer.
3.6 IXL Stock.
---------
(a) As of the date hereof, the authorized capital stock of IXL
consists of (i) (A) 50,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 8,443,356 shares are
validly issued and outstanding (taking into account the stock split described in
Section 7.9 hereof, but without taking into account any shares of IXL Stock to
be issued pursuant to this Agreement), fully paid and nonassessable; (ii)
500,000 shares of blank check preferred stock, (A) 250,000 of which have been
designated as Class A Convertible Preferred stock, of which 169,260 shares are
validly issued and outstanding, fully paid and nonassessable, (B) 100,000 of
which have been designated as Class B Convertible Preferred stock, of which
83,075 shares are validly issued and outstanding, fully paid and nonassessable,
and (C) 15,000 of which have been designated as Class C Convertible Preferred
stock, of which 9,232 shares are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 3.6 hereto, there are no
------------
options, warrants, calls, agreements, commitments or other rights presently
outstanding that would obligate IXL to issue, deliver or sell shares of its
capital stock, or to grant, extend or enter into any such option, warrant, call,
agreement, commitment or other right. In addition to the foregoing, as of the
date hereof, IXL has no bonds, debentures, notes or other indebtedness issued or
outstanding that have voting rights (or which are convertible into or
exercisable for securities having the right to vote) in IXL.
(b) When delivered to the Seller in accordance with the terms hereof,
the IXL Stock will be (i) duly authorized, validly issued, fully paid and
nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
3.7 Subsidiaries. Except as set forth on Schedule 3.7 hereto, IXL has no
------------ ------------
subsidiaries and does not otherwise own or control, directly or indirectly, any
equity interest in, or any security convertible into an equity interest in, any
Entity. Schedule 3.7 hereto lists the name of each of the Subsidiaries of IXL,
------------
and indicates their respective jurisdictions of incorporation, and the
percentage of the Subsidiary owned where the Subsidiary is not wholly-owned.
3.8 Financial Statements. IXL has heretofore furnished Seller with a true
--------------------
and complete copy of (a) the audited financial statements of IXL Interactive
Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31, 1993, 1994
and 1995, and for the four-month period ending April 30, 1996; (b) audited
combined financial statements for Creative Video, Inc. (n/k/a iXL, Inc.),
Creative Video Library, Inc. and Entrepreneur Television, Inc. for the years
ending December 31, 1993, 1994 and 1995, and for the four-month period ending
April 30, 1996; (c) the audited
-11-
<PAGE>
consolidated financial statements for IXL and its Subsidiaries for the eight
months ended December 31, 1996; and (iv) the unaudited consolidated financial
statements for IXL and its Subsidiaries, dated November 30, 1997 (collectively,
the "IXL Financial Statements"). The IXL Financial Statements present fairly in
all material respects the consolidated financial position, results of
operations, shareholders' equity and cash flows of IXL at the respective dates
or for the respective periods to which they apply. Except as disclosed therein,
such statements and related notes have been prepared each in accordance with
GAAP consistently applied throughout the periods involved (except, in the case
of the unaudited financial statements, for the exclusion of footnotes and normal
year end adjustments which would not be material in amount or effect).
3.9 Undisclosed Liabilities. Except as set forth on Schedule 3.9 hereto,
----------------------- ------------
neither IXL nor any of its Subsidiaries has any debt, liability or obligation of
any kind, whether accrued, absolute or otherwise, including, without limitation,
any liability or obligation on account of taxes or any governmental charges or
penalty, interest or fines, except (a) liabilities incurred in the ordinary
course of business after November 30, 1997 that would not, whether individually
or in the aggregate, have a material adverse impact on the business or financial
condition of the IXL and its Subsidiaries, taken as a whole; (b) liabilities
reflected on the IXL Financial Statements; and (c) liabilities incurred as a
result of the transactions contemplated by this Agreement.
3.10 Compliance with Applicable Laws. IXL or its Subsidiaries holds all
-------------------------------
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of IXL and its Subsidiaries, as appropriate, and to carry on IXL's
business as now conducted (the "IXL Permits"). To the knowledge of IXL, IXL and
its Subsidiaries are in material compliance with all applicable laws, ordinances
and regulations and the terms of the IXL Permits.
3.11 Bankruptcy. Neither IXL nor any of its Subsidiaries has filed a
----------
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
3.12 Absence of Changes. Except as provided in Schedule 3.12 hereto, since
------------------ -------------
November 30, 1997, there has not been (a) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of IXL and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of IXL and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to IXL and its
Subsidiaries, taken as a whole (including, without limitation, any borrowing or
sale of assets) except in the ordinary course of business consistent with past
practice; (d) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) with respect to its capital
stock; (e) any material change in its accounting principles, practices or
methods; (f) any split, combination or
-12-
<PAGE>
reclassification of any of IXL's capital stock or the issuance or authorization
of any issuance of any other securities in respect of, in lieu of or in
substitution for, shares of IXL's capital stock; or (g) any agreement (whether
or not in writing), arrangement or understanding to do any of the foregoing.
3.13 Intellectual Property.
---------------------
(a) IXL and its Subsidiaries own, or are validly licensed or
otherwise have the right to use or exploit, all of the material technology,
trade secrets, know-how, patents, patent rights, trademarks, trademark rights,
trade names, trade name rights, service marks, service mark rights, and
copyrights used or required to be used by IXL and its Subsidiaries in the
operation of their respective business (the "IXL Intellectual Property"). No
claims are pending or, to the knowledge of IXL, threatened, that IXL or its
Subsidiaries are infringing or otherwise adversely affecting the rights of any
Person with regard to any IXL Intellectual Property, IXL has used its reasonable
best efforts to protect its rights in the IXL Intellectual Property and, to the
knowledge of IXL, no Person is infringing the rights of IXL with respect to any
of the IXL Intellectual Property.
(b) IXL current licenses, or otherwise has the legal right to use,
all material computer software used or required to be used by IXL and its
Subsidiaries in the conduct of their respective businesses (including any
upgrades, alterations or enhancements with respect thereto), and all such
software is being used in material compliance with any applicable licenses or
other agreements.
3.14 Taxes. IXL and its Subsidiaries have duly and timely filed all
-----
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by IXL and its Subsidiaries on or prior to the date hereof. IXL and its
Subsidiaries have duly and timely paid all taxes and other governmental charges,
and all interest and penalties with respect thereto, required to be paid by IXL
and its Subsidiaries (whether by way of withholding or otherwise) to any
federal, state, local or other taxing authority (except to the extent the same
are being contested in good faith, and adequate reserves therefor have been
provided in the applicable IXL Financial Statement). As of the date hereof, all
deficiencies proposed as a result of any audits have been paid or settled.
3.15 Disclosure. No statement of fact by IXL or Buyer contained in this
----------
Agreement and no written statement of fact furnished or to be furnished by IXL
or Buyer to Seller pursuant to or in connection with this Agreement contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements herein or
therein contained not misleading.
ARTICLE IV
ADDITIONAL AGREEMENTS
---------------------
4.1 Public Announcements. The parties agree that, except as may otherwise
--------------------
be required to comply with applicable laws and regulations (including, without
limitation, applicable securities
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<PAGE>
laws) or to obtain consents required hereunder, public disclosure of the
transactions contemplated by this Agreement shall be made only upon or after the
consummation of the transactions contemplated by this Agreement. Any such
disclosure shall be coordinated by IXL, and none of Seller nor the Controlling
Members shall make any such disclosure without the prior written consent of IXL.
4.2 Transfer and Gains Taxes and Certain Other Taxes and Expenses. Each
-------------------------------------------------------------
of Seller and Buyer will pay 50% of all transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the transactions contemplated by this Agreement.
4.3 Further Assurances. From time to time after the date hereof, upon the
------------------
reasonable request of any party hereto, the other party or parties hereto shall
execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions of this Agreement.
ARTICLE V
DELIVERIES AT CLOSING
---------------------
5.1 Deliveries of Seller and the Green Room Members.
-----------------------------------------------
(a) At the Closing, and as a condition to Buyer's and IXL's
obligation to consummate the transactions contemplated hereby, Seller shall
deliver, or cause to be delivered, to Buyer, properly executed and dated as of
the date hereof: (i) the Bill of Sale and Assignment in the form of Exhibit "A"
----------
hereto (the "Bill of Sale"); (ii) the Assumption Agreement in the form of
Exhibit "B" hereto (the "Assumption Agreement"); (iii) the Assignment and
- -----------
Assumption of Contracts in the form of Exhibit "C" hereto (the "Contract
-----------
Assignment"); (iv) the Assignment and Assumption of Leases in the form of
Exhibit "D" hereto (the "Lease Assignment"); (v) the Trademark Assignment in the
- -----------
form of Exhibit "E" hereto (the "Trademark Assignment"); (vi) an Agreement to be
-----------
Bound to Registration Rights Agreement, substantially in the form of Exhibit "F"
-----------
hereto executed by each Green Room Member (the "Agreement to be Bound to
Registration Rights Agreement"); (vii) an Agreement to be Bound to Stockholders
Agreement executed by each Green Room Member, substantially in the form of
Exhibit "G" hereto; (viii) a closing certificate of Seller, substantially in the
- -----------
form of Exhibit "H" hereto; (ix) an Acknowledgment and Representation Letter
-----------
executed by each Green Room Member in the form of Exhibit I attached hereto; (x)
---------
Seller's opinion of counsel, substantially in the form of Exhibit "J" hereto;
-----------
and (xi) such other documents as provided in Article VII hereof or as Buyer
shall reasonably request.
(b) In addition to the foregoing, and as a further condition to
Buyer's and IXL's obligation to consummate the transactions contemplated by this
Agreement, at or prior to the Closing, Seller and the Green Room Members shall
have (i) obtained or caused to be obtained all of the Consents listed on
Schedule 5.1(b) hereto; and (ii) delivered to Buyer a Certificate of Good
- ---------------
-14-
<PAGE>
Standing of Seller, and a copy of the Articles of Organization of Seller, both
as certified by the Secretary of State of Virginia.
5.2 Deliveries of Buyer.
-------------------
(a) In addition to the payment of the Purchase Price in accordance
with Section 1.3 hereof (including the delivery of certificates representing the
shares of IXL Stock being delivered to Seller in connection therewith), at the
Closing, and as a condition to Seller's and each Controlling Members' obligation
to consummate the transactions contemplated hereby, Buyer shall deliver, or
cause to be delivered, to Seller, properly executed and dated as of the date
hereof: (i) the Bill of Sale; (ii) a closing certificate of IXL, substantially
in the form of Exhibit "K-1" hereof, and a closing certificate of Buyer,
-------------
substantially in the form of Exhibit "K-2" hereto; (iii) the Assumption
-------------
Agreement; (iv) the Contract Assignment; (v) the Lease Assignment; (vi) the
Trademark Assignment; (vii) an Agreement to be Bound to Registration Rights
Agreement; (viii) Buyer's opinion of counsel, substantially in the form of
Exhibit "L" hereto; and (ix) such other documents as Seller shall reasonably
- -----------
request.
(b) In addition to the foregoing, and as a further condition to
Buyer's obligation to consummate the transactions contemplated by this
Agreement, at or prior to the Closing, Buyer shall have (i) obtained or caused
to be obtained all of the Consents listed on Schedule 5.2(b) hereto; and (ii)
---------------
delivered to Seller a Certificate of Good Standing of IXL and Buyer, and a copy
of the Certificate of Incorporation of IXL and Buyer, all as certified by the
Secretary of State of Delaware.
ARTICLE V
INDEMNIFICATION
---------------
6.1 Indemnification by Buyer. (a) Each of IXL and Buyer shall jointly and
------------------------
severally indemnify and hold Seller, the Green Room Members and Seller's
officers, directors and employees (collectively, the "Seller Indemnified
Parties") harmless from and against, and agree promptly to defend each of the
Seller Indemnified Parties from and reimburse each of the Seller Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including, without limitation, reasonable
attorney fees and other legal costs and expenses) (collectively, a "Seller
Loss") that any of the Seller Indemnified Parties may at any time suffer or
incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations
and warranties made by Buyer or IXL in or pursuant to this Agreement, or in any
instrument, certificate or affidavit delivered by Buyer or IXL at the Closing in
accordance with the provisions hereof;
(ii) any failure by Buyer or IXL to carry out, perform,
satisfy and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the documents
and materials delivered by Buyer or IXL pursuant to this Agreement;
-15-
<PAGE>
(iii) the Assumed Liabilities; and
(iv) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 6.1(a).
(b) Notwithstanding any other provision to the contrary neither Buyer
nor IXL shall have any liability under Section 6.1(a)(i) above (i) unless the
aggregate of all Seller Losses for which IXL and Buyer would be liable but for
this sentence exceeds, on a cumulative basis, an amount equal to $75,000 and
then only to the extent of such excess, (ii) for amounts in excess of $1,800,000
in the aggregate, and (iii) unless a claim has been asserted with respect to the
matters set forth in Section 6.1(a)(i), or 6.1(a)(iv) to the extent applicable
to Section 6.1(a)(i), within two years of the date hereof. Notwithstanding any
implication to the contrary contained herein, the parties acknowledge and agree
that a decrease in the value of IXL Stock would not, by itself, constitute a
Seller Loss, unless and to the extent a decrease in the value of IXL Stock has
been demonstrated to be as a result of any event described in Sections
6.1(a)(i), (ii), (iii) or (iv) above.
6.2 Indemnification by Seller. (a) Each of Seller and the Controlling
-------------------------
Members shall jointly and severally indemnify and hold IXL, Buyer, and their
respective shareholders, directors, officers and employees (collectively, the
"Buyer Indemnified Parties") harmless from and against, and agree to promptly
defend each of the Buyer Indemnified Parties from and reimburse each of the
Buyer Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including, without limitation,
reasonable attorney fees and other legal costs and expenses) (collectively, a
"Buyer Loss") that any of the Buyer Indemnified Parties may at any time suffer
or incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any representations and
warranties made by Seller or the Controlling Members in or pursuant to this
Agreement, or in any certificate or affidavit delivered by the same at the
Closing in accordance with the provisions hereof;
(ii) any failure by Seller or the Controlling Members to
carry out, perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations under this Agreement or
under any of the documents and materials delivered by Seller or the Controlling
Members pursuant to this Agreement;
(iii) the Retained Liabilities; and
(iv) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 6.2(a).
(b) Notwithstanding any other provision to the contrary neither
Seller nor the Green Room Members shall have any liability under Section
6.2(a)(i) above (i) unless the aggregate of all Buyer Losses for which Seller
and the Green Room Members would be liable but for this sentence exceeds, on a
cumulative basis, an amount equal to $75,000, and then only to the extent of
such excess, (ii) for amounts in excess of $1,800,000 in the aggregate, and
(iii) unless a claim has
-16-
<PAGE>
been asserted with respect to the matters set forth in Section 6.2(a)(i), or
6.2(a)(iv) to the extent applicable to Section 6.2(a)(i), within two years of
the date hereof.
6.3 Notification of Claims; Election to Defend.
------------------------------------------
(a) A party entitled to be indemnified pursuant to Section 6.1 or 6.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification under this Agreement. Subject
to the Indemnifying Party's right to defend in good faith third party Claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VI within 30 days after the receipt of written notice thereof from
the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 6.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section 6.1 or 6.2 hereof, as the case may
be, the Indemnifying Party shall have the right, at its sole cost and expense,
to employ counsel of its own choosing to defend any such Claim asserted against
the Indemnified Party; provided, however, that if the Indemnified Party (i)
-------- -------
reasonably believes that its interests with respect to a Claim (or any material
portion thereof) are in conflict with the interests of the Indemnifying Party
with respect to such Claim (or portion thereof), and (ii) promptly notifies the
Indemnifying Party, in writing, of the nature of such conflict, then the
Indemnified Party shall be entitled to choose, at the sole cost and expense of
the Indemnifying Party, independent counsel to defend such Claim (or the
conflicting portion thereof). The Indemnified Party shall have the right to
participate in the defense of any such Claim at its own expense (except to the
extent provided in the foregoing sentence), but the Indemnifying Party shall
retain control over such litigation (except as provided in the foregoing
sentence). The Indemnifying Party shall notify the Indemnified Party in
writing, as promptly as possible (but in any case before the due date for the
answer or response to a claim) after the date of the notice of claim given by
the Indemnified Party to the Indemnifying Party under Section 6.3(a) hereof of
its election to defend in good faith any such third party Claim. So long as the
Indemnifying Party is defending in good faith any such Claim asserted by a third
party against the Indemnified Party (or has been relieved of the obligation to
defend such Claim in accordance with this Section 6.3(b) as a result of a
conflict of interest between the Indemnified Party and the Indemnifying Party),
the Indemnified Party shall not settle or compromise such Claim without the
prior written consent of the Indemnifying Party. The Indemnified Party shall
cooperate with the Indemnifying Party in connection with any such defense and
shall make available to the Indemnifying Party or its agents all records and
other materials in the Indemnified Party's possession reasonably required by it
for its use in contesting any third party Claim; provided, however, that the
-------- -------
Indemnifying Party shall have agreed, in writing, to keep such records and other
materials confidential except to the extent required for defense of the relevant
Claim. Whether or not the Indemnifying Party elects to defend any such Claim,
the Indemnified Party shall have no obligations to do so. Within 30 days after
a final determination (including, without limitation, a
-17-
<PAGE>
settlement) has been reached with respect to any Claim contested pursuant to
this Section 6.3(b), the Indemnifying Party shall satisfy its obligations with
respect thereto. Any amounts paid thereafter shall include interest thereon for
the period commencing at the end of such 30-day period and ending on the actual
date of payment, at a rate of 15% per annum, or, if lower, at the highest rate
of interest permitted by applicable law at the time of such payment.
ARTICLE VII
GENERAL PROVISIONS
------------------
7.1 Survival; Recourse. None of the agreements contained in this
------------------
Agreement shall survive the Closing, except that (i) the covenants contained in
Article IV hereof and the obligations to indemnify contained in Article VI
hereof shall survive indefinitely (except to the extent a shorter period of time
is explicitly specified therein) and (ii) the representations and warranties
made in Articles II and III of this Agreement shall survive the Closing for a
period of two years, and shall survive any independent investigation by the
parties, and any dissolution, merger or consolidation of Seller or Buyer, and
shall bind the legal representatives, assigns and successors of Seller, the
Controlling Members, IXL and Buyer.
7.2 Notices. All notices or other communications under this Agreement
-------
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by personal delivery, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Seller: Green Room Productions, L.L.C.
2400 Bridgeway Boulevard, Suite 300
Sausalito, California 94965
Attention: William A. Grana, Jr.
Telecopy: 415/289-7001
Telephone: 415/289-7100
With copies to: Greenbaum Doll & McDonald PLLC
1300 SunTrust Center
424 Church Street
Nashville, Tennessee 37219-2301
Attention: Stephen T. Braun, Esq.
Telecopy: 615/743-1900
Telephone: 615/743-1802
If to the Controlling Members: To the address listed under the signature
line of the applicable Controlling Member
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<PAGE>
If to IXL or Buyer: IXL Holdings, Inc.
Two Park Place
1888 Emery Street
Atlanta, Georgia 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Avenue
24/th/ Floor
New York, New York 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
7.3 Entire Agreement. This Agreement and the documents, schedules and
----------------
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof. There are no other representations or warranties, whether
written or oral, between the parties in connection the subject matter hereof,
except as expressly set forth herein.
7.4 Assignments; Parties in Interest. Neither this Agreement nor any of
--------------------------------
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests and
obligations of Buyer hereunder may be assigned to any wholly owned subsidiary of
Buyer without such prior consent. Subject to the preceding sentence, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any Person not a party hereto any right, benefit or remedy of
any nature whatsoever under or by reason of this Agreement, except as otherwise
provided herein.
7.5 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of Georgia (without giving effect to the provisions
thereof relating to conflicts of law).
-19-
<PAGE>
7.6 Headings. The descriptive headings herein are nserted for convenience
--------
of reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
7.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
7.8 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economics or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon determination that any term or other provision
hereof is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
7.9 Stock Split. The parties hereby agree and acknowledge that the per
-----------
share value of IXL Stock for purposes of this Agreement has been determined in
part by taking into account a 100 to 1 stock split of IXL Stock that is expected
to be effective on February 15, 1998 for all holders of record of IXL Stock as
of January 9, 1998. If the aforementioned stock split does not occur for any
reason, the parties agree that the per share value of IXL Stock shall be $500,
and that the provisions of this Agreement shall be adjusted accordingly.
7.10 Certain Definitions. As used in this Agreement:
-------------------
(a) the term "Subsidiary" or "Subsidiaries" means any Entity of which
IXL (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of that are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including, without limitation, Buyer);
provided, however, that with respect to IXL, the terms "Subsidiary" and
- -------- -------
"Subsidiaries" shall not include University Netcasting, Inc.; and
(b) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question, and any representation or warranty stated
to be made "to the Knowledge of Seller" shall include the knowledge of the
Controlling Members.
- SIGNATURES ON THE FOLLOWING PAGE -
-20-
<PAGE>
IN WITNESS WHEREOF, Buyer, Seller and IXL have caused this Agreement
to be signed by their respective officers thereunder duly authorized, and the
Controlling Members have signed this Agreement, all as of the date first written
above.
"SELLER"
GREEN ROOM PRODUCTIONS, L.L.C.,
a Virginia limited liability company
By: /s/ Eric G. Butz
-----------------------------------------
Eric G. Butz, Manager
By: /s/ Norwood H. Davis, III
-----------------------------------------
Norwood H. Davis, III, Manager
By: /s/ Gregory S. Waldbaum
-----------------------------------------
Gregory S. Waldbaum, Manager
"BUYER"
IXL-SAN FRANCISCO, INC., a Delaware
corporation
By: /s/ James V. Sandry
-----------------------------------------
James V. Sandry, Executive Vice President
"IXL"
IXL HOLDINGS, INC., a Delaware corporation
By: /s/ James V. Sandry
-----------------------------------------
James V. Sandry, Executive Vice President
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
-21-
<PAGE>
"CONTROLLING MEMBERS"
/s/ Eric G. Butz
---------------------------------------------
Eric G. Butz
Address:
------------------------------
2400 Bridgeway Blvd., Ste. 300
------------------------------
Sausalito, CA 94965
------------------------------
------------------------------
/s/ Norwood H. Davis III
---------------------------------------------
Norwood H. Davis, III
Address:
------------------------------
2400 Bridgeway Blvd., Ste. 300
------------------------------
Sausalito, CA 94965
------------------------------
------------------------------
/s/ Gregory S. Waldbaum
---------------------------------------------
Gregory S. Waldbaum
Address:
------------------------------
2400 Bridgeway Blvd., Ste. 300
------------------------------
Sausalito, CA 94965
------------------------------
------------------------------
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<PAGE>
EXHIBITS
--------
Bill of Sale ...................................................... Exhibit A
Assumption Agreement .............................................. Exhibit B
Contract Assignment ............................................... Exhibit C
Lease Assignment .................................................. Exhibit D
Trademark Assignment .............................................. Exhibit E
Agreement to be Bound to Registration Rights Agreement ............ Exhibit F
Agreement to be Bound to Stockholders' Agreement .................. Exhibit G
Seller's Closing Certificate ...................................... Exhibit H
Acknowledgment and Representation Letter .......................... Exhibit I
Seller's Opinion of Counsel ....................................... Exhibit J
IXL's Closing Certificate ......................................... Exhibit K-1
Buyer's Closing Certificate ....................................... Exhibit K-2
Buyer's Opinion of Counsel ........................................ Exhibit L
<PAGE>
SCHEDULE 1.1
------------
RETAINED ASSETS
SCHEDULE 1.4
------------
ASSUMED LIABILITIES
SCHEDULE 2.1
------------
ARTICLES OF ORGANIZATION AND AMENDED AND RESTATED OPERATING AGREEMENT OF SELLER
SCHEDULE 2.3
------------
MEMBERSHIP OF SELLER
SCHEDULE 2.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS
SCHEDULE 2.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES
SCHEDULE 2.10
-------------
EXCEPTIONS TO TITLE TO PROPERTIES
<PAGE>
SCHEDULE 2.12
-------------
EXCEPTIONS TO INTELLECTUAL PROPERTY RIGHTS
SCHEDULE 2.14
-------------
LEASES
SCHEDULE 2.15
-------------
CONTRACTS
SCHEDULE 2.17
-------------
LITIGATION
SCHEDULE 2.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS
SCHEDULE 2.19
-------------
ERISA
SCHEDULE 2.21
-------------
PERMITS
<PAGE>
SCHEDULE 2.22
-------------
BROKERS
SCHEDULE 2.25
-------------
INSURANCE
SCHEDULE 3.1
------------
CERTIFICATES OF INCORPORATION AND BYLAWS OF IXL AND BUYER
SCHEDULE 3.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS
SCHEDULE 3.4
------------
IXL AND BUYER LITIGATION
SCHEDULE 3.5
------------
IXL AND BUYER BROKERS
SCHEDULE 3.6
------------
OBLIGATIONS OF IXL TO ISSUE IXL OPTIONS, WARRANTS AND OTHER STOCK RIGHTS
<PAGE>
SCHEDULE 3.7
------------
SUBSIDIARIES
SCHEDULE 3.9
------------
IXL AND BUYER UNDISCLOSED LIABILITIES
SCHEDULE 3.12
-------------
EXCEPTIONS TO ABSENCE OF CHANGE
SCHEDULE 5.1(B)
---------------
REQUIRED CONSENTS OF GREEN ROOM
SCHEDULE 5.2(B)
---------------
IXL AND BUYER CONSENTS
<PAGE>
EXHIBIT 2.13
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
IXL HOLDINGS, INC.,
IXL-DENVER, INC.,
CONTINENTAL COMMUNICATIONS GROUP, INC. D/B/A
CUSTOMER COMMUNICATIONS GROUP, INC.
and
JOHN R. KLUG
DATED AS OF MARCH 27, 1998
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT is entered into this 27th day of March,
1998, by and between CONTINENTAL COMMUNICATIONS GROUP, INC. d/b/a CUSTOMER
COMMUNICATIONS GROUP, INC., a Delaware corporation ("Seller"), IXL-DENVER, INC.,
a Delaware corporation ("Buyer"), IXL HOLDINGS, INC., a Delaware corporation
("IXL"), and John R. Klug (the "Stockholder").
R E C I T A L S:
- - - - - - - -
A. Seller is engaged in the business of interactive media development
including web page design (the "Online Business") and also operates a marketing
agency (the "Marketing Agency").
B. The Stockholder owns 100% of the issued and outstanding capital stock
of Seller.
C. Seller is willing to sell to Buyer and Buyer is willing to purchase
from Seller, substantially all of the assets, business, properties and rights of
Seller related to the conduct of the Online Business on the terms and subject to
the conditions set forth herein.
D. Buyer is a wholly owned subsidiary of IXL.
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
PURCHASE AND SALE
-----------------
1.1 PURCHASE AND SALE. Contemporaneously with the execution and delivery
of this Agreement, and upon the terms and conditions hereof, Seller shall sell
and deliver to Buyer, and Buyer shall purchase, all of Seller's right, title and
interest in and to the Online Equipment (as defined in Section 2.11 hereof), the
Online Intellectual Property (as defined in Section 2.12(a) hereof), the Online
Software (as defined in Section 2.12(b) hereof), the Online Leases (as defined
in Section 2.14 hereof), the Online Contracts (as defined in Section 2.15
hereof), the Online Permits (as defined in Section 2.21 hereof), the Online
Accounts Receivable (as defined in Section 2.25 hereof), all moneys of Seller
relating to the Online Business, whether in the form of cash, cash equivalents,
marketable securities, short term investments or deposits in bank or other
financial institution accounts of any kind (the "Online Cash"), and all other
assets, tangible and intangible, used or useable in the operation of the Online
Business and as described in Schedule 1.1 hereto (the "Online Miscellaneous
------------
Assets"). The Online Equipment, the Online Intellectual Property, the Online
Software, the Online Leases, the Online Contracts, the Online Permits, the
Online Accounts
-1-
<PAGE>
Receivable, the Online Cash and the Online Miscellaneous Assets are collectively
referred to herein as the "Purchased Assets." Seller shall not transfer, convey
or assign to Buyer, but shall retain, all of its right, title and interest in
and to any assets not otherwise defined herein as Purchased Assets (the
"Retained Assets").
1.2 THE CLOSING. The closing of the aforementioned purchase and sale (the
"Closing") shall take place at the offices of Minkin & Snyder, A Professional
Corporation, One Buckhead Plaza, 3060 Peachtree Road, Suite 1100, Atlanta,
Georgia 30305, or at such other place as the parties may mutually agree. The
date upon which the Closing occurs is hereinafter referred to as the "Closing
Date."
1.3 PURCHASE CONSIDERATION. As consideration for the purchase of the
Purchased Assets, Buyer shall issue to Seller that number of shares of validly
issued, fully paid and nonassessable Class B Common Stock of IXL, $.01 par value
(the "IXL Shares") based on the following equation (the "Purchase
Consideration"):
(280,000 - O) + (C+AR+PP+WIP+F) - (AP+DR)
---------------------------
$5.00
where:
<TABLE>
<CAPTION>
<S> <C> <C>
C = The amount of Online Cash as of the Closing Date
AR = Amount of the Online Accounts Receivable (as defined herein) as of the Closing Date, net of any
allowance for doubtful accounts
PP = The amount of prepaid expenses of Seller related to the Online Business as of the Closing Date
WIP = The amount of work in progress related to the Online Business as of the Closing Date
AP = The amount of Online Accounts Payable (as defined in Section 2.26 hereof) as of the Closing Date
DR = The amount of deferred revenues of Seller related to the Online Business as of the Closing Date
F = The amount of Online Equipment, and the amount of furniture and fixtures related to the Online
Business at their net book value as of the Closing Date
O = The number of options to be issued pursuant to Section 4.4 hereof
</TABLE>
Notwithstanding the foregoing, the number of IXL Shares to be issued pursuant to
this Section 1.3 may never be greater than 280,000 less the options to be issued
pursuant to Section 4.4 hereof.
-2-
<PAGE>
1.4 ASSUMPTION OF LIABILITIES. In addition to the issuance of the IXL
Shares, as additional consideration for the purchase of the Purchased Assets,
Buyer shall assume: (a) the liabilities of Seller listed on Schedule 1.4 hereto;
------------
(b) the Online Accounts Payable (as herein defined) listed on Schedule 1.4
------------
hereto; (c) the deferred revenues of Seller attributable to the Online Business
and listed on Schedule 1.4 hereto; and (d) the obligations of Seller under the
------------
Online Contracts and the Online Leases, in each case arising from and accruing
with respect to the operation of the Online Business after the Closing Date (the
"Assumed Liabilities"). Seller shall be responsible for all the obligations and
liabilities of Seller whether now existing or previously or hereafter incurred
other than the Assumed Liabilities, including but not be limited to (a) all
taxes that result from or have accrued in connection with the operation of the
Online Business or the Marketing Agency prior to the Closing Date; (b)
liabilities and obligations arising under Online Contracts and Online Leases
transferred to Buyer in accordance with this Agreement to the extent such
liabilities and obligations arise during or relate to or have accrued in
connection with any period prior to the Closing Date except to the extent any
such liabilities are included as Online Accounts Payable; (c) all liabilities
and obligations accruing with respect to the operation of the Online Business
prior to the Closing Date except to the extent any such liabilities are included
as Online Accounts Payable; (d) all liabilities incurred prior to the Closing
Date and related to the Online Benefit Plans (as defined in Section 2.18(a)
hereof); and (e) all liabilities and obligations of Seller under this Agreement
and any other agreement entered into in connection herewith (collectively, the
"Retained Liabilities").
1.5 ALLOCATION OF PURCHASE CONSIDERATION. The Purchase Consideration will be
allocated among the items of Online Equipment in accordance with their
respective net book values, as reflected on the most recent Seller Financial
Statement (as defined in Section 2.6 hereof). The remainder of the Purchase
Consideration will be allocated to goodwill and other intangible assets. Each
of the parties hereto agrees to report the federal, state and local income and
other tax consequences of the transactions contemplated by this Agreement in a
manner consistent with such allocation.
1.6 OTHER DELIVERIES. In addition to the foregoing, at the Closing, each of
Buyer, IXL, and Seller shall make the deliveries described in Article V hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller and the Stockholder, jointly and severally, represent and warrant to
Buyer, which representations and warranties shall survive the Closing in
accordance with Section 7.1 of this Agreement, as follows:
2.1 ORGANIZATION AND QUALIFICATION. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Seller has the requisite power and authority to carry on the Online Business as
it is now being conducted and is duly qualified or licensed to do business, and
is in good standing, in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
-3-
<PAGE>
qualification necessary. Complete and correct copies of the Certificate of
Incorporation, and the Bylaws of the Seller, as in effect on the date hereof,
are attached as Schedule 2.1 hereto.
------------
2.2 AUTHORITY. Seller has the necessary power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Seller have been duly and validly authorized
and approved by the Stockholder and no other proceedings on the part of Seller
or the Stockholder are necessary to authorize or approve this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Seller and Stockholder, and assuming the due
authorization, execution and delivery by Buyer and IXL, constitutes the valid
and binding obligation of Seller and Stockholder, enforceable against Seller and
Stockholder in accordance with its terms subject, in each case, to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights and to general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing.
2.3 CAPITALIZATION OF SELLER. Stockholder owns 100% of the issued and
outstanding capital stock of Seller.
2.4 SUBSIDIARIES. Seller has no subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest in, or any security
convertible into an equity interest in, any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
2.5 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 2.5 hereto, none of the execution and delivery of this Agreement by
- ------------
Seller or Stockholder, the consummation by Seller and the Stockholder of the
transactions contemplated hereby or compliance by Seller with any of the
provisions hereof will:
(a) conflict with or violate the Certificate of Incorporation or;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Seller, Stockholder or the Purchased
Assets;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, contract, agreement,
arrangement, lease, license, permit, judgment, decree, franchise or other
instrument or obligation to which Seller is a party or by which the Purchased
Assets may be bound or affected;
(d) result in the creation of any lien, charge, security interest,
pledge, option, right of first refusal, voting proxies or other voting agreement
or encumbrance of any kind or nature (any of the foregoing, a "Lien") on any of
the Purchased Assets; or
-4-
<PAGE>
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), of (i) any government or subdivision thereof,
whether domestic, foreign or multinational, or any administrative, governmental,
or regulatory authority, agency, commission, court, tribunal or body, whether
domestic, foreign or multinational (a "Governmental Entity"); or (ii) any other
individual, corporation, trust, partnership, limited liability company or other
entity (collectively, a "Person").
2.6 FINANCIAL STATEMENTS. Seller has heretofore furnished Buyer with a true
and complete copy of (a) the audited financial statements of Seller for the
years ended December 31, 1994, 1995 and 1996; and (b) the unaudited financial
statements of Seller for the year ended December 31, 1997, and for the period
ending March 31, 1998 (all of the foregoing collectively herein referred to as
the "Seller Financial Statements"). The Seller Financial Statements have been
prepared in accordance with generally accepted accounting principles ("GAAP")
(except for the absence of footnotes and normal year-end adjustments in the case
of the Seller Financial Statements for the year ended December 31, 1997, and for
the period ending March 31, 1998, which were prepared by Seller's management and
have not been audited) consistently followed throughout the periods indicated
and present fairly, in all material respects, the financial position and
operating results of Seller as of the dates, and during the periods, indicated
therein.
2.7 ABSENCE OF CHANGES. Except as provided in Schedule 2.7 hereto, since
------------
December 31, 1997, (a) Seller has not entered into any transaction that was not
in the ordinary course of business; (b) there has been no material damage,
destruction or loss of any of the Purchased Assets (whether or not covered by
insurance); (c) there has been no distribution to the Stockholder in respect of
his stock interest, whether in cash or property, and no purchase or redemption
of the stock interest of any stockholder of Seller; (d) Seller has not failed to
satisfy any of its debts, obligations or liabilities related to the Online
Business or the Purchased Assets as the same become due and owing; (e) there
have been no capital expenditures in excess of $10,000 for any single item, or
$25,000 in the aggregate; (f) Seller has not ceased to transact business with
any customer that, as of the date of such cessation, represented more than 5% of
the annual gross revenues of Seller; (g) there has been no termination or
resignation of any key employee or officer of Seller, and to the knowledge of
Seller and the Stockholder, no such termination or resignation is threatened;
(h) there has been no change in accounting methods or practices of Seller, or
revaluation of any of the Purchased Assets (other than Online Accounts
Receivable (as defined in Section 2.25 hereof) written down in the ordinary
course of business that are not in excess of $10,000 for any single Online
Account Receivable and $25,000 in the aggregate); (i) there has been no
amendment or termination of any material oral or written contract, agreement or
license related to the Online Business, to which Seller is a party or by which
it is bound, except in the ordinary course of business, or except as expressly
contemplated by this Agreement; (j) there has been no agreement or commitment to
do any of the foregoing; and (k) there has been no other event or condition
pertaining to and affecting the Purchased Assets or the ability of Seller to
consummate the transactions contemplated by this Agreement.
2.8 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 2.8 hereto,
------------
Seller has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including, without limitation, any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after December 31,
-5-
<PAGE>
1997 that would not, whether individually or in the aggregate, have a material
adverse impact on the business or financial condition of Seller; (b) liabilities
reflected on the Seller Financial Statements; and (c) liabilities incurred as a
result of the transactions contemplated by this Agreement.
2.9 PURCHASED ASSETS. Except as set forth on Schedule 2.9 and except for
------------
the Retained Assets, the Purchased Assets include all of the assets, properties
and rights of every type and description, real, personal and mixed, tangible and
intangible, that are necessary for, or used in, the conduct of the Online
Business as conducted by Seller.
2.10 TITLE TO PROPERTIES . Except as set forth on Schedule 2.10 hereto,
-------------
Seller has good and marketable title to all of the Purchased Assets (other than
leasehold interests), and good and valid title to all leasehold interests
included as part of the Purchased Assets, in each case, free and clear of any
and all Liens other than Permitted Liens (as defined in Section 7.10 hereof).
2.11 EQUIPMENT. Seller has heretofore furnished IXL with a true and correct
list of all items of tangible personal property (including, without limitation,
computer hardware) necessary for or used in the operation of the Online Business
in the manner in which it has been and is now operated by Seller (the "Online
Equipment"), all of which is included as part of the Purchased Assets, except
for personal property having a net book value of less than $1,000, and except
for the Retained Assets. Each item of Online Equipment included in the
Purchased Assets is in good condition and repair, ordinary wear and tear
excepted.
2.12 INTELLECTUAL PROPERTY.
(a) Seller has heretofore furnished IXL with a true and complete
list of all proprietary technology, patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights, and copyrights used or required to be used by Seller in the operation of
the Online Business (together with trade secrets and know how used in the
conduct of the Business, the "Online Intellectual Property"), all of which is
included as part of the Purchased Assets, except for any Online Intellectual
Property which is not material to the Online Business. Except as set forth on
Schedule 2.12, Seller owns, or is validly licensed or otherwise has the right to
- -------------
use or exploit, all of the Intellectual Property, free of any obligation to make
any payment (whether of a royalty, license fee, compensation or otherwise). No
claims are pending or, to the knowledge of Seller, threatened, that Seller is
infringing or otherwise adversely affecting the rights of any Person with regard
to any of the Intellectual Property. Seller has used its reasonable best efforts
to protect its rights in the Online Intellectual Property and, to the knowledge
of Seller, no Person is infringing the rights of Seller with respect to any
Online Intellectual Property. No intangible property is required for the conduct
of the Online Business other than the Online Intellectual Property. To the
knowledge of Seller, use of the name "Customer Communications Group, Inc." does
not infringe upon the rights of any Person.
(b) Seller has heretofore furnished IXL with a true and complete list
of all computer software used or required to be used by Seller in the conduct of
the Online Business (the "Online Software"), all of which is included as part of
the Purchased Assets, except for Online Software which is not material to the
Online Business and except for Computer Software which is
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<PAGE>
part of the Retained Assets. Except as set forth on Schedule 2.12 hereto, Seller
-------------
currently licenses, or otherwise has the legal right to use, all of the Online
Software (including any upgrades, alterations or enhancements with respect
thereto), and all of the Online Software is being used in compliance with any
applicable licenses or other agreements.
2.13 REAL PROPERTY. Seller owns no real property.
2.14 LEASES. Schedule 2.14 hereto sets forth a list of all leases pursuant
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to which Seller leases, as lessor or lessee, personal property used in operating
the Online Business or otherwise (the "Online Leases"), all of which are
included as part of the Purchased Assets. Copies of the Online Leases, which
have previously been provided to IXL, are true and complete copies thereof. All
of the Online Leases are valid, binding and enforceable in accordance with their
respective terms, and there is not under any such Online Lease any existing
default by Seller, or, to the knowledge of Seller by any other party thereto, or
any condition or event of that, with notice or lapse of time or both, would
constitute a default. Seller has not received notice that the lessor of any of
the Online Leases intends to cancel, suspend or terminate the Online Leases or
to exercise or not exercise any options under any of the Online Leases. Except
as set forth on Schedule 2.14, all of the Online Leases are assignable to Buyer
-------------
without the consent or approval of any other person in connection with the
transactions contemplated by this Agreement.
2.15 CONTRACTS. Schedule 2.15 hereto sets forth a true and complete list of
-------------
all contracts, agreements and commitments (whether written or oral) to which
Seller is, directly or indirectly, a party (in its own name or as a successor in
interest), or by which it or the Purchased Assets are otherwise bound,
including, without limitation, any service agreements, customer agreements,
supplier agreements, agreements to lend or borrow money, shareholder agreements,
employment agreements, agreements relating to the Online Intellectual Property
and the like (collectively, the "Online Contracts"), all of which are included
as part of the Purchased Assets, except only those Online Contracts which
involve less than $10,000 and are cancelable, without penalty, on no more than
90 days notice. Seller represents and warrants that the aggregate value of all
payment obligations and rights to receive payments, under agreements, contracts
and commitments (whether oral or in writing) to which Seller is a party and
which relate to the Online Business or by which Seller is otherwise bound, and
that are not listed on Schedule 2.15, is less than $50,000 (calculating such
-------------
value by adding together the value of rights and obligations, and not by
determining the net amount thereof).
True and complete copies of each Online Contract required to be listed on
Schedule 2.15 (or a true and complete narrative description of any oral Online
- -------------
Contract) have previously been provided to IXL. Neither Seller nor, to the
knowledge of Seller, any other party to any of the Online Contracts, (x) is in
default under (nor does there exist any condition that, with notice or lapse of
time or both, would cause such a default under) any of the Online Contracts, or
(y) has waived any right it may have under any of the Online Contracts, the
waiver of which would have a material adverse effect on the business, assets or
financial condition of Seller. All of the Online Contracts constitute the valid
and binding obligation of Seller, enforceable in accordance with their
respective terms, and, to the knowledge of Seller and the other parties thereto.
Except as set forth on Schedule 2.15 all of the Online Contracts are assignable
-------------
to Buyer without the consent or approval of any other Person in connection with
the transactions contemplated by this Agreement.
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<PAGE>
2.16 PAYROLL INFORMATION. Schedule 2.16 hereto sets forth a true and
-------------
complete payroll report of Seller dated as of March 31, 1998, showing all
current employees of Seller and their current levels of compensation, other than
bonuses and other extraordinary compensation. Seller has paid all compensation
required to be paid to employees of Seller on or prior to the date hereof other
than compensation accrued in the current pay period.
2.17 LITIGATION. Except as set forth on Schedule 2.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Seller, threatened against or affecting Seller or the Purchased Assets, nor is
there any judgment, decree, injunction or order of any applicable Governmental
Entity or arbitrator outstanding against Seller.
2.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 2.18 hereto, there are no employee
-------------
benefit plans, agreements or arrangements maintained by Seller, including,
without limitation, (i) "employee benefit plans," within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"); (ii) affirmative action plans; (iii) current or deferred
compensation, pension, profit sharing, vacation or severance plans or programs;
or (iv) medical, hospital, accident, disability or death benefit plans
(collectively, "Online Benefit Plans"). All Online Benefit Plans are
administered in accordance with, and are in compliance with, all applicable laws
and regulations. No default exists with respect to the obligations of Seller
under any Online Benefit Plans.
(b) Seller is not a party to any collective bargaining agreement, no
such agreement determines the terms and conditions of employment of any employee
of Seller, no collective bargaining agent has been certified as a representative
of any of the employees of Seller, no representation campaign or election is now
in progress with respect to any employee of Seller and there are no labor
disputes, grievances, controversies, strikes or requests for union
representation pending, or, to the knowledge of Seller, threatened, relating to
or affecting the Online Business. To the knowledge of Seller, no event has
occurred that could give rise to any such dispute, controversy, strike or
request for representation.
2.19 ERISA.
(a) All Online Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the Online Benefit Plans that is
intended to meet the requirements of Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), is the subject of a favorable determination or
notification letter issued by the Internal Revenue Service. No Online Benefit
Plan is subject to Title IV of ERISA or Section 412 of the Code. Seller has not
engaged in any non-exempt "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA, involving Online Benefit Plans
that would subject Seller to the penalty or tax imposed under Section 502(i) of
ERISA or Section 4975 of the Code. Seller has not engaged in any transaction
described in Section 4069 of ERISA within the last five years. Except as
disclosed in Schedule 2.19 hereto, neither the execution and delivery of this
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Agreement nor the
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<PAGE>
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation or
golden parachute) becoming due to any director or other employee of Seller, (ii)
increase any benefits otherwise payable under any Online Benefit Plan or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits to any extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Online Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code (a "Pension
Plan"), or by any entity that is considered one employer with Seller under
Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate"), within
the 12-month period ending on the date hereof. Seller has not incurred any
liability to the Pension Benefit Guaranty Corporation in respect of any Online
Benefit Plan that remains unpaid.
2.20 TAXES. Seller has duly and timely filed all federal, state and local
income, franchise, excise, real and personal property and other tax returns and
reports, including extensions, required to have been filed by Seller on or prior
to the date hereof. Seller has duly and timely paid all taxes and other
governmental charges, and all interest and penalties with respect thereto,
required to be paid by Seller (whether by way of withholding or otherwise) to
any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Seller Financial Statement). As of the date hereof,
all deficiencies proposed as a result of any audits have been paid or settled.
There are, and after the date of this Agreement will be, no tax deficiencies
(including penalties and interest) of any kind assessed against or relating to
Seller with respect to any taxable periods ending on or before, or including,
the Closing Date of a character or nature that would result in Liens or claims
on any of the Purchased Assets or on Buyer's title or use of the Purchased
Assets or that would result in any claim against Buyer.
2.21 COMPLIANCE WITH APPLICABLE LAWS. Seller holds all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
necessary to own, lease or operate all of the Purchased Assets, as appropriate,
and to carry on the Online Business as now conducted (the "Online Permits"),
except for such permits which are not material to the Online Business. To the
knowledge of Seller, Seller is in material compliance with all applicable laws,
ordinances and regulations and the terms of the Online Permits, and all such
Online Permits are assignable to Buyer in connection with the transactions
contemplated by this Agreement. Schedule 2.21 hereto sets forth a list of the
-------------
Online Permits, a true and correct copy of each of which has been provided to
IXL.
2.22 BROKERS. Except as set forth on Schedule 2.22 hereto, no broker or
-------------
finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated by this Agreement as a result of
arrangements made by or on behalf of Seller.
2.23 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 2.23 hereto, to the knowledge of
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Seller,
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<PAGE>
no real property currently or formerly owned or operated by Seller is
contaminated with any Hazardous Substances (as hereinafter defined);
(b) Seller is not a party to any litigation or administrative
proceeding nor, to the knowledge of Seller, is any litigation or administrative
proceeding threatened against it, that, in either case, asserts or alleges that
Seller (i) violated any Environmental Laws (as hereinafter defined); (ii) is
required to clean up, remove or take remedial or other response action due to
the disposal, deposit, discharge, leak or other release of any Hazardous
Substances; or (iii) is required to pay all or a portion of the cost of any
past, present or future cleanup, removal or remedial or other action that arises
out of or is related to the disposal, deposit, discharge, leak or other release
of any Hazardous Substances.
(c) To the knowledge of Seller, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by Seller containing materials that, if known to
be present in soils or ground water, would require cleanup, removal or other
remedial action under Environmental Laws.
(d) To the knowledge of Seller, Seller is not subject to any judgment,
order or citation related to or arising out of any Environmental Laws and has
not been named or listed as a potentially responsible party by any Governmental
Entity in a matter related to or arising out of any Environmental Laws.
(e) For purposes of this Agreement, (i) the term "Environmental Law"
means any federal, state or local law (including statutes, regulations,
ordinances, codes, rules, judicial opinions and other governmental restrictions
and requirements), relating to the discharge of air pollutants, water
pollutants, noise, odors or process waste water, or otherwise relating to the
environment or hazardous or toxic substances; and (ii) the term "Hazardous
Substance" means any toxic or hazardous substance that is regulated by or under
authority of any Environmental Law, including, without limitation, any petroleum
products, asbestos or polychlorinated biphenyls.
2.24 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as provided in
Schedule 2.24 hereto, no officer, director, shareholder or employee of Seller
- -------------
and no family member of any of the foregoing (including a spouse, parent,
sibling or lineal descendent of any of the foregoing), has any direct or
indirect material interest in any material customer, supplier or competitor of
Seller, or in any Person from whom or to whom Seller leases any real or personal
property, or in any other Person with whom Seller is doing business whether
directly or indirectly (including, without limitation, as a debtor or creditor),
whether in existence as of the date hereof or proposed, other than the ownership
of stock of publicly traded outstanding stock of such corporation.
2.25 ACCOUNTS RECEIVABLE. All accounts, notes, contracts and other
receivables of Seller related to the Online Business and included in the
Purchased Assets (collectively, "Online Accounts Receivable") were acquired by
Seller in the ordinary course of business arising from bona fide transactions
completed in accordance with the terms and provisions contained in any documents
related thereto. To the knowledge of Seller, there are no set-offs,
counterclaims or disputes asserted
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<PAGE>
with respect to any Online Accounts Receivable that would result in claims in
excess of the reserve for bad debts set forth on the Seller Financial Statements
and, subject to such reserve, all Online Accounts Receivable are collectible in
full. Seller has previously provided IXL true and complete aging reports
prepared as of March 31, 1998 which shows the time elapsed since invoice date
for all Online Accounts Receivable as of such date.
2.26 ACCOUNTS PAYABLE. All accounts, notes, contracts and other amounts
payable by Seller related to the Online Business and included in the Assumed
Liabilities (collectively, "Online Accounts Payable") are currently within their
respective terms, and are neither in default nor otherwise past due by more than
90 days. Seller has previously provided IXL with a true and complete aging
report as of March 31, 1998, and which shows the time elapsed since invoice date
for all Online Accounts Payable as of such date.
2.27 INSURANCE. Seller currently maintains, in full force and effect, all
insurance policies that are required to be maintained for the conduct of the
Online Business or the ownership of Seller's property (both real and personal)
(collectively, the "Online Insurance Policies"). All of the Online Insurance
Policies are listed on Schedule 2.27 hereto, and true and compete copies of all
-------------
Online Insurance Policies have previously been provided to Buyer. Seller (i) is
not in default regarding the provisions of any Online Insurance Policy; (ii) has
paid all premiums due thereunder; and (iii) has not failed to present any notice
or present any material claim thereunder in a due and timely fashion.
2.28 BANKRUPTCY. Neither Seller, Stockholder, nor any entities affiliated,
related or controlled by any of such parties, has filed a petition or request
for reorganization or protection or relief under the bankruptcy laws of the
United States or any state or territory thereof, made any general assignment for
the benefit of creditors, or consented to the appointment of a receiver or
trustee, including a custodian under the United States bankruptcy laws, whether
such receiver or trustee is appointed in a voluntary or involuntary proceeding.
2.29 SELLER DEBT. Intentionally omitted.
2.30 INVESTMENT PURPOSE. Seller represents that it is acquiring the IXL
Shares solely for its own account for investment and not with a view to, or for
sale in connection with, any distribution thereof. Seller agrees that it will
not, directly or indirectly, offer, transfer, sell, pledge, hypothecate or
otherwise dispose of any IXL Shares (or solicit any offers to buy, purchase or
other acquire or take a pledge of any such shares) except in compliance with the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations thereunder, other applicable laws, rules and regulations, and IXL's
Second Amended and Restated Stockholders' Agreement (the "Stockholders'
Agreement").
2.31 RESTRICTIONS ON TRANSFER. Seller acknowledges that (a) the IXL Shares
received by it hereunder have not been registered under the Securities Act; (b)
the IXL Shares may be required to be held indefinitely, and Seller must continue
to bear the economic risk of the investment in such shares unless such shares
are subsequently registered under the Securities Act or an exemption from such
registration is available; (c) there may not be any public market for the IXL
Shares in the foreseeable future; (d) Rule 144 promulgated under the Securities
Act is
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<PAGE>
not presently available with respect to sales of any securities of IXL, and such
Rule is not anticipated to be available in the foreseeable future; (e) when and
if IXL Shares may be disposed of without registration in reliance upon Rule 144,
such disposition can be made only in limited amounts and in accordance with the
terms and conditions of such Rule; (f) if the exemption afforded by Rule 144 is
not available, public sale without registration will require the availability of
an exemption under the Securities Act; (g) the IXL Shares are subject to the
terms and conditions of the Stockholders' Agreement; (h) restrictive legends
shall be placed on the certificates representing the IXL Shares; and (i) a
notation shall be made in the appropriate records of IXL indicating that the IXL
Shares are subject to restrictions on transfer and, if IXL should in the future
engage the services of a stock transfer agent, appropriate stop-transfer
instructions will be issued to such transfer agent with respect to IXL stock.
2.32 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION. Seller
represents and warrants that (a) its financial situation is such that it can
afford to bear the economic risk of holding the IXL Shares acquired by it
hereunder for an indefinite period; (b) it can afford to suffer the complete
loss of such IXL Shares; (c) it has been granted the opportunity to ask
questions of, and receive answers from, representatives of Buyer and IXL
concerning the terms and conditions of the IXL Shares and to obtain any
additional information that it deems necessary; (d) its knowledge and experience
in financial business matters are such that it is capable of evaluating the
merits and risk of ownership of the IXL Shares; (e) it has carefully reviewed
the terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; (f) it (i) has reviewed the Private Placement
Memorandum of IXL dated March 19, 1998 (the "Memorandum"), (ii) has carefully
examined the Memorandum and has had an opportunity to ask questions of, and
receive answers from, representatives of IXL and to obtain additional
information concerning IXL and its Subsidiaries (as hereinafter defined), and
(iii) does not require additional information regarding IXL or its Subsidiaries
in connection with the any of transactions contemplated hereby; and (g) it was
not organized for the purpose of acquiring the IXL Shares.
2.33 DISCLOSURE. No statement of fact by Seller contained in this Agreement
and no written statement of fact furnished or to be furnished by Seller to Buyer
pursuant to or in connection with this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements herein or therein contained not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF IXL AND BUYER
-----------------------------------------------
Each of IXL and Buyer jointly and severally represents and warrants to Seller
which representations and warranties shall survive the Closing in accordance
with Section 7.1 of this Agreement, as follows:
3.1 ORGANIZATION AND QUALIFICATION. Each of IXL and its Subsidiaries (as
defined in Section 7.10 hereof) is a corporation duly organized, validly
existing and in good standing under
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<PAGE>
the laws of the state of its incorporation. Each of IXL and its Subsidiaries has
the requisite corporate power and authority to carry on its business as it is
now being conducted and is duly qualified or licensed to do business, and is in
good standing, in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes such qualification
necessary. Complete and correct copies of the Certificates of Incorporation and
Bylaws of IXL and Buyer as in effect on the date hereof are attached as Schedule
--------
3.1 hereto.
- ---
3.2 AUTHORITY. Each of IXL and Buyer has the necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by each of IXL and
Buyer have been duly and validly authorized and approved by their respective
Board of Directors and shareholders, and no other corporate or shareholder
proceedings on the part of either IXL or Buyer, or their respective boards of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of IXL and Buyer, and assuming the due
authorization, execution and delivery by Seller and the Stockholder, constitutes
the valid and binding obligation of each of IXL and Buyer, enforceable against
each of IXL and Buyer in accordance with its terms, subject, in each case, to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
application relating to or affecting creditors' rights and to general principles
of equity, including principles of commercial reasonableness, good faith and
fair dealing.
3.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 3.3 hereto, none of the execution and delivery of this Agreement by IXL
- ------------
or Buyer, the consummation by IXL and Buyer of the transactions contemplated
hereby or compliance by IXL and Buyer with any of the provisions hereof will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of IXL or Buyer, or the organizational documents of any other
Subsidiaries;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to IXL or its Subsidiaries, or
by which IXL, any of its Subsidiaries, or their respective properties or assets
may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which IXL or any of its Subsidiaries is a
party or by which IXL, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of IXL or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for
compliance with any applicable requirements of any applicable securities laws),
or (ii) any other Person.
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<PAGE>
3.4 LITIGATION. Except as set forth on Schedule 3.4 hereto, there is no
------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
IXL, threatened against or affecting IXL or its Subsidiaries, nor is there any
judgment, decree, injunction or order of any applicable Governmental Entity or
arbitrator outstanding against IXL or its Subsidiaries that, either individually
or in the aggregate, would have a material adverse effect on the assets,
business or financial condition of IXL and its Subsidiaries, taken as a whole.
3.5 BROKERS. Except as disclosed on Schedule 3.5 hereto, no broker or
------------
finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of IXL or Buyer.
3.6 IXL STOCK.
(a) As of the date hereof, the authorized capital stock of IXL
consists of (i) (A) 50,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 8,787,626 shares are
validly issued and outstanding (taking into account the stock split described in
Section 7.9 hereof, but without taking into account any shares of IXL Stock to
be issued pursuant to this Agreement), fully paid and nonassessable; (ii)
750,000 shares of blank check preferred stock, (A) 250,000 of which have been
designated as Class A Convertible Preferred stock, of which 172,452 shares are
validly issued and outstanding, fully paid and nonassessable, (B) 200,000 of
which have been designated as Class B Convertible Preferred stock, of which
98,767 shares are validly issued and outstanding, fully paid and nonassessable,
and (C) 15,000 of which have been designated as Class C Convertible Preferred
stock, of which 9,232 shares are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 3.6 hereto, there are no options,
------------
warrants, calls, agreements, commitments or other rights presently outstanding
that would obligate IXL to issue, deliver or sell shares of its capital stock,
or to grant, extend or enter into any such option, warrant, call, agreement,
commitment or other right. In addition to the foregoing, as of the date hereof,
IXL has no bonds, debentures, notes or other indebtedness issued or outstanding
that have voting rights (or which are convertible into or exercisable for
securities having the right to vote) in IXL.
(b) When delivered to the Seller in accordance with the terms hereof,
the IXL Shares will be (i) duly authorized, validly issued, fully paid and
nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
3.7 SUBSIDIARIES. Except as set forth on Schedule 3.7 hereto, IXL has no
------------
subsidiaries and does not otherwise own or control, directly or indirectly, any
equity interest in, or any security convertible into an equity interest in, any
Entity. Schedule 3.7 hereto lists the name of each of the Subsidiaries of IXL,
------------
and indicates their respective jurisdictions of incorporation, and the
percentage of the Subsidiary owned where the Subsidiary is not wholly-owned.
3.8 FINANCIAL STATEMENTS. IXL has heretofore furnished Seller with a true
and complete copy of (a) the audited financial statements of IXL Interactive
Excellence, Inc. (n/k/a iXL,
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<PAGE>
Inc.) for the years ended December 31, 1993, 1994 and 1995, and for the four-
month period ending April 30, 1996; (b) audited combined financial statements
for Creative Video, Inc. (n/k/a iXL, Inc.), Creative Video Library, Inc. and
Entrepreneur Television, Inc. for the years ended December 31, 1993, 1994 and
1995, and for the four-month period ending April 30, 1996; (c) the audited
consolidated financial statements for IXL and its Subsidiaries for the eight
months ended December 31, 1996; and (iv) the unaudited consolidated financial
statements for IXL and its Subsidiaries, dated December 31, 1997 (collectively,
the "IXL Financial Statements"). The IXL Financial Statements present fairly in
all material respects the consolidated financial position, results of
operations, shareholders' equity and cash flows of IXL at the respective dates
or for the respective periods to which they apply. Except as disclosed therein,
such statements and related notes have been prepared each in accordance with
GAAP consistently applied throughout the periods involved (except, in the case
of the unaudited financial statements, for the exclusion of footnotes and normal
year end adjustments).
3.9 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 3.9 hereto,
------------
neither IXL nor any of its Subsidiaries has any debt, liability or obligation of
any kind, whether accrued, absolute or otherwise, including, without limitation,
any liability or obligation on account of taxes or any governmental charges or
penalty, interest or fines, except (a) liabilities incurred in the ordinary
course of business after December 31, 1997 that would not, whether individually
or in the aggregate, have a material adverse impact on the business or financial
condition of the IXL and its Subsidiaries, taken as a whole; (b) liabilities
reflected on the IXL Financial Statements; and (c) liabilities incurred as a
result of the transactions contemplated by this Agreement.
3.10 COMPLIANCE WITH APPLICABLE LAWS. IXL or its Subsidiaries holds all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of IXL and its Subsidiaries, as appropriate, and to carry on IXL's
business as now conducted (the "IXL Permits"). To the knowledge of IXL, IXL and
its Subsidiaries are in material compliance with all applicable laws, ordinances
and regulations and the terms of the IXL Permits.
3.11 BANKRUPTCY. Neither IXL nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
3.12 ABSENCE OF CHANGES. Except as provided in Schedule 3.12 hereto,
-------------
since December 31, 1997, there has not been (a) any transaction, commitment,
dispute or other event or condition (financial or otherwise) of any character
(whether or not in the ordinary course of business) individually or in the
aggregate that has had, or would reasonably be expected to have, a material
adverse effect on the business, properties, assets, condition (financial or
otherwise), liabilities or results of operations of IXL and its Subsidiaries,
taken as a whole; (b) any damage, destruction or loss, whether or not covered by
insurance, which has had, or would reasonably be expected to have, a material
adverse effect on the business, properties, assets, condition (financial or
otherwise), liabilities or results of operations of IXL and its Subsidiaries,
taken as a whole; (c) any entry into any commitment or transaction material to
IXL and its Subsidiaries, taken as a whole (including,
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<PAGE>
without limitation, any borrowing or sale of assets) except in the ordinary
course of business consistent with past practice; (d) any declaration, setting
aside or payment of any dividend or distribution (whether in cash, stock or
property) with respect to its capital stock; (e) any material change in its
accounting principles, practices or methods; (f) any split, combination or
reclassification of any of IXL's capital stock or the issuance or authorization
of any issuance of any other securities in respect of, in lieu of or in
substitution for, shares of IXL's capital stock; or (g) any agreement (whether
or not in writing), arrangement or understanding to do any of the foregoing.
3.13 TAXES. IXL and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by IXL and its Subsidiaries on or prior to the date hereof. IXL and its
Subsidiaries have duly and timely paid all taxes and other governmental charges,
and all interest and penalties with respect thereto, required to be paid by IXL
and its Subsidiaries (whether by way of withholding or otherwise) to any
federal, state, local or other taxing authority (except to the extent the same
are being contested in good faith, and adequate reserves therefor have been
provided in the applicable IXL Financial Statement). As of the date hereof, all
deficiencies proposed as a result of any audits have been paid or settled.
3.14 INSURANCE. IXL and its Subsidiaries currently maintain, in full
force and effect, all insurance policies that are required to be maintained for
the conduct of their businesses or the ownership of their properties (both real
and personal) (collectively, the "IXL Insurance Policies"). IXL and its
Subsidiaries (a) are not in material default regarding the provisions of any IXL
Insurance Policy; (b) have paid all premiums due thereunder; and (c) have not
failed to present any material notice or present any material claim thereunder
in a due and timely fashion.
3.15 DISCLOSURE. No statement of fact by IXL or Buyer contained in this
Agreement and no written statement of fact furnished or to be furnished by IXL
or Buyer to Seller pursuant to or in connection with this Agreement contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements herein or
therein contained not misleading.
ARTICLE IV
ADDITIONAL AGREEMENTS
---------------------
4.1 PUBLIC ANNOUNCEMENTS. The parties agree that, except as may
otherwise be required to comply with applicable laws and regulations (including,
without limitation, applicable securities laws) or to obtain consents required
hereunder, public disclosure of the transactions contemplated by this Agreement
shall be made only upon or after the consummation of the transactions
contemplated by this Agreement. Any such disclosure shall be coordinated by IXL,
and none of Seller nor the Stockholder shall make any such disclosure without
the prior written consent of IXL.
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<PAGE>
4.2 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND EXPENSES. Each
of Seller and Buyer will pay 50% of all transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the transactions contemplated by this Agreement.
4.3 FURTHER ASSURANCES. From time to time after the date hereof, upon the
reasonable request of any party hereto, the other party or parties hereto shall
execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions of this Agreement.
4.4 OPTIONS. IXL hereby covenants and agrees that, at the Closing Date,
each of the employees of Seller who is to become an employee of Buyer and holds
options to acquire stock of Seller as set forth on Schedule 4.4 hereto shall
------------
receive options to purchase the number of validly issued, fully paid and
nonassessable IXL Shares, at an exercise price per share, as is set forth on
Schedule 4.4 hereto, all of which shall have been issued pursuant to the IXL
- ------------
Holdings, Inc. 1996 Stock Option Plan, as amended (the "IXL Stock Option Plan").
4.5 LEASE. Buyer shall enter into a lease agreement (the "New Lease
Agreement") with Stockholder for office space at the same location as the Online
Business on substantially the same terms as the existing lease agreement for
such space; provided, however, that the New Lease Agreement shall provide for
six months' notice by Buyer prior to termination and for Buyer to vacate the
premises for the last month of such six-month notice period.
ARTICLE V
DELIVERIES AT CLOSING
---------------------
5.1 DELIVERIES OF SELLER.
(a) At the Closing, and as a condition to Buyer's and IXL's
obligation to consummate the transactions contemplated hereby, Seller shall
deliver, or cause to be delivered, to Buyer, properly executed and dated as of
the date hereof: (i) the Bill of Sale and Assignment in the form of Exhibit "A"
-----------
hereto (the "Bill of Sale"); (ii) the Assumption Agreement in the form of
Exhibit "B" hereto (the "Assumption Agreement"); (iii) the Assignment and
- -----------
Assumption of Online Contracts in the form of Exhibit "C" hereto (the "Contract
-----------
Assignment"); (iv) the Assignment and Assumption of Online Leases in the form of
Exhibit "D" hereto (the "Lease Assignment"); (v) the Trademark Assignment in the
- -----------
form of Exhibit "E" hereto (the "Trademark Assignment"); (vi) an Agreement to be
-----------
Bound to Registration Rights Agreement, substantially in the form of Exhibit "F"
-----------
hereto (the "Agreement to be Bound to Registration Rights Agreement"); (vii) an
Agreement to be Bound to Stockholders Agreement, substantially in the form of
Exhibit "G" hereto; (viii) a closing certificate of Seller, substantially in the
- -----------
form of Exhibit "H" hereto; (ix) Seller's opinion of counsel, substantially in
-----------
the form of Exhibit "I" hereto; (x) the New Lease Agreement; and (xi) such other
-----------
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<PAGE>
documents as provided in this Article or as Buyer shall reasonably request
including evidence satisfactory to Buyer that Seller is an Accredited Investor.
(b) In addition to the foregoing, and as a further condition to
Buyer's and IXL's obligation to consummate the transactions contemplated by this
Agreement, at or prior to the Closing, Seller and the Stockholder shall have (i)
obtained or caused to be obtained all of the Consents listed on Schedule 5.1(b)
---------------
hereto; (ii) delivered to Buyer a corporate certificate of good standing for
Seller and a copy of the Certificate of Incorporation of Seller, both as
certified by the Secretary of State of Delaware; and (iii) Buyer shall have
received evidence satisfactory to it that at the Closing the Purchased Assets
are free and clear of all Liens other than permitted Liens.
5.2 DELIVERIES OF BUYER.
(a) In addition to the payment of the Purchase Consideration in
accordance with Section 1.3 hereof (including the delivery of certificates
representing the IXL Shares being delivered to Seller in connection therewith),
at the Closing, and as a condition to Seller's and Stockholder's obligation to
consummate the transactions contemplated hereby, Buyer shall deliver, or cause
to be delivered, to Seller, properly executed and dated as of the date hereof:
(i) the Bill of Sale; (ii) a closing certificate of IXL, substantially in the
form of Exhibit "J-1" hereto, and a closing certificate of Buyer, substantially
-------------
in the form of Exhibit "J-2" hereto; (iii) the Assumption Agreement; (iv) the
-------------
Contract Assignment; (v) the Lease Assignment; (vi) the Trademark Assignment;
(vii) an Agreement to be Bound to Registration Rights Agreement; (viii) Buyer's
opinion of counsel, substantially in the form of Exhibit "K" hereto; (ix) an
-----------
Option Agreement for each of the Persons listed on Schedule 4.4 hereto receiving
------------
options to purchase IXL Shares, substantially in the form of Exhibit "L" hereto,
-----------
(x) the New Lease Agreement, and (xi) such other documents as provided in this
Article V or as Seller shall reasonably request.
(b) In addition to the foregoing, and as a further condition to
Buyer's obligation to consummate the transactions contemplated by this
Agreement, at or prior to the Closing, Buyer shall have (i) obtained or caused
to be obtained all of the Consents listed on Schedule 5.2(b) hereto; and (ii)
---------------
delivered to Seller a Certificate of Good Standing of IXL and Buyer, and a copy
of the Certificate of Incorporation of IXL and Buyer, all as certified by the
Secretary of State of Delaware.
ARTICLE VI
INDEMNIFICATION
---------------
6.1 INDEMNIFICATION BY BUYER. (a) Each of IXL and Buyer shall jointly and
severally indemnify and hold Seller, Stockholder and Seller's officers,
directors and employees (collectively, the "Seller Indemnified Parties")
harmless from and against, and agree promptly to defend each of the Seller
Indemnified Parties from and reimburse each of the Seller Indemnified Parties
for, any and all losses, damages, costs, expenses, liabilities, obligations and
claims of any kind (including, without limitation, reasonable attorney fees and
other legal costs and expenses) (collectively, a "Seller Loss") that any of the
Seller Indemnified Parties may at any time suffer or incur, or become subject
to, as a result of or in connection with:
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<PAGE>
(i) any breach or inaccuracy of any of the
representations and warranties made by Buyer or IXL in or pursuant to this
Agreement, or in any instrument, certificate or affidavit delivered by Buyer or
IXL at the Closing in accordance with the provisions hereof;
(ii) any failure by Buyer or IXL to carry out, perform,
satisfy and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the documents
and materials delivered by Buyer or IXL pursuant to this Agreement;
(iii) the Assumed Liabilities; and
(iv) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 6.1(a).
(b) Notwithstanding any other provision to the contrary neither Buyer
nor IXL shall have any liability under Section 6.1(a)(i) above (i) unless the
aggregate of all Seller Losses for which IXL and Buyer would be liable but for
this sentence exceeds, on a cumulative basis, an amount equal to $50,000 and
then only to the extent of such excess, (ii) for amounts in excess of $1,400,000
in the aggregate, and (iii) unless a claim has been asserted with respect to the
matters set forth in Section 6.1(a)(i), or 6.1(a)(iv) to the extent applicable
to Section 6.1(a)(i), within two years of the date hereof, except with respect
to the matters arising under Section 3.15 hereof in which event Seller must have
asserted a claim within the applicable statute of limitations. Notwithstanding
any implication to the contrary contained herein, the parties acknowledge and
agree that a decrease in the value of the IXL Shares would not, by itself,
constitute a Seller Loss, unless and to the extent a decrease in the value of
the IXL Shares has been demonstrated to be as a result of any event described in
Sections 6.1(a)(i), (ii), (iii) or (iv) above.
6.2 INDEMNIFICATION BY SELLER AND STOCKHOLDER. (a) Each of Seller and
Stockholder shall jointly and severally indemnify and hold IXL, Buyer, and their
respective shareholders, directors, officers and employees (collectively, the
"Buyer Indemnified Parties") harmless from and against, and agree to promptly
defend each of the Buyer Indemnified Parties from and reimburse each of the
Buyer Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including, without limitation,
reasonable attorney fees and other legal costs and expenses) (collectively, a
"Buyer Loss") that any of the Buyer Indemnified Parties may at any time suffer
or incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any representations and
warranties made by Seller or Stockholder in or pursuant to this Agreement, or in
any certificate or affidavit delivered by the same at the Closing in accordance
with the provisions hereof;
(ii) any failure by Seller or Stockholder to carry out,
perform, satisfy and discharge any of their respective covenants, agreements,
undertakings, liabilities or obligations under this Agreement or under any of
the documents and materials delivered by Seller or Stockholder pursuant to this
Agreement;
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<PAGE>
(iii) the Retained Liabilities; and
(iv) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 6.2(a).
(b) Notwithstanding any other provision to the contrary neither
Seller nor the Stockholder shall have any liability under Section 6.2(a)(i)
above (i) unless the aggregate of all Buyer Losses for which Seller and the
Stockholder would be liable but for this sentence exceeds, on a cumulative
basis, an amount equal to $50,000, and then only to the extent of such excess,
(ii) for amounts in excess of $1,400,000 in the aggregate, and (iii) unless a
claim has been asserted with respect to the matters set forth in Section
6.2(a)(i), or 6.2(a)(iv) to the extent applicable to Section 6.2(a)(i), within
two years of the date hereof, except with respect to the matters arising under
Sections 2.20, 2.23 or 2.33 hereof, in which event IXL must have asserted a
claim within the applicable statute of limitations.
6.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND.
(a) A party entitled to be indemnified pursuant to Section 6.1 or 6.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification under this Agreement. Subject
to the Indemnifying Party's right to defend in good faith third party Claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VI within 30 days after the receipt of written notice thereof from
the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 6.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section 6.1 or 6.2 hereof, as the case may
be, the Indemnifying Party shall have the right, at its sole cost and expense,
to employ counsel of its own choosing to defend any such Claim asserted against
the Indemnified Party; provided, however, that if the Indemnified Party (i)
-------- -------
reasonably believes that its interests with respect to a Claim (or any material
portion thereof) are in conflict with the interests of the Indemnifying Party
with respect to such Claim (or portion thereof), and (ii) promptly notifies the
Indemnifying Party, in writing, of the nature of such conflict, then the
Indemnified Party shall be entitled to choose, at the sole cost and expense of
the Indemnifying Party, independent counsel to defend such Claim (or the
conflicting portion thereof). The Indemnified Party shall have the right to
participate in the defense of any such Claim at its own expense (except to the
extent provided in the foregoing sentence), but the Indemnifying Party shall
retain control over such litigation (except as provided in the foregoing
sentence). The Indemnifying Party shall notify the Indemnified Party in writing,
as promptly as possible (but in any case before the due date for the answer or
response to a claim) after the date of the notice of claim given by the
Indemnified Party to the Indemnifying Party under Section 6.3(a) hereof of its
election to defend in good faith any such third party Claim. So long as the
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<PAGE>
Indemnifying Party is defending in good faith any such Claim asserted by a third
party against the Indemnified Party (or has been relieved of the obligation to
defend such Claim in accordance with this Section 6.3(b) as a result of a
conflict of interest between the Indemnified Party and the Indemnifying Party),
the Indemnified Party shall not settle or compromise such Claim without the
prior written consent of the Indemnifying Party. The Indemnified Party shall
cooperate with the Indemnifying Party in connection with any such defense and
shall make available to the Indemnifying Party or its agents all records and
other materials in the Indemnified Party's possession reasonably required by it
for its use in contesting any third party Claim; provided, however, that the
-------- -------
Indemnifying Party shall have agreed, in writing, to keep such records and other
materials confidential except to the extent required for defense of the relevant
Claim. Whether or not the Indemnifying Party elects to defend any such Claim,
the Indemnified Party shall have no obligations to do so. Within 30 days after a
final determination (including, without limitation, a settlement) has been
reached with respect to any Claim contested pursuant to this Section 6.3(b), the
Indemnifying Party shall satisfy its obligations with respect thereto. Any
amounts paid thereafter shall include interest thereon for the period commencing
at the end of such 30-day period and ending on the actual date of payment, at a
rate of 15% per annum, or, if lower, at the highest rate of interest permitted
by applicable law at the time of such payment.
ARTICLE VII
GENERAL PROVISIONS
------------------
7.1 SURVIVAL; RECOURSE. None of the agreements contained in this
Agreement shall survive the Closing, except that (i) the covenants contained in
Article IV hereof and the obligations to indemnify contained in Article VI
hereof shall survive indefinitely (except to the extent a shorter period of time
is explicitly specified therein) and (ii) the representations and warranties
made in Articles II and III of this Agreement shall survive the Closing, and
shall survive any independent investigation by the parties, and any dissolution,
merger or consolidation of Seller or Buyer, and shall bind the legal
representatives, assigns and successors of Seller, Stockholder, IXL and Buyer
for a period of two years after the Closing Date (other than representations and
warranties contained in Sections 2.20, 2.23 and 2.33 hereof, which shall survive
for the applicable statute of limitations).
7.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by personal delivery, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Seller: Continental Communications Group, Inc. d/b/a
or to the Customer Communications Group, Inc.
Stockholder: 12600 West Cedar Drive
Denver, Colorado 80228
Attention: John R. Klug
Telecopy: 303/989-4805
Telephone: 303/986-3000
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<PAGE>
With copies to: Gelt, Fleishman & Sterling P.C.
1600 Broadway, Suite 2600
Denver, Colorado 80202-4926
Attention: Theodore Z. Gelt, Esq.
Telecopy: 303/894-0857
Telephone: 303/861-1000
If to IXL or Buyer: IXL Holdings, Inc.
Two Park Place
1888 Emery Street
Atlanta, Georgia 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
7.3 ENTIRE AGREEMENT. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof. There are no other representations or warranties, whether
written or oral, between the parties in connection the subject matter hereof,
except as expressly set forth herein.
7.4 ASSIGNMENTS; PARTIES IN INTEREST. Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests and
obligations of Buyer hereunder may be assigned to any wholly owned subsidiary of
Buyer without such prior consent. Subject to the preceding sentence, this
Agreement
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<PAGE>
shall be binding upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person not a party hereto any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, except as otherwise provided
herein.
7.5 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Georgia (without giving effect to the provisions
thereof relating to conflicts of law).
7.6 HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
7.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
7.8 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economics or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon determination that any term or other provision
hereof is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
7.9 FEES AND EXPENSES. All fees and expenses incurred in connection with
this Agreement and the transactions contemplated by this Agreement shall be paid
by the party incurring such fees or expenses.
7.10 CERTAIN DEFINITIONS. As used in this Agreement:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the Online
Real Property or interfering with the ordinary conduct of any of the Online
Business; and (e) those Liens listed on Schedule 7.10.
-------------
(b) the term "Subsidiary" or "Subsidiaries" means any Entity of
which IXL (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of that are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including, without limitation, Buyer);
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<PAGE>
provided, however, that with respect to IXL, the terms "Subsidiary" and
- -------- -------
"Subsidiaries" shall not include University Netcasting, Inc. or Seller.
(c) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question, and any representation or warranty stated
to be made "to the Knowledge of Seller" shall include the knowledge of the
Stockholder.
- SIGNATURES ON THE FOLLOWING PAGE -
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<PAGE>
IN WITNESS WHEREOF, Buyer, Seller and IXL have caused this Agreement to be
signed by their respective officers thereunder duly authorized, and the
Stockholder has signed this Agreement, all as of the date first written above.
"SELLER"
CONTINENTAL COMMUNICATIONS GROUP, INC. d/b/a
CUSTOMER COMMUNICATIONS GROUP, INC.
By: /s/ John R. Klug President
------------------------------------------
3/27/98
"BUYER"
IXL-DENVER, INC.
By: /s/ James V. Sandry
------------------------------------------
James V. Sandry, Executive Vice President
"IXL"
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
------------------------------------------
James V. Sandry, Executive Vice President
"STOCKHOLDER"
/s/ John R. Klug
---------------------------------------------
John R. Klug
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<PAGE>
EXHIBITS
--------
Bill of Sale..................................................... Exhibit A
Assumption Agreement............................................. Exhibit B
Contract Assignment.............................................. Exhibit C
Lease Assignment................................................. Exhibit D
Trademark Assignment............................................. Exhibit E
Agreement to be Bound to Registration Rights Agreement........... Exhibit F
Agreement to be Bound to Stockholders' Agreement................. Exhibit G
Closing Certificate of Seller.................................... Exhibit H
Seller's Legal Opinion........................................... Exhibit I
IXL Closing Certificate.......................................... Exhibit J-1
Buyer's Closing Certificate...................................... Exhibit J-2
Buyer's Legal Opinion............................................ Exhibit K
Option Agreement................................................. Exhibit L
<PAGE>
SCHEDULE 1.1
------------
ONLINE MISCELLANEOUS ASSETS
SCHEDULE 1.4
------------
ASSUMED LIABILITIES
SCHEDULE 2.1
------------
CERTIFICATE OF INCORPORATION AND BYLAWS OF SELLER
SCHEDULE 2.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS
SCHEDULE 2.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES
SCHEDULE 2.8
------------
UNDISCLOSED LIABILITIES
<PAGE>
SCHEDULE 2.9
------------
EXCEPTIONS TO PURCHASED ASSETS
SCHEDULE 2.10
-------------
EXCEPTIONS TO TITLE TO PROPERTIES
SCHEDULE 2.12
-------------
EXCEPTIONS TO SELLER'S TITLE TO INTELLECTUAL PROPERTY
SCHEDULE 2.14
-------------
LEASES
SCHEDULE 2.15
-------------
CONTRACTS
SCHEDULE 2.16
-------------
PAYROLL INFORMATION
SCHEDULE 2.17
-------------
LITIGATION
<PAGE>
SCHEDULE 2.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS
SCHEDULE 2.19
-------------
ERISA
SCHEDULE 2.21
-------------
PERMITS
SCHEDULE 2.22
-------------
BROKERS
SCHEDULE 2.23
-------------
ENVIRONMENTAL MATTERS
SCHEDULE 2.24
-------------
INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS
SCHEDULE 2.27
-------------
INSURANCE
<PAGE>
SCHEDULE 3.1
------------
CERTIFICATES OF INCORPORATION AND BYLAWS OF IXL AND BUYER
SCHEDULE 3.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS
SCHEDULE 3.4
------------
IXL AND BUYER LITIGATION
SCHEDULE 3.5
------------
IXL AND BUYER BROKERS
SCHEDULE 3.6
------------
OUTSTANDING OBLIGATIONS OF IXL TO ISSUE OPTIONS, WARRANTS OR OTHER IXL STOCK
RIGHTS
SCHEDULE 3.7
------------
SUBSIDIARIES
SCHEDULE 3.9
------------
IXL AND BUYER UNDISCLOSED LIABILITIES
<PAGE>
SCHEDULE 3.12
-------------
EXCEPTIONS TO ABSENCE OF CHANGE FOR IXL
SCHEDULE 4.4
------------
LIST OF EMPLOYEES OF SELLER TO RECEIVE IXL OPTIONS
SCHEDULE 5.1(B)
---------------
REQUIRED CONSENTS OF SELLER
SCHEDULE 5.2(B)
---------------
IXL AND BUYER CONSENTS
SCHEDULE 7.10
-------------
PERMITTED LIENS
<PAGE>
EXHIBIT 2.14
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
IXL HOLDINGS, INC.,
IXL-NEW YORK, INC.
MICRO INTERACTIVE, INC.
AND
THE MICRO SHAREHOLDERS
DATED AS OF May 4, 1998
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AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER is entered into this 4th day of May,
1998, by and between MICRO INTERACTIVE, INC., a New York corporation ("Micro"),
IXL HOLDINGS, INC., a Delaware corporation ("Parent"), IXL-NEW YORK, INC., a
Delaware corporation, or its successors or assigns ("Sub"), and the shareholders
of Micro as listed on the signature page hereto (the "Micro Shareholders").
R E C I T A L S:
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A. Micro is engaged in the business of designing and producing
interactive multimedia software applications (the "Micro Business").
B. Micro and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The Micro Shareholders collectively own 100% of the issued and
outstanding capital stock of Micro (the "Micro Stock").
D. The respective Boards of Directors of Parent, Sub and Micro, and the
respective shareholders of Sub and Micro, have approved the Merger, upon the
terms and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal
income tax purposes, as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, at
the Effective Time (as defined in Section 1.3 hereof), (a) Micro shall be merged
with and into Sub, (b) the separate existence of Micro shall cease, and (c) Sub
shall continue as the surviving corporation in the Merger under the laws of the
State of Delaware under the name iXL-New York, Inc. For purposes of this
Agreement, Sub shall be referred to, for the period commencing on the Effective
Time, as the "Surviving Corporation".
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1.2 CLOSING AND CLOSING DATE. Unless this Merger Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 9.1, and subject to the satisfaction or waiver of
the conditions set forth in Article VII hereof, the closing of the Merger (the
"Closing") will take place as promptly as practicable (and in any event within
five business days after satisfaction of the conditions set forth in Sections
7.1 and 7.2 hereto (the "Closing Date") at the offices of Howard, Darby & Levin,
1330 Avenue of the Americas, New York, New York 10019, unless another date,
time or place is agreed to by the parties.
1.3 EFFECTIVE TIME OF THE MERGER. At the Closing, the parties hereto
shall cause (a) a certificate of merger (the "Delaware Certificate of Merger")
to be filed with the office of the Secretary of State of the State of Delaware
in accordance with the provisions of the Delaware General Corporation Law, as
amended (the "DGCL"); and (b) a certificate of merger (the "New York Certificate
of Merger"; collectively with the Delaware Certificate of Merger, the
"Certificate of Merger") to be filed with the office of the Department of State
of the State of New York in accordance with the provisions of the New York
Business Corporation Law (the "BCL"). When used in this Agreement, the term
"Effective Time" shall mean the time when the Delaware Certificate of Merger has
been accepted for filing by the Secretary of State of the State of Delaware and
the New York Certificate of Merger has been accepted for filing by the
Department of State of the State of New York, or such time as otherwise
specified in the Certificate of Merger.
1.4 EFFECT OF THE MERGER. The Merger shall, from and after the Effective
Time, have all the effects provided by the DGCL and the BCL. If at any time
after the Effective Time, any further action is deemed necessary or desirable to
carry out the purposes of this Agreement, the parties hereto agree that the
Surviving Corporation and its proper officers and directors shall be authorized
to take, and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Sub, a form of which is attached hereto on Schedule 5.1, shall be the
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Certificate of Incorporation of the Surviving Corporation after the Effective
Time, until thereafter changed or amended as provided therein or by applicable
law.
2.2 BYLAWS. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub are included on Schedule 5.1 hereto.
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2.3 BOARD OF DIRECTORS; OFFICERS. The Board of Directors and officers of
Sub immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
3.1 MERGER CONSIDERATION. As of the Effective Time:
(a) All shares of Micro Stock owned by Micro shall, by virtue of the
Merger and without any action on the part of any stockholder, officer or
director of Micro or Sub, be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(b) The issued and outstanding shares of Micro Stock owned by those
Micro Shareholders listed on Schedule 3.1(b) hereto shall, upon surrender to Sub
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at the Closing of the underlying share certificates, be converted into, and
become exchangeable for, the amount of cash listed opposite such Micro
Shareholder's name on Schedule 3.1(b).
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(c) The issued and outstanding shares of Micro Stock (other than
shares of Micro Stock owned by the Micro Shareholders listed on Schedule 3.1(b)
shall, upon surrender to Sub at the Closing of the underlying share
certificates, be converted into, and become exchangeable for, a number of shares
of validly issued, fully paid and nonassessable Class B Common Stock of Parent,
$.01 par value (the "Parent Stock") and the amount of cash listed opposite such
Micro Shareholder's name on Schedule 3.1(c) hereto.
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(d) Each issued and outstanding share of common stock of Sub shall,
by virtue of the Merger and without any action on the part of any stockholder,
officer or director of Micro or Sub, be converted into and become one fully paid
and nonassessable share of common stock of the Surviving Corporation.
3.2 Intentionally omitted.
3.3 NO FURTHER RIGHTS. From and after the Effective Time, holders of
certificates theretofore evidencing Micro Stock shall cease to have any rights
as stockholders of Micro, except as provided herein or by law.
3.4 CLOSING OF MICRO'S TRANSFER BOOKS. At the Effective Time, the
stock transfer books of Micro shall be closed and no transfer of Micro Stock
shall be made thereafter. If, after the Effective time, certificates for Micro
Stock are presented to Parent
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or the Surviving Corporation, they shall be canceled and exchanged for an amount
of Parent Stock as set forth in Section 3.1 hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MICRO
Micro, and Steven C. Baum and Eric H. Freedman (collectively, the
"Controlling Shareholders"), severally represent and warrant to Parent and Sub
the representations and warranties set forth in this Article IV, which shall
survive the Closing in accordance with Section 10.1 of this Agreement.
4.1 ORGANIZATION AND QUALIFICATION. Micro is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. Micro has the requisite corporate power and authority to carry on the
Micro Business as it is now being conducted and is duly qualified or licensed to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities
makes such qualification necessary. Complete and correct copies of the
Certificate of Incorporation and Bylaws of Micro as in effect on the date hereof
are attached as Schedule 4.1 hereto. The minute book of Micro, a true and
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complete copy of which has been delivered to Parent, (a) accurately reflects all
action taken by the directors and shareholders of Micro at meetings of Micro's
Board of Directors or shareholders, as the case may be; and (b) contains true
and complete copies of, or originals of, the respective minutes of all meetings
or consent actions of the directors or shareholders.
4.2 AUTHORITY. Micro has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Micro have been duly and
validly authorized and approved by Micro's Board of Directors and the Micro
Shareholders, and no other corporate or shareholder proceedings on the part of
Micro, its Board of Directors or the Micro Shareholders is necessary to
authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Micro and each Micro Shareholder, and assuming the due authorization, execution
and delivery by Parent and Sub, constitutes the valid and binding obligation of
Micro and each Micro Shareholder, enforceable against Micro and each Micro
Shareholder in accordance with its terms subject, in each case, to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights and to general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing.
4.3 CAPITALIZATION.
(a) The authorized capital stock of Micro consists of 3,000,000
shares of common stock, $.01 par value, of which 796,000 shares are validly
issued and
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outstanding, fully paid and nonassessable. All outstanding capital stock of
Micro was issued in accordance with applicable federal and state securities
laws. Except as set forth on Schedule 4.3(a) hereto, there are no options,
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warrants, calls, agreements, commitments or other rights presently outstanding
that would obligate Micro or the any of the Micro Shareholders to issue, deliver
or sell shares of its capital stock, or to grant, extend or enter into any such
option, warrant, call, agreement, commitment or other right. In addition to the
foregoing, as of the date hereof, Micro has no bonds, debentures, notes or other
indebtedness issued or outstanding that have voting rights in Micro. Schedule
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4.3(a) set forth a list of all holders of record of Micro Stock, Micro Stock
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Rights (as defined in Section 6.6(a) hereof) the number of shares held by each
Micro Shareholder and the number of shares of capital stock of Micro represented
by the Micro Stock Rights (as defined in Section 6.6 hereof), and the exercise
price for each such Micro Stock Right.
(b) All of the issued and outstanding shares of capital stock of
Micro are validly issued, fully paid and nonassessable. Except as set forth on
Schedule 4.3(b) hereto, the Micro Stock is free and clear of any lien, charge,
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security interest, pledge, option, right of first refusal, voting proxies or
other voting agreements, or encumbrance of any kind or nature other than
restrictions on transfer imposed by federal and state securities laws (any of
the foregoing, a "Lien").
4.4 SUBSIDIARIES. Micro has no subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest in, or any security
convertible into an equity interest in, any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 4.5 hereto, none of the execution and delivery of this Agreement by
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Micro or the Micro Shareholders, the consummation by Micro and the Micro
Shareholders of the transactions contemplated hereby or compliance by Micro with
any of the provisions hereof will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Micro;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to Micro or the Micro
Shareholders, or by which Micro or its properties or assets may be bound or
affected;
(c) result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Micro is a party or by which Micro or
its properties may be bound or affected;
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(d) result in the creation of any Lien on any of the property or
assets of Micro; or
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), of (i) any government or subdivision thereof,
whether domestic, foreign or multinational, or any administrative, governmental,
or regulatory authority, agency, commission, court, tribunal or body, whether
domestic, foreign or multinational (a "Governmental Entity"), except for the
filing of the Certificate of Merger pursuant to the DGCL and the BCL; or (ii)
any other individual or Entity (collectively, a "Person").
4.6 FINANCIAL STATEMENTS. Micro has heretofore furnished Parent with a
true and complete copy of (a) the financial statements of Micro for the years
ended December 31, 1995 and 1996; and (b) the unaudited financial statements of
Micro for the year ended December 31, 1997 and the three month period ended
December 31, 1997 (collectively herein referred to as the "Micro Financial
Statements"). Except as disclosed therein, the Micro Financial Statements have
been prepared in accordance with generally accepted accounting principles
("GAAP") (except for the absence of footnotes and normal year-end adjustments in
the case of the Micro Financial Statements for the period ended December 31,
1997) consistently followed throughout the period indicated, and present fairly,
in all material respects, the financial position and operating results of Micro
as of the dates, and during the periods, indicated therein.
4.7 ABSENCE OF CHANGES. Except as provided in Schedule 4.7 hereto and
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except as contemplated by this Agreement, since December 31, 1997, (a) there has
been no sale, assignment, transfer, mortgage, pledge, encumbrance or lease of
any material assets or properties of Micro except in the ordinary course of
business consistent with past practice; (b) there has been (i) no declaration or
payment of a dividend, or any other declaration, payment or distribution of any
type or nature to any shareholder of Micro in respect of its stock, whether in
cash or property, and (ii) no purchase or redemption of any shares of the
capital stock of Micro or any split, combination or reclassification of any of
Micro's capital stock or the issuance or authorization of any issuance of any
stock; (c) there has been no declaration, payment, or commitment for the
payment, by Micro, of a bonus or other additional salary, compensation, or
benefit to any employee of Micro that was not in the ordinary course of
business, except for normal year-end bonuses paid in the ordinary course of
business; (d) there has been no release, compromise, waiver or cancellation of
any material debts to or material claims by Micro, or waiver of any material
rights of Micro; (e) there have been no capital expenditures in excess of
$10,000 for any single item, or $25,000 in the aggregate; (f) there has been no
change in accounting principles, methods or practices or revaluation of any
assets of Micro (other than Micro Accounts Receivable (as defined in Section
4.26 hereof) written down in the ordinary course of business that are not in
excess of $10,000 for any single Micro Account Receivable and $25,000 in the
aggregate); (g) there has been no material damage, destruction or loss of
physical property (whether or not covered by insurance) adversely affecting the
Micro Business or the operations of Micro; (h) there has been no loan by Micro,
or guaranty by Micro of any loan, to any employee of Micro; (i) Micro
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has not ceased to transact business with any customer that, as of the date of
such cessation, represented more than 5% of the annual gross revenues of Micro;
(j) there has been no termination or resignation of any key employee or officer
of Micro, and to the knowledge of Micro, no such termination or resignation is
threatened; (k) there has been no amendment or termination of any material oral
or written contract, agreement or license related to the Micro Business, to
which Micro is a party or by which it is bound, except in the ordinary course of
business, or except as expressly contemplated by this Agreement; (l) Micro has
not failed to satisfy any of its debts, obligations or liabilities related to
the Micro Business or the assets of Micro as the same become due and owing
(except for Micro Accounts Payable (as defined in Section 4.27 hereof), payable
in accordance with past practices and in the ordinary course of business); (m)
there has been no agreement or commitment by Micro to do any of the foregoing;
and (n) there has been no other event or condition of any character pertaining
to and materially and adversely affecting the assets, business or financial
condition of Micro.
4.8 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.8 hereto,
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Micro has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including, without limitation, any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997, that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Micro; (b) liabilities reflected on the Micro Financial Statements; and (c)
liabilities incurred as a result of the transactions contemplated by this
Agreement.
4.9 TITLE TO PROPERTIES. Except as set forth on Schedule 4.9 hereto,
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Micro has good and marketable title to all tangible property and assets used in
the Micro Business, and good and valid title to its leasehold interests, in each
case, free and clear of any and all Liens other than Permitted Liens (as defined
in Section 10.12 hereof).
4.10 EQUIPMENT. Except as set forth on Schedule 4.10 hereto, each material
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item of tangible personal property (including, without limitation, computer
hardware) necessary for or used in the operation of the Micro Business in the
manner in which it has been and is now operated by Micro is in good condition
and repair, ordinary wear and tear excepted.
4.11 INTELLECTUAL PROPERTY.
(a) Micro has furnished, or will prior to Closing furnish, Parent
with a true and complete list of all material proprietary technology, and all
patents, registered trademarks, registered trade names, registered service marks
and registered copyrights, used in the conduct of the Micro Business. Micro
owns, or is validly licensed or otherwise has the right to use or exploit, as
currently used or exploited, all of the intellectual property rights identified
in the preceding sentence, along with all material patent rights, trademark
rights, trade name rights, service mark rights, copyrights, trade secrets and
know how used by Micro in the conduct of the Micro Business (collectively, the
"Micro Intellectual Property Rights"), free of any obligation to make any
payment
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(whether of a royalty, license fee, compensation or otherwise). No claims are
pending or, to the knowledge of Micro, threatened, that Micro is infringing or
otherwise adversely affecting the rights of any Person with regard to any Micro
Intellectual Property Right. To the knowledge of Micro, no Person is infringing
the rights of Micro with respect to any Micro Intellectual Property Right. To
the knowledge of Micro, neither Micro nor any employee, agent or independent
contractor of Micro, in connection with the performance of such Person's
services with Micro, has used, appropriated or disclosed, directly or
indirectly, any trade secrets or other proprietary or confidential information
of any other Person, or otherwise violated any confidential relationship with
any other Person. Micro has not received any notice that use of the name "Micro
Interactive" in connection with the Micro Business infringes upon the rights of
any Person.
(b) Micro has furnished, or will prior to Closing furnish, Parent
with a true and complete list of all material computer software used by Micro in
the conduct of the Micro business other than shrinkwrap software (the "Micro
Software"). Micro currently licenses, or otherwise has the legal right to use,
all of the Micro Software (including any upgrades, alterations or enhancements
with respect thereto), and to the knowledge of Micro all of the Micro Software
is being used in compliance with any applicable licenses or other agreements.
4.12 REAL PROPERTY. Except as set forth on Schedule 4.12 hereto:
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(a) Micro has good and valid leasehold interest in all real property
(including all buildings, improvements and fixtures thereon) used in the
operation of the Micro Business (the "Micro Real Property"). Micro owns no real
property. Except for Permitted Liens, and for the items set forth on Schedule
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4.12, there are no Liens on Micro's interest in any of the Micro Real Property.
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(b) There are no parties in possession of any portion of the Micro
Real Property other than Micro, whether as sublessees, or subtenants at will.
(c) To the knowledge of Micro, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, under the provisions of any of the
Micro Leases (as hereinafter defined), any material expenditure by Micro to
modify or improve any of the Micro Real Property to bring it into compliance
therewith.
4.13 LEASES. Schedule 4.13 hereto sets forth a list of all leases pursuant
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to which Micro leases, as lessor or lessee, real or personal property used in
operating the Micro Business or otherwise (the "Micro Leases"). Copies of the
Micro Leases, which have previously been provided to Parent, are true and
complete copies thereof. All of the Micro Leases are valid, binding and
enforceable against Micro and, to the knowledge of Micro, against the other
parties thereto, in accordance with their respective terms, and there is not
under any such Micro Lease any existing default by Micro, or, to the knowledge
of Micro, by any other party thereto, or any condition or event that, with
notice or lapse of time or both, would constitute a default. Micro has not
received notice
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that the lessor of any of the Micro Leases intends to cancel, suspend or
terminate the Micro Leases or to exercise or not exercise any options under any
of the Micro Leases.
4.14 CONTRACTS. Schedule 4.14 hereto sets forth a true and complete list
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of all contracts, agreements and commitments (whether written or oral) to which
Micro is, directly or indirectly, a party (in its own name or as a successor in
interest), or by which it is otherwise bound, including, without limitation, any
service agreements, customer agreements (the names of the counterparties to
which shall be furnished to Parent prior to Closing), supplier agreements,
agreements to lend or borrow money, shareholder agreements, employment
agreements, agreements relating to Micro Intellectual Property Rights and the
like (collectively, the "Micro Contracts"); excepting only these Micro Contracts
which involve less than $10,000. Micro represents and warrants that the
aggregate value of all payment obligations and rights to receive payments, under
agreements, contracts and commitments (whether oral or in writing) to which
Micro is a party or by which it is otherwise bound, and that are not listed on
Schedule 4.14, is less than $50,000 (calculating such value by adding together
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the value of rights and obligations, and not by determining the net amount
thereof).
True and complete copies of each Micro Contract (or a true and complete
narrative description of any material oral Micro Contract) have previously been
provided to Parent, except for customer agreements, which shall be provided
prior to Closing. Neither Micro nor, to the knowledge of Micro, any other party
to any of the Micro Contracts, (x) is in default under (nor does there exist any
condition that, with notice or lapse of time or both, would cause such a default
under) any of the Micro Contracts, or (y) has waived any right it may have under
any of the Micro Contracts, the waiver of which would have a material adverse
effect on the business, assets or financial condition or prospects of Micro.
All of the Micro Contracts constitute the valid and binding obligation of Micro,
enforceable in accordance with their respective terms, and, to the knowledge of
Micro, the other parties thereto.
4.15 DIRECTORS AND OFFICERS. Schedule 4.15 hereto sets forth a list, as of
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the date of this Agreement, of the name of each director and officer of Micro
and the offices held by each.
4.16 PAYROLL INFORMATION. Micro will provide Parent prior to Closing with
a true and complete copy of the payroll report of Micro as of a date within 30
days of the execution and delivery of this Agreement, showing all current
employees of Micro and their current levels of compensation, other than bonuses
and other extraordinary compensation. Micro has paid all compensation required
to be paid to employees of Micro on or prior to the date hereof other than
compensation, vacation pay and benefits accrued through the current pay period.
4.17 LITIGATION. Except as set forth on Schedule 4.17 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
Micro, threatened against or affecting Micro or the Micro Business, nor is there
any judgment,
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decree, injunction or order of any applicable Governmental Entity or arbitrator
outstanding against Micro.
4.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 4.18 hereto, there are no
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employee benefit plans, agreements or arrangements maintained by Micro,
including, without limitation, (i) "employee benefit plans," within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"); (ii) current or deferred compensation, pension, profit
sharing, vacation or severance plans or programs; or (iii) medical, hospital,
accident, disability or death benefit plans (collectively, "Micro Benefit
Plans"). All Micro Benefit Plans are administered in accordance with, and are in
material compliance with, all applicable laws and regulations. No default exists
with respect to the obligations of Micro under any Micro Benefit Plans.
(b) Micro is not a party to any collective bargaining agreement, no
collective bargaining agent has been certified as a representative of any of the
employees of Micro, no representation campaign or election is now in progress
with respect to any employee of Micro and there are no labor disputes,
grievances, controversies, strikes or requests for union representation pending,
or, to the knowledge of Micro, threatened, relating to or affecting the Micro
Business. To the knowledge of Micro, no event has occurred that could give rise
to any such dispute, controversy, strike or request for representation.
4.19 ERISA.
(a) All Micro Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of Micro Benefit Plans that is intended to
meet the requirements of Section 401(a) of the Code has been determined by the
Internal Revenue Service to meet such requirements within the meaning of such
provision. No Micro Benefit Plan is subject to Title IV of ERISA or Section 412
of the Code. Micro has not engaged in any nonexempt "prohibited transactions,"
as such term is defined in Section 4975 of the Code or Section 406 of ERISA,
involving Micro Benefit Plans that would subject Micro to the penalty or tax
imposed under Section 502(i) of ERISA or Section 4975 of the Code. Micro has
not engaged in any transaction described in Section 4069 of ERISA within the
last five years. Except as disclosed in Schedule 4.19 hereto or pursuant to the
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terms of Micro Benefit Plans, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation or golden parachute) becoming due to any director or other employee
of Micro, (ii) increase any benefits otherwise payable under any Micro Benefit
Plan or (iii) result in the acceleration of the time of payment or vesting of
any such benefits to any extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has
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been required to be filed for any Micro Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code, or by any
entity that is considered one employer with Micro under Section 4001 of ERISA or
Section 414 of the Code, within the 12-month period ending on the date hereof.
Micro has not incurred any liability to the Pension Benefit Guaranty Corporation
in respect of any Micro Benefit Plan that remains unpaid.
4.20 TAXES.
(a) Micro has duly and timely filed all federal, state and local
income, franchise, excise, real and personal property and other tax returns and
reports, including extensions, required to have been filed by Micro on or prior
to the date hereof. Micro has duly and timely paid all taxes and other
governmental charges, and all interest and penalties with respect thereto,
required to be paid by Micro (whether by way of withholding or otherwise) to any
federal, state, local or other taxing authority (except to the extent the same
are being contested in good faith, and adequate reserves therefor have been
provided in the Micro Financial Statements). As of the date hereof, all
deficiencies proposed as a result of any audits have been paid or settled.
(b) Micro is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) Micro has not consented to have the provisions of Section
341(f)(2) of the Code (or comparable state law provisions) apply to it, and
Micro has not agreed or been requested to make any adjustment under Section
481(c) of the Code by reason of a change in accounting method or otherwise.
4.21 COMPLIANCE WITH APPLICABLE LAWS. Micro holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary, if any, to own, lease or operate all of the assets and
properties of Micro, as appropriate, and to carry on the Micro Business as now
conducted (the "Micro Permits"). To the knowledge of Micro, Micro is in
material compliance with all applicable laws, ordinances and regulations that
relate to the Micro Business. There are no Micro Permits.
4.22 BOARD OF DIRECTOR/SHAREHOLDER CONSENT. Both the Board of Directors of
Micro and the Micro Shareholders have adopted and approved this Agreement and
the transactions contemplated hereby (including, without limitation, the
Merger).
4.23 BROKERS. Except as set forth on Schedule 4.23 hereto, no broker or
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finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated by this Agreement as a result of
arrangements made by or on behalf of Micro.
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4.24 ENVIRONMENTAL MATTERS.
(a) Micro is not a party to any litigation or administrative
proceeding nor, to the knowledge of Micro, is any litigation or administrative
proceeding threatened against it, that, in either case, asserts or alleges that
Micro (i) violated any Environmental Laws (as hereinafter defined); (ii) is
required to clean up, remove or take remedial or other response action due to
the disposal, deposit, discharge, leak or other release of any Hazardous
Substances; or (iii) is required to pay all or a portion of the cost of any
past, present or future cleanup, removal or remedial or other action that arises
out of or is related to the disposal, deposit, discharge, leak or other release
of any Hazardous Substances.
(b) To the knowledge of Micro, Micro is not subject to any judgment,
order or citation related to or arising out of any Environmental Laws and has
not been named or listed as a potentially responsible party by any Governmental
Entity in a matter related to or arising out of any Environmental Laws.
(c) For purposes of this Agreement, (i) the term "Environmental Law"
means any federal, state or local law (including statutes, regulations,
ordinances, codes, rules, judicial opinions and other governmental restrictions
and requirements), relating to the discharge of air pollutants, water
pollutants, noise, odors or process waste water, or otherwise relating to the
environment or hazardous or toxic substances; and (ii) the term "Hazardous
Substance" means any toxic or hazardous substance that is regulated by or under
authority of any Environmental Law, including, without limitation, any petroleum
products, asbestos or polychlorinated biphenyls.
4.25 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as provided
in Schedule 4.25 hereto, no officer, director, shareholder or employee of Micro
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and no immediate family member (including a spouse, parent, sibling or lineal
descendent of any of the foregoing), has any direct or indirect material
interest in any material customer, supplier or competitor of Micro, or in any
Person from whom or to whom Micro leases any real or personal property, or in
any other Person with whom Micro is doing business whether directly or
indirectly (including, without limitation, as a debtor or creditor), whether in
existence as of the date hereof or proposed, other than the ownership of stock
of publicly traded outstanding stock of such corporation.
4.26 ACCOUNTS RECEIVABLE. Except as provided in Schedule 4.26 hereto, all
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accounts, notes, contracts and other receivables of Micro (collectively, "Micro
Accounts Receivable") were acquired by Micro in the ordinary course of business
arising from bona fide transactions.
4.27 ACCOUNTS PAYABLE. All material accounts, notes, contracts and other
amounts payable of Micro (collectively, "Micro Accounts Payable") are currently
within their respective terms, and are neither in default nor otherwise past due
by more than 90 days. Micro has previously provided Parent with a true and
complete aging report
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prepared as of December 31, 1997, and which shows the time elapsed since invoice
date for all Micro Accounts Payable as of such date.
4.28 INSURANCE. Micro currently maintains, in full force and effect, all
insurance policies that are required to be maintained for the conduct of the
Micro Business or the ownership of Micro 's property (both real and personal)
(collectively, the "Micro Insurance Policies"). The Micro Insurance Policies
are listed on Schedule 4.28 hereto, and true and compete copies of all Micro
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Insurance Policies have previously been provided to Parent. Micro (a) is not in
default regarding the provisions of any Micro Insurance Policy; (b) has paid all
premiums due thereunder; and (c) has not failed to present any notice or present
any material claim thereunder in a due and timely fashion.
4.29 BANKRUPTCY. Micro has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 Intentionally omitted.
4.31 ACCREDITED INVESTORS; INVESTMENT PURPOSE. Each Micro Shareholder
receiving Parent Stock in the Merger represents that he is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"). Each Micro Shareholder receiving Parent Stock in the
Merger further represents that he is acquiring the Parent Stock solely for his
own account for investment and not with a view to, or for sale in connection
with, any distribution thereof. Each Micro Shareholder receiving parent Stock
in the Merger agrees that he will not, directly or indirectly, offer, transfer,
sell, pledge, hypothecate or otherwise dispose of any Parent Stock (or solicit
any offers to buy, purchase or other acquire or take a pledge of any such
shares) except in compliance with the Securities Act and the rules and
regulations thereunder, other applicable laws, rules and regulations, and the
Stockholders' Agreement (as defined in Section 7.2(e) hereof).
4.32 RESTRICTIONS ON TRANSFER. Each Micro Shareholder receiving Parent
Stock in the Merger acknowledges that (a) the Parent Stock received by him
hereunder has not been registered under the Securities Act; (b) the Parent Stock
may be required to be held indefinitely, and each Micro Shareholder must
continue to bear the economic risk of the investment in such shares unless such
shares are subsequently registered under the Securities Act or an exemption from
such registration is available; (c) there may not be any public market for the
Parent Stock in the foreseeable future; (d) Rule 144 promulgated under the
Securities Act is not presently available with respect to sales of any
securities of Parent, and such Rule is not anticipated to be available in the
foreseeable future; (e) when and if Parent Stock may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
limited amounts and in accordance
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with the terms and conditions of such Rule; (f) if the exemption afforded by
Rule 144 is not available, public sale without registration will require the
availability of an exemption under the Securities Act; (g) the Parent Stock is
subject to the terms and conditions of the Stockholders' Agreement; (h)
restrictive legends shall be placed on the certificates representing Parent
Stock; and (i) a notation shall be made in the appropriate records of Parent
indicating that Parent Stock is subject to restrictions on transfer and, if
Parent should in the future engage the services of a stock transfer agent,
appropriate stop-transfer instructions will be issued to such transfer agent
with respect to Parent Stock.
4.33 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION. Each
Micro Shareholder receiving Parent Stock in the Merger represents and warrants
that (a) his financial situation is such that he can afford to bear the economic
risk of holding Parent Stock acquired by him hereunder for an indefinite period;
(b) he can afford to suffer the complete loss of such Parent Stock; (c) he has
been granted the opportunity to ask questions of, and receive answers from,
representatives of Sub and Parent concerning the terms and conditions of the
Parent Stock and to obtain any additional information that he deems necessary;
(d) his knowledge and experience in financial business matters is such that he
is capable of evaluating the merits and risk of ownership of the Parent Stock;
(e) he has carefully reviewed the terms of the Stockholders' Agreement and has
evaluated the restrictions and obligations contained therein; (f) he has (i)
reviewed the Private Placement Memorandum of Parent dated as of April 20, 1998
(including revisions thereto, the "Memorandum"); (ii) has carefully examined the
Memorandum and has had an opportunity to ask questions of, and receive answers
from representatives of Parent, and to obtain additional information concerning
Parent and its Subsidiaries (as hereinafter defined), and (iii) does not require
additional information regarding Parent or its Subsidiaries in connection with
the merger.
4.34 DISCLOSURE. No statement of fact by Micro or a Micro Shareholder
contained in this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
contained, in light of the circumstances under which they were made, not
materially misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to
Micro and the Micro Shareholders, which representations and warranties shall
survive the Closing in accordance with Section 9.1 of this Agreement, as
follows:
5.1 ORGANIZATION AND QUALIFICATION. Each of Parent and its Subsidiaries
(as defined in Section 10.12 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good
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standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary. Complete and correct copies of the Certificates of Incorporation and
Bylaws of Parent and Sub as in effect on the date hereof are attached as
Schedule 5.1 hereto.
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5.2 AUTHORITY. Each of Parent and Sub has the necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by each of Parent
and Sub have been duly and validly authorized and approved by their respective
Board of Directors and by Sub's sole shareholder, and no other corporate or
shareholder proceedings on the part of either Parent or Sub, or their respective
boards of directors or shareholders, are necessary to authorize or approve this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by each of Parent and Sub, and assuming the
due authorization, execution and delivery by Micro and the Micro Shareholders,
constitutes the valid and binding obligation of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms subject,
in each case, to bankruptcy, insolvency, reorganization, moratorium and similar
laws of general application relating to or affecting creditors' rights and to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing.
5.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. None of the execution
and delivery of this Agreement by Parent or Sub, the consummation by Parent and
Sub of the transactions contemplated hereby or compliance by Parent and Sub with
any of the provisions hereof will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Parent or Sub, or the organizational documents of any other
Subsidiaries;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to Parent or its Subsidiaries,
or by which Parent, any of its Subsidiaries, or their respective properties or
assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for
(x) compliance with any applicable requirements of any applicable securities
laws, and (y)
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the filing of the Certificate of Merger pursuant to the DGCL and the BCL) or
(ii) any other Person.
5.4 LITIGATION. Except as set forth on Schedule 5.4 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 BROKERS. Except as disclosed on Schedule 5.5 hereto, No broker or
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finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Sub.
5.6 PARENT STOCK.
(a) As of the date hereof the authorized capital stock of Parent
consists of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 8,869,010 shares are
validly issued and outstanding (without taking into account any shares of Parent
Stock to be issued pursuant to this Agreement), fully paid and nonassessable;
(ii) 750,000 shares of blank check preferred stock, (A) 250,000 of which have
been designated as Class A Convertible Preferred Stock, of which 172,452 shares
are validly issued and outstanding, fully paid and nonassessable, (B) 200,000 of
which have been designated as Class B Convertible Preferred Stock, of which
98,767 shares are validly issued and outstanding, fully paid and nonassessable,
and (C) 15,000 of which have been designated as Class C Convertible Preferred
Stock, of which 9,232 shares are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 5.6 hereto, there are no
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options, warrants, calls, agreements, commitments or other rights presently
outstanding that would obligate Parent to issue, deliver or sell shares of its
capital stock, or to grant, extend or enter into any such option, warrant, call,
agreement, commitment or other right (without taking into account any options to
be issued pursuant to this Agreement). In addition to the foregoing, as of the
date hereof, Parent has no bonds, debentures, notes or other indebtedness issued
or outstanding that have voting rights in Parent.
(b) The holders of record, immediately prior to the Effective Time,
of the outstanding shares of capital stock of Parent, together with the number
of shares of capital stock then outstanding, are set forth on Schedule 5.6
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hereto.
(c) When delivered to the Micro Shareholders in accordance with the
terms hereof, the Parent Stock will (i) be duly authorized, fully paid and
nonassessable, and (b) be free and clear of all Liens other than restrictions
imposed by the Stockholders Agreement and by federal and state securities laws.
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5.7 SUBSIDIARIES. Except as set forth on Schedule 5.7 hereto, Parent has
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no subsidiaries and does not otherwise own or control, directly or indirectly,
any equity interest in, or any security convertible into an equity interest in,
any Entity. Schedule 5.7 hereto lists the name of each of the Subsidiaries of
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Parent, and indicates their respective jurisdictions of incorporation. Parent
owns 100% of each Subsidiary (including all of Sub's outstanding shares,
consisting of 100 shares of common stock, $.01 par value) or other Entity listed
on Schedule 5.7 hereto, except as indicated on such Schedule.
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5.8 FINANCIAL STATEMENTS. Parent has heretofore furnished Micro with a
true and complete copy of (a) the audited financial statements of iXL
Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31,
1993, 1994 and 1995, and for the four-month period ended April 30, 1996; (b)
audited combined financial statements for Creative Video, Inc. (n/k/a iXL,
Inc.), Creative Video Library, Inc. and Entrepreneur Television, Inc. for the
years ended December 31, 1993, 1994 and 1995, and for the four-month period
ended April 30, 1996; (c) the audited consolidated financial statements for
Parent and its Subsidiaries for the eight months ended December 31, 1996; and
(d) the audited consolidated financial statements for Parent and its
Subsidiaries, as of December 31, 1997. Such financial statements present fairly
in all material respects the consolidated financial position, results of
operations, shareholders' equity and cash flows of Parent at the respective
dates or for the respective periods to which they apply. Except as disclosed
therein, such statements and related notes have been prepared each in accordance
with GAAP consistently applied throughout the periods involved (except, in the
case of the unaudited financial statements, for the exclusion of footnotes and
normal year end adjustments).
5.9 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including, without
limitation, any liability or obligation on account of taxes or any governmental
charges or penalty, interest or fines, except (a) liabilities incurred in the
ordinary course of business after December 31, 1997 that would not, whether
individually or in the aggregate, have a material adverse impact on the business
or financial condition of the Parent and its Subsidiaries, taken as a whole; (b)
liabilities reflected on the Parent Financial Statements; and (c) liabilities
incurred as a result of the transactions contemplated by this Agreement.
5.10 COMPLIANCE WITH APPLICABLE LAWS. Parent or its Subsidiaries holds all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
5.11 BOARD OF DIRECTOR SHAREHOLDER CONSENT. Both the Board of Directors of
Parent and the Board of Directors and shareholders of Sub have, by unanimous
written
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consent, adopted and approved this Agreement and the transactions contemplated
hereby (including, without limitation, the Merger).
5.12 BANKRUPTCY. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 ABSENCE OF CHANGES. Except as provided in Schedule 5.13 hereto, since
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December 31, 1997, there has not been (a) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including, without limitation, any borrowing
or sale of assets) except in the ordinary course of business consistent with
past practice; (d) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) with respect to its capital
stock; (e) any material change in its accounting principles, practices or
methods; (f) any split, combination or reclassification of any of Parent's
capital stock or the issuance or authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for, shares of Parent's
capital stock; or (g) any agreement (whether or not in writing), arrangement or
understanding to do any of the foregoing.
5.14 TAXES. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the date hereof. Parent and
its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the date hereof,
all deficiencies proposed as a result of any audits have been paid or settled.
5.15 DISCLOSURE. The Memorandum does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements herein or therein contained, in light of the circumstances under
which they were made, not materially misleading.
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5.16 INTELLECTUAL PROPERTY.
(a) Parent and each of its Subsidiaries owns, or is validly licensed
or otherwise has the right to use or exploit, as currently used or exploited,
all material proprietary technology, patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service mark rights and
copyrights used by Parent or any of its Subsidiaries in the conduct of their
respective businesses (together with trade secrets and know how used in the
conduct of such businesses, the "IXL Intellectual Property Rights"), free of any
obligation to make any payment (whether of a royalty, license fee, compensation
or otherwise). No claims are pending or, to the knowledge of Parent, threatened,
that Parent or any of its Subsidiaries is infringing or otherwise adversely
affecting the rights of any Person with regard to any IXL Intellectual Property
Right. To the knowledge of Parent, no Person is infringing the rights of Parent
or any of its Subsidiaries with respect to any IXL Intellectual Property Right.
To the knowledge of Parent, neither Parent, nor Subsidiary nor any employee,
agent or independent contractor of Parent or any of its Subsidiaries, in
connection with the performance of such Person's services with Parent or any of
its Subsidiaries, has used, appropriated or disclosed, directly or indirectly,
any trade secrets or other proprietary or confidential information of any other
Person, or otherwise violated any confidential relationship with any other
Person. Parent has not received any notice that use of the name "IXL" or "IXL
Interactive Excellence" in connection with the business of Parent infringes upon
the rights of any Person.
(b) Parent and its Subsidiaries currently license, or otherwise have
legal right to use, all of the material computer software used by Parent and its
Subsidiaries in the conduct of the business of Parent and its Subsidiaries
(together with any upgrades, alterations or enhancements with respect thereto,
the "IXL Software"), and, to the knowledge of Parent, all of the IXL Software is
being used in compliance with any applicable licenses or other agreements.
5.17 INTERIM TRANSACTIONS.
(a) It is contemplated that, after the execution hereof but on or
before the Closing Date, Parent may enter into merger agreements with one or
more of Digital Planet (the "Digital Merger"), Spin Cycle Entertainment (the
"Spin Cycle Merger"), InTouch Interactive, Inc. (the "InTouch Merger") and
Denovo New Media, Ltd. (the "Denovo Merger"), pursuant to which Parent may issue
(i) an aggregate of up to 700,000 additional shares of Parent Stock, (ii) an
aggregate of up to 65,000 options on Parent Stock, and (iii) up to 20,000
warrants with respect to Parent Stock.
(b) Notwithstanding anything to the contrary herein, after the date
hereof through the Closing Date (i) Schedules 5.6, 5.7, 5.9 and 5.13 hereto may
--------------------------------
be revised, to reflect the closings of the Digital Merger, Spin Cycle Merger,
Denovo Merger and InTouch Merger; and (ii) the Memorandum may be revised, to
reflect (A) the foregoing; (B) other potential acquisitions; and (C) other new
developments, during such
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interim period, in Parent's or Sub's business, finance, capital or property,
provided that such developments do not have a material adverse effect on Parent.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 CONDUCT OF BUSINESS BY MICRO PENDING THE MERGER. From and after the
date hereof, prior to the Effective Time, except as contemplated by this Merger
Agreement, unless Parent shall otherwise agree in writing, Micro shall carry on
its business in the ordinary course in substantially the same manner as
heretofore conducted, use reasonable efforts to preserve intact its present
business organization, keep available the services of its employees and preserve
its relationships with customers, suppliers, licensors, licensees, distributors
and others having business dealings with Micro to the end that its goodwill and
on-going businesses shall not be impaired in any material respect at the
Effective Time. Without limiting the generality of the foregoing, and except as
contemplated by this Merger Agreement unless Parent shall otherwise agree in
writing, prior to the Effective Time, Micro shall not:
(a) (i) declare, set aside, or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (ii) split, combine
or reclassify any of its capital stock or issue or, authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock, or (iii) purchase, redeem or otherwise acquire, any shares of
capital stock of Micro or any other equity securities thereof or any rights,
warrants, or options to acquire any such shares or other securities;
(b) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities issued by Micro or any securities
convertible into, or any rights, warrants or options to acquire, any such shares
or voting securities;
(c) amend its Certificate of Incorporation, By-laws or other
comparable organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, joint venture, association or
other business organization or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to Micro;
(e) subject to a Lien or sell, lease or otherwise dispose of any of
its properties or assets outside the ordinary course of business;
(f) (i) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another Person or issue or sell any debt securities of
Micro, guarantee any debt securities of another Person or enter into any "keep
well" or other
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agreement to maintain any financial condition of another Person, make any loans,
advances or capital contributions to, or investments in, any other Person, or
settle or compromise any material claim or litigation; or
(g) authorize any of, or commit or agree to take any of, the
foregoing actions.
6.2 ACCESS TO INFORMATION. From the date hereof through the Effective
Time, Micro shall afford to Parent and Parent's accountants, counsel and other
representatives reasonable access during normal business hours (and at such
other times as the parties may mutually agree) upon reasonable prior notice and
approval of Micro, which shall not be unreasonably withheld, to its properties,
books, contracts, commitments, records and personnel and, during such period,
shall furnish promptly to Parent all information concerning its business,
properties and personnel as Parent may reasonably request. Parent and its
accountants, counsel and other representatives shall, in the exercise of the
rights described in this Section 6.2, not unduly interfere with the operation of
the business of Micro.
6.3 TAX ELECTIONS. Micro shall, before settling or compromising any
material income tax liability of Micro, consult with Parent and its advisors as
to the positions and elections that will be taken or made with respect to such
matter.
6.4 PUBLIC ANNOUNCEMENTS. The parties agree that, except as may otherwise
be required to comply with applicable laws and regulations (including, without
limitation, applicable securities laws) or to obtain consents required
hereunder, public disclosure of the transactions contemplated by this Agreement
shall be made only upon or after the consummation of the Merger. Any such
disclosure shall be coordinated by Parent, and none of the Micro Shareholders
shall make any such disclosure without the prior written consent of Parent.
6.5 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND EXPENSES. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 OPTIONS.
(a) Micro hereby covenants and agrees that at the Effective Time, all
of the outstanding options, warrants and other rights to purchase capital stock
of Micro (all of which are set forth on Schedule 4.3(a) hereto) (collectively,
---------------
the "Micro Stock Rights") shall have been properly canceled, and all rights and
obligations thereunder shall have been terminated.
(b) At the Effective Time, Parent shall issue options to purchase up
to 50,000 shares of validly issued, fully paid and nonassessable Parent Stock,
at an exercise
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price of $5.00 per share, to those Persons listed on Schedule 6.6(b) hereto (or
---------------
to such other individuals as are selected by Micro and approved by Parent),
pursuant to the IXL Holdings, Inc. 1996 Stock Option Plan, as amended (the
"Parent Stock Option Plan"). If fewer than 50,000 options are issued at Closing,
the Controlling Shareholders shall have the right to designate (subject to
Parent's approval, unless the designees are the Controlling Shareholders
themselves) other Persons or employees to receive the remaining options,
provided such right shall expire three months after the Effective Time.
6.7 FURTHER ASSURANCES. From time to time after the Effective Time, upon
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions of this Agreement.
6.8 FINAL NEW YORK FRANCHISE TAX REPORT. The Surviving Corporation will,
within 30 days after the filing of the New York Certificate of Merger, file a
final cessation franchise tax report, and promptly pay to the department of
taxation and finance all fees and taxes (including penalties and interest), if
any, due by Micro to the department of taxation and finance, in accordance with
Section 907(e)(2)(h) of the BCL.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATION OF MICRO AND THE MICRO SHAREHOLDERS TO EFFECT
THE MERGER. The obligation of Micro and the Micro Shareholders to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) Parent and Sub shall have performed in all material respects
their respective agreements contained in this Merger Agreement required to be
performed at or prior to the Effective Time and the representations and
warranties of Parent and Sub contained in this Merger Agreement shall be true in
all material respects when made and (except for representations and warranties
made as of a specified date, which need only be true as of such date) at and as
of the Effective Time as if made at and as of such time, except as contemplated
by this Merger Agreement;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to Micro at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-1" hereto, and (ii) the
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appropriate officers of Sub shall have executed and delivered to Micro at the
Closing, a closing certificate and incumbency certificate, substantially in the
form of Exhibit "A-2" hereto;
-------------
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
- ---------------
22
<PAGE>
(d) Micro shall have received a corporate certificate of good
standing for Parent and Sub, and a copy of the Certificate of Incorporation for
Parent and Sub, both as certified by the Secretary of State of Delaware;
(e) there shall have been delivered to each of the Controlling
Shareholders at the Closing, duly executed by Parent, an Agreement to be Bound
to the Registration Rights Agreement of Parent, dated as of the hereof (the
"Agreement to be Bound to the Registration Rights Agreement"), substantially in
the form of Exhibit "B" hereto;
-----------
(f) Parent shall have executed and delivered at the Closing an Option
Agreement for each of the Persons listed on Schedule 6.6(b) hereto receiving
---------------
options to purchase Parent Stock, substantially in the form of Exhibit "C"
-----------
hereto;
(g) Parent shall have paid off, at the Closing, all amounts due under
that certain Promissory Note of Micro, in favor of Alice Baum and Debra
Freedman, in the principal amount of $250,000, plus any accrued interest
calculated through the date of such payment;
(h) Micro shall have received, at the Closing, a duly executed
opinion of counsel to Parent and Sub, substantially in the form of Exhibit "D"
-----------
hereto;
(i) Micro shall have received from Parent and Sub such other
documents as Micro's counsel shall have reasonably requested, in form and
substance reasonably satisfactory to Micro's counsel; and
(j) Sub shall have executed and delivered an Assignment and
Assumption Agreement, substantially in the form of Exhibit "H" hereto, with
-----------
respect to Micro's Sublease (as defined therein).
7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time of the following conditions:
(a) Micro and the Micro Shareholders shall have performed in all
material respects their respective agreements contained in this Merger Agreement
required to be performed at or prior to the Effective Time and the
representations and warranties of Micro and the Micro Shareholders contained in
this Merger Agreement shall be true when made and (except for representations
and warranties made as of a specified date, which need only be true as of such
date) at and as of the Effective Time as if made at and as of such time, except
as contemplated by this Merger Agreement;
(b) Parent shall have completed its due diligence review of Micro's
customer information, employees and software not provided to Parent prior to the
date of this Agreement, and shall have completed its financial due diligence
with respect to
23
<PAGE>
Micro's customer information; and shall be satisfied that (i) nothing in such
review could reasonably be expected to cause a material adverse change in the
Micro Business or in the financial condition of Micro, and (ii) the features,
functionality and performance of the Iguana Software are reasonably satisfactory
to Parent;
(c) the appropriate officers of Micro shall have executed and
delivered to Parent at the Closing, a closing certificate, and incumbency
certificate substantially in the form of Exhibit "E" hereto;
-----------
(d) Micro and the Micro Shareholders shall have obtained or caused to
be obtained all of the Consents, if any, listed on Schedule 7.2(d) hereto;
---------------
(e) there shall have been delivered to Parent at the Closing, duly
executed by the Controlling Shareholders, (i) an Agreement to be Bound to the
Second Amended and Restated Stockholders' Agreement of Parent, dated December
17, 1997 (the "Stockholders' Agreement"), substantially in the form of Exhibit
-------
"F" hereto; and (ii) an Agreement to be Bound by the Registration Rights
- ---
Agreement;
(f) Parent shall have received a corporate certificate of good
standing for Micro, and a copy of the Certificate of Incorporation of Micro,
both as certified by the Secretary of State of New York;
(g) as of three business days prior to the Closing, the Micro Debt
(as defined on Schedule 3.1(c) hereto) shall be no greater than $700,000, all of
---------------
which will be paid at Closing and reduce the cash available at Closing for the
Controlling Shareholders;
(h) Micro shall have complied with its obligations under Section
6.6(a) hereof;
(i) Parent shall have received, at the Closing, a duly executed
opinion of counsel to Micro and the Micro Shareholders, substantially in the
form of Exhibit "G" hereto;
-----------
(j) Parent shall have received evidence satisfactory to it that Micro
has filed, pursuant to Section 907(e)(2)(H) of the BCL, an estimated cessation
franchise tax report through the anticipated Closing Date;
(k) Parent shall have received from Micro or the Micro Shareholders,
as the case may be, such other documents as Parent's counsel shall have
reasonably requested, in form and substance reasonably satisfactory to Parent's
counsel;
(l) Parent shall have received evidence satisfactory to it that at
the Closing the assets and properties used in the Micro Business are free and
clear of all Liens other than Permitted Liens; and
24
<PAGE>
(m) Micro shall have executed and delivered an Assignment and
Assumption Agreement, substantially in the form of Exhibit "H" hereto, with
-----------
respect to its Sublease (as defined therein).
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY PARENT.
(a) Parent shall indemnify and hold the Micro Shareholders and
Micro's directors, officers, employees and agents (collectively, the "Micro
Indemnified Parties") harmless from and against, and agree promptly to defend
each of the Micro Indemnified Parties from and reimburse each of the Micro
Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including, without limitation,
reasonable attorney fees and other legal costs and expenses) (collectively a
"Micro Loss") that any of the Micro Indemnified Parties may at any time suffer
or incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations
and warranties made by Parent or Sub in or pursuant to this Agreement, or in any
instrument, certificate or affidavit delivered by Parent or Sub at the Closing
in accordance with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform,
satisfy and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the documents
and materials delivered by Parent pursuant to this Agreement; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision to the contrary Parent shall
not have any liability under Section 8.1(a) above (i) unless the aggregate of
all Micro Losses for which Parent would be liable but for this sentence exceeds,
on a cumulative basis, an amount equal to $100,000, and then only to the extent
of such excess, (ii) for amounts in excess of $3,700,000 in the aggregate, and
(iii) unless the Micro Shareholders have asserted a claim with respect to the
matters set forth in Section 8.1(a) above within two years of the Effective
Time. Notwithstanding any implication to the contrary contained herein, the
parties acknowledge and agree that a decrease in the value of Parent Stock would
not, by itself, constitute a Micro Loss, unless and to the extent a decrease in
the value of Parent Stock has been demonstrated to be as a result of any event
described in Sections 8.1(a)(i), (ii) or (iii) above.
25
<PAGE>
8.2 INDEMNIFICATION BY THE MICRO SHAREHOLDERS.
(a) The Controlling Shareholders shall severally indemnify and hold
Parent, Sub, Surviving Corporation and their respective shareholders, directors,
officers and employees (collectively, the "Parent Indemnified Parties") harmless
from and against, and agree to promptly defend each of the Parent Indemnified
Parties from and reimburse each of the Parent Indemnified Parties for, any and
all losses, damages, costs, expenses, liabilities, obligations and claims of any
kind (including, without limitation, reasonable attorney fees (collectively, a
"Parent Loss") that any of the Parent Indemnified Parties may at any time suffer
or incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any representations and
warranties made by Micro or the Controlling Shareholders in or pursuant to this
Agreement, or in any instrument certificate or affidavit delivered by the same
at the Closing in accordance with the provisions hereof;
(ii) any failure by Micro or the Micro Shareholders to
carry out, perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations under this Agreement or
under any of the documents and materials delivered by Micro pursuant to this
Agreement; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above and subject to Section 8.2(c) below,
the Controlling Shareholders collectively shall not have any liability under
Section 8.2(a) above (i) unless the aggregate of all Parent Losses for which the
Controlling Shareholders would be liable but for this sentence exceeds, on a
cumulative basis, an amount equal to $100,000, and then only to the extent of
such excess, (ii) for amounts in excess of $3,700,000 in the aggregate, and
(iii) unless Parent has asserted a claim with respect to the matters set forth
in Section 8.2(a) above within two years of the Effective Time, except with
respect to the matters arising under Sections 4.18, 4.19, 4.20 or 4.24 hereof,
in which event Parent must have asserted a claim within the applicable statute
of limitations. Notwithstanding any implication to the contrary contained
herein, the parties acknowledge and agree that a decrease in the value of Parent
Stock would not, by itself, constitute a Parent Loss, unless and to the extent a
decrease in the value of Parent Stock has been demonstrated to be as a result of
any event described in Sections 8.2(a)(i), (ii) or (iii) above.
(c) Notwithstanding the above, (i) claims for indemnification against
the Controlling Shareholders shall be asserted against them pro rata to their
respective Micro Stock holdings immediately prior to the Effective Time,
relative to their aggregate Micro Stock holdings at such time; and (ii) the
liability of the Controlling Shareholders under Section 8.2(a) above shall not
exceed (A) as to Steven C. Baum, $2,035,000, and (B) as to Eric H. Freedman,
$1,665,000.
26
<PAGE>
8.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification under this Agreement. Subject
to the Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section 8.1 or 8.2 hereof, as the case may
be, the Indemnifying Party shall have the right, at its sole cost and expense,
to employ counsel of its own choosing to defend any such Claim asserted against
the Indemnified Party; provided, however, that if the Indemnified Party (i)
reasonably believes that its interests with respect to a Claim (or any material
portion thereof) are in conflict with the interests of the Indemnifying Party
with respect to such Claim (or portion thereof), and (ii) promptly notifies the
Indemnifying Party, in writing, of the nature of such conflict, then the
Indemnified Party shall be entitled to choose, at the sole cost and expense of
the Indemnifying Party, independent counsel to defend such Claim (or the
conflicting portion thereof). The Indemnified Party shall have the right to
participate in the defense of any such Claim at its own expense (except to the
extent provided in the foregoing sentence), but the Indemnifying Party shall
retain control over such litigation (except as provided in the foregoing
sentence). The Indemnifying Party shall notify the Indemnified Party in
writing, as promptly as possible (but in any case before the due date for the
answer or response to a claim) after the date of the notice of claim given by
the Indemnified Party to the Indemnifying Party under Section 8.3(a) hereof of
its election to defend in good faith any such third party Claim. So long as the
Indemnifying Party is defending in good faith any such Claim asserted by a third
party against the Indemnified Party, the Indemnified Party shall not settle or
compromise such Claim without the prior written consent of the Indemnifying
Party. The Indemnified Party shall cooperate with the Indemnifying Party in
connection with any such defense and shall make available to the Indemnifying
Party or its agents all records and other materials in the Indemnified Party's
possession reasonably required by it for its use in contesting any third party
Claim; provided, however, that the Indemnifying Party shall have agreed, in
writing, to keep such records and other materials confidential expect to the
extent required for defense of the relevant Claim. Whether or not the
Indemnifying Party elects to defend any such Claim, the Indemnified Party shall
have no obligations to do so. Within 30 days after a final determination
(including, without limitation, a settlement) has been reached with respect to
any Claim contested pursuant to this Section 8.3(b), the Indemnifying Party
shall satisfy its obligations with respect thereto. Any amounts paid thereafter
shall include interest thereon for the period commencing at the end of such 30-
day period and ending on the actual date of payment, at a rate of 10% per
27
<PAGE>
annum, or, if lower, at the highest rate of interest permitted by applicable law
at the time of such payment.
8.4 PAYMENT. Any Indemnifying Party may, at such Indemnifying Party's
option, pay amounts due under this Article VIII by delivery of shares of Parent
Stock having a value equal to the amount due. For purposes of this provision,
the value of the Parent Stock shall be deemed to be $5.00 per share.
8.5 EXCLUSIVE REMEDY. Provided that the Closing occurs, the remedies set
forth in this Article VIII shall be the sole remedy for a breach of this
Agreement by the other party.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Merger Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of Parent and Micro;
(b) by Micro, upon a material breach of this Merger Agreement on the
part of Parent or Sub which has not been cured and which would cause any
condition set forth in Section 7.1 to be incapable of being satisfied within two
weeks of the date on which this Merger Agreement is executed and delivered by
all parties hereto;
(c) by Parent, upon a material breach of this Merger Agreement on the
part of Micro set forth in this Merger Agreement which has not been cured and
which would cause any condition set forth in Section 7.2 to be incapable of
being satisfied within two weeks of the date on which this Merger Agreement is
executed and delivered by all parties hereto;
(d) by Parent, if the condition set forth in Section 7.2(b) hereof
shall not have been satisfied;
(e) by Parent or Micro if any court of competent jurisdiction shall
have issued, enacted, entered, promulgated or enforced any order, judgment,
decree, injunction or ruling which restrains, enjoins or otherwise prohibits the
Merger and such order, judgment, decree, injunction or fueling shall have become
final and nonappealable; or
(f) by either Parent or Micro if the Merger shall not have been
consummated within two weeks of the date on which this Merger Agreement is
executed and delivered by the parties hereto (provided the terminating party is
not otherwise in
28
<PAGE>
material breach of its representations, warranties or obligations under this
Merger Agreement).
9.2 FEES AND EXPENSES.
(a) If the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by this Merger
Agreement shall be paid by the Surviving Corporation; provided, however, that
the fees and expenses incurred by Micro and the Micro Shareholders in excess of
$50,000 shall be paid by the Controlling Shareholders.
(b) If the Merger is not consummated for a reason other than the
willful and material breach of this Agreement by a party, all fees and expenses
incurred in connection with this Merger Agreement and the transactions
contemplated by this Merger Agreement shall be paid by the party incurring such
fees or expenses.
(c) If the Merger is not consummated because of a willful and
material breach of this Merger Agreement by any party, the nonbreaching party
shall be entitled to pursue all legal and equitable remedies against the
breaching party for such breach including specific performance and all fees and
expenses incurred by the nonbreaching party or parties in connection with
enforcing its rights under this Agreement with respect to such breach shall be
paid by the party breaching this Merger Agreement.
9.3 AMENDMENT. This Merger Agreement may be amended by the parties hereto
at any time before or after approval hereof by the stockholders of Micro, but,
after such approval, no amendment shall be made which (i) changes the form or
decreases the amount of the consideration to be received in the Merger, (ii) in
any way materially adversely affects the rights of the Micro Shareholders, or
(iii) under applicable law would require approval of the Micro Shareholders, in
any such case referred to in clauses (i), (ii) and (iii), without the further
approval of the Micro Shareholders. This Merger Agreement may not be amended
except by an instrument in writing signed on behalf of the parties hereto,
provided that after the Effective Time, any such amendment must be signed by the
former holders of a majority of the Micro Stock.
9.4 WAIVER. At any time prior to the Effective Time, the parties hereto
may, to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
29
<PAGE>
ARTICLE X
GENERAL PROVISIONS
10.1 SURVIVAL; RECOURSE. None of the agreements contained in this
Agreement shall survive the Merger, except that (i) the agreements contained in
Article III hereof, the covenants contained in Article VI hereof, the
obligations to indemnify contained in Article VIII hereof and the agreements of
the Surviving Corporation referred to in Sections 10.10 and 10.11 hereof, shall
survive the Merger (except to the extent a shorter period of time is explicitly
specified therein) and (ii) the representations and warranties made in Articles
IV and V of this Agreement shall survive the Merger, and shall survive any
independent investigation by the parties, and any dissolution, merger or
consolidation of Micro or Parent, and shall bind the legal representatives,
assigns and successors of Micro, the Micro Shareholders and Parent, for a period
of two years after the Closing Date (other than the representations and
warranties contained in Sections 4.18, 4.19, 4.20 and 4.24 hereof, which shall
survive for the applicable statute of limitations).
10.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in Person, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Micro : Micro Interactive, Inc.
100 Fifth Avenue, 10th Floor
New York, New York 10011
Attention: Steven Baum
Telephone: 212/366-4600
Telecopy: 212/366-1393
With a copy to: Howard, Darby & Levin
1330 6th Avenue
New York, NewYork 10019
Attention: Scott F. Smith, Esq.
Telephone: 212/841-1000
Telecopy: 212/841-1010
If to the Micro To the address listed under the signature
Shareholders: line of the applicable Micro Shareholder
30
<PAGE>
If to Parent or Sub: IXL Holdings, Inc.
Two Park Place
1888 Emery Street, 2nd Floor
Atlanta, Georgia 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10022
Attention: James J. Connors, II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 ENTIRE AGREEMENT. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof; except that the Confidentiality Agreement dated March 10, 1998
shall survive until Closing, and if the Closing shall not occur, shall remain in
full force and effect, including without limitation, the confidentiality of
information concerning the Iguana Software. There are no other representations
or warranties, whether written or oral, between the parties in connection the
subject matter hereof, except as expressly set forth herein.
10.4 ASSIGNMENTS; PARTIES IN INTEREST. Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests, and
obligations of Sub hereunder may be assigned to any direct wholly owned Delaware
subsidiary of Parent without such prior consent. Subject to the preceding
sentence, this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Agreement, express or implied, is
31
<PAGE>
intended to or shall confer upon any Person not a party hereto any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement,
except as otherwise provided herein.
10.5 Intentionally deleted
10.6 GOVERNING LAW. This Agreement, except to the extent that the DGCL is
mandatorily applicable to the Merger or the rights of the shareholders of Micro
or the other parties hereto with respect to the Merger, shall be governed in all
respects by the laws of the State of New York (without giving effect to the
provisions thereof relating to conflicts of law).
10.7 HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
10.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.9 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economics or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon determination that any term or other provision
hereof is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
10.10 POST-CLOSING ACCESS. For a period of three years after the Closing
Date, the Controlling Shareholders and their agents and representatives shall
have reasonable access to the books and records of the Micro Business.
10.11 POST-CLOSING NOTICE. To the extent the Surviving Corporation
receives written notice of any event or circumstance that materially affects any
of the Micro Shareholders, the Surviving Corporation shall promptly notify the a
ected Micro Shareholder of such matter, information, or event and shall provide
them with copies of all relevant documentation or correspondence in connection
thereto.
10.12 CERTAIN DEFINITIONS. As used in this Merger Agreement:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens
32
<PAGE>
imposed by law created in the ordinary course of business for amounts not yet
due; (c) Liens (other than any Lien imposed by ERISA) incurred or deposits made
in the ordinary course of business in connection with worker's compensation,
unemployment insurance or other types of social security (d) minor defects of
title, easements, rights-of-way, restrictions and other similar charges or
encumbrances not materially detracting from the value of the Micro Real Property
or interfering with the ordinary conduct of any of the Micro Business; and (e)
those Liens listed on Schedule 10.12 hereto;
--------------
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of Micro" shall refer to the knowledge,
subject to clause (i) above, of any of the Controlling Shareholders; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of that are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including, without limitation, Sub);
provided, however, that with respect to the Parent, the terms "Subsidiary" and
- -------- -------
"Subsidiaries" shall not include (i) University Netcasting, Inc., or (ii) Micro.
- SIGNATURES ON THE FOLLOWING PAGE -
33
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and Micro have caused this Agreement to be
signed by their respective officers thereunder duly authorized, and each Micro
Shareholder has signed this Agreement, all as of the date first written above.
"MICRO"
MICRO INTERACTIVE, INC., a New York corporation
By: /s/ Steven C. Baum
--------------------------------------
Title: President
"PARENT"
IXL HOLDINGS, INC., a Delaware corporation
By:_______________________________________
Title:____________________________________
"SUB"
iXL-New York, Inc., a Delaware corporation
By:_______________________________________
Title:____________________________________
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
34
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and Micro have caused this Agreement to be
signed by their respective officers thereunder duly authorized, and each Micro
Shareholder has signed this Agreement, all as of the date first written above.
"MICRO"
MICRO INTERACTIVE, INC., a New York corporation
By: ______________________________________
Title:____________________________________
"PARENT"
IXL HOLDINGS, INC., a Delaware corporation
By: /s/ James V. Sandry
--------------------------------------
Title: Executive Vice President
"SUB"
iXL-New York, Inc., a Delaware corporation
By: /s/ James V. Sandry
--------------------------------------
Title: Executive Vice President
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
34
<PAGE>
"MICRO SHAREHOLDERS"
/s/ Scott F. Smith
--------------------------------
Scott F. Smith
Address: Howard, Darby & Levin
--------------------------------
1330 Avenue of the Americans
--------------------------------
New York, New York 10019
--------------------------------
________________________________
Address: __________________________________
__________________________________
__________________________________
35
<PAGE>
"MICRO SHAREHOLDERS"
/s/ Ann McClaughlin
-------------------------------
Ann McClaughlin
Address: Michael Associates
--------------------------------
1 Evertrust Plaza
--------------------------------
Jersey City, New Jersey 07302
--------------------------------
/s/ Al Ricciardi
--------------------------------
Al Ricciardi
Address: Michael Associates
--------------------------------
1 Evertrust Plaza
--------------------------------
Jersey City, New Jersey 07302
36
<PAGE>
"MICRO SHAREHOLDERS"
/s/ Alice Baum
----------------------------------
Alice Baum
Address: Gruntal & Co
6800 Jericho Turnpike
Syosset, New York 11791
/s/ Lynn Shostack
----------------------------------
Lynn Shostack
Address: Joyce International
156 West 56th Street, Suite 1604
New York, New York 10019-3800
37
<PAGE>
"MICRO SHAREHOLDERS"
/s/ Steven C. Baum
--------------------------------
Steven C. Baum
Address: 16 Park Circle
--------------------------------
Short Hills, New Jersey 07078
--------------------------------
--------------------------------
/s/ Eric H. Freedman
--------------------------------
Eric H. Freedman
Address: 10 Penny Lane
--------------------------------
Scarsdale, New York 10583
--------------------------------
--------------------------------
38
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate................................ Exhibit A-1
Sub's Closing Certificate................................... Exhibit A-2
Agreement to be Bound to Registration Rights Agreement...... Exhibit B
Option Agreement............................................ Exhibit C
Opinion of Counsel to Parent and Sub........................ Exhibit D
Micro's Closing Certificate................................. Exhibit E
Agreement to be Bound to Stockholders' Agreement............ Exhibit F
Opinion of Counsel to Micro................................. Exhibit G
Assignment and Assumption Agreement......................... Exhibit H
<PAGE>
SCHEDULE 3.1(B)
---------------
MICRO SHAREHOLDERS RECEIVING CASH
(See Schedule 3.1(B) attached hereto)
SCHEDULE 3.1(C)
---------------
MICRO SHAREHOLDERS RECEIVING PARENT STOCK AND CASH
(See Schedule 3.1(C) attached hereto)
SCHEDULE 4.1
------------
CERTIFICATE OF INCORPORATION AND BYLAWS OF MICRO
SCHEDULE 4.3(A)
---------------
RIGHTS TO MICRO STOCK
SCHEDULE 4.3(B)
---------------
LIENS AGAINST MICRO STOCK
<PAGE>
SCHEDULE 3.1(b)
---------------
MICRO SHAREHOLDERS RECEIVING CASH
Micro Shareholders IXL Shares Cash
------------------------ ---------------------- --------------------
Alfred Ricciardi 0 $ 79,968.00
Alice Baum 0 $ 104,522.00
Ann McLaughlin 0 $ 19,992.00
Lynn Shostack 0 $ 99,960.00
Scott F. Smith 0 $ 49,980.00
-------------
total: $ 354,422.00
<PAGE>
SCHEDULE 3.1(c)
---------------
MICRO SHAREHOLDERS RECEIVING PARENT STOCK AND CASH
<TABLE>
<CAPTION>
Micro Shareholder IXL Shares Cash
- -------------------------- ------------ -----------------------------
<S> <C> <C>
Steven C. Baum 407,000 55% of Remaining Cash
Eric H. Freedman 333,000 45% of Remaining Cash
-------
total: 740,000
</TABLE>
Definitions:
- -----------
"Remaining Cash" means $1,500,000 reduced by the sum of (i) $354,422 paid to
other Micro Shareholders as set forth on Schedule 3.1(b) and (ii) the Micro
Debt.
"Micro Debt" means the outstanding indebtedness of Micro, including, without
limitation, debt for borrowed money and accrued interest thereon, and accounts
payable and accrued expenses (but only to the extent that accounts payable and
accrued expenses exceed $200,000), but excluding deferred rent and also
excluding the equipment leases set forth on Schedule 4.13 to the Merger
Agreement, all as of the date three business days prior to the Closing, and all
as determined in accordance with generally accepted accounting principles.
<PAGE>
SCHEDULE 4.5
-------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF MICRO
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF MICRO
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF MICRO
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF MICRO
SCHEDULE 4.10
-------------
EXCEPTIONS TO GOOD CONDITION OF EQUIPMENT OF MICRO
SCHEDULE 4.12
-------------
LIENS ON REAL PROPERTY OF MICRO
SCHEDULE 4.13
-------------
LEASES OF MICRO
<PAGE>
SCHEDULE 4.14
-------------
CONTRACTS OF MICRO
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF MICRO
SCHEDULE 4.17
-------------
LITIGATION OF MICRO
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF MICRO
SCHEDULE 4.19
-------------
ERISA OF MICRO
SCHEDULE 4.23
-------------
BROKERS OF MICRO
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS & COMPETITORS OF MICRO
<PAGE>
SCHEDULE 4.26
-------------
EXCEPTIONS TO ACCOUNTS RECEIVABLE OF MICRO ARISING IN THE
ORDINARY COURSE OF BUSINESS
SCHEDULE 4.28
-------------
INSURANCE POLICIES OF MICRO
SCHEDULE 5.1
------------
CERTIFICATE OF INCORPORATION AND BYLAWS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
OUTSTANDING OBLIGATIONS TO ISSUE PARENT OPTIONS, WARRANTS OR OTHER
PARENT STOCK RIGHTS
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
<PAGE>
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES OF PARENT
SCHEDULE 6.6(B)
---------------
RECIPIENTS OF PARENT STOCK OPTIONS
SCHEDULE 7.1(C)
---------------
PARENT CONSENTS
SCHEDULE 7.2(D)
---------------
MICRO CONSENTS
SCHEDULE 10.12
--------------
PERMITTED LIENS OF MICRO
<PAGE>
EXHIBIT 2.15
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
IXL HOLDINGS, INC.,
IXL-LOS ANGELES , INC.,
SPIN CYCLE ENTERTAINMENT
AND
THE SCE SHAREHOLDERS
DATED AS OF MAY 8, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into this 8th day of May,
1998, by and between SPIN CYCLE ENTERTAINMENT, a California corporation ("SCE"),
IXL HOLDINGS, INC., a Delaware corporation ("Parent"), IXL-LOS ANGELES, INC., a
Delaware corporation, or its successors or assigns ("Sub"), and the shareholders
of SCE as listed on the signature page hereto (the "SCE Shareholders").
R E C I T A L S:
- - - - - - - -
A. SCE is engaged in the business of developing internet sites and
furnishing internet services, including website design and maintenance (the "SCE
Business").
B. SCE and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The SCE Shareholders collectively own 100% of the issued and
outstanding capital stock of SCE (the "SCE Stock").
D. The respective Boards of Directors of Parent, Sub and SCE, and the
respective shareholders of Sub and SCE, have approved the Merger, upon the terms
and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal
income tax purposes, as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, at
the Effective Time (as defined in Section 1.3 hereof), (a) SCE shall be merged
with and into Sub, (b) the separate existence of SCE shall cease, and (c) Sub
shall continue as the surviving corporation in the Merger under the laws of the
State of Delaware under the name iXLLos Angeles, Inc. For purposes of this
Agreement, Sub shall be referred to, for the period commencing on the Effective
Time, as the "Surviving Corporation."
1.2 CLOSING AND CLOSING DATE. Unless this Merger Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9.1 hereof, and
1
<PAGE>
subject to the satisfaction or waiver of the conditions set forth in Article VII
hereof, the closing of the Merger (the "Closing") will take place as promptly as
practicable (and in any event within five business days after satisfaction of
the conditions set forth in Sections 7.1 and 7.2 hereof) (the "Closing Date") at
the offices of Minkin & Snyder, A Professional Corporation, One Buckhead Plaza,
3060 Peachtree Rd., Ste. 1100, Atlanta, GA 30305, unless another date, time or
place is agreed to by the parties.
1.3 EFFECTIVE TIME OF THE MERGER. At the Closing, the parties hereto shall
cause (a) a certificate of merger (the "Delaware Certificate of Merger") to be
filed with the office of the Secretary of State of the State of Delaware in
accordance with the provisions of the Delaware General Corporation Law, as
amended (the "DGCL"); and (b) a copy of the Delaware Certificate of Merger (the
"California Certificate of Merger;" collectively with the Delaware Certificate
of Merger, the "Certificate of Merger") to be filed with the office of the
Secretary of State of the State of California in accordance with the provisions
of the California General Corporation Law (the "GCL"). When used herein, the
term "Effective Time" shall mean the time when the Certificate of Merger has
been accepted for filing by the Secretary of State of the States of Delaware and
California, respectively, or such time as otherwise specified therein.
1.4 EFFECT OF THE MERGER. The Merger shall, from and after the Effective
Time, have all the effects provided by the DGCL and the GCL. If at any time
after the Effective Time, any further action is deemed necessary or desirable to
carry out the purposes of this Agreement, the parties hereto agree that the
Surviving Corporation and its proper officers and directors shall be authorized
to take, and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of Sub,
a form of which is attached hereto on Schedule 5.1, shall be the Certificate of
------------
Incorporation of the Surviving Corporation after the Effective Time, until
thereafter changed or amended as provided therein or by applicable law.
2.2 BYLAWS. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is included on Schedule 5.1 hereto.
------------
2.3 BOARD OF DIRECTORS; OFFICERS. The Board of Directors and officers of
Sub immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified.
2
<PAGE>
ARTICLE III
CONVERSION OF SHARES
3.1 MERGER CONSIDERATION. As of the Effective Time:
(a) All shares of SCE Stock owned by SCE shall, by virtue of the
Merger and without any action on the part of any shareholder, officer or
director of SCE or Sub, be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding share of SCE Stock owned by those SCE
Shareholders listed on Schedule 3.1(b) hereto shall, upon surrender to Sub, at
---------------
the Closing, of the underlying share certificates, become exchangeable for the
amount of cash set forth opposite such SCE Shareholder's name on Schedule 3.1(b)
---------------
hereto.
(c) Each issued and outstanding share of SCE Stock (other than (i)
shares owned by the SCE Shareholders listed on Schedule 3.1(b) hereto; and (ii)
---------------
any Dissenting Shares, as defined in Section 3.2 hereof) shall, upon surrender
to Sub, at the Closing, of the underlying share certificates, be converted into,
and become exchangeable for a number of shares of validly issued, fully paid and
nonassessable Class B Common Stock of Parent, $.01 par value (the "Parent
Stock") based on the following equation:
200,000 D - C
- ----------
PS = 10
---------------------------------
Ns
where:
C = the total amount of cash for which shares of SCE Stock owned
by the SCE Shareholders listed on Schedule 3.1(b) hereto
---------------
shall be exchanged pursuant to the Merger
$10 = the per share value of Parent Stock for purposes of the
Merger
PS = the number of shares of Parent Stock for which each share of
SCE Stock described in Section 3.1(c) hereof shall be
exchanged pursuant to the Merger
D = the outstanding indebtedness of SCE (the "SCE Debt"),
including without limitation, any non-current liabilities,
the current portion of any notes payable plus accrued
interest thereon, debt for borrowed money and accrued
interest thereon, accrued taxes, accounts payable and
accrued expenses, all as of the date three business days
prior to the
3
<PAGE>
Closing Date, all as determined in accordance with generally
accepted accounting principles ("GAAP")
Ns = the number of issued and outstanding shares of SCE Stock
owned by the SCE Shareholders described in Section 3.1(c)
hereof on the Closing Date.
(d) Each issued and outstanding share of common stock of Sub shall,
by virtue of the Merger and without any action on the part of any shareholder,
officer or director of SCE or Sub, be converted into and become one fully paid
and nonassessable share of common stock of the Surviving Corporation.
3.2 DISSENTING SHARES. Notwithstanding any provision hereof to the
contrary, any shares of SCE Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be converted as described in Section 3.1 hereof,
but instead shall be converted into the right to receive the consideration due a
Dissenting Shareholder pursuant to the DGCL or GCL, as applicable; provided,
however, that if a Dissenting Shareholder shall fail to perfect his demand,
withdraw his demand or otherwise lose his right for appraisal under the terms of
the DGCL or the GCL, as applicable, the SCE Stock held by such Dissenting
Shareholder (the "Dissenting Shares") shall be deemed to be converted as of the
Effective Time in accordance with the provisions of Section 3.1 hereof. SCE
shall not voluntarily make any payment with respect to, settle, or offer to
settle or otherwise negotiate, any such demands. The Surviving Corporation shall
pay all amounts paid to Dissenting Shareholders without interest thereon (to the
extent permitted by applicable law). For purposes hereof, the term "Dissenting
Shareholder" shall mean a SCE Shareholder who (a) objects to the Merger; and (b)
complies with the applicable provisions of the DGCL or GCL concerning
dissenter's rights.
3.3 NO FURTHER RIGHTS. From and after the Effective Time, holders of
certificates theretofore evidencing SCE Stock shall cease to have any rights as
stockholders of SCE, except as provided herein or by applicable law.
3.4 CLOSING OF SCE'S TRANSFER BOOKS. At the Effective Time, the stock
transfer books of SCE shall be closed and no transfer of SCE Stock shall be made
thereafter. If after the Effective Time, certificates for SCE Stock are
presented to Parent or the Surviving Corporation, they shall be canceled and
exchanged for a consideration as set forth in Section 3.1 hereof, subject to
applicable law in the case of Dissenting Shareholders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SCE
SCE, and Stephen P. Jackson (the "Controlling Shareholder"), jointly and
severally, represent and warrant to Parent and Sub the representations and
warranties set forth in this Article IV, other than those specifically
enumerated in the following sentence. In addition, the SCE Shareholders
(including the Controlling Shareholder) individually (but not jointly and
severally) make the representations and warranties that are stated in this
Article IV to be made by the SCE Shareholders (specifically, those
4
<PAGE>
contained in Sections 4.2, 4.3(b), 4.5, 4.31, 4.32, 4.33 and 4.34 hereof). The
representations and warranties contained in this Article IV shall survive the
Closing in accordance with Section 10.1 hereof.
4.1 ORGANIZATION AND QUALIFICATION. SCE is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
SCE has the requisite corporate power and authority to carry on the SCE Business
as it is now being conducted and is duly qualified or licensed to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities makes such
qualification necessary. Complete and correct copies of the Articles of
Incorporation and Bylaws of SCE as in effect on the date hereof are attached as
Schedule 4.1 hereto. The minute book of SCE, a true and complete copy of which
- ------------
has been delivered to Parent, (a) accurately reflects all action taken by the
directors and shareholders of SCE at meetings of SCE's Board of Directors or
shareholders, as the case may be; and (b) contains true and complete copies, or
originals, of the respective minutes of all meetings or consent actions of the
directors or shareholders.
4.2 AUTHORITY. SCE has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery hereof and the consummation of
the transactions contemplated hereby by SCE have been duly and validly
authorized and approved by SCE's Board of Directors and the SCE Shareholders,
and no other corporate or shareholder proceedings on the part of SCE, its Board
of Directors or the SCE Shareholders is necessary to authorize or approve this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by SCE and each SCE Shareholder, and
assuming the due authorization, execution and delivery by Parent and Sub,
constitutes the valid and binding obligation of SCE and each SCE Shareholder,
enforceable against SCE and each SCE Shareholder in accordance with its terms
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
4.3 CAPITALIZATION.
(a) The authorized capital stock of SCE consists of five million
shares of common stock, no par value, of which one million shares are validly
issued and outstanding, fully paid and nonassessable. All outstanding capital
stock of SCE was issued in accordance with applicable federal and state
securities laws. There are no options, warrants, calls, agreements, commitments
or other rights presently outstanding that would obligate SCE or any of the SCE
Shareholders to issue, deliver or sell shares of its capital stock, or to grant,
extend or enter into any such option, warrant, call, agreement, commitment or
other right. In addition to the foregoing, as of the date hereof, SCE has no
bonds, debentures, notes or other indebtedness issued or outstanding that have
voting rights in SCE. Schedule 4.3(a) sets forth a list of all holders of record
---------------
of SCE Stock and the number of shares held by each SCE Shareholder.
(b) All of the issued and outstanding shares of capital stock of SCE
are validly issued, fully paid and nonassessable. Except as set forth on
Schedule 4.3(b) hereto, each SCE Shareholder represents and warrants that the
- ---------------
SCE Stock held by such SCE Shareholder is free and clear
5
<PAGE>
of any lien, charge, security interest, pledge, option, right of first refusal,
voting proxy or other voting agreement, or encumbrance of any kind or nature
other than restrictions on transfer imposed by federal and state securities laws
(any of the foregoing, a "Lien").
4.4 SUBSIDIARIES. SCE has no subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
- ------------
SCE or the SCE Shareholders, (ii) the consummation by SCE and the SCE
Shareholders of the transactions contemplated hereby or (iii) compliance by SCE
with any of the provisions hereof will:
(a) conflict with or violate the Articles of Incorporation or Bylaws
of SCE;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to SCE or any of the SCE
Shareholders, or by which SCE or any of its properties or assets may be bound or
affected;
(c) result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which SCE is a party or by which SCE or any
of its properties or assets may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of SCE; or
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), (i) any government or subdivision thereof, whether
domestic or foreign, or any administrative, governmental, or regulatory
authority, agency, commission, court, tribunal or body, whether domestic,
foreign or multinational (any of the foregoing, a "Governmental Entity"), except
for the filing of the Certificate of Merger pursuant to the DGCL and the GCL; or
(ii) any other individual or Entity (collectively, a "Person").
4.6 FINANCIAL STATEMENTS. SCE has heretofore furnished Parent with a true
and complete copy of the unaudited financial statements of SCE for the year
ended December 31, 1997 (the "SCE Financial Statements"). Except as disclosed
therein, the SCE Financial Statements have been prepared in accordance with GAAP
(except for the absence of footnotes and normal year-end adjustments in the case
of the SCE Financial Statements for the year ended December 31, 1997)
consistently followed throughout the period indicated, and present fairly, in
all material respects, the financial position and operating results of SCE as of
the dates, and during the periods, indicated therein.
6
<PAGE>
4.7 ABSENCE OF CHANGES. Except as provided in Schedule 4.7 hereto and
------------
except as contemplated hereby, since December 31, 1997 (a) SCE has not entered
into any transaction that was not in the ordinary course of business; (b) except
for sales of services and licenses of software in the ordinary course of
business, there has been no sale, assignment, transfer, mortgage, pledge,
encumbrance or lease of any material asset or property of SCE; (c) there has
been (i) no declaration or payment of a dividend, or any other declaration,
payment or distribution of any type or nature to any shareholder of SCE in
respect of its stock, whether in cash or property, and (ii) no purchase or
redemption of any share of the capital stock of SCE; (d) there has been no
declaration, payment, or commitment for the payment, by SCE, of a bonus or other
additional salary, compensation, or benefit to any employee of SCE that was not
in the ordinary course of business, except for normal year-end bonuses paid in
the ordinary course of business; (e) there has been no release, compromise,
waiver or cancellation of any debt to or claim by SCE, or waiver of any right of
SCE; (f) there have been no capital expenditures in excess of $10,000 for any
single item, or $25,000 in the aggregate; (g) there has been no change in
accounting methods or practices or revaluation of any asset of SCE (other than
SCE Accounts Receivable as defined in Section 4.26 hereof) written down in the
ordinary course of business in excess of $10,000 for any single SCE Accounts
Receivable, or $25,000 in the aggregate); (h) there has been no material damage,
or destruction to, or loss of, physical property (whether or not covered by
insurance) adversely affecting the SCE Business or the operations of SCE; (i)
there has been no loan by SCE, or guaranty by SCE of any loan, to any employee
of SCE; (j) SCE has not ceased to transact business with any customer that, as
of the date of such cessation, represented more than 5% of the annual gross
revenues of SCE; (k) there has been no termination or resignation of any key
employee or officer of SCE, and to the knowledge of SCE, no such termination or
resignation is threatened; (l) there has been no amendment or termination of any
material oral or written contract, agreement or license related to the SCE
Business, to which SCE is a party or by which it is bound, except in the
ordinary course of business, or except as expressly contemplated hereby; (m) SCE
has not failed to satisfy any of its debts, obligations or liabilities related
to the SCE Business or the assets of SCE as the same become due and owing
(except for SCE Accounts Payable (as defined in Section 4.27 hereof) payable in
accordance with past practices and in the ordinary course of business); (n)
there has been no agreement or commitment by SCE to do any of the foregoing; and
(o) there has been no other event or condition of any character pertaining to
and materially and adversely affecting the assets, business or financial
condition of SCE.
4.8 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.8 hereto,
------------
SCE has no debt, liability or obligation of any kind, whether accrued, absolute
or otherwise, including, without limitation, any liability or obligation on
account of taxes or any governmental charge or penalty, interest or fine, except
(a) liabilities incurred in the ordinary course of business after December 31,
1997, that would not, whether individually or in the aggregate, have a material
adverse impact on the business or financial condition of SCE; (b) liabilities
reflected on the SCE Financial Statements; and (c) liabilities incurred as a
result of the transactions contemplated hereby.
4.9 TITLE TO PROPERTIES. Except as set forth on Schedule 4.9 hereto, SCE
------------
has good and marketable title to all tangible property and assets used in the
SCE Business, and good and valid title to its leasehold interests, in each case,
free and clear of any and all Liens other than Permitted Liens (as defined in
Section 10.11 hereof).
7
<PAGE>
4.10 EQUIPMENT. SCE has heretofore furnished Parent with a true and
correct list of all items of tangible personal property (including, without
limitation, computer hardware) necessary for or used in the operation of the SCE
Business in the manner in which it has been and is now operated by SCE ("the SCE
Equipment"), except for personal property having a net book value of less than
$1,000. Except as set forth on Schedule 4.10 hereto, each material item of SCE
-------------
Equipment is in good condition and repair, ordinary wear and tear excepted.
4.11 INTELLECTUAL PROPERTY.
(a) No claims are pending or, to the knowledge of SCE, threatened,
that SCE is infringing or otherwise adversely affecting the rights of any Person
with regard to any material proprietary technology, patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights, trade secrets, know how or copyrights (or any pending
applications for any of the foregoing) used by SCE in the conduct of the SCE
Business (the "SCE Intellectual Property Rights"). No Person is, to the
knowledge of SCE, infringing the rights of SCE with respect to any SCE
Intellectual Property Right. Neither SCE nor, to the knowledge of SCE or the
Controlling Shareholder, any employee, agent or independent contractor of SCE,
in connection with the performance of such Person's services with SCE, has used,
appropriated or disclosed, directly or indirectly, any trade secret or other
proprietary or confidential information of any other Person, or otherwise
violated any confidential relationship with any other Person.
(b) SCE has heretofore furnished Parent with a true and complete
list of all material computer software used by SCE in the conduct of the SCE
Business (the "SCE Software"). SCE currently licenses, or otherwise has the
legal right to use, all of the SCE Software (including any upgrade, alteration
or enhancement with respect thereto), and all of the SCE Software is being used
in compliance with any applicable license or other agreement.
4.12 REAL PROPERTY. Except as set forth on Schedule 4.12 hereto:
-------------
(a) SCE has a good and valid leasehold interest in all real property
(including all buildings, improvements and fixtures thereon) used in the
operation of the SCE Business (the "SCE Real Property"). SCE owns no real
property. Except for Permitted Liens, and for the items set forth on Schedule
--------
4.12, there are no Liens on SCE's interest in any of the SCE Real Property.
- ----
(b) There are no parties in possession of any portion of the SCE
Real Property other than SCE, whether as sublessees, subtenants at will or
trespassers.
(c) To the knowledge of SCE, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, under the provisions of any of the SCE
Leases (as hereinafter defined), any material expenditure by SCE to modify or
improve any of the SCE Real Property to bring it into compliance therewith.
4.13 LEASES. Schedule 4.13 hereto sets forth a list of all leases pursuant
-------------
to which SCE leases, as lessor or lessee, real or personal property used in
operating the SCE Business or otherwise (the "SCE Leases"). Copies of the SCE
Leases, all of which have previously been provided to Parent,
8
<PAGE>
are true and complete copies thereof. To the knowledge of SCE and the
Controlling Shareholder, (a) all of the SCE Leases are valid, binding and
enforceable against the lessor thereunder, in accordance with their respective
terms; and (b) there is not under any such SCE Lease any existing default by the
lessor thereunder, or any condition or event that, with notice or lapse of time
or both, would constitute a default. SCE has not received notice that the lessor
of any of the SCE Leases intends to cancel, suspend or terminate such SCE Lease
or to exercise or not exercise any option thereunder. SCE is current in payments
on behalf of the lessee under each of the SCE Leases.
4.14 CONTRACTS. Schedule 4.14 hereto sets forth a true and complete list
-------------
of all contracts, agreements and commitments (whether written or oral) to which
SCE is, directly or indirectly, a party (in its own name or as a successor in
interest), or by which it or any of its properties or assets is otherwise bound,
including, without limitation, any service agreements, customer agreements,
supplier agreements, agreements to lend or borrow money, shareholder agreements,
employment agreements, agreements relating to SCE Intellectual Property Rights
and the like; excepting only (i) those SCE Contracts which involve less than
$10,000 and are cancelable, without penalty, on no more than 90 days' notice,
and (ii) SCE Leases that are set forth on Schedule 4.13 hereto (subject to those
-------------
exceptions, all of the foregoing, collectively, the "SCE Contracts"). The
aggregate value of all payment obligations and rights to receive payments, under
agreements, contracts and commitments (whether oral or in writing) to which SCE
is a party or by which it or any of its properties is otherwise bound, and that
are not listed on Schedule 4.14, is less than $50,000 (calculating such value by
-------------
adding together the value of rights and obligations, and not by determining the
net amount thereof).
True and complete copies of all SCE Contracts (or a true and complete
narrative description of any oral SCE Contract) have previously been provided to
Parent. Except as specified in Schedule 4.14 hereto, neither SCE nor, to the
-------------
knowledge of SCE, any other party to any of the SCE Contracts (x) is in default
under (nor does there exist any condition that, with notice or lapse of time or
both, would cause such a default under) any of the SCE Contracts, or (y) has
waived any right it may have under any of the SCE Contracts, the waiver of which
would have a material adverse effect on the business, assets or financial
condition or prospects of SCE. Except as specified in Schedule 4.14, all of the
SCE Contracts constitute the valid and binding obligations of SCE, enforceable
in accordance with their respective terms, and, to the knowledge of SCE, of the
other parties thereto.
4.15 DIRECTORS AND OFFICERS. Schedule 4.15 hereto sets forth a list, as of
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the Closing Date, of the name of each director and officer of SCE and the
position(s) held by each.
4.16 PAYROLL INFORMATION. SCE has previously provided Parent with a true
and complete copy of the most recent payroll report of SCE, showing all current
employees of SCE and their current levels of compensation, other than bonuses
and other extraordinary compensation. SCE has paid all compensation required to
be paid to employees of SCE on or prior to the date hereof other than
compensation accrued in the current pay period.
4.17 LITIGATION. Except as set forth on Schedule 4.17 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
SCE, threatened against or affecting SCE or the SCE Business, nor is there any
judgment, decree, injunction or order of any applicable Governmental Entity or
arbitrator outstanding against SCE.
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4.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 4.18 hereto, there are no
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employee benefit plans, agreements or arrangements maintained by SCE, including,
without limitation, (i) "employee benefit plans" within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"); (ii) current or deferred compensation, pension, profit sharing,
vacation or severance plans or programs; or (iii) medical, hospital, accident,
disability or death benefit plans (collectively, "SCE Benefit Plans"). All SCE
Benefit Plans are administered in accordance with, and are in material
compliance with, all applicable laws and regulations. No default exists with
respect to the obligations of SCE under any SCE Benefit Plan.
(b) SCE is not a party to any collective bargaining agreement; no
collective bargaining agent has been certified as a representative of any of the
employees of SCE; no representation campaign or election is now in progress with
respect to any employee of SCE; and there are no labor disputes, grievances,
controversies, strikes or requests for union representation pending, or, to the
knowledge of SCE, threatened, relating to or affecting the SCE Business. To the
knowledge of SCE, no event has occurred that could give rise to any such
dispute, controversy, strike or request for representation.
4.19 ERISA.
(a) All SCE Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the SCE Benefit Plans that is intended
to meet the requirements of Section 401(a) of the Code has been determined by
the Internal Revenue Service to meet such requirements within the meaning of
such provision. No SCE Benefit Plan is subject to Title IV of ERISA or Section
412 of the Code. SCE has not engaged in any nonexempt "prohibited transactions,"
as such term is defined in Section 4975 of the Code or Section 406 of ERISA,
involving SCE Benefit Plans that would subject SCE to the penalty or tax imposed
under Section 502(i) of ERISA or Section 4975 of the Code. SCE has not engaged
in any transaction described in Section 4069 of ERISA within the last five
years. Except as disclosed in Schedule 4.19 hereto or pursuant to the terms of
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the SCE Benefit Plans, neither the execution and delivery hereof nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation or
golden parachute) becoming due to any director or other employee of SCE, (ii)
increase any benefit otherwise payable under any SCE Benefit Plan or (iii)
result in the acceleration of the time of payment or vesting of any such benefit
to any extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA, for which the 30-day reporting requirement has not been waived,
has been required to be filed for any SCE Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code, or by any
entity that is considered one employer with SCE under Section 4001 of ERISA or
Section 414 of the Code, within the 12-month period ending on the Closing Date.
SCE has not incurred any liability to the Pension Benefit Guaranty Corporation
in respect of any SCE Benefit Plan that remains unpaid.
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4.20 TAXES.
(a) Except as set forth in Schedule 4.20 hereto, (i) SCE has duly
-------------
and timely filed all federal, state and local income, franchise, excise, real
and personal property and other tax returns and reports, including extensions,
required to have been filed by SCE on or prior to the Closing Date; (ii) SCE has
duly and timely paid all taxes and other governmental charges, and all interest
and penalties with respect thereto, required to be paid by SCE (whether by way
of withholding or otherwise) to any federal, state, local or other taxing
authority (except to the extent the same are being contested in good faith, and
adequate reserves therefor have been provided in the SCE Financial Statements);
and (iii) as of the Closing Date, all deficiencies proposed as a result of any
audit have been paid or settled.
(b) SCE is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) SCE has not consented to have the provisions of Section
341(f)(2) of the Code (or comparable state law provisions) apply to it, and SCE
has not agreed or been requested to make any adjustment under Section 481(c) of
the Code by reason of a change in accounting method or otherwise.
4.21 COMPLIANCE WITH APPLICABLE LAWS. SCE holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
SCE, as appropriate, and to carry on the SCE Business as now conducted (the "SCE
Permits"). To the knowledge of SCE, SCE is in material compliance with all
applicable laws, ordinances and regulations and the terms of the SCE Permits.
Except as set forth on Schedule 4.21 hereto, all of the SCE Permits are fully
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assignable by SCE in connection with the Merger. Schedule 4.21 hereto sets
-------------
forth a true and complete list of all SCE Permits, true and complete copies of
which have previously been provided to Parent.
4.22 BOARD OF DIRECTORS/SHAREHOLDER CONSENT. Both the Board of Directors
of SCE and the SCE Shareholders have adopted and approved this Agreement and the
transactions contemplated hereby (including, without limitation, the Merger).
4.23 BROKERS. Except as set forth on Schedule 4.23 hereto, no broker or
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finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of SCE.
4.24 ENVIRONMENTAL MATTERS.
(a) To the knowledge of SCE, no real property currently or formerly
owned or operated by SCE is contaminated with any Hazardous Substance (as
hereinafter defined);
(b) SCE is not a party to any litigation or administrative
proceeding nor, to the knowledge of SCE, is any litigation or administrative
proceeding threatened against it, that, in either case, asserts or alleges that
SCE (i) violated any Environmental Law (as hereinafter defined); (ii) is
required to clean up, remove or take remedial or other responsive action due to
the disposal, deposit, discharge, leak or other release of any Hazardous
Substance; or (iii) is required to pay all or a portion of
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the cost of any past, present or future cleanup, removal or remedial or other
action that arises out of or is related to the disposal, deposit, discharge,
leak or other release of any Hazardous Substance.
(c) To the knowledge of SCE, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by SCE containing materials that, if known to be
present in soil or ground water, would require cleanup, removal or other
remedial action under Environmental Law.
(d) To the knowledge of SCE, SCE is not subject to any judgment,
order or citation related to or arising out of any Environmental Law and has not
been named or listed as a potentially responsible party by any Governmental
Entity in a matter related to or arising out of any Environmental Law.
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including, without limitation, any petroleum products, asbestos or
polychlorinated biphenyls.
4.25 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as provided
in Schedule 4.25 hereto, no officer, director, shareholder or employee of SCE
-------------
and no family member (including a spouse, parent, sibling or lineal descendent
of any of the foregoing), has any direct or indirect material interest in any
material customer, supplier or competitor of SCE, or in any Person from whom or
to whom SCE leases any real or personal property, or in any other Person with
whom SCE is doing business whether directly or indirectly (including, without
limitation, as a debtor or creditor), whether in existence as of the Closing
Date or proposed, other than the ownership of stock of publicly traded
corporations.
4.26 ACCOUNTS RECEIVABLE. All accounts, notes, contracts and other
receivables of SCE (collectively, "SCE Accounts Receivable") were acquired by
SCE in the ordinary course of business arising from bona fide transactions. To
the knowledge of SCE, there are no set-offs, counterclaims or disputes asserted
with respect to any SCE Accounts Receivable that would result in claims in
excess of the reserve for bad debts set forth on the SCE Financial Statements
and, to the knowledge of SCE and subject to such reserve, all SCE Accounts
Receivable are collectible in full. SCE has previously provided Parent with a
true and complete aging report prepared as of March 24, 1998 which shows the
time elapsed since invoice date for all SCE Accounts Receivable as of such date.
4.27 ACCOUNTS PAYABLE. All material accounts, notes, contracts and other
amounts payable of SCE (collectively, "SCE Accounts Payable") are currently
within their respective terms, and are neither in default nor otherwise past due
by more than 90 days. SCE has previously provided Parent with a true and
complete aging report prepared as of April 16, 1998 which shows the time elapsed
since invoice date for all SCE Accounts Payable as of such date.
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4.28 INSURANCE. SCE currently maintains, in full force and effect, all
insurance policies that are required to be maintained for the conduct of the SCE
Business or the ownership of SCE's property (both real and personal)
(collectively, the "SCE Insurance Policies"). The SCE Insurance Policies are
listed on Schedule 4.28 hereto, and true and complete copies of all SCE
-------------
Insurance Policies have previously been provided to Parent. SCE (a) is not in
default regarding the provisions of any SCE Insurance Policy; (b) has paid all
premiums due thereunder; and (c) has not failed to present any notice or
material claim thereunder in a due and timely fashion.
4.29 BANKRUPTCY. SCE has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 SCE DEBT. As of the date hereof, the SCE Debt is not in excess of
$150,000.
4.31 INVESTMENT PURPOSE; ACCREDITED INVESTORS OR PURCHASER REPRESENTATIVE.
(a) Each SCE Shareholder receiving Parent Stock in the Merger represents that he
(i) is acquiring the Parent Stock solely for his own account for investment and
not with a view to, or for sale in connection with, any distribution thereof;
and (ii) will not, directly or indirectly, offer, transfer, sell, pledge,
hypothecate or otherwise dispose of any Parent Stock (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of any such shares) except
in compliance with the Securities Act of 1933, as amended (the "Securities
Act"), and the rules and regulations thereunder, other applicable laws, rules
and regulations, and the Second Amended and Restated Stockholders' Agreement of
Parent, dated December 17, 1997 (the "Stockholders' Agreement"); (b) Each SCE
Shareholder receiving Parent Stock in the Merger and identified on Schedule
--------
4.31(b) hereto as an accredited investor further represents that he is an
- -------
"accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act;
and (c) Each SCE Shareholder receiving Parent Stock in the Merger and identified
on Schedule 4.31(c) hereto as not an accredited investor further represents that
-----------------
(i) John Taylor is his Purchaser representative (the "Purchaser representative")
as such term is defined in Rule 501 of Regulation D under the Securities Act;
and (ii) the Purchaser representative (A) is not an affiliate, director, officer
or other employee of Parent, or beneficial owner of 10% or more of any class of
the equity securities of, or 10% or more of the equity interest in, Parent; (B)
has such knowledge and experience in financial and business matters that he is
capable of evaluating, alone, or together with such SCE Shareholder, the merits
and risks of the prospective investment in Parent Stock; (C) has been
acknowledged by such SCE Shareholder in writing, during the course of the
Merger, to be his purchaser representative in connection with evaluating the
merits and risks of the prospective investment in Parent Stock; and (D) has
disclosed to such SCE Shareholder in writing a reasonable time prior to the
Closing any material relationship between the Purchaser representative or his
affiliates and Parent or its affiliates that exists, is mutually understood to
be contemplated, or has existed at any time during the previous two years, and
any compensation received or to be received as a result of such relationship.
4.32 RESTRICTIONS ON TRANSFER. Each SCE Shareholder receiving Parent Stock
in the Merger acknowledges that (a) the Parent Stock received by him hereunder
has not been registered under the Securities Act; (b) the Parent Stock may be
required to be held indefinitely, and he must
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continue to bear the economic risk of the investment in such shares unless such
shares are subsequently registered under the Securities Act or an exemption from
such registration is available; (c) there may not be any public market for the
Parent Stock in the foreseeable future; (d) Rule 144 promulgated under the
Securities Act is not presently available with respect to sales of any
securities of Parent, and such Rule is not anticipated to be available in the
foreseeable future; (e) when and if Parent Stock may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
limited amounts and in accordance with the terms and conditions of such Rule;
(f) if the exemption afforded by Rule 144 is not available, public sale without
registration will require the availability of an exemption under the Securities
Act; (g) the Parent Stock is subject to the terms and conditions of the
Stockholders' Agreement; (h) restrictive legends shall be placed on the
certificates representing Parent Stock; and (i) a notation shall be made in the
appropriate records of Parent indicating that Parent Stock is subject to
restrictions on transfer and, if Parent should in the future engage the services
of a stock transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to Parent Stock.
4.33 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION. (a) Each
SCE Shareholder receiving Parent Stock in the Merger represents and warrants
that (i) his financial situation is such that he can afford to bear the economic
risk of holding Parent Stock acquired by him hereunder for an indefinite period;
and (ii) he can afford to suffer the complete loss of such Parent Stock; (b)
Each SCE Shareholder receiving Parent Stock in the Merger and listed on Schedule
--------
4.31(b) hereto further represents that (i) he has been granted the opportunity
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to ask questions of, and receive answers from, representatives of Parent
concerning the terms and conditions of the Parent Stock and to obtain any
additional information that he deems necessary; (ii) his knowledge and
experience in financial business matters is such that he is capable of
evaluating the merits and risk of ownership of the Parent Stock; (iii) he has
carefully reviewed the terms of the Stockholders' Agreement and has evaluated
the restrictions and obligations contained therein; and (iv) he (A) has reviewed
the Private Placement Memorandum of Parent dated as of April 24, 1998, as
revised as of May 5, 1998 (the "Memorandum"); (B) has carefully examined the
Memorandum and has had an opportunity to ask questions of, and receive answers
from, representatives of Parent, and to obtain additional information concerning
Parent and its Subsidiaries (as hereinafter defined); and (C) does not require
additional information regarding Parent or its Subsidiaries in connection with
the Merger; and (c) Each SCE Shareholder receiving Parent Stock in the Merger
and listed on Schedule 4.31(c) hereto as not an accredited investor further
----------------
represents that, either alone or with the Purchaser representative, (i) he has
been granted the opportunity to ask questions of, and receive answers from,
representatives of Parent concerning the terms and conditions of the Parent
Stock and to obtain any additional information that he deems necessary; (ii) his
knowledge and experience in financial business matters is such that he is
capable of evaluating the merits and risk of ownership of the Parent Stock;
(iii) he has carefully reviewed the terms of the Stockholders' Agreement and has
evaluated the restrictions and obligations contained therein; and (iv) he (A)
has reviewed the Memorandum; (B) has carefully examined the Memorandum and has
had an opportunity to ask questions of, and receive answers from,
representatives of Parent, and to obtain additional information concerning
Parent and its Subsidiaries; and (C) does not require additional information
regarding Parent or its Subsidiaries in connection with the Merger.
4.34 DISCLOSURE. No statement of fact by SCE or any SCE Shareholder
contained herein and no written statement of fact furnished by SCE or any SCE
Shareholder to Parent or Sub in
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connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements herein or
therein contained not materially misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to SCE
and the SCE Shareholders, which representations and warranties shall survive the
Closing in accordance with Section 10. 1 hereof, as follows:
5.1 ORGANIZATION AND QUALIFICATION. Each of Parent and its Subsidiaries
(as defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached as Schedule 5.1 hereto.
------------
5.2 AUTHORITY. Each of Parent and Sub has the necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by SCE and the SCE Shareholders,
constitutes the valid and binding obligation of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms,
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
5.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Parent or Sub, or the organizational documents of any other
Subsidiaries;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to Parent or its Subsidiaries,
or by which Parent, any of its Subsidiaries, or their respective properties or
assets may be bound or affected;
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(c) result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for
(x) compliance with any applicable requirements of any applicable securities
laws, and (y) the filing of the Certificate of Merger pursuant to the DGCL and
the GCL); or (ii) any other Person.
5.4 LITIGATION. Except as set forth on Schedule 5.4 hereto, there is no
------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 BROKERS. Except as disclosed on Schedule 5.5 hereto, no broker or
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finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Parent or Sub.
5.6 PARENT STOCK
(a) As of the date hereof the authorized capital stock of Parent consists
of (I) (A) 75,000,000 shares of Class A Common Stock, $.01 par value, of which
no shares are validly issued and outstanding, and (B) 100,000,000 shares of
Class B Common Stock, $.01 par value, of which 8,869,010 shares are validly
issued and outstanding (without taking into account any shares of Parent Stock
to be issued pursuant to (I) this Agreement, (II) the Agreement and Plan of
Merger, dated as of May 4, 1998, among Parent, iXL-New York, Inc., Micro
Interactive, Inc. ("Micro") and the shareholders of Micro identified therein
(the "Micro Merger"), which Agreement is anticipated to close on or about May
15, 1998, or (III) the proposed Agreement and Plan of Merger among Parent, Sub,
Digital Planet ("Digital") and the shareholders of Digital identified therein
(the "Digital Merger"), which Agreement is anticipated to be executed and
delivered, and closed, on or about May 8, 1998), fully paid and nonassessable;
(ii) 750,000 shares of blank check preferred stock, (A) 250,000 of which have
been designated as Class A Convertible Preferred Stock, of which 172,452 shares
are validly issued and outstanding, fully paid and nonassessable, (B) 200,000 of
which have been designated as Class B Convertible Preferred Stock, of which
98,767 shares are validly issued and outstanding, fully paid and nonassessable,
and (C) 15,000 of which have been designated as Class C Convertible Preferred
Stock, of which 9,232 shares are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 5.6 hereto, there are no options,
------------
warrants, calls, agreements, commitments or other rights presently outstanding
that would obligate Parent to issue, deliver or sell shares of its capital
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stock, or to grant, extend or enter into any such option, warrant, call,
agreement, commitment or other right. In addition to the foregoing, as of the
Closing Date, Parent has no bonds, debentures, notes or other indebtedness
issued or outstanding that have voting rights in Parent.
(b) The outstanding shares of capital stock of Parent immediately prior to
the Effective Time are set forth on Schedule 5.6 hereto.
------------
(c) When delivered to the SCE Shareholders in accordance with the terms
hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (b) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
5.7 SUBSIDIARIES. Except as set forth on Schedule 5.7 hereto, Parent has
------------
no subsidiaries and does not otherwise own or control, directly or indirectly,
any equity interest in, or any security convertible into an equity interest in,
any Entity. Schedule 5.7 hereto lists the name of each of the Subsidiaries of
------------
Parent, and indicates their respective jurisdictions of incorporation.
5.8 FINANCIAL STATEMENTS. Parent has heretofore furnished SCE with a true
and complete copy of (a) the audited financial statements of iXL Interactive
Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31, 1993, 1994
and 1995, and for the four-month period ended April 30, 1996; (b) audited
combined financial statements for Creative Video, Inc. (n/k/a iXL, Inc.),
Creative Video Library, Inc. and Entrepreneur Television, Inc. for the years
ended December 31, 1993, 1994 and 1995, and for the four-month period ended
April 30, 1996; (c) the audited consolidated financial statements for Parent and
its Subsidiaries for the eight months ended December 31, 1996; and (d) the
audited consolidated financial statements for Parent and its Subsidiaries, dated
December 31, 1997 (all of the foregoing, collectively, "Parent Financial
Statements"). The Parent Financial Statements present fairly in all material
respects the consolidated financial position, results of operations,
shareholders' equity and cash flow of Parent at the respective dates or for the
respective periods to which they apply. Except as disclosed therein, such
statements and related notes have been prepared in accordance with GAAP
consistently applied throughout the periods involved (except, in the case of the
unaudited financial statements, for the exclusion of footnotes and normal year
end adjustments).
5.9 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997 that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Parent and its Subsidiaries, taken as a whole; (b) liabilities reflected on
the Parent Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
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5.10 COMPLIANCE WITH APPLICABLE LAWS. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
5.11 BOARD OF DIRECTORS/SHAREHOLDER CONSENT. Both the Board of Directors
of Parent and the Board of Directors and shareholder of Sub have, by unanimous
written consent, adopted and approved this Agreement and the transactions
contemplated hereby (including, without limitation, the Merger).
5.12 BANKRUPTCY. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 ABSENCE OF CHANGES. Except as provided in Schedule 5.13 hereto, since
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December 31, 1997, there has not been (a) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
material change in Parent's accounting principles, practices or methods; (f) any
split, combination or reclassification of any of Parent's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Parent's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
5.14 TAXES. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent
and its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the Closing Date,
all deficiencies proposed as a result of any audits have been paid or settled.
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5.15 DISCLOSURE. No statement of fact by Parent or Sub contained herein
and no written statement of fact furnished or to be furnished by Parent or Sub
to SCE in connection herewith contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements herein or therein contained not misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 CONDUCT OF BUSINESS BY SCE PENDING THE MERGER. From and after the
date hereof, prior to the Effective Time, except as contemplated hereby, unless
Parent shall otherwise agree in writing, SCE shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, use reasonable efforts to preserve intact its present
business organization, keep available the services of its employees and preserve
its relationships with customers, suppliers, licensors, licensees, distributors
and others having business dealings with SCE to the end that its goodwill and
on-going businesses shall not be impaired in any material respect at the
Effective Time. Without limiting the generality of the foregoing, and except as
contemplated hereby, unless Parent shall otherwise agree in writing, prior to
the Effective Time, SCE shall not, directly or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any
other distribution in respect of, any of its capital stock, (ii) split, combine
or reclassify any of its capital stock, or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock, or (iii) purchase, redeem or otherwise acquire, any share of
capital stock of SCE or any other equity security thereof or any right, warrant,
or option to acquire any such share or other security;
(b) issue, deliver, sell, pledge or otherwise encumber any share of
its capital stock, any other voting security issued by SCE or any security
convertible into, or any right, warrant or option to acquire any such share or
voting security;
(c) amend its Articles of Incorporation, Bylaws or other comparable
organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any Entity or division thereof, or (ii) any assets that
are material, individually or in the aggregate, to SCE;
(e) subject to a Lien or sell, lease or otherwise dispose of any of
its properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of SCE,
guarantee any debt security of another Person or enter into any "keep well" or
other agreement to maintain the financial condition of another Person, make any
loan, advance or capital contribution to, or investment in, any other Person, or
settle or compromise any material claim or litigation; or
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(g) authorize any of, or commit or agree to take any of, the
foregoing actions.
6.2 ACCESS TO INFORMATION. From the date hereof through the Effective
Time, SCE shall afford to Parent and Parent's accountants, counsel and other
representatives reasonable access during normal business hours (and at such
other times as the parties may mutually agree) upon reasonable prior notice and
approval of SCE, which shall not be unreasonably withheld, to its properties,
books, contracts, commitments, records and personnel and, during such period,
shall furnish promptly to Parent all information concerning its business,
properties and personnel as Parent may reasonably request. Parent and its
accountants, counsel and other representatives shall, in the exercise of the
rights described in this Section 6.2, not unduly interfere with the operation of
the business of SCE.
6.3 FILINGS; TAX ELECTIONS. SCE shall promptly provide Parent with copies
of all filings made by SCE with any Governmental Entity in connection herewith
and the transactions contemplated hereby. SCE shall, before settling or
compromising any material income tax liability of SCE, consult with Parent and
its advisors as to the positions and elections that will be taken or made with
respect to such matter.
6.4 PUBLIC ANNOUNCEMENTS. The parties agree that, except as may otherwise
be required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger. Any such disclosure shall be coordinated by Parent,
and none of the SCE Shareholders shall make any such disclosure without the
prior written consent of Parent.
6.5 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND EXPENSES. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 STATE TAX ASSUMPTION. SCE shall, prior to the Effective Time, have
obtained a tax clearance certificate (the "Tax Clearance Certificate") from the
California Franchise Tax Board ("FTB") and, in that connection, shall execute,
and deliver to the FTB, a corporate assumption of tax liability ("State Tax
Assumption"). Sub agrees to enter into an Assumption Agreement with SCE,
substantially in the form of Exhibit "C" hereto, whereby Sub will assume the
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State Tax Assumption ("Assumption Agreement").
6.7 FURTHER ASSURANCES. From time to time after the Effective Time, upon
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof.
6.8 SCE STOCK RIGHTS. SCE shall, prior to the Closing Date, have canceled
any stock options or other such rights granted to Universal Studios On-Line,
Inc., pursuant to the Consulting
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Agreement dated June 26, 1997, except for that Entity's entitlement to the
50,000 shares of SCE Stock reflected as its holding in Schedule 4.3(a) hereto.
---------------
6.9 SCE Assignments or Terminations. SCE shall, prior to the Closing
Date, have (a) terminated, or made other arrangements satisfactory to Parent
concerning, (i) any "Participation Share" (as defined therein) or other SCE
payment obligation under the Dissolution and Mutual Release Agreement, dated as
of August 18, 1997, with ZM Productions, Inc. and certain other parties; (ii)
each of the employment agreements described in Schedule 6.9(a) hereto, including
---------------
any provisions thereunder entitling employees to securities (whether of SCE or
of any successor corporation thereto), salary, automobile or other entitlements
based on SCE profits or on commissions or project completions; (iii) the
confidentiality agreement, dated November 10, 1997, with dCode Inc.; (iv) the
Togglethis Software License Agreement, dated as of November 7, 1997, with Toggle
Entertainment, Inc.; and (v) the Stock Purchase Agrement, dated March 19, 1998
with Lazarus Family Investments, LLC, including any preemptive rights or anti-
dilution entitlements thereunder, subject to repayment, immediately prior to the
Effective Time, of the related Promissory Note-Fixed Interest Rate, dated March
16, 1998 and in the amount of $50,000; (b) assigned to Parent (or, at Parent's
discretion, to Sub), or made other arrangements satisfactory to Parent
concerning, each of the leases or financing agreements described in Schedule
--------
6.9(b) hereto; and (c) assigned to the Controlling Shareholder, in consideration
- ------
for his assumption and the counterparty's consent, or made other arrangements
satisfactory to Parent concerning, SCE's rights and obligations under the
Independent Producer Contract, dated as of February 1, 1998, with Gina Offerman.
6.10 PURCHASER REPRESENTATIVE. With respect to the SCE Shareholders
receiving Parent Stock in the Merger and listed on Schedule 4.31(c) hereto as
----------------
not being accredited investors, (a) the Purchaser representative shall furnish
to Parent, to Parent's satisfaction, a completed Purchaser Representative
Questionnaire, substantially in the form of Exhibit "H" hereto; and (b) each
-----------
such SCE Shareholder shall furnish to Parent a signed Purchaser Acknowledgement
in connection therewith.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATION OF SCE AND THE SCE SHAREHOLDERS TO EFFECT
THE MERGER. The obligation of SCE and the SCE Shareholders to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) Parent and Sub shall have performed in all material respects
their respective agreements contained herein required to be performed at or
prior to the Effective Time, and the representations and warranties of Parent
and Sub contained herein shall be true when made and (except for representations
and warranties made as of a specified date, which need only be true as of such
date) at and as of the Effective Time as if made at and as of such time, except
as contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to SCE at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-1" hereto, and (ii) the
-------------
appropriate officers of Sub shall have executed and delivered to SCE at the
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Closing, a closing certificate and incumbency certificate, substantially in the
form of Exhibit "A-2" hereto;
-------------
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
- ---------------
(d) SCE shall have received corporate certificates of good standing
for Parent and Sub, and a copy of the Certificate of Incorporation for Parent
and Sub, respectively, both as certified by the Secretary of State of Delaware;
(e) there shall have been delivered to each of the SCE Shareholders
at the Closing, duly executed by Parent, an Agreement to be Bound to the
Registration Rights Agreement of Parent, dated as of Closing Date (the
"Agreement to be Bound to the Registration Rights Agreement"), substantially in
the form of Exhibit "B" hereto;
-----------
(f) SCE shall have received the Tax Clearance Certificate from the
FTB, and Sub shall have executed and delivered at the Closing the Assumption
Agreement;
(g) SCE shall have received, at the Closing, a duly executed opinion
of counsel to Parent and Sub, substantially in the form of Exhibit "D" hereto;
-----------
and
(h) SCE shall have received from Parent and Sub such other documents
as SCE's counsel shall have reasonably requested, in form and substance
reasonably satisfactory to SCE's counsel.
7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) SCE and the SCE Shareholders shall have performed in all material
respects their respective agreements contained herein required to be performed
at or prior to the Effective Time, and the representations and warranties of SCE
and the SCE Shareholders contained herein shall be true when made and (except
for representations and warranties made as of a specified date, which need only
be true as of such date) at and as of the Effective Time as if made at and as of
such time, except as contemplated hereby;
(b) Parent shall have completed its due diligence review of SCE and
shall, in its sole and absolute discretion, be satisfied with the results of
such review;
(c) the appropriate officers of SCE shall have executed and delivered
to Parent at the Closing, a closing certificate and incumbency certificate,
substantially in the form of Exhibit "E" hereto.
-----------
(d) SCE and the SCE Shareholders shall have obtained or caused to be
obtained all of the Consents, if any, listed on Schedule 7.2(d) hereto;
---------------
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(e) there shall have been delivered to Parent at the Closing, duly
executed by each of the SCE Shareholders receiving Parent Stock in the Merger,
(i) an Agreement to be Bound to the Stockholders' Agreement, substantially in
the form of Exhibit "F" hereto; and (ii) an Agreement to be Bound to the
-----------
Registration Rights Agreement, substantially in the form of Exhibit "B" hereto;
-----------
(f) Parent shall have received a corporate certificate of good
standing for SCE, and a copy of the Articles of Incorporation of SCE, both as
certified by the Secretary of State of California;
(g) as of the date three business days prior to the Closing Date the
SCE Debt shall be no greater than $150,000;
(h) SCE shall have furnished evidence to Parent's satisfaction of
performance under Sections 6.8, 6.9(a), 6.9(b) and 6.10 hereof;
(i) Parent shall have received, at the Closing, a duly executed
opinion of counsel to SCE and the SCE Shareholders, substantially in the form of
Exhibit "G" hereto;
- -----------
(j) Parent shall have received from SCE the Tax Clearance
Certificate, indicating that, except as set forth in Schedule 4.20 hereto, no
-------------
taxes are owed by SCE to state or local taxing authorities in the State of
California ;
(k) Parent shall have received from SCE or the SCE Shareholders, as
the case may be, such other documents as Parent's counsel shall have reasonably
requested, in form and substance reasonably satisfactory to Parent's counsel;
and
(l) Parent shall have received evidence satisfactory to it that at
the Closing the assets and properties used in the SCE Business are free and
clear of all Liens other than Permitted Liens.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY PARENT.
(a) Parent shall indemnify and hold the SCE Shareholders and SCE's
directors, officers and employees (collectively, the "SCE Indemnified Parties")
harmless from and against, and agree promptly to defend each of the SCE
Indemnified Parties from and reimburse each of the SCE Indemnified Parties for,
any and all losses, damages, costs, expenses, liabilities, obligations and
claims of any kind (including, without limitation, reasonable attorney fees and
other legal costs and expenses) (collectively, a "SCE Loss") that any of the SCE
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with:
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(i) any breach or inaccuracy of any of the representations
and warranties made by Parent or Sub in or pursuant hereto, or in any
instrument, certificate or affidavit delivered by Parent or Sub at the Closing
in accordance with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform,
satisfy and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations hereunder or under any of the documents and materials
delivered by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary,
Parent shall not have any liability under Section 8.1(a)(i) above (i) unless the
aggregate of all SCE Losses for which Parent would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $50,000, and then
only to the extent of such excess, (ii) for amounts in excess of $2,000,000 in
the aggregate, and (iii) unless the SCE Shareholders have asserted a claim with
respect to the matters set forth in Section 8.1(a)(i), or 8.1(a)(iii) to the
extent applicable to Section 8.1(a)(i), within two years of the Effective Time.
Notwithstanding any implication to the contrary contained herein, the parties
acknowledge and agree that a decrease in the value of Parent Stock would not, by
itself, constitute a SCE Loss, unless and to the extent a decrease in the value
of Parent Stock has been demonstrated to be as a result of any event described
in Sections 8.1(a)(i), (ii) or (iii) above.
8.2 INDEMNIFICATION BY THE SCE SHAREHOLDERS.
(a) The Controlling Shareholder and the SCE Shareholders shall,
severally and not jointly, indemnify and hold Parent, Sub, Surviving Corporation
and their respective shareholders, directors, officers and employees
(collectively, the "Parent Indemnified Parties") harmless from and against, and
agree to defend promptly each of the Parent Indemnified Parties from and
reimburse each of the Parent Indemnified Parties for, any and all losses,
damages, costs, expenses, liabilities, obligations and claims of any kind
(including, without limitation, reasonable attorneys' fees and other legal costs
and expenses) (collectively, a "Parent Loss") that any of the Parent Indemnified
Parties may at any time suffer or incur, or become subject to, as a result of or
in connection with:
(i) in the case of the Controlling Shareholder, (A) any
breach or inaccuracy of any of the representations and warranties made by SCE or
the SCE Shareholders in or pursuant hereto, or in any instrument, certificate or
affidavit delivered by any of the same at the Closing in accordance with the
provisions hereof, (B) Section 4.20 hereof or Schedule 4.20 hereto, to the
-------------
extent that liability for SCE's unpaid taxes (including any penalty or interest)
exceeds $10,000, and (C) the Agreements described in Sections 6.9(a)(i) and
6.9(c) hereof;
(ii) in the case of each SCE Shareholder (including the
Controlling Shareholder individually), any breach or inaccuracy of any of the
representations and warranties made by such SCE Shareholder in or pursuant
hereto (specifically, those contained in Sections 4.2, 4.3(b), 4.5, 4.31, 4.32.
4.33 and 4.34 hereof), or in any instrument, certificate or affidavit delivered
by any of the same at the Closing in accordance with the provisions hereof;
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(iii) any failure by SCE or any of the SCE Shareholders to carry out,
perform, satisfy and discharge any of their respective covenants, agreements,
undertakings, liabilities or obligations hereunder or under any of the documents
and materials delivered by SCE pursuant hereto; and
(iv) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above, none of the SCE Shareholders shall have any
liability under Section 8.2(a) above (i) unless the aggregate of all Parent
Losses for which the SCE Shareholders would be liable but for this sentence
exceeds, on a cumulative basis, an amount equal to $50,000, and then only to the
extent of such excess, (ii) for amounts in excess of $2,000,000 in the
aggregate, and (iii) unless Parent has asserted a claim with respect to the
matters set forth in Sections 8.2(a)(i), (ii) or (iii), or 8.2(a)(iv) (to the
extent applicable to Section 8.2(a)(i), (ii) or (iii) within two years of the
Effective Time, except with respect to the matters arising under Sections 4.18,
4.19, 4.20 or 4.24 hereof, in which event Parent must have asserted a claim
within the applicable statute of limitations. Notwithstanding any implication to
the contrary contained herein, the parties acknowledge and agree that a decrease
in the value of Parent Stock would not, by itself, constitute a Parent Loss,
unless and to the extent a decrease in the value of Parent Stock has been
demonstrated to be as a result of any event described in Sections 8.2(a)(i),
(ii), (iii) or (iv) above.
8.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder. Subject to the
Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section 8.1 or 8.2 hereof, as the case may
be, the Indemnifying Party shall have the right, at its sole cost and expense,
to employ counsel of its own choosing to defend any such Claim asserted against
the Indemnified Party. Notwithstanding anything to the contrary in the preceding
sentence, if the Indemnified Party (i) reasonably believes that its interests
with respect to a Claim (or any material portion thereof) are in conflict with
the interests of the Indemnifying Party with respect to such Claim (or portion
thereof), and (ii) promptly notifies the Indemnifying Party, in writing, of the
nature of such conflict, then the Indemnified Party shall be entitled to choose,
at the sole cost and expense of the Indemnifying Party, independent counsel to
defend such Claim (or the conflicting portion thereof). The Indemnified Party
shall have the right to
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participate in the defense of any Claim at its own expense (except to the extent
provided in the preceding sentence), but the Indemnifying Party shall retain
control over such litigation (except as provided in the preceding sentence). The
Indemnifying Party shall notify the Indemnified Party in writing, as promptly as
possible (but in any case before the due date for the answer or response to a
Claim) after receipt of the notice of Claim given by the Indemnified Party to
the Indemnifying Party under Section 8.3(a) hereof, of its election to defend in
good faith any such third party Claim. For so long as the Indemnifying Party is
defending in good faith any such Claim asserted by a third party against the
Indemnified Party, the Indemnified Party shall not settle or compromise such
Claim without the prior written consent of the Indemnifying Party. The
Indemnified Party shall cooperate with the Indemnifying Party in connection with
any such defense and shall make available to the Indemnifying Party or its
agents all records and other materials in the Indemnified Party's possession
reasonably required by it for its use in contesting any third party Claim;
provided, however, that the Indemnifying Party shall have agreed, in writing, to
keep such records and other materials confidential except (i) to the extent
required for defense of the relevant Claim, or (ii) as required by law or court
order. Whether or not the Indemnifying Party elects to defend any such Claim,
the Indemnified Party shall have no obligations to do so. Within 30 days after a
final determination (including a settlement) has been reached with respect to
any Claim contested pursuant to this Section 8.3(b), the Indemnifying Party
shall satisfy its obligations hereunder with respect thereto. Any amount paid
thereafter shall include interest thereon for the period commencing at the end
of such 30-day period and ending on the actual date of payment, at a rate of 15%
per annum, or, if lower, at the highest rate of interest permitted by applicable
law at the time of such payment.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Merger Agreement may be terminated at any time prior
to the Effective Time:
(a) by mutual written consent of Parent and SCE;
(b) by SCE, upon a material breach hereof on the part of Parent or
Sub which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by May 15, 1998;
(c) by Parent, upon a material breach hereof on the part of SCE or
any of the SCE Shareholders which has not been cured and which would cause any
condition set forth in Section 7.2 hereof to be incapable of being satisfied by
May 15, 1998;
(d) by Parent, if the condition set forth in Section 7.2(b) hereof
shall not have been satisfied in Parent's sole and absolute discretion;
(e) by Parent or SCE if any court of competent jurisdiction shall
have issued, enacted, entered, promulgated or enforced any order, judgment,
decree, injunction or ruling which
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restrains, enjoins or otherwise prohibits the Merger and such order, judgment,
decree, injunction or ruling shall have become final and nonappealable; or
(f) by either Parent or SCE if the Merger shall not have been
consummated on or before May 15, 1998 (provided the terminating party is not
otherwise in material breach of its representations, warranties or obligations
hereunder).
9.2 FEES AND EXPENSES.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the Surviving Corporation; provided, however, that the SCE Shareholders shall
pay all fees and expenses (including agents, counsel and other advisors) of SCE
and themselves.
(b) If the Merger is not consummated for a reason other than the
willful and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
(c) If the Merger is not consummated because of a willful and
material breach hereof by any party, the nonbreaching party or parties shall be
entitled to pursue all legal and equitable remedies against the breaching party
for such breach including specific performance and all fees and expenses
incurred by the nonbreaching party or parties in connection with enforcing its
or their rights hereunder with respect to such breach shall be paid by the
breaching party.
9.3 AMENDMENT. This Merger Agreement may be amended by the parties hereto
at any time before or after approval hereof by the SCE Shareholders, but, after
such approval, no amendment shall be made which (i) changes the form or
decreases the amount of the consideration to be received in the Merger, (ii) in
any way materially adversely affects the rights of the SCE Shareholders, or
(iii) under applicable law would require approval of the SCE Shareholders, in
any such case referred to in clauses (i), (ii) and (iii), without the further
approval of the SCE Shareholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties hereto, provided that
after the Effective Time, any such amendment must be signed by the former
holders of a majority of the SCE Stock.
9.4 WAIVER. At any time prior to the Effective Time, the parties hereto
may, to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
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ARTICLE X
GENERAL PROVISIONS
10.1 SURVIVAL; RECOURSE. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 10.9 and 10.10 hereof, shall survive the
Merger (except to the extent a shorter period of time is explicitly specified
therein) and (ii) the representations and warranties made in Articles IV and V
hereof shall survive the Merger, and shall survive any independent investigation
by the parties, and any dissolution, merger or consolidation of SCE or Parent,
and shall bind the legal representatives, assigns and successors of SCE, the SCE
Shareholders and Parent, for a period of two years after the Closing Date (other
than the representations and warranties contained in Sections 4.18, 4.19, 4.20
and 4.24 hereof, which shall survive for the applicable statute of limitations).
10.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in Person, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to SCE: Spin Cycle Entertainment
100 Universal City Plaza MT-27
Universal City, CA 91608
Attention: Mr. Stephen P. Jackson, Pres. and CEO
Telephone: (818) 777-8432
Telecopy: (800) 329-3925
With a copy to: James K. Baer, Esq.
Strategic Law Partners
333 S. Grand Ave., Ste. 3950
Los Angeles, CA 90071
Telephone: (213) 617-8960
Telecopy: (213) 617-8961
If to the SCE To the address listed under the signature
Shareholders: line of the applicable SCE Shareholder
If to Parent or Sub: IXL Holdings, Inc.
Two Park Place
1888 Emery St., 2nd Floor
Atlanta, GA 30318
Attention: Mr. James V. Sandry, Exec. V.P. and CFO
Telecopy: 404/267-3801
Telephone: 404/267-3800
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With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Rd., Ste. 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Ave., 24th Floor
New York, NY 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 ENTIRE AGREEMENT. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof. There are no other representations or warranties, whether
written or oral, between the parties in connection the subject matter hereof,
except as expressly set forth herein.
10.4 ASSIGNMENTS; PARTIES IN INTEREST Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests, and
obligations of Sub hereunder may be assigned to any direct wholly owned Delaware
subsidiary of Parent without such prior consent. Subject to the preceding
sentence, this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing herein, express or implied, is intended to or
shall confer upon any Person not a party hereto any right, benefit or remedy of
any nature whatsoever under or by reason hereof, except as otherwise provided
herein.
10.5 GOVERNING LAW. This Agreement, except to the extent that the GCL or
the DGCL is mandatorily applicable to the Merger or the rights of the SCE
Shareholders or the other parties hereto with respect to the Merger, shall be
governed in all respects by the laws of the State of Georgia (without giving
effect to the provisions thereof relating to conflicts of law).
10.6 HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation hereof.
10.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
29
<PAGE>
10.8 SEVERABILITY. If any term or other provision hereof is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions hereof shall nevertheless remain in full force
and effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.9 POST-CLOSING ACCESS. For a period of three years after the Closing
Date, the SCE Shareholders and their agents and representatives shall have
reasonable access to the books and records of the SCE Business.
10.10 POST-CLOSING NOTICE. To the extent the Surviving Corporation
receives written notice of any event or circumstance that materially affects any
of the SCE Shareholders, the Surviving Corporation shall promptly notify the
affected SCE Shareholder of such matter, information, or event and shall provide
them with copies of all relevant documentation or correspondence in connection
thereto.
10.11 CERTAIN DEFINITIONS. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the SCE Real
Property or interfering with the ordinary conduct of any of the SCE Business;
and (e) those Liens listed on Schedule 10.11;
--------------
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of SCE" shall refer to the knowledge,
subject to clause (i) above, of any of the SCE Shareholders; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of
which Parent (either alone or through or together with any other Subsidiary)
owns, directly or indirectly, stock or other equity interests the holders of
which are entitled to more than 50% of the vote for the election of the board of
directors or other governing body of such Entity (including, without limitation,
Sub); provided, however, that with respect to the Parent, the terms "Subsidiary"
and "Subsidiaries" shall not include SCE or University Netcasting, Inc.
- SIGNATURES ON THE FOLLOWING PAGE -
30
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and SCE have caused this Agreement to be
signed and delivered by their respective officers thereunder duly authorized,
and each SCE Shareholder has signed and delivered this Agreement, all as of the
date first written above.
"SCE"
SPIN CYCLE ENTERTAINMENT, a California corporation
By: /s/ Stephen P. Jackson
---------------------------------------
Title: President
------------------------------------
"PARENT"
IXL HOLDINGS, INC., a Delaware corporation
By: /s/ James V. Sandry
---------------------------------------
Title: Executive VP
------------------------------------
"SUB"
iXL-LOS ANGELES, INC., a Delaware corporation
By: /s/ James V. Sandry
---------------------------------------
Title: Executive VP
------------------------------------
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
31
<PAGE>
"SCE SHAREHOLDERS"
/s/ Stephen P. Jackson
-----------------------------------------
Stephen P. Jackson
Address: 291 S. Glenroy
Los Angeles, CA 90049
/s/ Kevin Davis
-----------------------------------------
Kevin Davis
Address: 10926 Moorpark St. #11
West Toluca Lake, CA 91602
/s/ Melissa Shenkin
-----------------------------------------
Melissa Shenkin
Address: 12203 Idaho Ave., #301
Los Angeles, CA 90025
/s/ Crile Carvey Jr.
-----------------------------------------
Crile Carvey Jr.
Address: 4123 1/2 Toluca Lake Ave.
Burbank, CA 91505
/s/ Paul Rioux
-----------------------------------------
Universal Studios On-Line, Inc.
Address: 10 Universal City Plaza 509-32
Universal City, CA 91608
/s/ Jonathan Grotenstein
-----------------------------------------
Jonathan Grotenstein
Address: 7460 Hollywood Blvd., #2
Los Angeles, CA 90046
/s/ James Saunders
----------------------------------------
James Saunders
Address: 12203 Idaho Ave., #301
Los Angeles, CA 90025
32
<PAGE>
/s/ John Tomich
-----------------------------------------
John Tomich
Address: 326 N. Alta Vista
Los Angeles, CA 90036
/s/ Roland V. Plukas
-----------------------------------------
Roland Plukas
Address: 1047 2nd St., #10
Santa Monica, CA 90403
/s/ John Lazarus
-----------------------------------------
Lazarus Family Investments LLC
Address: 2835 82nd Ave. SE
Mercer Island, WA 98040
/s/ Doug Hauck
-----------------------------------------
Doug Hauck
Address: 3624 Mandeville Canyon Rd.
Los Angeles, CA 90049
/s/ Nicholas Scalurro
-----------------------------------------
Nicholas Scalurro
Address: 672 S. Ave. 21, Studio #1
Los Angeles, CA 90031
/s/ Stephen Hyland
-----------------------------------------
Stephen Hyland
Address: 245 W. Loraine St., #317
Glendale, CA 91202
/s/ Jim Beard
-----------------------------------------
Jim Beard
Address: 11707 Sunset Blvd., #20
Los Angeles, CA 90046
33
<PAGE>
/s/ Brenna Shenkin
----------------------------------------
Brenna Shenkin
Address: 10926 Huston St., #104
Toluca Lake, CA 91601
/s/ Megan Odell
----------------------------------------
Megan Odell
Address: 319 N. Hollywood Way, #3
Burbank, CA 91505
34
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate.................................... Exhibit A-1
Sub's Closing Certificate....................................... Exhibit A-2
Agreement to Be Bound to the Registration Rights Agreement...... Exhibit B
Assumption Agreement............................................ Exhibit C
Opinion of Counsel to Parent and Sub............................ Exhibit D
SCE Closing Certificate......................................... Exhibit E
Agreement to be Bound to the Stockholders' Agreement............ Exhibit F
Opinion of Counsel to SCE....................................... Exhibit G
Purchaser Representative Questionnaire and Acknowledgement...... Exhibit H
<PAGE>
SCHEDULE 3.1(B)
---------------
SCE SHAREHOLDERS RECEIVING CASH
SCHEDULE 4.1
------------
ARTICLES AND BYLAWS OF SCE
SCHEDULE 4.3(A)
---------------
SCE SHAREHOLDERS
SCHEDULE 4.3(B)
---------------
LIENS ON STOCK OF SCE
SCHEDULE 4.5
------------
Conflicts, Required Filings and Consents of SCE
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF SCE
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF SCE
<PAGE>
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF SCE
SCHEDULE 4.10
-------------
BAD EQUIPMENT OF SCE
SCHEDULE 4.12
-------------
LIENS ON REAL PROPERTY OF SCE
SCHEDULE 4.13
-------------
LEASES OF SCE
SCHEDULE 4.14
-------------
CONTRACTS OF SCE
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF SCE
SCHEDULE 4.17
-------------
LITIGATION OF SCE
<PAGE>
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF SCE
SCHEDULE 4.19
-------------
ERISA ISSUES OF SCE
SCHEDULE 4.20
-------------
EXCEPTIONS TO TAXES OF SCE BEING TIMELY FILED AND PAID
SCHEDULE 4.21
-------------
PERMITS OF SCE
SCHEDULE 4.23
-------------
BROKERS OF SCE
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS & COMPETITORS OF SCE
SCHEDULE 4.28
-------------
INSURANCE POLICIES OF SCE
<PAGE>
SCHEDULE 4.31(B)
----------------
ACCREDITED INVESTORS OF SCE
SCHEDULE 4.31(C)
----------------
NON-ACCREDITED INVESTORS OF SCE
SCHEDULE 5.1
------------
CERTIFICATE OF INCORPORATION AND BYLAWS OF PARENT AND SUB
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
CAPITALIZATION OF PARENT
<PAGE>
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES OF PARENT
SCHEDULE 6.9(A)
---------------
TERMINATION OF SCE EMPLOYMENT AGREEMENTS
SCHEDULE 6.9(B)
---------------
TERMINATION OF LEASES AND FINANCING AGREEMENTS
SCHEDULE 7.1(C)
---------------
PARENT CONSENTS
SCHEDULE 7.2(D)
---------------
SCE CONSENTS
SCHEDULE 10.11
--------------
PERMITTED LIENS
<PAGE>
EXHIBIT 2.16
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
IXL HOLDINGS, INC.,
IXL-LOS ANGELES, INC.,
DIGITAL PLANET
AND
THE DIGITAL SHAREHOLDERS
DATED AS OF MAY 12, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into this 12th day of May,
1998, by and between DIGITAL PLANET, a California corporation ("Digital"), IXL
HOLDINGS, INC., a Delaware corporation ("Parent"), iXL-LOS ANGELES, INC., a
Delaware corporation, or its successors or assigns ("Sub"), and the shareholders
of Digital as listed on the signature page hereto (the "Digital Shareholders").
R E C I T A L S:
- - - - - - - -
A. Digital is engaged in the business of developing internet sites and
furnishing internet services, including website maintenance (the "Digital
Business").
B. Digital and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The Digital Shareholders collectively own 100% of the issued and
outstanding capital stock of Digital (the "Digital Stock").
D. The respective Boards of Directors of Parent, Sub and Digital, and the
respective shareholders of Sub and Digital, have approved the Merger, upon the
terms and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal
income tax purposes, as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, at
the Effective Time (as defined in Section 1.3 hereof), (a) Digital shall be
merged with and into Sub, (b) the separate existence of Digital shall cease, and
(c) Sub shall continue as the surviving corporation in the Merger under the laws
of the State of Delaware under the name iXL-Los Angeles, Inc. For purposes of
this Agreement, Sub shall be referred to, for the period commencing on the
Effective Time, as the "Surviving Corporation".
1
<PAGE>
1.2 CLOSING. Subject to the satisfaction or waiver of the conditions set
forth in Article VII hereof, the closing of the Merger (the "Closing") will take
place at the offices of Minkin & Snyder, A Professional Corporation, One
Buckhead Plaza, 3060 Peachtree Road, Suite 1100, Atlanta, Georgia 30305, or at
such other place as the parties may agree, at such time as the parties agree
("Closing Date").
1.3 EFFECTIVE TIME OF THE MERGER. At the Closing, the parties hereto
shall cause (a) a certificate of merger (the "Delaware Certificate of Merger")
to be filed with the office of the Secretary of State of the State of Delaware
in accordance with the provisions of the Delaware General Corporation Law, as
amended (the "DGCL"); and (b) a copy of the Delaware Certificate of Merger to be
filed with the office of the Secretary of State of the State of California in
accordance with the provisions of the California Corporations Code (the "CCC").
When used in this Agreement, the term "Effective Time" shall mean the time when
the Delaware Certificate of Merger has been accepted for filing by the Secretary
of State of the States of Delaware and California, respectively, or such time as
otherwise specified in the Certificate of Merger.
1.4 EFFECT OF THE MERGER. The Merger shall, from and after the Effective
Time, have all the effects provided by the DGCL and the CCC. If at any time
after the Effective Time, any further action is deemed necessary or desirable to
carry out the purposes of this Agreement, the parties hereto agree that the
Surviving Corporation and its proper officers and directors shall be authorized
to take, and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Sub, a form of which is attached hereto on Schedule 5.1, shall be the
------------
Certificate of Incorporation of the Surviving Corporation after the Effective
Time, until thereafter changed or amended as provided therein or by applicable
law.
2.2 BYLAWS. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub are included on Schedule 5.1 hereto.
------------
2.3 BOARD OF DIRECTORS; OFFICERS. The Board of Directors and officers of
Sub immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified.
2
<PAGE>
ARTICLE III
CONVERSION OF SHARES
3.1 MERGER CONSIDERATION. As of the Effective Time:
(a) All shares of Digital Stock owned by Digital shall, by virtue of
the Merger and without any action on the part of any shareholder, officer or
director of Digital or Sub, be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding share of Digital Stock (other than any
Dissenting Shares, as defined in Section 3.2 hereof) shall, upon surrender to
Sub, at the Closing, of the underlying share certificates, be converted into,
and become exchangeable for, a number of shares of validly issued, fully paid
and nonassessable Class B Common Stock of Parent, $.01 par value (the "Parent
Stock") based on the following equation:
D + R
-----
PS= 800,000 - $5.00
------------------------------
X + W + O
where:
PS = the number of shares of Parent Stock for which each share of
Digital Stock shall be exchanged pursuant to the Merger
(collectively, for all X, the "Merger Consideration")
X = the number of shares of issued and outstanding Digital Stock
on the date hereof
D = the outstanding indebtedness of Digital (including, without
limitation, debt for borrowed money and accrued interest
thereon, accounts payable and accrued expenses; but excluding
(i) any indebtedness to Colonial Pacific Leasing Corp
pursuant to Lease No. 311705001, dated January 8, 1998, as
amended (the "CPL Lease"); (ii) one half of the contingent
liability described in the item on Schedule 4.8 hereto; and
------------
(iii) liability under the Office Lease, dated as of July 29,
1997 (the "Office Lease"), between MPI, Ltd. and Digital) as
of the date three business days prior to the Closing, all as
determined in accordance with generally accepted accounting
principles ("GAAP") (the "Digital Debt")
3
<PAGE>
R = amounts paid, if any, to redeem outstanding stock,
warrants or options of Digital on or after January 13,
1998
$5.00 = the per share value of the Parent Stock
W = the total number of warrants to acquire Digital Stock
outstanding on the date hereof and which are being
exchanged for a specified number of warrants to purchase
Parent Stock as set forth in Section 6.3(b) hereof
O = the total number of options to purchase Digital Stock
outstanding on the date hereof and which are being
exchanged for a specified number of options to purchase
Parent Stock as set forth in Section 6.3(b) hereof.
(c) Each issued and outstanding share of common stock of Sub shall,
by virtue of the Merger and without any action on the part of any shareholder,
officer or director of Digital or Sub, be converted into and become one fully
paid and nonassessable share of common stock of the Surviving Corporation.
(d) As additional consideration for the Merger, each issued and
outstanding Digital Stock Right (as defined in Section 6.3(a) hereof) shall be
surrendered and exchanged for a specified number of options or warrants to
purchase Parent Stock, as applicable, as set forth in Section 6.3(b) hereof.
3.2 DISSENTING SHARES. Notwithstanding any provisions of this Agreement
to the contrary, any shares of Digital Stock held by a Dissenting Shareholder
(as hereinafter defined) shall not be canceled as described in Section 3.1(b)
hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Shareholder pursuant to the DGCL or CCC, as
applicable; provided, however, that if a Dissenting Shareholder shall fail to
perfect his demand, withdraw his demand or otherwise lose his right for
appraisal under the terms of the DGCL or the CCC, as applicable, the Digital
Stock held by such Dissenting Shareholder (the "Dissenting Shares") shall be
deemed to be canceled as of the Effective Time in accordance with the provisions
of Section 3.1 hereof. Digital shall not voluntarily make any payment with
respect to, settle, or offer to settle or otherwise negotiate, any such demands.
All amounts paid to Dissenting Shareholders shall be paid without interest
thereon (to the extent permitted by applicable law) by the Surviving
Corporation. For purposes of this Agreement, the term "Dissenting Shareholder"
shall mean a Digital Shareholder who (a) objects to the Merger; and (b) complies
with the applicable provisions of the DGCL and CCC concerning dissenter's
rights.
3.3 NO FURTHER RIGHTS. From and after the Effective Time, holders of
certificates theretofore evidencing Digital Stock shall cease to have any rights
as stockholders of Digital, except as provided herein or by law.
4
<PAGE>
3.4 CLOSING OF THE DIGITAL'S TRANSFER BOOKS. At the Effective Time, the
stock transfer books of Digital shall be closed and no transfer of Digital Stock
shall be made thereafter. If after the Effective Time, certificates for Digital
Stock are presented to Parent or the Surviving Corporation, they shall be
canceled and exchanged for an amount of Parent Stock as set forth in Section 3.1
hereof, subject to applicable law in the case of Dissenting Shares.
3.5 ESCROW OF PARENT STOCK. Notwithstanding the provisions of Section 3.1
hereof, 100,000 shares of Parent Stock ("Escrow Stock," including, if applicable
for the period during which it is subject to the Escrow Agreement as hereinafter
defined, an appropriate adjustment for any dividend, distribution,
reclassification, subdivision or combination with respect to Parent Stock) shall
be held in escrow for a period of up to six months, pursuant to the terms of the
Escrow Agreement attached hereto as Exhibit "I" between the Digital
----------
Shareholders, SunTrust Bank, Atlanta, Georgia ("Escrow Agent"), and Parent
("Escrow Agreement"), pending the determination of any liability related to the
Office Lease. At the end of the six month escrow period, if Parent and (on
behalf of the Digital Shareholders) the Controlling Shareholders have yet to
agree on the disposition of the Escrow Stock in accordance with the Escrow
Agreement, then Parent will cause Price Waterhouse LLP to determine the extent,
if any, of such liability, which determination shall be binding on Parent and
the Digital Shareholders. The Digital Shareholders and Parent agree that, to
the extent of such liability, a corresponding portion of the Escrow Stock
(valued at $5.00 per share) shall be considered subtracted from the Merger
Consideration; Parent and the Digital Shareholders shall notify the Escrow Agent
accordingly, and, pursuant to the Escrow Agreement, (i) such Escrow Stock shall
be returned to Parent; and (ii) any remaining Escrow Stock will be delivered to
the Digital Shareholders, pro rata in accordance with the number of shares of
Parent Stock received in the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DIGITAL
Digital, and Joshua Greer and Paul Grand (collectively the "Controlling
Shareholders"), jointly and severally, represent and warrant to Parent and Sub
the representations and warranties set forth in this Article IV, other than the
representations and warranties specifically enumerated in the following
sentence. In addition, the Digital Shareholders (including the Controlling
Shareholders) individually (but not jointly and severally) make the
representations and warranties that are stated in this Article IV to be made by
the Digital Shareholders (specifically, the representations and warranties
contained in Sections 4.2, 4.3(b), 4.5, 4.31, 4.32, 4.33 and 4.34 hereof). The
representations and warranties contained in this Article IV shall survive the
Closing in accordance with Section 9.1 of this Agreement.
4.1 ORGANIZATION AND QUALIFICATION. Digital is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Digital has the requisite corporate power and authority to carry on
the Digital Business as it is now being conducted and is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction where the
5
<PAGE>
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary. Complete and correct copies of
the Articles of Incorporation and Bylaws of Digital as in effect on the date
hereof are attached as Schedule 4.1 hereto. The minute book of Digital, a true
------------
and complete copy of which has been delivered to Parent, (a) accurately reflects
all action taken by the directors and shareholders of Digital at meetings of
Digital's Board of Directors or shareholders, as the case may be; and (b)
contains true and complete copies of, or originals of, the respective minutes of
all meetings or consent actions of the directors or shareholders.
4.2 AUTHORITY. Digital has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Digital have been duly
and validly authorized and approved by Digital's Board of Directors and the
Digital Shareholders, and no other corporate or shareholder proceedings on the
part of Digital, its Board of Directors or the Digital Shareholders is necessary
to authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Digital and each Digital Shareholder, and assuming the due authorization,
execution and delivery by Parent and Sub, constitutes the valid and binding
obligation of Digital and each Digital Shareholder, enforceable against Digital
and each Digital Shareholder in accordance with its terms subject, in each case,
to bankruptcy, insolvency, reorganization, moratorium and similar laws of
general application relating to or affecting creditors' rights and to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing.
4.3 CAPITALIZATION.
(a) The authorized capital stock of Digital consists of (i) 40,000,000
shares of common stock, no par value, of which 9,580,000 shares are validly
issued and outstanding, fully paid and nonassessable; and (ii) 10,000,000 shares
of preferred stock, no par value, of which 1,966,163 have been designated as
Series A Preferred Stock, of which 811,596 shares are validly issued and
outstanding, fully paid and nonassessable. All outstanding capital stock of
Digital was issued in accordance with applicable federal and state securities
laws. Except as set forth on Schedule 4.3(a) hereto, there are no options,
---------------
warrants, calls, agreements, commitments or other rights presently outstanding
that would obligate Digital to issue, deliver or sell shares of its capital
stock, or to grant, extend or enter into any such option, warrant, call,
agreement, commitment or other right. In addition to the foregoing, as of the
date hereof, Digital has no bonds, debentures, notes or other indebtedness
issued or outstanding that have voting rights in Digital. Schedule 4.3(a)
---------------
hereto sets forth a list of all holders of record of Digital Stock, Digital
Stock Rights (as defined in Section 6.3(a) hereof), the number of shares held by
each Digital Shareholder and the number of shares of capital stock of Digital
represented by such Digital Stock Rights, and the exercise price for each such
Digital Stock Right.
(b) All of the issued and outstanding shares of capital stock of
Digital are validly issued, fully paid and nonassessable. Except as set forth
on Schedule 4.3(b) hereto, each Digital Shareholder represents and warrants that
---------------
the Digital Stock held by such Digital Shareholder
6
<PAGE>
is free and clear of any lien, charge, security interest, pledge, option, right
of first refusal, voting proxies or other voting agreements, or encumbrance of
any kind or nature other than restrictions on transfer imposed by federal and
state securities laws (any of the foregoing, a "Lien").
4.4 SUBSIDIARIES. Except as set forth on Schedule 4.4 hereto, Digital has
------------
no subsidiaries and does not otherwise own or control, directly or indirectly,
any equity interest in, or any security convertible into an equity interest in,
any corporation, partnership, limited liability company, joint venture,
association or other business entity (any of the foregoing, an "Entity").
4.5 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 4.5 hereto, none of the execution and delivery of this Agreement by
- ------------
Digital or the Digital Shareholders, the consummation by Digital and the Digital
Shareholders of the transactions contemplated hereby or compliance by Digital
with any of the provisions hereof will:
(a) conflict with or violate the Articles of Incorporation or Bylaws
of Digital;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Digital or the Digital Shareholders, or
by which Digital or its properties or assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which Digital is a party or by which Digital
or its properties may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Digital; or
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent") (i) any government or subdivision thereof, whether
domestic, foreign or multinational, or any administrative, governmental, or
regulatory authority, agency, commission, court, tribunal or body, whether
domestic, foreign or multinational (a "Governmental Entity"), except for the
filing of the Certificate of Merger pursuant to the DGCL and the CCC; or (ii)
any other individual or Entity (collectively, a "Person"), except in either case
for any Consent which has previously been obtained.
4.6 FINANCIAL STATEMENTS. Digital has heretofore furnished Parent with a
true and complete copy of (a) the audited financial statements of Digital for
the period from October 24, 1994 to September 30, 1995 and for the year ending
September 30, 1996; and (b) the unaudited financial statements of Digital for
the year ending September 30, 1997 and the three month period ending December
31, 1997 (collectively herein referred to as the "Digital Financial
Statements").
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Except as disclosed therein, the Digital Financial Statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") (except for
the absence of footnotes and normal year-end adjustments in the case of the
Digital Financial Statements for the period ending December 31, 1997)
consistently followed throughout the period indicated, and present fairly, in
all material respects, the financial position and operating results of Digital
as of the dates, and during the periods, indicated therein.
4.7 ABSENCE OF CHANGES. Except as provided in Schedule 4.7 hereto and
------------
except as contemplated by this Agreement, since December 31, 1997, (a) Digital
has not entered into any transaction that was not in the ordinary course of
business; (b) except for sales of services and licenses of software in the
ordinary course of business, there has been no sale, assignment, transfer,
mortgage, pledge, encumbrance or lease of any material assets or properties of
Digital; (c) there has been (i) no declaration or payment of a dividend, or any
other declaration, payment or distribution of any type or nature to any
shareholder of Digital in respect of its stock, whether in cash or property, and
(ii) no purchase or redemption of any shares of the capital stock of Digital;
(d) there has been no declaration, payment, or commitment for the payment, by
Digital, of a bonus or other additional salary, compensation, or benefit to any
employee of Digital that was not in the ordinary course of business, except for
normal year-end bonuses and salary increases paid in the ordinary course of
business; (e) there has been no release, compromise, waiver or cancellation of
any debts to or claims by Digital, or waiver of any rights of Digital; (f) there
have been no capital expenditures in excess of $10,000 for any single item, or
$25,000 in the aggregate; (g) there has been no change in accounting methods or
practices or revaluation of any assets of Digital (other than Digital Accounts
Receivable (as defined in Section 4.26 hereof) written down in the ordinary
course of business in excess of $10,000 for any single Digital Account
Receivable and $25,000 in the aggregate); (h) there has been no material damage,
destruction or loss of physical property (whether or not covered by insurance)
adversely affecting the Digital Business or the operations of Digital; (i) there
has been no loan by Digital, or guaranty by Digital of any loan, to any employee
of Digital; (j) Digital has not ceased to transact business with any customer
that, as of the date of such cessation, represented more than 5% of the annual
gross revenues of Digital; (k) there has been no termination or resignation of
any key employee or officer of Digital, and to the knowledge of Digital, no such
termination or resignation is threatened; (l) there has been no material
amendment or termination of any material oral or written contract, agreement or
license related to the Digital Business, to which Digital is a party or by which
it is bound, except in the ordinary course of business, or except as expressly
contemplated by this Agreement; (m) Digital has not failed to satisfy any of its
debts, obligations or liabilities related to the Digital Business or the assets
of Digital as the same become due and owing (except for Digital Accounts Payable
(as defined in Section 4.27 hereof), payable in accordance with past practices
and in the ordinary course of business); (n) there has been no agreement or
commitment by Digital to do any of the foregoing; and (o) there has been no
other event or condition of any character pertaining specifically to and
materially and adversely affecting the assets, business or financial condition
of Digital.
4.8 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.8 hereto,
------------
Digital has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including, without limitation, any liability or
obligation on account of taxes or any governmental charges or penalty,
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interest or fines, except (a) liabilities incurred in the ordinary course of
business after December 31, 1997, that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Digital; (b) liabilities reflected on the Digital Financial Statements; and
(c) liabilities incurred as a result of the transactions contemplated by this
Agreement.
4.9 TITLE TO PROPERTIES. Except as set forth on Schedule 4.9 hereto,
------------
Digital has good and marketable title to all tangible property and assets used
in the Digital Business, and good and valid title to its leasehold interests, in
each case, free and clear of any and all Liens other than Permitted Liens (as
defined in Section 9.12 hereof).
4.10 EQUIPMENT. Digital has heretofore furnished Parent with a true and
correct list of all items of tangible personal property (including, without
limitation, computer hardware) necessary for or used in the operation of the
Digital Business in the manner in which it has been and is now operated by
Digital ("the Digital Equipment"), except for personal property having a net
book value of less than $5,000. Except as set forth on Schedule 4.10 hereto,
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each material item of Digital Equipment is in good condition and repair,
ordinary wear and tear excepted.
4.11 INTELLECTUAL PROPERTY.
(a) Digital has heretofore furnished Parent with a true and complete
list of all material proprietary technology, patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights, and copyrights (and all pending applications for any of the foregoing)
used by Digital in the conduct of the Digital Business (together with trade
secrets and know how used in the conduct of the Digital Business, the "Digital
Intellectual Property Rights"). Digital owns, or is validly licensed or
otherwise has the right to use or exploit, as currently used or exploited, all
of the Digital Intellectual Property Rights, free of any obligation to make any
payment (whether of a royalty, license fee, compensation or otherwise). No
claims are pending or, to the knowledge of Digital, threatened, that Digital is
infringing or otherwise adversely affecting the rights of any Person with regard
to any Digital Intellectual Property Right. Except as set forth on Schedule 4.11
-------------
hereto, to the knowledge of Digital, no Person is infringing the rights of
Digital with respect to any Digital Intellectual Property Right. To the
knowledge of Digital, neither Digital nor any employee, agent or independent
contractor of Digital, in connection with the performance of such Person's
services with Digital, has used, appropriated or disclosed, directly or
indirectly, any trade secrets or other proprietary or confidential information
of any other Person, or otherwise violated any confidential relationship with
any other Person. To the knowledge of Digital, use of the name "Digital Planet"
by Digital does not infringe upon the rights of any Person.
(b) Digital has heretofore furnished Parent with a true and complete
list of all material computer software used by Digital in the conduct of the
Digital business (the "Digital Software"). Digital currently licenses, or
otherwise has the legal right to use, all of the Digital Software (including any
upgrades, alterations or enhancements with respect thereto), and all of the
Digital Software is being used in compliance with any applicable licenses or
other agreements.
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4.12 REAL PROPERTY. Except as set forth on Schedule 4.12 hereto:
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(a) Digital has good and valid leasehold interest in all real
property (including all buildings, improvements and fixtures thereon) used in
the operation of the Digital Business (the "Digital Real Property"). Digital
owns no real property. Except for Permitted Liens, and for the items set forth
on Schedule 4.12, there are no Liens on Digital's interest in any of the
-------------
Digital Real Property.
(b) There are no parties in possession of any portion of the Digital
Real Property other than Digital, whether as sublessees, subtenants at will or
trespassers.
(c) To the knowledge of Digital, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, under the provisions of any of the
Digital Leases (as hereinafter defined), any material expenditure by Digital to
modify or improve any of the Digital Real Property to bring it into compliance
therewith.
4.13 LEASES Schedule 4.13 hereto sets forth a list of all leases pursuant
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to which Digital leases, as lessor or lessee, real or personal property used in
operating the Digital Business or otherwise (the "Digital Leases"). Copies of
the Digital Leases, which have previously been provided to Parent, are true and
complete copies thereof. All of the Digital Leases are valid, binding and
enforceable against Digital and, to the knowledge of Digital, against the other
parties thereto, in accordance with their respective terms, and there is not
under any such Digital Lease any existing default by Digital, or, to the
knowledge of Digital, by any other party thereto, or any condition or event
that, with notice or lapse of time or both, would constitute a default. Digital
has not received written notice that the lessor of any of the Digital Leases
intends to cancel, suspend or terminate the Digital Leases or to exercise or not
exercise any options under any of the Digital Leases.
4.14 CONTRACTS. Schedule 4.14 hereto sets forth a true and complete list
-------------
of all contracts, agreements and commitments (whether written or oral) to which
Digital is, directly or indirectly, a party (in its own name or as a successor
in interest), or by which it is otherwise bound, including, without limitation,
any service agreements, customer agreements, supplier agreements, agreements to
lend or borrow money, shareholder agreements, employment agreements, agreements
relating to Digital Intellectual Property Rights and the like (collectively, the
"Digital Contracts"); excepting only those Digital Contracts which involve less
than $10,000 and are cancelable, without penalty, on no more than 90 days
notice. Digital represents and warrants that the aggregate value of all payment
obligations and rights to receive payments, under agreements, contracts and
commitments (whether oral or in writing) to which Digital is a party or by which
it is otherwise bound, and that are not listed on Schedule 4.14 hereto, is less
--------------------
than $50,000 (calculating such value by adding together the value of rights and
obligations, and not by determining the net amount thereof).
True and complete copies of each Digital Contract (or a true and complete
narrative description of any oral Digital Contract) have previously been
provided to Parent. Neither Digital
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nor, to the knowledge of Digital, any other party to any of the Digital
Contracts, (x) is in default under (nor does there exist any condition that,
with notice or lapse of time or both, would cause such a default under) any of
the Digital Contracts, or (y) has waived any right it may have under any of the
Digital Contracts, the waiver of which would have a material adverse effect on
the business, assets or financial condition or prospects of Digital. All of the
Digital Contracts constitute the valid and binding obligations of Digital,
enforceable in accordance with their respective terms, and, to the knowledge of
Digital, of the other parties thereto.
4.15 DIRECTORS AND OFFICERS. Schedule 4.15 hereto sets forth a list, as of
-------------
the date of this Agreement, of the name of each director and officer of Digital
and the offices held by each.
4.16 PAYROLL INFORMATION. Digital has previously provided Parent with a
true and complete copy of the payroll report of Digital dated March 6, 1998,
showing all current employees of Digital and their current levels of
compensation, other than bonuses and other extraordinary compensation. Digital
has paid all compensation required to be paid to employees of Digital on or
prior to the date hereof other than compensation accrued in the current pay
period.
4.17 LITIGATION. Except as set forth on Schedule 4.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Digital, threatened against or affecting Digital or the Digital Business, nor is
there any judgment, decree, injunction or order of any applicable Governmental
Entity or arbitrator outstanding against Digital.
4.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 4.18 hereto, there are no employee
-------------
benefit plans, agreements or arrangements maintained by Digital, including,
without limitation, (i) "employee benefit plans," within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"); (ii) current or deferred compensation, pension, profit sharing,
vacation or severance plans or programs; or (iii) medical, hospital, accident,
disability or death benefit plans (collectively, "Digital Benefit Plans"). All
Digital Benefit Plans are administered in accordance with, and are in material
compliance with, all applicable laws and regulations. No default exists with
respect to the obligations of Digital under any Digital Benefit Plans.
(b) Digital is not a party to any collective bargaining agreement, no
collective bargaining agent has been certified as a representative of any of the
employees of Digital, to the knowledge of Digital, no representation campaign or
election is now in progress with respect to any employee of Digital; and there
are no material labor disputes, grievances, controversies, strikes or requests
for union representation pending, or, to the knowledge of Digital, threatened,
relating to or affecting the Digital Business. To the knowledge of Digital, no
event has occurred that could give rise to any such material dispute,
controversy, strike or request for representation.
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4.19 ERISA.
(a) All Digital Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of Digital Benefit Plans that is intended
to meet the requirements of Section 401(a) of the Code has been determined by
the Internal Revenue Service to meet such requirements within the meaning of
such provision. No Digital Benefit Plan is subject to Title IV of ERISA or
Section 412 of the Code. Digital has not engaged in any nonexempt "prohibited
transactions," as such term is defined in Section 4975 of the Code or Section
406 of ERISA, involving Digital Benefit Plans that would subject Digital to the
penalty or tax imposed under Section 502(i) of ERISA or Section 4975 of the
Code. Digital has not engaged in any transaction described in Section 4069 of
ERISA within the last five years. Except as disclosed in Schedule 4.19 hereto
-------------
or pursuant to the terms of Digital Benefit Plans, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment (including, without limitation, severance,
unemployment compensation or golden parachute) becoming due to any director or
other employee of Digital, (ii) increase any benefits otherwise payable under
any Digital Benefit Plan or (iii) result in the acceleration of the time of
payment or vesting of any such benefits to any extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Digital Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code, or by any
entity that is considered one employer with Digital under Section 4001 of ERISA
or Section 414 of the Code, within the 12-month period ending on the date
hereof. Digital has not incurred any liability to the Pension Benefit Guaranty
Corporation in respect of any Digital Benefit Plan that remains unpaid.
4.20 TAXES.
(a) Digital has duly and timely filed all federal, state and local
income, franchise, excise, real and personal property and other tax returns and
reports, including extensions, required to have been filed by Digital on or
prior to the date hereof. Digital has duly and timely paid all taxes and other
governmental charges, and all interest and penalties with respect thereto,
required to be paid by Digital (whether by way of withholding or otherwise) to
any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the Digital Financial Statements). As of the date hereof, all
deficiencies proposed as a result of any audits have been paid or settled.
(b) Digital is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) Digital has not consented to have the provisions of Section
341(f)(2) of the Code (or comparable state law provisions) apply to it, and
Digital has not agreed or been requested
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to make any adjustment under Section 481(c) of the Code by reason of a change in
accounting method or otherwise.
4.21 COMPLIANCE WITH APPLICABLE LAWS. Digital holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
Digital, as appropriate, and to carry on the Digital Business as now conducted
(the "Digital Permits"). To the knowledge of Digital, Digital is in material
compliance with all applicable laws, ordinances and regulations and the terms of
the Digital Permits. Except as set forth on Schedule 4.21 hereto, all of the
-------------
Digital Permits are fully assignable by Digital in connection with the Merger.
Schedule 4.21 hereto sets forth and true and complete list of all Digital
- -------------
Permits, true and complete copies of which have previously been provided to
Parent.
4.22 BOARD OF DIRECTORS/SHAREHOLDER CONSENT. Both the Board of Directors
of Digital and the Digital Shareholders have adopted and approved this Agreement
and the transactions contemplated hereby (including, without limitation, the
Merger).
4.23 BROKERS. Except as set forth on Schedule 4.23 hereto, no broker or
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finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated by this Agreement as a result of
arrangements made by or on behalf of Digital.
4.24 ENVIRONMENTAL MATTERS.
(a) To the knowledge of Digital, no real property currently or
formerly owned or operated by Digital is contaminated with any Hazardous
Substances (as hereinafter defined);
(b) Digital is not a party to any litigation or administrative
proceeding nor, to the knowledge of Digital, is any litigation or administrative
proceeding threatened against it, that, in either case, asserts or alleges that
Digital (i) violated any Environmental Laws (as hereinafter defined); (ii) is
required to clean up, remove or take remedial or other response action due to
the disposal, deposit, discharge, leak or other release of any Hazardous
Substances; or (iii) is required to pay all or a portion of the cost of any
past, present or future cleanup, removal or remedial or other action that arises
out of or is related to the disposal, deposit, discharge, leak or other release
of any Hazardous Substances.
(c) To the knowledge of Digital, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by Digital containing materials that, if known
to be present in soils or ground water, would require cleanup, removal or other
remedial action under Environmental Laws.
(d) To the knowledge of Digital, Digital is not subject to any
judgment, order or citation related to or arising out of any Environmental Laws
and has not been named or listed as a potentially responsible party by any
Governmental Entity in a matter related to or arising out of any Environmental
Laws.
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(e) For purposes of this Agreement, (i) the term "Environmental Law"
means any federal, state or local law (including statutes, regulations,
ordinances, codes, rules, judicial opinions and other governmental restrictions
and requirements), relating to the discharge of air pollutants, water
pollutants, noise, odors or process waste water, or otherwise relating to the
environment or hazardous or toxic substances; and (ii) the term "Hazardous
Substance" means any toxic or hazardous substance that is regulated by or under
authority of any Environmental Law, including, without limitation, any petroleum
products, asbestos or polychlorinated biphenyls.
4.25 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as
provided in Schedule 4.25 hereto, no officer, director or shareholder of
-------------
Digital, or, to the knowledge of Digital, any employee of Digital, and no family
member as defined for purposes of Release No. 34-7793 pursuant to the Securities
Exchange Act of 1934, as amended, of any of the foregoing (including a spouse,
parent, sibling or lineal descendent of any of the foregoing), has any direct or
indirect material interest in any material customer, supplier or competitor of
Digital, or in any Person from whom or to whom Digital leases any real or
personal property, or in any other Person with whom Digital is doing business,
whether directly or indirectly (including, without limitation, as a debtor or
creditor), whether in existence as of the date hereof or proposed, other than
the ownership of stock of publicly traded corporations.
4.26 ACCOUNTS RECEIVABLE. All accounts, notes, contracts and other
receivables of Digital (collectively, "Digital Accounts Receivable") were
acquired by Digital in the ordinary course of business arising from bona fide
transactions. Except as set forth on Schedule 4.26 hereto, to the knowledge of
-------------
Digital, there are no set-offs, counterclaims or disputes asserted with respect
to any Digital Accounts Receivable that would result in claims in excess of the
reserve for bad debts set forth on the Digital Financial Statements and, to the
knowledge of Digital, subject to such reserve, all Digital Accounts Receivable
are collectible in full. Digital has previously provided Parent with a true and
complete aging report prepared as of December 31, 1997, which shows the time
elapsed since invoice date for all Digital Accounts Receivable as of such date.
4.27 ACCOUNTS PAYABLE. Except as set forth on Schedule 4.27 hereto, all
-------------
material accounts, notes, contracts and other amounts payable of Digital
(collectively, "Digital Accounts Payable") are currently within their respective
terms, and are neither in default nor otherwise past due by more than 90 days.
Digital has previously provided Parent with a true and complete aging report
prepared as of December 31, 1997, which shows the time elapsed since invoice
date for all Digital Accounts Payable as of such date.
4.28 INSURANCE. Digital currently maintains, in full force and effect, all
insurance policies that are required to be maintained for the conduct of the
Digital Business or the ownership of Digital's property (both real and personal)
(collectively, the "Digital Insurance Policies"). The Digital Insurance
Policies are listed on Schedule 4.28 hereto, and true and compete copies of all
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Digital Insurance Policies have previously been provided to Parent. Digital (a)
is not in default regarding the provisions of any Digital Insurance Policy; (b)
has paid all premiums due thereunder;
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and (c) has not failed to present any notice or present any material claim
thereunder in a due and timely fashion.
4.29 BANKRUPTCY. Digital has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 DIGITAL DEBT. As of the date hereof, the Digital Debt is not in
excess of $1.5 million.
4.31 INVESTMENT PURPOSE; ACCREDITED INVESTORS OR PURCHASER REPRESENTATIVE.
(a) Each Digital Shareholder represents that he (i) is acquiring the Parent
Stock solely for his own account for investment and not with a view to, or for
sale in connection with, any distribution thereof; and (ii) will not, directly
or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose
of any Parent Stock (or solicit any offers to buy, purchase or otherwise acquire
or take a pledge of any such shares) except in compliance with the Securities
Act of 1933, as amended (the "Securities Act"), and the rules and regulations
thereunder, other applicable laws, rules and regulations, and the Second Amended
and Restated Stockholders' Agreement of Parent, dated December 17, 1997 (the
"Stockholders' Agreement"); (b) Each Digital Shareholder identified on Schedule
--------
4.31 hereto as an accredited investor further represents that he is an
- ----
"accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act;
and (c) Each Digital Shareholder identified on Schedule 4.31 hereto as not an
-------------
accredited investor further represents that (i) John F. Taylor is his Purchaser
representative (the "Purchaser representative") as such term is defined in Rule
501 of Regulation D under the Securities Act; and (ii) the Purchaser
representative (A) is not an affiliate, director, officer or other employee of
Parent, or beneficial owner of 10% or more of any class of the equity securities
of, or 10% or more of the equity interest in, Parent; (B) has such knowledge and
experience in financial and business matters that he is capable of evaluating,
alone, or together with such Digital Shareholder, the merits and risks of the
prospective investment in Parent Stock; (C) has been acknowledged by such
Digital Shareholder in writing, during the course of the Merger, to be his
purchaser representative in connection with evaluating the merits and risks of
the prospective investment in Parent Stock; and (D) has disclosed to such
Digital Shareholder in writing a reasonable time prior to the Closing any
material relationship between the Purchaser representative or his affiliates and
Parent or its affiliates that exists, is mutually understood to be contemplated,
or has existed at any time during the previous two years, and any compensation
received or to be received as a result of such relationship.
4.32 RESTRICTIONS ON TRANSFER. Each Digital Shareholder acknowledges that
(a) the Parent Stock received by him hereunder has not been registered under the
Securities Act; (b) the Parent Stock may be required to be held indefinitely,
and each Digital Shareholder must continue to bear the economic risk of the
investment in such shares unless such shares are subsequently registered under
the Securities Act or an exemption from such registration is available; (c)
there
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may not be any public market for the Parent Stock in the foreseeable future; (d)
Rule 144 promulgated under the Securities Act is not presently available with
respect to sales of any securities of Parent, and such Rule is not anticipated
to be available in the foreseeable future; (e) when and if Parent Stock may be
disposed of without registration in reliance upon Rule 144, such disposition can
be made only in limited amounts and in accordance with the terms and conditions
of such Rule; (f) if the exemption afforded by Rule 144 is not available, public
sale without registration will require the availability of an exemption under
the Securities Act; (g) the Parent Stock is subject to the terms and conditions
of the Stockholders' Agreement; (h) restrictive legends shall be placed on the
certificates representing Parent Stock; and (i) a notation shall be made in the
appropriate records of Parent indicating that Parent Stock is subject to
restrictions on transfer and, if Parent should in the future engage the services
of a stock transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to Parent Stock.
4.33 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION. (a) Each
Digital Shareholder represents and warrants that (i) his financial situation is
such that he can afford to bear the economic risk of holding Parent Stock
acquired by him hereunder for an indefinite period; and (ii) he can afford to
suffer the complete loss of such Parent Stock; (b) Each Digital Shareholder
identified on Schedule 4.31 hereto as an accredited investor further represents
-------------
that (i) he has been granted the opportunity to ask questions of, and receive
answers from, representatives of Parent concerning the terms and conditions of
the Parent Stock and to obtain any additional information that he deems
necessary; (ii) his knowledge and experience in financial business matters is
such that he is capable of evaluating the merits and risk of ownership of the
Parent Stock; (iii) he has carefully reviewed the terms of the Stockholders'
Agreement and has evaluated the restrictions and obligations contained therein;
and (iv) he (A) has reviewed the Private Placement Memorandum of Parent dated
February 27, 1998, as revised as of May 5, 1998 (the "Memorandum"), (B) has
carefully examined the Memorandum and has had an opportunity to ask questions
of, and receive answers from, representatives of Parent, and to obtain
additional information concerning Parent and its Subsidiaries (as hereinafter
defined), and (C) does not require additional information regarding Parent or
its Subsidiaries in connection with the Merger; and (c) Each Digital Shareholder
identified on Schedule 4.31 hereto as not an accredited investor further
-------------
represents that, either alone or with the Purchaser representative, (i) he has
been granted the opportunity to ask questions of, and receive answers from,
representatives of Parent concerning the terms and conditions of the Parent
Stock and to obtain any additional information that he deems necessary; (ii) his
knowledge and experience in financial business matters is such that he is
capable of evaluating the merits and risk of ownership of the Parent Stock;
(iii) he has carefully reviewed the terms of the Stockholders' Agreement and has
evaluated the restrictions and obligations contained therein; and (iv) he (A)
has reviewed the Memorandum, (B) has carefully examined the Memorandum and has
had an opportunity to ask questions of, and receive answers from,
representatives of Parent, and to obtain additional information concerning
Parent and its Subsidiaries, and (C) does not require additional information
regarding Parent or its Subsidiaries in connection with the Merger.
4.34 DISCLOSURE. No statement of fact by Digital or the Controlling
Shareholders contained in this Agreement and no written statement of fact
furnished by Digital or the Controlling Shareholders to Parent or Sub pursuant
to or in connection with this Agreement contains any untrue
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statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein contained not materially
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to
Digital and the Digital Shareholders, which representations and warranties shall
survive the Closing in accordance with Section 9.1 of this Agreement, as
follows:
5.1 ORGANIZATION AND QUALIFICATION. Each of Parent and its Subsidiaries
(as defined in Section 9.12 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached as Schedule 5.1 hereto.
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5.2 AUTHORITY. Each of Parent and Sub has the necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by each of Parent
and Sub have been duly and validly authorized and approved by their respective
Board of Directors and by Sub's sole shareholder, and no other corporate or
shareholder proceedings on the part of either Parent or Sub, or their respective
boards of directors or shareholders, are necessary to authorize or approve this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by each of Parent and Sub, and assuming the
due authorization, execution and delivery by Digital and the Digital
Shareholders, constitutes the valid and binding obligation of each of Parent and
Sub, enforceable against each of Parent and Sub in accordance with its terms
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
5.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby or compliance by Parent and Sub with any of the provisions
hereof will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Parent or Sub, or the organizational documents of any other
Subsidiaries;
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(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to Parent or its Subsidiaries,
or by which Parent, any of its Subsidiaries, or their respective properties or
assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for
(x) compliance with any applicable requirements of any applicable securities
laws, and (y) the filing of the Certificate of Merger pursuant to the DGCL and
the CCC); or (ii) any other Person, except in either case for any Consent which
has previously been obtained.
5.4 LITIGATION. Except as set forth on Schedule 5.4 hereto, there is no
------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 BROKERS. Except as disclosed on Schedule 5.5 hereto, no broker or
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finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Sub.
5.6 PARENT STOCK
(a) As of the date hereof the authorized capital stock of Parent
consists of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 8,869,010 shares are
validly issued and outstanding (without taking into account any shares of Parent
Stock to be issued pursuant to (I) this Agreement, (II) the Agreement and Plan
of Merger, dated as of May 4, 1998, among Parent, iXL-New York, Inc., Micro
Interactive, Inc. ("Micro") and the shareholders of Micro identified therein
(the "Micro Merger"), which Agreement is anticipated to close on or about May
15, 1998, or (III) the proposed Agreement and Plan of Merger among Parent, Sub,
Spin Cycle Entertainment ("SCE") and the shareholders of SCE identified therein
(the "SCE Merger"), which Agreement is anticipated to be executed and delivered,
and closed, on or about May 7, 1998), fully paid and nonassessable; (ii) 750,000
shares of blank check preferred stock, (A) 250,000 of which have been designated
as Class A Convertible Preferred Stock, of
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which 172,452 shares are validly issued and outstanding, fully paid and
nonassessable, (B) 200,000 of which have been designated as Class B Convertible
Preferred Stock, of which 98,767 shares are validly issued and outstanding,
fully paid and nonassessable, and (C) 15,000 of which have been designated as
Class C Convertible Preferred Stock, of which 9,232 shares are validly issued
and outstanding, fully paid and nonassessable. Except as set forth on Schedule
--------
5.6 hereto, there are no options, warrants, calls, agreements, commitments or
- ---
other rights presently outstanding that would obligate Parent to issue, deliver
or sell shares of its capital stock, or to grant, extend or enter into any such
option, warrant, call, agreement, commitment or other right. In addition to the
foregoing, as of the date hereof, Parent has no bonds, debentures, notes or
other indebtedness issued or outstanding that have voting rights in Parent.
(b) The holders of record immediately prior to the Effective Time of
the outstanding shares of capital stock of Parent, together with the number of
shares of capital stock then outstanding, are set forth on Schedule 5.6 hereto.
------------
(c) When delivered to the Digital Shareholders in accordance with the
terms hereof, the Parent Stock will (i) be duly authorized, fully paid and
nonassessable, and (ii) be free and clear of all Liens other than restrictions
imposed by the Stockholders Agreement and by federal and state securities laws.
5.7 SUBSIDIARIES. Except as set forth on Schedule 5.7 hereto, Parent has
------------
no subsidiaries and does not otherwise own or control, directly or indirectly,
any equity interest in, or any security convertible into an equity interest in,
any Entity. Schedule 5.7 hereto lists the name of each of the Subsidiaries of
------------
Parent, and indicates their respective jurisdictions of incorporation.
5.8 FINANCIAL STATEMENTS. Parent has heretofore furnished Digital with a
true and complete copy of (a) the audited financial statements of iXL
Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31,
1993, 1994 and 1995, and for the four-month period ended April 30, 1996; (b)
audited combined financial statements for Creative Video, Inc. (n/k/a iXL,
Inc.), Creative Video Library, Inc. and Entrepreneur Television, Inc. for the
years ended December 31, 1993, 1994 and 1995, and for the four-month period
ended April 30, 1996; (c) the audited consolidated financial statements for
Parent and its Subsidiaries for the eight months ended December 31, 1996; and
(d) the audited consolidated financial statements for Parent and its
Subsidiaries, dated December 31, 1997 (all of the foregoing, collectively,
"Parent Financial Statements"). The Parent Financial Statements present fairly
in all material respects the consolidated financial position, results of
operations, shareholders' equity and cash flows of Parent at the respective
dates or for the respective periods to which they apply. Except as disclosed
therein, such statements and related notes have been prepared each in accordance
with GAAP consistently applied throughout the periods involved (except, in the
case of the unaudited financial statements, for the exclusion of footnotes and
normal year end adjustments).
5.9 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including, without
limitation, any liability or obligation on account of taxes
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or any governmental charges or penalty, interest or fines, except (a)
liabilities incurred in the ordinary course of business after December 31, 1997
that would not, whether individually or in the aggregate, have a material
adverse impact on the business or financial condition of the Parent and its
Subsidiaries, taken as a whole; (b) liabilities reflected on the Parent
Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated by this Agreement.
5.10 COMPLIANCE WITH APPLICABLE LAWS. Parent or its Subsidiaries holds all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's and the Subsidiaries' business as now conducted (the "Parent Permits").
To the knowledge of Parent, Parent and its Subsidiaries are in material
compliance with all applicable laws, ordinances and regulations and the terms of
the Parent Permits.
5.11 BOARD OF DIRECTORS/SHAREHOLDER CONSENTS. Both the Board of Directors
of Parent and the Board of Directors and shareholder of Sub have, by unanimous
written consent, adopted and approved this Agreement and the transactions
contemplated hereby (including, without limitation, the Merger).
5.12 BANKRUPTCY. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 ABSENCE OF CHANGES. Except as provided in Schedule 5.13 hereto, since
-------------
December 31, 1997, there has not been (a) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including, without limitation, any borrowing
or sale of assets) except in the ordinary course of business consistent with
past practice; (d) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) with respect to its capital
stock; (e) any material change in its accounting principles, practices or
methods; (f) any split, combination or reclassification of any of Parent's
capital stock or the issuance or authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for, shares of Parent's
capital stock; or (g) any agreement (whether or not in writing), arrangement or
understanding to do any of the foregoing.
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5.14 TAXES. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the date hereof. Parent and
its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the date hereof,
all deficiencies proposed as a result of any audits have been paid or settled.
5.15 DISCLOSURE. No statement of fact by Parent or Sub contained in this
Agreement and no written statement of fact furnished or to be furnished by
Parent or Sub to Digital pursuant to or in connection with this Agreement
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
herein or therein contained not misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 PUBLIC ANNOUNCEMENTS. The parties agree that, except as may otherwise
be required to comply with applicable laws and regulations (including, without
limitation, applicable securities laws) or to obtain consents required
hereunder, public disclosure of the transactions contemplated by this Agreement
shall be made only upon or after the consummation of the Merger. Any such
disclosure shall be coordinated by Parent and the Digital Shareholders.
6.2 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND EXPENSES. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.3 OPTION/WARRANTS.
(a) Digital hereby covenants and agrees that at the Effective Time,
all of the outstanding options, warrants and other rights to purchase capital
stock of Digital (all of which are set forth on Schedule 4.3(a) hereto)
---------------
(collectively, the "Digital Stock Rights") shall have been properly canceled,
and, except for the right to receive options or warrants (as the case may be) to
acquire Parent Stock described in Section 6.3(b) below, all rights and
obligations thereunder shall have been terminated.
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(b) Parent hereby covenants and agrees that, at the Effective Time,
each of the holders of Digital Stock Rights shall receive, as appropriate,
either (i) options to purchase that number of shares of validly issued, fully
paid and nonassessable Parent Stock, at an exercise price per share as is set
forth on Schedule 6.3(b) hereto, all of which shall have been issued pursuant to
---------------
the IXL Holdings, Inc. 1996 Stock Option Plan, as amended (the "Parent Stock
Option Plan"); and/or (ii) warrants to purchase that number of shares of validly
issued, fully paid and nonassessable Parent Stock, at an exercise price per
share, as is set forth on Schedule 6.3(b); provided, however, that with respect
---------------
to either of the foregoing, if for any reason any such options or warrants shall
not fully vest in accordance with the terms of the award thereof, or are not
exercised within the time period provided therein, and therefore expire or are
cancelled, then in that event shares of Parent Stock equal to the number of
shares of Parent Stock subject to such expired or cancelled option or warrant
shall be issued to the Digital Shareholders without the payment of any
additional consideration therefor, pro rata in accordance with the number of
shares of Parent Stock received in the Merger.
6.4 EMPLOYMENT. For a period of one year following the Closing, the
Surviving Corporation shall enter into an employment agreement with Joshua
Greer, at a compensation level equal to or greater than that which he is
currently being paid by Digital. The Surviving Corporation will also assume
Digital's existing employment agreements with Thomas Lakeman and Jeffery Gaul.
6.5 FURTHER ASSURANCES. From time to time after the Effective Time, upon
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions of this Agreement.
6.6 STATE TAX ASSUMPTION. Digital has obtained a tax clearance
certificate (the "Tax Clearance Certificate") from the California Franchise Tax
Board ("FTB") and, in that connection, Joshua Greer has executed, and delivered
to the FTB, an assumption of tax liability ("State Tax Assumption"). Sub agrees
to enter into an Assumption Agreement with Joshua Greer, substantially in the
form of Exhibit "J" hereto, whereby Sub will assume the State Tax Assumption.
-----------
6.7 DIGITAL DEBT AND PERSONAL GUARANTEES. With respect to each item of
indebtedness comprising the Digital Debt, Parent or Sub will pay off such item
as and when due and payable in accordance with its terms, excluding Digital
Accounts Payable which may or may not be paid in accordance with their terms but
which shall be paid by Parent or Sub. To the extent that either or both of the
Controlling Shareholders have personally guaranteed such items of indebtedness,
Parent will (a) obtain the release of such personal guarantees, or (b) indemnify
the Controlling Shareholders and hold them harmless from liabilities resulting
from Parent's or Sub's breach of their obligations under the preceding sentence.
6.8 PURCHASER REPRESENTATIVE. With respect to the Digital Shareholders
identified on Schedule 4.31 hereto as not being accredited investors, (a) the
-------------
Purchaser representative shall furnish to Parent, to Parent's satisfaction, a
completed Purchaser Representative Questionnaire,
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substantially in the form of Exhibit "K" hereto; and (b) each such Digital
-----------
Shareholder shall furnish to Parent a signed Purchaser Acknowledgement in
connection therewith.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATION OF DIGITAL AND THE DIGITAL SHAREHOLDERS TO
EFFECT THE MERGER. The obligation of Digital and the Digital Shareholders to
effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions:
(a) (i) the appropriate officers of Parent shall have executed and
delivered to Digital at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-1" hereto, and (ii) the
-------------
appropriate officers of Sub shall have executed and delivered to Digital at the
Closing, a closing certificate and incumbency certificate, substantially in the
form of Exhibit "A-2" hereto;
-------------
(b) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(b) hereto;
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(c) Digital shall have received a corporate certificate of good
standing for Parent and Sub, and a copy of the Certificate of Incorporation for
Parent and Sub, both as certified by the Secretary of State of Delaware;
(d) there shall have been delivered to each of the Digital
Shareholders at the Closing, duly executed by Parent, an Agreement to be Bound
to the Registration Rights Agreement of Parent, dated as of the hereof (the
"Agreement to be Bound to the Registration Rights Agreement"), substantially in
the form of Exhibit "B" hereto;
-----------
(e) Parent shall have executed and delivered at the Closing an Option
Agreement for each of the Persons listed on Schedule 6.3(b) hereto receiving
---------------
options to purchase Parent Stock, substantially in the form of Exhibit "C"
-----------
hereto;
(f) Parent shall have executed and delivered at the Closing a Warrant
Agreement for each of the Persons listed on Schedule 6.3(b) hereto receiving
---------------
warrants to purchase Parent Stock, substantially in the form of Exhibit "D"
-----------
hereto;
(g) Digital shall have received, at the Closing, a duly executed
opinion of counsel to Parent and Sub, substantially in the form of Exhibit "E"
-----------
hereto;
(h) Digital shall have received from Parent such other documents as
Digital's counsel shall have reasonably requested, in form and substance
reasonably satisfactory to Digital's counsel;
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(i) Digital shall have received the Tax Clearance Certificate from
the FTB;
(j) Parent and Sub shall have complied with all of the covenants and
agreements set forth in Article VI hereof (except to the extent that Article VI
provides for them to be complied with post-Closing); and
(k) The Escrow Agreement and Assumption Agreement shall have been
executed and delivered at the Closing by Parent, Sub and the Escrow Agent, as
appropriate.
7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) the appropriate officers of Digital shall have executed and
delivered to Parent at the Closing, a closing certificate, and incumbency
certificate substantially in the form of Exhibit "F" hereto.
-----------
(b) Digital and the Digital Shareholders shall have obtained or
caused to be obtained all of the Consents, if any, listed on Schedule 7.2(b)
---------------
hereto;
(c) there shall have been delivered to Parent at the Closing, duly
executed by each of the Digital Shareholders, (i) an Agreement to be Bound to
the Stockholders' Agreement, substantially in the form of Exhibit "G" hereto;
-----------
and (ii) an Agreement to be Bound by the Registration Rights Agreement;
(d) Parent shall have received a corporate certificate of good
standing for Digital, and a copy of the Articles of Incorporation of Digital,
both as certified by the Secretary of State of California;
(e) as of the date three business days prior to the Closing the
Digital Debt shall be no greater than $1.5 million;
(f) Digital shall have complied with its obligations under Section
6.3(a) hereof;
(g) Parent shall have received, at the Closing, a duly executed
opinion of counsel to Digital and the Digital Shareholders, substantially in the
form of Exhibit "H" hereto;
-----------
(h) Parent shall have received from Digital the Tax Clearance
Certificate, indicating that no taxes are owed by Digital to state or local
taxing authorities in the State of California;
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(i) Parent shall have received from Digital or the Digital
Shareholders, as the case may be, such other documents as Parent's counsel shall
have reasonably requested, in form and substance reasonably satisfactory to
Parent's counsel;
(j) Parent shall have received evidence satisfactory to it (i) that
the assets and properties used in the Digital Business are free and clear of all
Liens other than Permitted Liens, and (ii) of performance under Section 6.8
hereof; and
(k) Parent shall have received, at the Closing, the Escrow Agreement
executed and delivered by the Digital Shareholders and the Escrow Agent,
respectively.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY PARENT.
(a) Parent shall indemnify and hold the Digital Shareholders and
Digital's directors, officers and employees (collectively, the "Digital
Indemnified Parties") harmless from and against, and agree promptly to defend
each of the Digital Indemnified Parties from and reimburse each of the Digital
Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including, without limitation,
reasonable attorney fees and other legal costs and expenses) (collectively a
"Digital Loss") that any of the Digital Indemnified Parties may at any time
suffer or incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the
representations and warranties made by Parent or Sub in or pursuant to this
Agreement, or in any instrument, certificate or affidavit delivered by Parent or
Sub at the Closing in accordance with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform,
satisfy and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations under this Agreement or under any of the documents
and materials delivered by Parent pursuant to this Agreement; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.1(a).
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(b) Notwithstanding any other provision to the contrary Parent shall
not have any liability under Section 8.1(a)(i) above (i) unless the aggregate of
all Digital Losses for which Parent would be liable but for this sentence
exceeds, on a cumulative basis, an amount equal to $100,000, and then only to
the extent of such excess, (ii) for amounts in excess of $4,000,000 in the
aggregate, and (iii) unless the Digital Shareholders have asserted a claim with
respect to the matters set forth in Section 8.1(a)(i), or 8.1(a)(iii) to the
extent applicable to Section 8.1(a)(i), within two years of the Effective Time.
Notwithstanding any implication to the contrary contained herein, the parties
acknowledge and agree that a decrease in the value of Parent Stock would not, by
itself, constitute a Digital Loss, unless and to the extent a decrease in the
value of Parent Stock has been demonstrated to be as a result of any event
described in Sections 8.1(a)(i), (ii) or (iii) above.
8.2 INDEMNIFICATION BY THE DIGITAL SHAREHOLDERS.
(a) The Controlling Shareholders shall jointly and severally, and the
Digital Shareholders (other than the Controlling Shareholders) shall severally
and not jointly, indemnify and hold Parent, Sub, Surviving Corporation and their
respective shareholders, directors, officers and employees (collectively, the
"Parent Indemnified Parties") harmless from and against, and agree to promptly
defend each of the Parent Indemnified Parties from and reimburse each of the
Parent Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including, without limitation,
reasonable attorney fees) (collectively, a "Parent Loss") that any of the Parent
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(i) in the case of the Controlling Shareholders any
breach or inaccuracy of any representations and warranties made by Digital or
the Controlling Shareholders in or pursuant to this Agreement, or in any
instrument, certificate or affidavit delivered by the same at the Closing in
accordance with the provisions hereof;
(ii) in the case of each Digital Shareholder (including
each Controlling Shareholder individually), any breach or inaccuracy of any
representations and warranties made by such Digital Shareholder in or pursuant
to this Agreement (specifically, the representations and warranties contained in
Sections 4.2, 4.3(b), 4.5, 4.31, 4.32, 4.33 and 4.34), or in any instrument,
certificate or affidavit delivered by the same at the Closing in accordance with
the provisions hereof;
(iii) any failure by Digital or the Digital Shareholders to
carry out, perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations under this Agreement or
under any of the documents and materials delivered by Digital pursuant to this
Agreement; and
(iv) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.2.
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(b) Notwithstanding the above, none of the Digital Shareholders
(including the Controlling Shareholders individually and as Controlling
Shareholders) shall have any liability under Section 8.2(a)(i) above (i) unless
the aggregate of all Parent Losses for which the Digital Shareholders would be
liable but for this sentence exceeds, on a cumulative basis, an amount equal to
$100,000, and then only to the extent of such excess, (ii) for amounts in excess
of $4,000,000 in the aggregate, and (iii) unless Parent has asserted a claim
with respect to the matters set forth in Section 8.2(a)(i) or 8.2(a)(ii) or
8.2(a)(iv) (to the extent applicable to Section 8.2(a)(i) or 8.2(a)(ii)) within
two years of the Effective Time, except with respect to the matters arising
under Sections 4.18, 4.19, 4.20 or 4.24 hereof, in which event Parent must have
asserted a claim within the applicable statute of limitations. Notwithstanding
any implication to the contrary contained herein, the parties acknowledge and
agree that a decrease in the value of Parent Stock would not, by itself,
constitute a Parent Loss, unless and to the extent a decrease in the value of
Parent Stock has been demonstrated to be as a result of any event described in
Sections 8.2(a)(i), (ii) (iii) or (iv) above.
8.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification under this Agreement. Subject
to the Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section 8.1 or 8.2 hereof, as the case may
be, the Indemnifying Party shall have the right, at its sole cost and expense,
to employ counsel of its own choosing to defend any such Claim asserted against
the Indemnified Party; provided, however, that if the Indemnified Party (i)
reasonably believes that its interests with respect to a Claim (or any material
portion thereof) are in conflict with the interests of the Indemnifying Party
with respect to such Claim (or portion thereof), and (ii) promptly notifies the
Indemnifying Party, in writing, of the nature of such conflict, then the
Indemnified Party shall be entitled to choose, at the sole cost and expense of
the Indemnifying Party, independent counsel to defend such Claim (or the
conflicting portion thereof). The Indemnified Party shall have the right to
participate in the defense of any such Claim at its own expense (except to the
extent provided in the foregoing sentence), but the Indemnifying Party shall
retain control over such litigation (except as provided in the foregoing
sentence). The Indemnifying Party shall notify the Indemnified Party in
writing, as promptly as possible (but in any case before the due date for the
answer or response to a Claim) after the date of the notice of Claim given by
the Indemnified Party to the Indemnifying Party under Section 8.3(a)
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hereof of its election to defend in good faith any such third party Claim. So
long as the Indemnifying Party is defending in good faith any such Claim
asserted by a third party against the Indemnified Party, the Indemnified Party
shall not settle or compromise such Claim without the prior written consent of
the Indemnifying Party. The Indemnified Party shall cooperate with the
Indemnifying Party in connection with any such defense and shall make available
to the Indemnifying Party or its agents all records and other materials in the
Indemnified Party's possession reasonably required by it for its use in
contesting any third party Claim; provided, however, that the Indemnifying Party
shall have agreed, in writing, to keep such records and other materials
confidential except (i) to the extent required for defense of the relevant
Claim, or (ii) as required by law or court order. Whether or not the
Indemnifying Party elects to defend any such Claim, the Indemnified Party shall
have no obligations to do so. Within 30 days after a final determination
(including, without limitation, a settlement) has been reached with respect to
any Claim contested pursuant to this Section 8.3(b), the Indemnifying Party
shall satisfy its obligations with respect thereto. Any amounts paid thereafter
shall include interest thereon for the period commencing at the end of such 30-
day period and ending on the actual date of payment, at a rate of 15% per annum,
or, if lower, at the highest rate of interest permitted by applicable law at the
time of such payment.
ARTICLE IX
GENERAL PROVISIONS
9.1 SURVIVAL; RECOURSE. None of the agreements contained in this
Agreement shall survive the Merger, except that (i) the agreements contained in
Article III hereof, the covenants contained in Article VI hereof, the
obligations to indemnify contained in Article VIII hereof and the agreements of
the Surviving Corporation referred to in Sections 9.5, 9.10 and 9.11 hereof,
shall survive the Merger (except to the extent a shorter period of time is
explicitly specified therein) and (ii) the representations and warranties made
in Articles IV and V of this Agreement shall survive the Merger, and shall
survive any independent investigation by the parties, and any dissolution,
merger or consolidation of Digital or Parent, and shall bind the legal
representatives, assigns and successors of Digital, the Digital Shareholders,
Parent, for a period of two years after the Closing Date (other than the
representations and warranties contained in Sections 4.18, 4.19, 4.20 and 4.24
hereof, which shall survive for the applicable statute of limitations).
9.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in Person, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
28
<PAGE>
If to Digital: Digital Planet
8501 Wilshire Boulevard
Suite 200
Beverly Hills, California 90211
Attention: Joshua Lawrence Greer
Telephone: 310/967-0208
Telecopy: 310/289-1546
With copies to: Weissmann, Wolff, Bergman, Coleman & Silverman, LLP
9665 Wilshire Boulevard
Suite 900
Beverly Hills, California 90212
Attention: Daniel Wolff, Esq.
Telephone: 310/858-7888
Telecopy: 310/550-7191
If to the Digital To the address listed under the signature
Shareholders: line of the applicable Digital Shareholder
If to Parent or Sub: IXL Holdings, Inc.
Two Park Place
1888 Emery Street
2nd Floor
Atlanta, Georgia 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
29
<PAGE>
and to: Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
9.3 ENTIRE AGREEMENT. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof. There are no other representations or warranties, whether
written or oral, between the parties in connection the subject matter hereof,
except as expressly set forth herein.
9.4 ASSIGNMENTS; PARTIES IN INTEREST Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests, and
obligations of Sub hereunder may be assigned to any direct wholly owned Delaware
subsidiary of Parent without such prior consent. Subject to the preceding
sentence, this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any Person not a party hereto any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement,
except as otherwise provided herein.
9.5 FEES AND EXPENSES. All reasonable fees and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the Surviving Corporation; provided, however that the
fees and expenses incurred by Digital or the Digital Shareholders in excess of
$25,000 shall be paid by the Digital Shareholders.
9.6 GOVERNING LAW. This Agreement, except to the extent that the CCC or
the DGCL is mandatorily applicable to the Merger or the rights of the
shareholders of Digital or the other parties hereto with respect to the Merger,
shall be governed in all respects by the laws of the State of Georgia (without
giving effect to the provisions thereof relating to conflicts of law).
9.7 HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
30
<PAGE>
9.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
9.9 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economics or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon determination that any term or other provision
hereof is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
9.10 POST-CLOSING ACCESS. For a period of three years after the Closing
Date, the Digital Shareholders and their agents and representatives shall have
reasonable access to the books and records of the Digital Business.
9.11 POST-CLOSING NOTICE. To the extent the Surviving Corporation receives
written notice of any event or circumstance that materially affects any of the
Digital Shareholders, the Surviving Corporation shall promptly notify the
affected Digital Shareholder of such matter, information, or event and shall
provide them with copies of all relevant documentation or correspondence in
connection thereto.
9.12 CERTAIN DEFINITIONS. As used in this Merger Agreement:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security (d) minor
defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the Digital
Real Property or interfering with the ordinary conduct of any of the Digital
Business; and (e) those Liens listed on Schedule 9.12;
-------------
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of Digital" shall refer to the knowledge,
subject to clause (i) above, of any of the Controlling Shareholders; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of that are
entitled to more than 50% of the vote for the election of
31
<PAGE>
the board of directors or other governing body of such Entity (including,
without limitation, Sub); provided, however, that with respect to the Parent,
-------- -------
the terms "Subsidiary" and "Subsidiaries" shall not include (i) University
Netcasting, Inc., or (ii) Digital.
9.13 SCHEDULES. Any item or matter disclosed by or on behalf of a party
hereto on one or more of its Schedules shall be deemed to be disclosed by such
party on each of its Schedules.
- SIGNATURES ON THE FOLLOWING PAGE -
32
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and Digital have caused this Agreement to be
signed by their respective officers thereunder duly authorized, and each Digital
Shareholder has signed this Agreement, all as of the date first written above.
"DIGITAL"
DIGITAL PLANET, a California corporation
By: /s/ Joshua Greer
------------------------------------------
Title: President
---------------------------------------
"PARENT"
IXL HOLDINGS, INC., a Delaware corporation
By: /s/ James V. Sandry
-----------------------------------------
Title: Executive Vice President
---------------------------------------
"SUB"
iXL-LOS ANGELES, INC., a Delaware corporation
By: /s/ James V. Sandry
------------------------------------------
Title: Executive Vice President
---------------------------------------
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
33
<PAGE>
"DIGITAL SHAREHOLDERS"
/s/ Joshua Greer
----------------------------------------------
Joshua Greer
Address: 8501 Wilshire Blvd., Suite 200
Beverly Hills, CA 90211
/s/ Paul Grand
----------------------------------------------
Paul Grand
Address: 1291 Devon Avenue
Los Angeles, CA 90024
/s/ Thomas Lakeman
----------------------------------------------
Thomas Lakeman
Address: 8501 Wilshire Blvd., Suite 200
Beverly Hills, CA 90211
/s/ Robert M. Burk
-----------------------------------------------
Robert M. Burk, Trustee of the Burk Family Trust
dated 8.17/82
Address: 611 Woodruff Ave.
Los Angeles, CA 90024
34
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate...................................... Exhibit A-1
Sub's Closing Certificate......................................... Exhibit A-2
Agreement to Be Bound to the Registration Rights Agreement........ Exhibit B
Option Agreement.................................................. Exhibit C
Warrant Agreement................................................. Exhibit D
Opinion of Counsel of Parent and Sub.............................. Exhibit E
Digital's Closing Certificate..................................... Exhibit F
Agreement to be Bound to the Stockholders' Agreement.............. Exhibit G
Digital's Opinion of Counsel...................................... Exhibit H
Escrow Agreement.................................................. Exhibit I
Assumption Agreement.............................................. Exhibit J
Purchaser Representative Questionnaire............................ Exhibit K
<PAGE>
SCHEDULE 4.1
------------
ARTICLES OF INCORPORATION AND BYLAWS OF DIGITAL
SCHEDULE 4.3(A)
---------------
HOLDERS OF DIGITAL STOCK AND DIGITAL STOCK RIGHTS
SCHEDULE 4.3(B)
---------------
LIENS ON DIGITAL STOCK
SCHEDULE 4.4
------------
SUBSIDIARIES OF DIGITAL
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF DIGITAL
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF DIGITAL
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF DIGITAL
<PAGE>
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF DIGITAL
SCHEDULE 4.10
-------------
BAD EQUIPMENT OF DIGITAL
SCHEDULE 4.11
-------------
INFRINGEMENT UPON INTELLECTUAL PROPERTY OF DIGITAL
SCHEDULE 4.12
-------------
LIENS ON REAL PROPERTY OF DIGITAL
SCHEDULE 4.13
-------------
LEASES OF DIGITAL
SCHEDULE 4.14
-------------
CONTRACTS OF DIGITAL
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF DIGITAL
2
<PAGE>
SCHEDULE 4.17
-------------
LITIGATION OF DIGITAL
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS OF DIGITAL
SCHEDULE 4.19
-------------
ERISA ISSUES OF DIGITAL
SCHEDULE 4.21
-------------
PERMITS OF DIGITAL (INCLUDING EXCEPTIONS TO THEIR ASSIGNABILITY)
SCHEDULE 4.23
-------------
BROKERS OF DIGITAL
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS & COMPETITORS OF DIGITAL
SCHEDULE 4.26
-------------
EXCEPTIONS TO COLLECTIBILITY OF ACCOUNTS RECEIVABLE OF DIGITAL
3
<PAGE>
SCHEDULE 4.27
-------------
DEFAULT/PAST DUE STATUS OF ACCOUNTS PAYABLE OF DIGITAL
SCHEDULE 4.28
-------------
INSURANCE OF DIGITAL
SCHEDULE 4.31
-------------
CLASSIFICATION OF EACH DIGITAL SHAREHOLDER AS EITHER AN ACCREDITED INVESTOR OR
NOT AN ACCREDITED INVESTOR
SCHEDULE 5.1
------------
CERTIFICATE OF INCORPORATION AND BYLAWS OF PARENT AND SUB
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT OR SUB LITIGATION
4
<PAGE>
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
CAPITALIZATION OF PARENT (INCLUDING PARENT STOCK RIGHTS)
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT AND SUB UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES OF PARENT
SCHEDULE 6.3(B)
---------------
OPTIONS AND WARRANTS RECEIVED BY HOLDERS OF DIGITAL STOCK RIGHTS
SCHEDULE 7.1(B)
---------------
PARENT CONSENTS
5
<PAGE>
SCHEDULE 7.2(B)
---------------
CONSENTS OF DIGITAL
SCHEDULE 9.12
-------------
PERMITTED LIENS OF DIGITAL
6
<PAGE>
EXHIBIT 2.17
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
IXL HOLDINGS, INC.,
iXL-Charlotte , Inc.,
INTOUCH INTERACTIVE, INC.
AND
THE INTOUCH SHAREHOLDERS
Dated as of May 12, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into this 12th day of May,
1998, by and between INTOUCH INTERACTIVE, INC., a North Carolina corporation
("InTouch"), IXL HOLDINGS, INC., a Delaware corporation ("Parent"), IXL-
CHARLOTTE, INC., a Delaware corporation, or its successors or permitted assigns
("Sub"), and the shareholders of InTouch as listed on the signature page hereto
(the "InTouch Shareholders").
R E C I T A L S:
- - - - - - - -
A. InTouch is engaged in the business of creation of multimedia
communications and marketing materials (the "InTouch Business").
B. InTouch and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The InTouch Shareholders collectively own 100% of the issued and
outstanding capital stock of InTouch (the "InTouch Stock").
D. The respective Boards of Directors of Parent, Sub and InTouch have
approved the Merger, as have the respective shareholders of Sub and InTouch,
upon the terms and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal
income tax purposes, as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, at
the Effective Time (as defined in Section 1.3 hereof), (a) InTouch shall be
merged with and into Sub, (b) the separate existence of InTouch shall cease, and
(c) Sub shall continue as the surviving corporation in the Merger under the laws
of the State of Delaware under the name iXL-Charlotte, Inc. For purposes of this
Agreement, Sub shall be referred to, for the period commencing on the Effective
Time, as the "Surviving Corporation."
1.2 CLOSING AND CLOSING DATE. Unless this Merger Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 9.1 hereof, and subject to the satisfaction or
waiver of the conditions set forth in Article
-1-
<PAGE>
VII hereof, the closing of the Merger (the "Closing") will take place as
promptly as practicable (and in any event within five business days after
satisfaction of the conditions set forth in Sections 7.1 and 7.2 hereof) (the
"Closing Date") at the offices of Minkin & Snyder, A Professional Corporation,
One Buckhead Plaza, 3060 Peachtree Rd., Ste. 1100, Atlanta, GA 30305, unless
another date, time or place is agreed to by the parties.
1.3 EFFECTIVE TIME OF THE MERGER. At the Closing, the parties hereto
shall cause (a) a certificate of merger (the "Delaware Certificate of Merger")
to be filed with the office of the Secretary of State of the State of Delaware
in accordance with the provisions of the Delaware General Corporation Law, as
amended (the "DGCL"); and (b) articles of merger (the "North Carolina
Certificate of Merger;" collectively with the Delaware Certificate of Merger,
the "Certificate of Merger") to be filed with the office of the Secretary of
State of the State of North Carolina in accordance with the provisions of the
North Carolina Business Corporation Act, as amended (the "NBCA"). When used
herein, the term "Effective Time" shall mean the time when the Certificate of
Merger has been accepted for filing by the Secretary of State of the States of
Delaware and North Carolina, respectively, or such time as otherwise specified
therein.
1.4 EFFECT OF THE MERGER. The Merger shall, from and after the Effective
Time, have all the effects provided by the DGCL and the NBCA. If at any time
after the Effective Time, any further action is deemed necessary or desirable to
carry out the purposes of this Agreement, the parties hereto agree that the
Surviving Corporation and its proper officers and directors shall be authorized
to take, and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Amended and Restated Certificate of
Incorporation of Sub, a form of which is attached hereto on Schedule 5.1, shall
------------
be the Certificate of Incorporation of the Surviving Corporation after the
Effective Time, until thereafter changed or amended as provided therein or by
applicable law.
2.2 BYLAWS. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is included on Schedule 5.1 hereto.
------------
2.3 BOARD OF DIRECTORS; OFFICERS. The Board of Directors and officers of
Sub immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified. Immediately prior to the Effective Time,
Parent shall cause the following persons to be elected and appointed to the
following offices of Sub: William A. Lackey: President; William M. Lackey:
Senior Vice President; Steven P. Amedio: Chief Technology Officer.
-2-
<PAGE>
ARTICLE III
CONVERSION OF SHARES
3.1 MERGER CONSIDERATION. As of the Effective Time:
(a) All shares of InTouch Stock owned by InTouch shall, by virtue of
the Merger and without any action on the part of any stockholder, officer or
director of InTouch or Sub, be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
(b) Upon surrender to Sub, at the Closing, of the underlying share
certificates of InTouch Stock (other than any Dissenting Shares, as defined in
Section 3.2 hereof), each such share shall be converted into, and become
exchangeable for such amount of cash, and such number of shares of validly
issued, fully paid and nonassessable Class B Common Stock of Parent, $.01 par
value (the "Parent Stock"), as indicated on Schedule 3.1(b).
(c) Each issued and outstanding share of common stock of Sub shall,
by virtue of the Merger and without any action on the part of any stockholder,
officer or director of InTouch or Sub, be converted into and become one fully
paid and nonassessable share of common stock of the Surviving Corporation.
3.2 DISSENTING SHARES. Notwithstanding any provision hereof to the
contrary, any shares of InTouch Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be converted as described in Section 3.1 hereof,
but instead shall be converted into the right to receive the consideration due a
Dissenting Shareholder pursuant to the DGCL or NBCA, as applicable; provided,
however, that if a Dissenting Shareholder shall fail to perfect his demand,
withdraw his demand or otherwise lose his right for appraisal under the terms of
the DGCL or the NBCA, as applicable, the InTouch Stock held by such Dissenting
Shareholder (the "Dissenting Shares") shall be deemed to be converted as of the
Effective Time in accordance with the provisions of Section 3.1 hereof. InTouch
shall not voluntarily make any payment with respect to, settle, or offer to
settle or otherwise negotiate, any such demand. The Surviving Corporation shall
pay all amounts paid to Dissenting Shareholders without interest thereon (to the
extent permitted by applicable law). For purposes hereof, the term "Dissenting
Shareholder" shall mean an InTouch Shareholder who (a) objects to the Merger;
and (b) complies with the applicable provisions of the DGCL or NBCA concerning
dissenter's rights.
3.3 NO FURTHER RIGHTS. From and after the Effective Time, holders of
certificates theretofore evidencing InTouch Stock shall cease to have any rights
as stockholders of InTouch, except as provided herein or by applicable law.
3.4 CLOSING OF INTOUCH'S TRANSFER BOOKS. At the Effective Time, the stock
transfer books of InTouch shall be closed and no transfer of InTouch Stock shall
be made thereafter. If after the Effective Time, certificates for InTouch Stock
are presented to Parent or the Surviving Corporation, they shall be canceled and
exchanged for a consideration as set forth in Section 3.1 hereof, subject to
applicable law in the case of Dissenting Shareholders.
-3-
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INTOUCH
InTouch and the InTouch Shareholders, jointly and severally, represent and
warrant to Parent and Sub as follows, which representations and warranties shall
survive the Closing in accordance with Section 10.1 hereof.
4.1 ORGANIZATION AND QUALIFICATION. InTouch is a corporation duly
organized, validly existing and in good standing under the laws of the State of
North Carolina. InTouch has the requisite corporate power and authority to
carry on the InTouch Business as it is now being conducted and is duly qualified
or licensed to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary. Complete and correct copies of
the Articles of Incorporation and Bylaws of InTouch as in effect on the date
hereof are attached as Schedule 4.1 hereto. The minute book of InTouch, a true
------------
and complete copy of which has been delivered to Parent, (a) accurately reflects
all action taken by the directors and shareholders of InTouch at meetings of
InTouch's Board of Directors or shareholders, as the case may be; and (b)
contains true and complete copies, or originals, of the respective minutes of
all meetings or consent actions of the directors or shareholders.
4.2 AUTHORITY. InTouch has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery hereof and the consummation of
the transactions contemplated hereby by InTouch have been duly and validly
authorized and approved by InTouch's Board of Directors and the InTouch
Shareholders, and no other corporate or shareholder proceedings on the part of
InTouch, its Board of Directors or the InTouch Shareholders is necessary to
authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
InTouch and each InTouch Shareholder, and assuming the due authorization,
execution and delivery by Parent and Sub, constitutes the valid and binding
obligation of InTouch and each InTouch Shareholder, enforceable against InTouch
and each InTouch Shareholder in accordance with its terms subject, in each case,
to bankruptcy, insolvency, reorganization, moratorium and similar laws of
general application relating to or affecting creditors' rights and to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing.
4.3 CAPITALIZATION.
(a) The authorized capital stock of InTouch consists of 10,000 shares
of common stock, $10.00 par value, of which three shares are validly issued and
outstanding, fully paid and nonassessable. All outstanding capital stock of
InTouch was issued in accordance with applicable federal and state securities
laws. There are no options, warrants, calls, agreements, commitments or other
rights presently outstanding that would obligate InTouch or any of the InTouch
Shareholders to issue, deliver or sell shares of its capital stock, or to grant,
extend or enter into any such option, warrant, call, agreement, commitment or
other right. In addition to
-4-
<PAGE>
the foregoing, as of the date hereof, InTouch has no bonds, debentures, notes or
other indebtedness issued or outstanding that have voting rights in InTouch.
Schedule 4.3(a) sets forth a list of all holders of record of InTouch Stock and
- ---------------
the number of shares held by each InTouch Shareholder.
(b) All of the issued and outstanding shares of capital stock of
InTouch are validly issued, fully paid and nonassessable. Except as set forth on
Schedule 4.3(b) hereto, each InTouch Shareholder represents and warrants that
- ---------------
the InTouch Stock held by such InTouch Shareholder is free and clear of any
lien, charge, security interest, pledge, option, right of first refusal, voting
proxy or other voting agreement, or encumbrance of any kind or nature other than
restrictions on transfer imposed by federal and state securities laws (any of
the foregoing, a "Lien").
4.4 SUBSIDIARIES. InTouch has no subsidiaries and does not otherwise own
or control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
- ------------
InTouch or the InTouch Shareholders, (ii) the consummation by InTouch and the
InTouch Shareholders of the transactions contemplated hereby or (iii) compliance
by InTouch with any of the provisions hereof will:
(a) conflict with or violate the Articles of Incorporation or Bylaws
of InTouch;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to InTouch or any of the
InTouch Shareholders, or by which InTouch or any of its properties or assets may
be bound or affected;
(c) result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which InTouch is a party or by which InTouch
or any of its properties or assets may be bound or affected (collectively, for
the purposes of this Section 4.5, an "InTouch Agreement");
(d) result in the creation of any Lien on any of the property or
assets of InTouch; or
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), (i) any government or subdivision thereof, whether
domestic or foreign, or any administrative, governmental, or regulatory
authority, agency, commission, court, tribunal or body, whether
-5-
<PAGE>
domestic, foreign or multinational (any of the foregoing, a "Governmental
Entity"), except for the filing of the Certificate of Merger pursuant to the
DGCL and the NBCA; or (ii) any other individual or Entity (collectively, a
"Person") pursuant to any InTouch Agreement.
4.6 FINANCIAL STATEMENTS. InTouch has heretofore furnished Parent with a
true and complete copy of (a) the unaudited financial statements of InTouch for
the years ended December 31, 1995, 1996 and 1997; and (b) the unaudited
financial statements of InTouch for the month ended March 31, 1998 (all of the
foregoing collectively herein referred to as the "InTouch Financial
Statements"). Except as set forth on Schedule 4.6, the InTouch Financial
------------
Statements present fairly, in all material respects, the financial position and
operating results of InTouch as of the dates, and during the periods, indicated
therein.
4.7 ABSENCE OF CHANGES. Except as provided in Schedule 4.7 hereto and
------------
except as contemplated hereby, since December 31, 1997 (a) InTouch has not
entered into any transaction that was not in the ordinary course of business;
(b) except for sales of services and licenses of software in the ordinary course
of business, there has been no sale, assignment, transfer, mortgage, pledge,
encumbrance or lease of any material asset or property of InTouch; (c) there has
been (i) no declaration or payment of a dividend, or any other declaration,
payment or distribution of any type or nature to any shareholder of InTouch in
respect of its stock, whether in cash or property, and (ii) no purchase or
redemption of any share of the capital stock of InTouch; (d) there has been no
declaration, payment, or commitment for the payment, by InTouch, of a bonus or
other additional salary, compensation, or benefit to any employee of InTouch
that was not in the ordinary course of business, except for normal year-end
bonuses paid in the ordinary course of business; (e) there has been no release,
compromise, waiver or cancellation of any debt to or claim by InTouch, or waiver
of any right of InTouch in each case over $10,000; (f) there have been no
capital expenditures in excess of $10,000 for any single item, or $25,000 in the
aggregate; (g) there has been no change in accounting methods or practices or
revaluation of any asset of InTouch (other than InTouch Accounts Receivable (as
defined in Section 4.26 hereof) written down in the ordinary course of business
that are not in excess of $10,000 for any single InTouch Accounts Receivable, or
$25,000 in the aggregate); (h) there has been no material damage, or material
destruction to, or material loss of, material physical property (whether or not
covered by insurance) adversely affecting the InTouch Business or the operations
of InTouch; (i) there has been no loan by InTouch, or guaranty by InTouch of any
loan, to any employee of InTouch; (j) InTouch has not ceased to transact
business with any customer that, as of the date of such cessation, represented
more than 5% of the annual gross revenues of InTouch; (k) there has been no
termination or resignation of any key employee or officer of InTouch, and to the
knowledge of InTouch, no such termination or resignation is threatened; (l)
there has been no amendment or termination of any material oral or written
contract, agreement or license related to the InTouch Business, to which InTouch
is a party or by which it is bound, except in the ordinary course of business,
or except as expressly contemplated hereby; (m) InTouch has not failed to
satisfy any of its debts, obligations or liabilities related to the InTouch
Business or the assets of InTouch as the same become due and owing (except for
InTouch Accounts Payable (as defined in Section 4.27 hereof) payable in
accordance with past practices and in the ordinary course of business); (n)
there has been no agreement or commitment by InTouch to do any of the foregoing;
and (o) there has been no other event or condition of any character pertaining
to and materially and adversely affecting the assets, business or financial
condition of InTouch.
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4.8 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.8 hereto,
------------
InTouch has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including, without limitation, any liability or
obligation on account of taxes or any governmental charge or penalty, interest
or fine, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997, that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of InTouch; (b) liabilities reflected on the InTouch Financial Statements; and
(c) liabilities incurred as a result of the transactions contemplated hereby.
4.9 TITLE TO PROPERTIES. Except as set forth on Schedule 4.9 hereto,
------------
InTouch has good and marketable title to all tangible property and assets used
in the InTouch Business (other than leased property), and good and valid title
to its leasehold interests, in each case, free and clear of any and all Liens
other than Permitted Liens (as defined in Section 10.11 hereof).
4.10 EQUIPMENT. Attached hereto as Schedule 4.10 is a true and correct
-------------
list of all items of tangible personal property (including, without limitation,
computer hardware) necessary for or used in the operation of the InTouch
Business in the manner in which it has been and is now operated by InTouch ("the
InTouch Equipment"), except for personal property having a net book value of
less than $1,000. Except as set forth on Schedule 4.10 hereto, each material
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item of InTouch Equipment is in adequate condition and repair for its intended
use, ordinary wear and tear excepted.
4.11 INTELLECTUAL PROPERTY.
(a) InTouch has heretofore furnished Parent with a true and complete
list of all material proprietary technology, patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights, and registered copyrights (and all pending applications for any of the
foregoing) used by InTouch in the conduct of the InTouch Business (together with
trade secrets and know how used in the conduct of the InTouch Business, the
"InTouch Intellectual Property Rights"). InTouch owns, or is validly licensed or
otherwise has the right to use or exploit, as currently used or exploited, all
of the InTouch Intellectual Property Rights, free of any obligation to make any
payment (whether of a royalty, license fee, compensation or otherwise). No
claims are pending or, to the knowledge of InTouch, threatened, that InTouch is
infringing or otherwise adversely affecting the rights of any Person with regard
to any InTouch Intellectual Property Right. No Person is infringing the rights
of InTouch with respect to any InTouch Intellectual Property Right. To the
knowledge of InTouch, neither InTouch nor any employee, agent or independent
contractor of InTouch, in connection with the performance of such Person's
services with InTouch, has used, appropriated or disclosed, directly or
indirectly, any trade secret or other proprietary or confidential information of
any other Person, or otherwise violated any confidential relationship with any
other Person.
(b) InTouch has heretofore furnished Parent with a true and complete
list of all material computer software used by InTouch in the conduct of the
InTouch Business (the "InTouch Software"). Other than incidental software valued
at less than $5,000 in the aggregate, InTouch currently licenses, or otherwise
has the legal right to use, all of the InTouch Software
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(including any upgrade, alteration or enhancement with respect thereto), and all
of the InTouch Software is being used in compliance with any applicable license
or other agreement.
4.12 REAL PROPERTY. Except as set forth on Schedule 4.12 hereto:
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(a) InTouch has a good and valid leasehold interest in all real
property (including all buildings, improvements and fixtures thereon) used in
the operation of the InTouch Business (the "InTouch Real Property"). InTouch
owns no real property. Except for Permitted Liens, and for the items set forth
on Schedule 4.12, there are no Liens on InTouch's interest in any of the InTouch
-------------
Real Property.
(b) There are no parties in possession of any portion of the InTouch
Real Property other than InTouch, whether as sublessees, subtenants at will or
trespassers.
4.13 LEASES. Schedule 4.13 hereto sets forth a list of all leases
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pursuant to which InTouch leases, as lessor or lessee, real or personal property
used in operating the InTouch Business or otherwise (the "InTouch Leases").
Copies of the InTouch Leases, all of which have previously been provided to
Parent, are true and complete copies thereof. Except as set forth on Schedule
4.13, all of the InTouch Leases are valid, binding and enforceable against
InTouch and, to the knowledge of InTouch, against the other parties thereto, in
accordance with their respective terms, and there is not under any such InTouch
Lease any existing default by InTouch, or, to the knowledge of InTouch, by any
other party thereto, or any condition or event that, with notice or lapse of
time or both, would constitute a default with respect to InTouch, or to the
knowledge of InTouch, any other party thereto. InTouch has not received notice
that the lessor of any of the InTouch Leases intends to cancel, suspend or
terminate such InTouch Lease or to exercise or not exercise any option
thereunder.
4.14 CONTRACTS. Schedule 4.14 hereto sets forth a true and complete list
-------------
of all contracts, agreements and commitments (whether written or oral) to which
InTouch is, directly or indirectly, a party (in its own name or as a successor
in interest), or by which it or any of its properties or assets is otherwise
bound, including, without limitation, any service agreements, customer
agreements, supplier agreements, agreements to lend or borrow money, shareholder
agreements, employment agreements, agreements relating to InTouch Intellectual
Property Rights and the like (collectively, but excluding the contracts,
agreements and commitments hereafter excepted, the "InTouch Contracts");
excepting only those contracts, agreements and commitments which involve less
than $10,000 and are cancelable, without penalty, on no more than 90 days'
notice. The aggregate value of all payment obligations and rights to receive
payments, under agreements, contracts and commitments (whether oral or in
writing) to which InTouch is a party or by which it or any of its properties is
otherwise bound, and that are not listed on Schedule 4.14, is less than $50,000
-------------
(calculating such value by adding together the value of rights and obligations,
and not by determining the net amount thereof).
True and complete copies of all InTouch Contracts (or a true and complete
narrative description of any oral InTouch Contract) have previously been
provided to Parent. Neither InTouch nor, to the knowledge of InTouch, any other
party to any of the InTouch Contracts (x) is in default under (nor does there
exist any condition that, with notice or lapse of time or both,
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<PAGE>
would cause such a default under) any of the InTouch Contracts, or (y) has
waived any right it may have under any of the InTouch Contracts, the waiver of
which would have a material adverse effect on the business, assets or financial
condition of InTouch. All of the InTouch Contracts constitute the valid and
binding obligations of InTouch, enforceable in accordance with their respective
terms, and, to the knowledge of InTouch, of the other parties thereto.
4.15 DIRECTORS AND OFFICERS. Schedule 4.15 hereto sets forth a list, as
-------------
of the Closing Date, of the name of each director and officer of InTouch and the
position(s) held by each.
4.16 PAYROLL INFORMATION. Attached hereto as Schedule 4.16 is a true
-------------
and complete copy of the payroll report of InTouch dated April 30, 1998, showing
all current employees of InTouch and their current levels of compensation, other
than bonuses and other extraordinary compensation. InTouch has paid all
compensation required to be paid to employees of InTouch on or prior to the date
hereof other than compensation accrued in the current pay period.
4.17 LITIGATION. Except as set forth on Schedule 4.17 hereto, there
-------------
is no suit, action, claim, investigation or proceeding pending or, to the
knowledge of InTouch, threatened against or affecting InTouch or the InTouch
Business, nor is there any judgment, decree, injunction or order of any
applicable Governmental Entity or arbitrator outstanding against InTouch.
4.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 4.18 hereto, there are no
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employee benefit plans, agreements or arrangements maintained by InTouch,
including, without limitation, (i) "employee benefit plans" within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"); (ii) current or deferred compensation, pension, profit
sharing, vacation or severance plans or programs; or (iii) medical, hospital,
accident, disability or death benefit plans (collectively, "InTouch Benefit
Plans"). All InTouch Benefit Plans are administered in accordance with, and are
in material compliance with, all applicable laws and regulations. No default
exists with respect to the obligations of InTouch under any InTouch Benefit
Plan.
(b) InTouch is not a party to any collective bargaining agreement; no
collective bargaining agent has been certified as a representative of any of the
employees of InTouch; no representation campaign or election is now in progress
with respect to any employee of InTouch; and there are no labor disputes,
grievances, controversies, strikes or requests for union representation pending,
or, to the knowledge of InTouch, threatened, relating to or affecting the
InTouch Business. To the knowledge of InTouch, no event has occurred that could
give rise to any such dispute, controversy, strike or request for
representation.
4.19 ERISA.
(a) All InTouch Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the InTouch Benefit Plans that is
intended to meet the requirements of
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Section 401(a) of the Code has been determined by the Internal Revenue Service
to meet such requirements within the meaning of such provision. No InTouch
Benefit Plan is subject to Title IV of ERISA or Section 412 of the Code. InTouch
has not engaged in any nonexempt "prohibited transactions," as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, involving InTouch
Benefit Plans that would subject InTouch to the penalty or tax imposed under
Section 502(i) of ERISA or Section 4975 of the Code. InTouch has not engaged in
any transaction described in Section 4069 of ERISA within the last five years.
Except as disclosed in Schedule 4.19 hereto or pursuant to the terms of the
-------------
InTouch Benefit Plans, neither the execution and delivery hereof nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation or
golden parachute) becoming due to any director or other employee of InTouch,
(ii) increase any benefit otherwise payable under any InTouch Benefit Plan or
(iii) result in the acceleration of the time of payment or vesting of any such
benefit to any extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA, for which the 30-day reporting requirement has not been waived,
has been required to be filed for any InTouch Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code, or by any
entity that is considered one employer with InTouch under Section 4001 of ERISA
or Section 414 of the Code, within the 12-month period ending on the Closing
Date. InTouch has not incurred any liability to the Pension Benefit Guaranty
Corporation in respect of any InTouch Benefit Plan that remains unpaid.
4.20 TAXES.
(a) InTouch has duly and timely filed all federal, state and local
income, franchise, excise, real and personal property and other tax returns and
reports, including extensions, required to have been filed by InTouch on or
prior to the Closing Date. InTouch has duly and timely paid all taxes and other
governmental charges, and all interest and penalties with respect thereto,
required to be paid by InTouch (whether by way of withholding or otherwise) to
any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the InTouch Financial Statements). As of the Closing Date, all
deficiencies proposed as a result of any audit have been paid or settled.
(b) InTouch is not a party to, or bound by, or otherwise in any
way obligated under, any tax sharing or similar agreement.
(c) InTouch has not consented to have the provisions of Section
341(f)(2) of the Code (or comparable state law provisions) apply to it, and
InTouch has not agreed or been requested to make any adjustment under Section
481(c) of the Code by reason of a change in accounting method or otherwise.
4.21 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth on Schedule
--------
4.21, InTouch holds all material permits, licenses, variances, exemptions,
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orders and approvals of all Governmental Entities necessary to own, lease or
operate all of the assets and properties of
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<PAGE>
InTouch, as appropriate, and to carry on the InTouch Business as now conducted
(the "InTouch Permits"). To the knowledge of InTouch, InTouch is in material
compliance with all applicable laws, ordinances and regulations and the terms of
the InTouch Permits. Except as set forth on Schedule 4.21 hereto, all of the
-------------
InTouch Permits are fully assignable by InTouch in connection with the Merger.
Schedule 4.21 hereto sets forth a true and complete list of all InTouch Permits,
- -------------
true and complete copies of which have previously been provided to Parent.
4.22 BOARD OF DIRECTORS/SHAREHOLDER CONSENT. Both the Board of
Directors of InTouch and the InTouch Shareholders have adopted and approved this
Agreement and the transactions contemplated hereby (including, without
limitation, the Merger).
4.23 BROKERS. Except as set forth on Schedule 4.23 hereto, no broker
-------------
or finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of InTouch.
4.24 ENVIRONMENTAL MATTERS.
(a) To the knowledge of InTouch, no real property currently or
formerly owned or operated by InTouch is contaminated with any Hazardous
Substance (as hereinafter defined);
(b) InTouch is not a party to any litigation or administrative
proceeding nor, to the knowledge of InTouch, is any litigation or administrative
proceeding threatened against it, that, in either case, asserts or alleges that
InTouch (i) violated any Environmental Law (as hereinafter defined); (ii) is
required to clean up, remove or take remedial or other responsive action due to
the disposal, deposit, discharge, leak or other release of any Hazardous
Substance; or (iii) is required to pay all or a portion of the cost of any past,
present or future cleanup, removal or remedial or other action that arises out
of or is related to the disposal, deposit, discharge, leak or other release of
any Hazardous Substance.
(c) To the knowledge of InTouch, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by InTouch containing materials that, if known
to be present in soil or ground water, would require cleanup, removal or other
remedial action under Environmental Law.
(d) To the knowledge of InTouch, InTouch is not subject to any
judgment, order or citation related to or arising out of any Environmental Law
and has not been named or listed as a potentially responsible party by any
Governmental Entity in a matter related to or arising out of any Environmental
Law.
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
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<PAGE>
hazardous substance that is regulated by or under authority of any Environmental
Law, including, without limitation, any petroleum products, asbestos or
polychlorinated biphenyls.
4.25 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as
provided in Schedule 4.25 hereto, no officer, director, shareholder or employee
-------------
of InTouch and no family member (including a spouse, parent, sibling or lineal
descendent of any of the foregoing), has any direct or indirect material
interest in any material customer, supplier or competitor of InTouch, or in any
Person from whom or to whom InTouch leases any real or personal property, or in
any other Person with whom InTouch is doing business whether directly or
indirectly (including, without limitation, as a debtor or creditor), whether in
existence as of the Closing Date or proposed, other than the ownership of stock
of publicly traded corporations.
4.26 ACCOUNTS RECEIVABLE. All accounts, notes, contracts and other
receivables of InTouch (collectively, "InTouch Accounts Receivable") were
acquired by InTouch in the ordinary course of business arising from bona fide
transactions. To the knowledge of InTouch, there are no set-offs, counterclaims
or disputes asserted with respect to any InTouch Accounts Receivable that would
result in claims in excess of $10,000 in the aggregate and, to the knowledge of
InTouch and subject to such $10,000 figure, all InTouch Accounts Receivable are
collectible in full. InTouch has previously provided Parent with a true and
complete aging report prepared as of March 31, 1998 which shows the time elapsed
since invoice date for all InTouch Accounts Receivable as of such date.
4.27 ACCOUNTS PAYABLE. All material accounts, notes, contracts and other
amounts payable of InTouch (collectively, "InTouch Accounts Payable") are
currently within their respective terms, and are neither in default nor
otherwise past due by more than 90 days. InTouch has previously provided Parent
with a true and complete aging report prepared as of March 31, 1998 which shows
the time elapsed since invoice date for all InTouch Accounts Payable as of such
date.
4.28 INSURANCE. True and complete copies of the insurance policies listed
on Schedule 4.28 hereto (the "InTouch Insurance Policies") have previously been
-------------
provided to Parent. InTouch (a) is not in default regarding the provisions of
any InTouch Insurance Policy; (b) has paid all premiums due thereunder; and (c)
has not failed to present any notice or material claim thereunder in a due and
timely fashion.
4.29 BANKRUPTCY. InTouch has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 INTOUCH DEBT. As of the date hereof, there is no InTouch Debt.
4.31 INVESTMENT PURPOSE; ACCREDITED INVESTORS OR PURCHASER REPRESENTATIVE.
(a) Each InTouch Shareholder receiving Parent Stock in the Merger represents
that he (i) is acquiring the Parent Stock solely for his own account for
investment and not with a view to, or
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<PAGE>
for sale in connection with, any distribution thereof; and (ii) will not,
directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise
dispose of any Parent Stock (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of any such shares) except in compliance with the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations thereunder, other applicable laws, rules and regulations, and the
Second Amended and Restated Stockholders' Agreement of Parent, dated December
17, 1997 (as amended, the "Stockholders' Agreement"); (b) Each InTouch
Shareholder receiving Parent Stock in the Merger and listed on Schedule 4.31(b)
----------------
hereto further represents that he is an "accredited investor" as such term is
defined in Rule 501 of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act; and (c) Each InTouch Shareholder receiving
Parent Stock in the Merger and listed on Schedule 4.31(c) hereto further
----------------
represents that (i) Robert Ratonyi is his Purchaser representative (the
"Purchaser representative") as such term is defined in Rule 501 of Regulation D
under the Securities Act; and (ii) the Purchaser representative (A) is not an
affiliate, director, officer or other employee of Parent, or beneficial owner of
10% or more of any class of the equity securities of, or 10% or more of the
equity interest in, Parent; (B) has such knowledge and experience in financial
and business matters that he is capable of evaluating, alone, or together with
such InTouch Shareholder, the merits and risks of the prospective investment in
Parent Stock; (C) has been acknowledged by such InTouch Shareholder in writing,
during the course of the Merger, to be his purchaser representative in
connection with evaluating the merits and risks of the prospective investment in
Parent Stock; and (D) has disclosed to such InTouch Shareholder in writing a
reasonable time prior to the Closing any material relationship between the
Purchaser representative or his affiliates and Parent or its affiliates that
exists, is mutually understood to be contemplated, or has existed at any time
during the previous two years, and any compensation received or to be received
as a result of such relationship.
4.32 RESTRICTIONS ON TRANSFER. Each InTouch Shareholder receiving Parent
Stock in the Merger acknowledges that (a) the Parent Stock received by him
hereunder has not been registered under the Securities Act; (b) the Parent Stock
may be required to be held indefinitely, and he must continue to bear the
economic risk of the investment in such shares unless such shares are
subsequently registered under the Securities Act or an exemption from such
registration is available; (c) there may not be any public market for the Parent
Stock in the foreseeable future; (d) Rule 144 promulgated under the Securities
Act is not presently available with respect to sales of any securities of
Parent, and such Rule is not anticipated to be available in the foreseeable
future; (e) when and if Parent Stock may be disposed of without registration in
reliance upon Rule 144, such disposition can be made only in limited amounts and
in accordance with the terms and conditions of such Rule; (f) if the exemption
afforded by Rule 144 is not available, public sale without registration will
require the availability of an exemption under the Securities Act; (g) the
Parent Stock is subject to the terms and conditions of the Stockholders'
Agreement; (h) restrictive legends shall be placed on the certificates
representing Parent Stock; and (i) a notation shall be made in the appropriate
records of Parent indicating that Parent Stock is subject to restrictions on
transfer and, if Parent should in the future engage the services of a stock
transfer agent, appropriate stop-transfer instructions will be issued to such
transfer agent with respect to Parent Stock.
4.33 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION. (a) Each
InTouch Shareholder receiving Parent Stock in the Merger represents and warrants
that (i) his financial
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situation is such that he can afford to bear the economic risk of holding Parent
Stock acquired by him hereunder for an indefinite period; and (ii) he can afford
to suffer the complete loss of such Parent Stock.; (b) Each InTouch Shareholder
receiving Parent Stock in the Merger and listed on Schedule 4.31(b) hereto
----------------
further represents that (i) he has been granted the opportunity to ask questions
of, and receive answers from, representatives of Parent concerning the terms and
conditions of the Parent Stock and to obtain any additional information that he
deems necessary; (ii) his knowledge and experience in financial business matters
is such that he is capable of evaluating the merits and risk of ownership of the
Parent Stock; (iii) he has carefully reviewed the terms of the Stockholders'
Agreement and has evaluated the restrictions and obligations contained therein;
and (iv) he (A) has reviewed the Private Placement Memorandum of Parent dated
May 7, 1998 (the "Memorandum"); (B) has carefully examined the Memorandum and
has had an opportunity to ask questions of, and receive answers from,
representatives of Parent, and to obtain additional information concerning
Parent and its Subsidiaries (as hereinafter defined); and (C) does not require
additional information regarding Parent or its Subsidiaries in connection with
the merger; and (c) Each InTouch Shareholder receiving Parent Stock in the
Merger and listed on Schedule 4.31(c) hereto further represents that, either
----------------
alone or with the Purchaser representative, (i) he has been granted the
opportunity to ask questions of, and receive answers from, representatives of
Parent concerning the terms and conditions of the Parent Stock and to obtain any
additional information that he deems necessary; (ii) his knowledge and
experience in financial business matters is such that he is capable of
evaluating the merits and risk of ownership of the Parent Stock; (iii) he has
carefully reviewed the terms of the Stockholders' Agreement and has evaluated
the restrictions and obligations contained therein; and (iv) he (A) has reviewed
the Memorandum; (B) has carefully examined the Memorandum and has had an
opportunity to ask questions of, and receive answers from, representatives of
Parent, and to obtain additional information concerning Parent and its
Subsidiaries; and (C) does not require additional information regarding Parent
or its Subsidiaries in connection with the Merger.
4.34 DISCLOSURE. No statement of fact by InTouch or any InTouch
Shareholder contained herein and no written statement of fact furnished by
InTouch or any InTouch Shareholder to Parent or Sub in connection herewith
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein contained not
materially misleading; provided, that no representation or warranty is made with
respect to any projections provided by InTouch to Parent or Sub.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants
to InTouch and the InTouch Shareholders, which representations and warranties
shall survive the Closing in accordance with Section 10. 1 hereof, as follows:
5.1 ORGANIZATION AND QUALIFICATION. Each of Parent and its
Subsidiaries (as defined in Section 10.11 hereof) is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. Each of Parent and its Subsidiaries has the requisite
corporate power and authority to carry on its business as it is now being
conducted and
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<PAGE>
is duly qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached as Schedule 5.1 hereto.
------------
5.2 AUTHORITY. Each of Parent and Sub has the necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by InTouch and the InTouch Shareholders,
constitutes the valid and binding obligation of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms,
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
5.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
- ------------
Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Parent or Sub, or the organizational documents of any other
Subsidiaries;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to Parent or its Subsidiaries,
or by which Parent, any of its Subsidiaries, or their respective properties or
assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for
(x) compliance with any applicable requirements of any applicable securities
laws, and (y) the filing of the Certificate of Merger pursuant to the DGCL and
the NBCA); or (ii) any other Person.
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5.4 LITIGATION. Except as set forth on Schedule 5.4 hereto, there is
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no suit, action, claim, investigation or proceeding pending or, to the knowledge
of Parent, threatened against or affecting Parent or its Subsidiaries, nor is
there any judgment, decree, injunction or order of any applicable Governmental
Entity or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 BROKERS. Except as disclosed on Schedule 5.5 hereto, no broker or
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finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Parent or Sub.
5.6 PARENT STOCK.
(a) As of the date hereof the authorized capital stock of Parent
consists of (I) (A) 75,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 9,024,210 shares are
validly issued and outstanding (without taking into account any shares of Parent
Stock to be issued (I) pursuant to this Agreement, (II) pursuant to the
Agreement and Plan of Merger, dated on or about May 12, 1998 among Parent, iXL-
Los Angeles, Inc., Digital Planet, a California corporation ("Digital") and the
shareholders of Digital identified therein (the "Digital Merger"), which
agreement is anticipated to close on or about May 12, 1998, or (III) pursuant to
the Agreement and Plan of Merger, dated as of May 4, 1998 among Parent, iXL-New
York, Inc., Micro Interactive, Inc. ("Micro") and the shareholders of Micro
identified therein (the "Micro Merger"), which agreement is anticipated to close
on or about May 15, 1998), fully paid and nonassessable; (ii) 750,000 shares of
blank check preferred stock, (A) 250,000 of which have been designated as Class
A Convertible Preferred Stock, of which 172,452 shares are validly issued and
outstanding, fully paid and nonassessable, (B) 200,000 of which have been
designated as Class B Convertible Preferred Stock, of which 98,767 shares are
validly issued and outstanding, fully paid and nonassessable, and (C) 15,000 of
which have been designated as Class C Convertible Preferred Stock, of which
9,232 shares are validly issued and outstanding, fully paid and nonassessable.
Except as set forth on Schedule 5.6 hereto, there are no options, warrants,
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calls, agreements, commitments or other rights presently outstanding that would
obligate Parent to issue, deliver or sell shares of its capital stock, or to
grant, extend or enter into any such option, warrant, call, agreement,
commitment or other right. In addition to the foregoing, as of the Closing
Date, Parent has no bonds, debentures, notes or other indebtedness issued or
outstanding that have voting rights in Parent.
(b) The outstanding shares of capital stock of Parent at the
Effective Time are set forth on a pro forma basis on Schedule 5.6 hereto.
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(c) When delivered to the InTouch Shareholders in accordance with the
terms hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (b) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
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5.7 SUBSIDIARIES. Except as set forth on Schedule 5.7 hereto, Parent has
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no subsidiaries and does not otherwise own or control, directly or indirectly,
any equity interest in, or any security convertible into an equity interest in,
any Entity. Schedule 5.7 hereto lists the name of each of the Subsidiaries of
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Parent, and indicates their respective jurisdictions of incorporation. All of
the issued and outstanding shares of capital stock of each of the Subsidiaries
of Parent is duly authorized, validly issued, fully paid and non-assessable and
is owned by Parent free and clear of all Liens; and there are no voting trusts,
voting agreements or similar understandings applicable to such shares. There are
no outstanding subscriptions, options, rights, warrants, puts, calls,
registration or other agreements or commitments of any type (i) obligating
Parent or any of its Subsidiaries to issue, sell or transfer any shares of
capital stock of any Subsidiary, any securities convertible into or exchangeable
for shares of capital stock of any Subsidiary or any right to acquire capital
stock of any Subsidiary; (ii) obligating Parent to grant, offer or enter into
any of the foregoing; or (iii) relating to the voting or control of any shares
of capital stock of any Subsidiary.
5.8 FINANCIAL STATEMENTS. Parent has heretofore furnished InTouch with a
true and complete copy of (a) the audited financial statements of iXL
Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31,
1993, 1994 and 1995, and for the four-month period ended April 30, 1996; (b)
audited combined financial statements for Creative Video, Inc. (n/k/a iXL,
Inc.), Creative Video Library, Inc. and Entrepreneur Television, Inc. for the
years ended December 31, 1993, 1994 and 1995, and for the four-month period
ended April 30, 1996; (c) the audited consolidated financial statements for
Parent and its Subsidiaries for the eight months ended December 31, 1996; (d)
the audited consolidated financial statements for Parent and its Subsidiaries,
dated December 31, 1997; and (e) the unaudited consolidated financial statements
for Parent and its Subsidiaries dated March 31, 1998 (all of the foregoing,
collectively, "Parent Financial Statements"). The Parent Financial Statements
present fairly in all material respects the consolidated financial position,
results of operations, shareholders' equity and cash flow of Parent at the
respective dates or for the respective periods to which they apply. Except as
disclosed therein, such statements and related notes have been prepared in
accordance with GAAP consistently applied throughout the periods involved
(except, in the case of the unaudited financial statements, for the exclusion of
footnotes and normal year end adjustments).
5.9 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 5.9 hereto,
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neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997 that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Parent and its Subsidiaries, taken as a whole; (b) liabilities reflected on
the Parent Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
5.10 COMPLIANCE WITH APPLICABLE LAWS. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To
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the knowledge of Parent, Parent and its Subsidiaries are in material compliance
with all applicable laws, ordinances and regulations and the terms of the Parent
Permits.
5.11 BOARD OF DIRECTORS/SHAREHOLDER CONSENT. Both the Board of Directors of
Parent and the Board of Directors and shareholder of Sub have, by unanimous
written consent, adopted and approved this Agreement and the transactions
contemplated hereby (including, without limitation, the Merger).
5.12 BANKRUPTCY. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 ABSENCE OF CHANGES. Except as provided in Schedule 5.13 hereto, since
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December 31, 1997, there has not been (a) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
material change in Parent's accounting principles, practices or methods; (f) any
split, combination or reclassification of any of Parent's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Parent's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
5.14 TAXES. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent and
its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the Closing Date,
all deficiencies proposed as a result of any audits have been paid or settled.
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5.15 DISCLOSURE. No statement of fact by Parent or Sub contained herein and
no written statement of fact furnished or to be furnished by Parent or Sub to
InTouch in connection herewith (including, without limitation, statements
contained in the Memorandum) contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements herein or therein contained not misleading.
5.16 TAX FREE REORGANIZATION.
(a) At all times prior to the Merger, Parent has owned all of the
outstanding equity interests in Sub (including rights to acquire an equity
interest in Sub, if any). Accordingly, both prior to and immediately after the
Merger, Parent will be in control of Sub within the meaning of Section 368(c) of
the Code. "Control" for these purposes means the ownership of stock possessing
at least eighty percent (80%) of the total combined voting power of all classes
of stock entitled to vote and at least eighty percent (80%) of the total number
of shares of each class of nonvoting stock. Following the Merger, Parent has no
plan or intention to cause Sub to issue additional equity interests that would
result in Parent losing "Control," as defined above, of Sub.
(b) After the Merger, Parent will own 100% of the outstanding equity
interest in Sub (including the right to acquire such an equity interest). Parent
has no plan or intention to liquidate Sub, to merge Sub with or into another
operation (including Parent), to sell, transfer ownership, or otherwise dispose
of or transfer any portion of its assets (including those assets acquired from
InTouch) to any person or entity (including Parent), except for dispositions
made in the ordinary course of business or transfers of assets to a corporation
controlled by Sub (including payments to dissenters ("Permissible Transfers").
(c) Parent intends that, following the Merger, it will cause Sub
either to continue InTouch's historic business or to continue to use a
significant portion of InTouch's historic business assets in a business;
provided, however, to the extent that the business or assets of InTouch are
subject to a Permissible Transfer, Parent intends that the transferee will
continue the historic business of InTouch or use a significant portion of
InTouch's assets in a business.
(d) Neither Parent nor Sub is an "investment company" as defined in
Section 368(a)(2)(F)(ii) and (iv) of the Code.
(e) Neither Parent nor Sub is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368 (a)(3)(A) of the
Code.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 CONDUCT OF BUSINESS BY INTOUCH PENDING THE MERGER. From and after the
date hereof, prior to the Effective Time, except as contemplated hereby, unless
Parent shall otherwise agree in writing, InTouch shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, use reasonable efforts to preserve intact
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its present business organization, keep available the services of its employees
and preserve its relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with InTouch to the end that
its goodwill and on-going businesses shall not be impaired in any material
respect at the Effective Time. Without limiting the generality of the foregoing,
and except as contemplated hereby, unless Parent shall otherwise agree in
writing, prior to the Effective Time, InTouch shall not, directly or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire, any share of
capital stock of InTouch or any other equity security thereof or any right,
warrant, or option to acquire any such share or other security;
(b) issue, deliver, sell, pledge or otherwise encumber any share of
its capital stock, any other voting security issued by InTouch or any security
convertible into, or any right, warrant or option to acquire any such share or
voting security;
(c) amend its Articles of Incorporation, Bylaws or other
comparable organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to InTouch;
(e) subject to a Lien or sell, lease or otherwise dispose of any
of its properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of InTouch,
guarantee any debt security of another Person or enter into any "keep well" or
other agreement to maintain the financial condition of another Person, make any
loan, advance or capital contribution to, or investment in, any other Person, or
settle or compromise any material claim or litigation; or
(g) authorize any of, or commit or agree to take any of, the
foregoing actions.
6.2 ACCESS TO INFORMATION. From the date hereof through the
Effective Time, InTouch shall afford to Parent and Parent's accountants, counsel
and other representatives reasonable access during normal business hours (and at
such other times as the parties may mutually agree) upon reasonable prior notice
and approval of InTouch, which shall not be unreasonably withheld, to its
properties, books, contracts, commitments, records and personnel and, during
such period, shall furnish promptly to Parent all information concerning its
business, properties and personnel as Parent may reasonably request. Parent and
its accountants, counsel and other representatives shall, in the exercise of the
rights described in this Section 6.2, not unduly interfere with the operation of
the business of InTouch.
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6.3 FILINGS; TAX ELECTIONS. InTouch shall promptly provide Parent with
copies of all filings made by InTouch with any Governmental Entity in connection
herewith and the transactions contemplated hereby. InTouch shall, before
settling or compromising any material income tax liability of InTouch, consult
with Parent and its advisors as to the positions and elections that will be
taken or made with respect to such matter.
6.4 PUBLIC ANNOUNCEMENTS. The parties agree that, except as may
otherwise be required to comply with applicable laws and regulations (including
applicable securities laws) or to obtain consents required hereunder, public
disclosure of the transactions contemplated hereby shall be made only upon or
after the consummation of the Merger. Any such disclosure shall be coordinated
by Parent and, except as required by law, shall not disclose the financial terms
of the transaction. None of the InTouch Shareholders shall make any such
disclosure without the prior written consent of Parent.
6.5 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND EXPENSES. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 OPTIONS. At the Effective Time, Parent will issue options to purchase
30,000 shares of validly issued, fully paid and nonassessable Parent Stock, at
an exercise price of $10.00 per share and subject to a five year, 20% per year
vesting schedule, to those Persons listed on Schedule 6.6 hereto (provided that
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they become employees of Sub; or to such other individuals as are selected by
InTouch and approved by Parent), pursuant to the Parent's 1996 Stock Option
Plan, as amended.
6.7 FURTHER ASSURANCES. From time to time after the Effective Time, upon
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof.
6.8 PURCHASER REPRESENTATIVE. With respect to the InTouch Shareholders
receiving Parent Stock in the Merger and listed on Schedule 4.31(c) as not being
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accredited investors, (a) the Purchaser representative shall furnish to Parent,
to Parent's satisfaction, a completed Purchaser Representative Questionnaire,
substantially in the form of Exhibit "H" hereto; and (b) each such InTouch
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Shareholder shall furnish to Parent a signed Purchaser Acknowledgement in
connection therewith.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATION OF INTOUCH AND THE INTOUCH SHAREHOLDERS TO
EFFECT THE MERGER. The obligation of InTouch and the InTouch Shareholders to
effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions:
(a) Parent and Sub shall have performed in all material respects
their respective agreements contained herein required to be performed at or
prior to the Effective Time, and the representations and warranties of Parent
and Sub contained herein shall be true in all material respects when made and
(except for representations and warranties made as of a specified date, which
need only be true as of such date) at and as of the Effective Time as if made at
and as of such time, except as contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to InTouch at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-1" hereto, and (ii) the
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appropriate officers of Sub shall have executed and delivered to InTouch at the
Closing, a closing certificate and incumbency certificate, substantially in the
form of Exhibit "A-2" hereto;
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(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
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(d) InTouch shall have received corporate certificates of good
standing for Parent and Sub, and a copy of the Certificate of Incorporation for
Parent and Sub, respectively, both as certified by the Secretary of State of
Delaware;
(e) there shall have been delivered to each of the InTouch
Shareholders at the Closing, duly executed by Parent, an Agreement to be Bound
to the Registration Rights Agreement of Parent, dated as of Closing Date (the
"Agreement to be Bound to the Registration Rights Agreement"), substantially in
the form of Exhibit "B" hereto;
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(f) Parent shall have executed and delivered at the Closing an Option
Agreement for each of the Persons listed on Schedule 6.6 hereto receiving
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options to purchase Parent Stock, substantially in the form of Exhibit "C"
-----------
hereto;
(g) InTouch shall have received, at the Closing, a duly executed
opinion of counsel to Parent and Sub, substantially in the form of Exhibit "D"
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hereto; and
(h) InTouch shall have received from Parent and Sub such other
documents as InTouch's counsel shall have reasonably requested, in form and
substance reasonably satisfactory to InTouch's counsel.
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7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) InTouch and the InTouch Shareholders shall have performed in all
material respects their respective agreements contained herein required to be
performed at or prior to the Effective Time, and the representations and
warranties of InTouch and the InTouch Shareholders contained herein shall be
true in all material respects when made and (except for representations and
warranties made as of a specified date, which need only be true as of such date)
at and as of the Effective Time as if made at and as of such time, except as
contemplated hereby;
(b) the appropriate officers of InTouch shall have executed and
delivered to Parent at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "E" hereto;
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(c) InTouch and the InTouch Shareholders shall have obtained or
caused to be obtained all of the Consents, if any, listed on Schedule 7.2(d)
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hereto;
(d) there shall have been delivered to Parent at the Closing, duly
executed by each of the InTouch Shareholders receiving Parent Stock in the
Merger, (i) an Agreement to be Bound to the Stockholders' Agreement,
substantially in the form of Exhibit "F" hereto; and (ii) an Agreement to be
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Bound to the Registration Rights Agreement, substantially in the form of Exhibit
-------
"B" hereto;
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(e) Parent shall have received a corporate certificate of good
standing for InTouch, and a copy of the Articles of Incorporation of InTouch,
both as certified by the Secretary of State of North Carolina;
(f) as of the date three business days prior to the Closing Date
there shall be no InTouch Debt;
(g) InTouch shall have furnished evidence to Parent's satisfaction of
performance under Section 6.8 hereof;
(h) Parent shall have received, at the Closing, a duly executed
opinion of counsel to InTouch and the InTouch Shareholders, substantially in the
form of Exhibit "G" hereto;
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(i) Parent shall have received from InTouch a duly authorized tax
clearance certificate, in form and substance acceptable to Parent, indicating
that no taxes are owed by InTouch to state or local taxing authorities in the
State of North Carolina;
(j) Parent shall have received from InTouch or the InTouch
Shareholders, as the case may be, such other documents as Parent's counsel shall
have reasonably requested, in form and substance reasonably satisfactory to
Parent's counsel; and
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(k) Parent shall have received evidence satisfactory to it that at
the Closing the assets and properties used in the InTouch Business are free and
clear of all Liens other than Permitted Liens.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY PARENT.
(a) Parent shall indemnify and hold the InTouch Shareholders and
InTouch's directors, officers and employees (collectively, the "InTouch
Indemnified Parties") harmless from and against, and agree promptly to defend
each of the InTouch Indemnified Parties from and reimburse each of the InTouch
Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including, without limitation,
reasonable attorney fees and other legal costs and expenses) (collectively, an
"InTouch Loss") that any of the InTouch Indemnified Parties may at any time
suffer or incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Parent or Sub at the Closing in accordance
with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform, satisfy
and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations hereunder or under any of the documents and materials
delivered by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in
any way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary,
Parent shall not have any liability under Section 8.1(a)(i) above (i) unless the
aggregate of all InTouch Losses for which Parent would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $50,000, and then
only to the extent of such excess, (ii) for amounts in excess of $1,200,000 in
the aggregate, and (iii) unless the InTouch Shareholders have asserted a claim
with respect to the matters set forth in Section 8.1(a)(i), or 8.1(a)(iii) to
the extent applicable to Section 8.1(a)(i), within two years of the Effective
Time. Notwithstanding any implication to the contrary contained herein, the
parties acknowledge and agree that a decrease in the value of Parent Stock would
not, by itself, constitute a InTouch Loss, unless and to the extent a decrease
in the value of Parent Stock has been demonstrated to be as a result of any
event described in Sections 8.1(a)(i), (ii) or (iii) above.
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8.2 INDEMNIFICATION BY THE INTOUCH SHAREHOLDERS.
(a) The InTouch Shareholders shall, jointly and severally, indemnify
and hold Parent, Sub, Surviving Corporation and their respective shareholders,
directors, officers and employees (collectively, the "Parent Indemnified
Parties") harmless from and against, and agree to defend promptly each of the
Parent Indemnified Parties from and reimburse each of the Parent Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including, without limitation, reasonable
attorneys' fees and other reasonable legal costs and expenses) (collectively, a
"Parent Loss") that any of the Parent Indemnified Parties may at any time suffer
or incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by InTouch or the InTouch Shareholders in or pursuant hereto, or
in any instrument, certificate or affidavit delivered by any of the same at the
Closing in accordance with the provisions hereof;
(ii) any failure by InTouch or any of the InTouch Shareholders
to carry out, perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations hereunder or under any of
the documents and materials delivered by InTouch pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in
any way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above, none of the InTouch Shareholders shall
have any liability under Section 8.2(a) above (i) unless the aggregate of all
Parent Losses for which the InTouch Shareholders would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $75,000, and then
only to the extent of such excess, (ii) for amounts in excess of $1,200,000 in
the aggregate, and (iii) unless Parent has asserted a claim with respect to the
matters set forth in Sections 8.2(a)(i) or (ii), or 8.2(a)(iii) (to the extent
applicable to Section 8.2(a)(i) or (ii) within two years of the Effective Time,
except with respect to the matters arising under Sections 4.19 or 4.24 hereof,
in which event Parent must have asserted a claim within three years of the
Effective Time, and matters arising under Section 4.20 hereof, in which event
Parent must have asserted a claim within forty-two months of the Effective Time.
Notwithstanding any implication to the contrary contained herein, the parties
acknowledge and agree that a decrease in the value of Parent Stock would not, by
itself, constitute a Parent Loss, unless and to the extent a decrease in the
value of Parent Stock has been demonstrated to be as a result of any event
described in Sections 8.2(a)(i), (ii) or (iii) above.
8.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND
(a) A party seeking to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the other
party (the "Indemnifying Party") in writing of any claim or demand (a "Claim")
that the Indemnified Party has determined has given or could give rise to a
right of indemnification hereunder, including in its notice a description of the
facts that are the basis of the claim. The Indemnifying Party shall satisfy its
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obligations under this Article VIII within 30 days after a final determination
(including a settlement) has been reached with respect to any Claim contested
pursuant to this Section 8.3(a). Any amounts paid thereafter shall include
interest thereon for the period commencing at the end of such 30-day period and
ending on the actual date of payment, at a rate of 10% per annum, or, if lower,
at the highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party, the Indemnifying
Party shall have the right, at its sole cost and expense, to employ counsel of
its own choosing to defend and settle any such Claim asserted against the
Indemnified Party. Notwithstanding anything to the contrary in the preceding
sentence, if the Indemnified Party (i) has received advice from legal counsel
that its interests with respect to a Claim (or any material portion thereof) are
in conflict with the interests of the Indemnifying Party with respect to such
Claim (or portion thereof), and (ii) promptly notifies the Indemnifying Party,
in writing, of the nature of such conflict, then the Indemnified Party shall be
entitled to choose, at the sole cost and expense of the Indemnifying Party,
independent counsel to defend such Claim (or the conflicting portion thereof).
The Indemnified Party shall have the right to participate in the defense of any
Claim at its own expense (except to the extent provided in the preceding
sentence), but the Indemnifying Party shall retain control over such litigation
(except as provided in the preceding sentence). In the event that within 10 days
after notice of any such third party Claim, the Indemnifying Party has not
notified the Indemnified Party of its intention to defend the third party Claim,
the Indemnified Party shall have the right to undertake the defense or
settlement of such Claim. In such event, (i) the Indemnifying Party may elect to
participate in such defense or any settlement negotiations at its sole expense
and (ii) the Indemnified Party may not settle such third party Claim without the
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld or delayed. Notwithstanding the foregoing, the Indemnifying Party may
not settle any third party Claim without the consent of the Indemnified Party,
which consent shall not be unreasonably withheld or delayed; provided, that the
Indemnified Party shall be deemed to have consented to a proposed settlement if
such settlement (i) includes as an unconditional term thereof a release of the
Indemnified Party from all liability in respect of such Claim, and (ii) involves
as the sole relief the payment by the Indemnifying Party of money damages. The
Indemnified Party shall cooperate with the Indemnifying Party in connection with
any such defense and shall make available to the Indemnifying Party or its
agents all records and other materials in the Indemnified Party's possession
reasonably required by it for its use in contesting any third party Claim;
provided, however, that the Indemnifying Party shall have agreed, in writing, to
keep such records and other materials confidential except (i) to the extent
required for defense of the relevant Claim, or (ii) as required by law or court
order. Whether or not the Indemnifying Party elects to defend any such Claim,
the Indemnified Party shall have no obligations to do so. Within 30 days after a
final determination (including a settlement) has been reached with respect to
any Claim contested pursuant to this Section 8.3(b), the Indemnifying Party
shall satisfy its obligations hereunder with respect thereto. Any amount paid
thereafter shall include interest thereon for the period commencing at the end
of such 30-day period and ending on the actual date of payment, at a rate of 10%
per annum, or, if lower, at the highest rate of interest permitted by applicable
law at the time of such payment.
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<PAGE>
8.4 OTHER INDEMNIFICATION MATTERS.
(a) An Indemnified Party under this Article VIII shall act in good
faith and in a commercially reasonable manner to mitigate any damages that it
may suffer. Notwithstanding anything in this Agreement to the contrary, in no
event shall any party be liable to any other party for punitive damages or for
any loss, expense, damage or deficiency related to such other party's negligence
or willful misconduct.
(b) The amount of any loss suffered by a party under this Agreement
shall be reduced by the amount, if any, of any insurance benefit or recovery or
the present value of any tax benefit or recovery (net of reasonable expenses,
taxes and other costs incurred in obtaining any such benefit or recovery) that
the Indemnified Party under this Agreement shall have received with respect
thereto; and if such recovery or benefit is received by an Indemnified Party
after it receives payment or other credit under this Agreement with respect to a
loss, then a refund equal in aggregate amount of the recovery, net of reasonable
expenses and taxes and other costs incurred in obtaining any such benefit or
recovery, shall be made to the Indemnifying Party. For purposes of the
foregoing, the present value of any tax benefit shall be determined solely with
respect to those future tax benefits that can be reasonably estimated by the
Indemnified Party at the time the claim is being determined and shall take into
account only those tax benefits reasonably expected to be utilized by the
Indemnified Party or an affiliate during the five taxable years following the
Effective Time (counting the taxable year in the Effective Time occurs as one of
such taxable years). The present value shall be calculated using the prevailing
interest rates established under the Code.
8.5 EXCLUSIVE REMEDY. After the Closing, the right of each party hereto to
assert indemnification claims and receive indemnification payments pursuant to
this Article VIII shall be the sole and exclusive remedy exercisable by such
party with respect to any damage, expense, claim, demand, suit, lien, penalty,
liability, judgment, or other cost or loss of any kind arising out of any breach
by the other party hereto of any representation, warranty, covenant or
obligation set forth in this Agreement, any matter of a type covered by such
indemnification, and/or any matter relating in any manner to any Hazardous
Substance or Environmental Law, and no party hereto shall have any other remedy
(statutory, equitable, common law or other) against another party hereto with
respect thereto, all such other remedies hereby being waived; provided, that the
foregoing shall not restrict the exercise of any rights or remedies with respect
to a claim or cause of action the gravamen of which is fraud.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Merger Agreement may be terminated at any time prior
to the Effective Time:
(a) by mutual written consent of Parent and InTouch;
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<PAGE>
(b) by InTouch, upon a material breach hereof on the part of Parent
or Sub which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by May 29, 1998;
(c) by Parent, upon a material breach hereof on the part of InTouch
or any of the InTouch Shareholders which has not been cured and which would
cause any condition set forth in Section 7.2 hereof to be incapable of being
satisfied by May 29, 1998;
(d) by Parent or InTouch if any court of competent jurisdiction shall
have issued, enacted, entered, promulgated or enforced any order, judgment,
decree, injunction or ruling which restrains, enjoins or otherwise prohibits the
Merger and such order, judgment, decree, injunction or ruling shall have become
final and nonappealable; or
(e) by either Parent or InTouch if the Merger shall not have been
consummated on or before May 29, 1998 (provided the terminating party is not
otherwise in material breach of its representations, warranties or obligations
hereunder).
9.2 FEES AND EXPENSES.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby (including the fees
of the InTouch Shareholders) shall be paid by the Surviving Corporation.
(b) If the Merger is not consummated for a reason other than the
willful and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
(c) If the Merger is not consummated because of a willful and
material breach hereof by any party, the nonbreaching party or parties shall be
entitled to pursue all legal and equitable remedies against the breaching party
for such breach including specific performance and all fees and expenses
incurred by the nonbreaching party or parties in connection with enforcing its
or their rights hereunder with respect to such breach shall be paid by the
breaching party.
9.3 AMENDMENT. This Merger Agreement may be amended by the parties hereto
at any time before or after approval hereof by the InTouch Shareholders, but,
after such approval, no amendment shall be made which (i) changes the form or
decreases the amount of the consideration to be received in the Merger, (ii) in
any way materially adversely affects the rights of the InTouch Shareholders, or
(iii) under applicable law would require approval of the InTouch Shareholders,
in any such case referred to in clauses (i), (ii) and (iii), without the further
approval of the InTouch Shareholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of the parties hereto, provided
that after the Effective Time, any such amendment must be signed by the former
holders of a majority of the InTouch Stock.
9.4 WAIVER. At any time prior to the Effective Time, the parties hereto
may, to the extent permitted by applicable law, (i) extend the time for the
performance of any of the
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<PAGE>
obligations or other acts of any other party hereto, (ii) waive any inaccuracies
in the representations and warranties by any other party contained herein or in
any documents delivered by any other party pursuant hereto and (iii) waive
compliance with any of the agreements of any other party or with any conditions
to its own obligations contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 SURVIVAL; RECOURSE. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof, the confidentiality obligations
contained in the first sentence of Section 10.12(b) hereof and the agreements of
the Surviving Corporation referred to in Sections 10.9 and 10.10 hereof, shall
survive the Merger (except to the extent a shorter period of time is explicitly
specified therein) and (ii) the representations and warranties made in Articles
IV and V hereof shall survive the Merger, and shall survive any independent
investigation by the parties, and any dissolution, merger or consolidation of
InTouch or Parent, and shall bind the legal representatives, assigns and
successors of InTouch, the InTouch Shareholders and Parent, for a period of two
years after the Closing Date (other than the representations and warranties
contained in Sections 4.19 and 4.24 hereof, which shall survive for three years
after the Effective Time, and the representations and warranties contained in
Section 4.20 hereof, which shall survive for forty-two months after the
Effective Time).
10.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in Person, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to InTouch : InTouch Interactive, Inc.
700 East Blvd., Ste. 4
Charlotte, NC 28203-5156
Attention: Mr. Allan Lackey
Telephone: 704/370-0667
Telecopy: 704/376-4139
With a copy to: Robinson, Bradshaw & Hinson, P.A.
101 N. Tryon St., Ste. 1900
Charlotte, NC 28246-1900
Attention: Robert Bryan, Esq.
Telephone: (704) 377-2536
Telecopy: (704) 378-4000
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<PAGE>
If to the InTouch To the address listed under the signature
Shareholders: line of the applicable InTouch Shareholder
If to Parent or Sub: IXL Holdings, Inc.
Two Park Place
1888 Emery St., 2nd Floor
Atlanta, GA 30318
Attention: Mr. James V. Sandry, Exec. V.P. and CFO
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Rd., Ste. 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Ave., 24th Floor
New York, NY 10032
Attention: James J. Connors, II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 ENTIRE AGREEMENT. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof. There are no other representations or warranties, whether
written or oral, between the parties in connection the subject matter hereof,
except as expressly set forth herein.
10.4 ASSIGNMENTS; PARTIES IN INTEREST. Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests, and
obligations of Sub hereunder may be assigned to any direct wholly owned Delaware
subsidiary of Parent without such prior consent. Subject to the preceding
sentence, this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing herein, express or implied, is intended to or
shall confer upon any Person not a party hereto any right, benefit or remedy of
any nature whatsoever under or by reason hereof, except as otherwise provided
herein.
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<PAGE>
10.5 GOVERNING LAW. This Agreement, except to the extent that the NBCA or
the DGCL is mandatorily applicable to the Merger or the rights of the InTouch
Shareholders or the other parties hereto with respect to the Merger, shall be
governed in all respects by the laws of the State of Georgia (without giving
effect to the provisions thereof relating to conflicts of law).
10.6 HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation hereof.
10.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 SEVERABILITY. If any term or other provision hereof is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions hereof shall nevertheless remain in full force
and effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.9 POST-CLOSING ACCESS. For a period of three years after the Closing
Date, the InTouch Shareholders and their agents and representatives shall have
reasonable access to the books and records of the InTouch Business.
10.10 POST-CLOSING NOTICE. To the extent the Surviving Corporation
receives written notice of any event or circumstance that materially affects any
of the InTouch Shareholders, the Surviving Corporation shall promptly notify the
affected InTouch Shareholder of such matter, information, or event and shall
provide them with copies of all relevant documentation or correspondence in
connection thereto.
10.11 CERTAIN DEFINITIONS. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the InTouch
Real Property or interfering with the ordinary conduct of any of the InTouch
Business; and (e) those Liens listed on Schedule 10.11;
--------------
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<PAGE>
(b) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's actual knowledge following
reasonable inquiry as to the matter in question, provided that any
representation or warranty stated to be made "to the knowledge of InTouch" shall
refer solely to the actual knowledge, following reasonable inquiry as to the
matter in question, of any of the InTouch Shareholders; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of
which Parent (either alone or through or together with any other Subsidiary)
owns, directly or indirectly, stock or other equity interests the holders of
which are entitled to more than 50% of the vote for the election of the board of
directors or other governing body of such Entity (including, without limitation,
Sub); provided, however, that with respect to the Parent, the terms "Subsidiary"
and "Subsidiaries" shall not include InTouch or University Netcasting, Inc.
10.12 CONFIDENTIALITY.
(a) Parent agrees that, prior to the Effective Time, it and its
agents and representatives shall not use for its or their own benefit, except in
connection with the transactions contemplated herein and the investigation and
review of InTouch, the InTouch Business and the InTouch Shareholders, and will
hold in strict confidence and not disclose (except when required by law, rule,
regulation or court order), (i) any data or information relating to InTouch, its
affiliates, or the InTouch Business obtained from InTouch or its directors,
officers, employees, agents or representatives in connection herewith, or (ii)
any data or information relating to the business, customers, financial
statements or operations of the InTouch Business which is confidential in nature
and not generally known to the public (clauses (i) and (ii) together, "InTouch's
Information"). If the transactions contemplated herein are not consummated for
any reason, then Parent shall return to InTouch all data, information and any
other written material obtained by Parent from InTouch in connection herewith,
and any copies, summaries or extracts thereof, and shall refrain from disclosing
any of InTouch's Information to any third party or using any of InTouch's
Information for its own benefit or that of any other Person.
(b) InTouch and the InTouch Shareholders agree that they and their
agents and representatives shall not use for their own benefit, except in
connection with investigation and review of Parent in connection herewith), and
shall hold in strict confidence and not disclose (except when required by law,
rule, regulation or court order), (i) any data or information relating to
Parent, Sub, their subsidiaries or affiliates, obtained from any of them or any
of their directors, officers, employees, agents or representatives in connection
herewith, or (ii) any data or information relating to the business, customers,
financial statements, securities or operations of Parent which is confidential
in nature and not generally known to the public (clauses (i) and (ii) together,
"Parent's Information"). If the transactions contemplated herein are not
consummated for any reason, then InTouch and the InTouch Shareholders shall
return to Parent all data, information and any other written material obtained
by or on behalf of InTouch or any of the InTouch Shareholders in connection
herewith, and any copies, summaries or extracts thereof, and shall refrain from
disclosing any of Parent's Information to any third party or using any of
Parent's Information for their own benefit or that of any other Person.
- SIGNATURES ON THE FOLLOWING PAGE -
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<PAGE>
IN WITNESS WHEREOF, Parent, Sub and InTouch have caused this Agreement to
be signed and delivered by their respective officers thereunder duly authorized,
and each InTouch Shareholder has signed and delivered this Agreement, all as of
the date first written above.
"INTOUCH"
INTOUCH INTERACTIVE, INC., a North Carolina corporation
By: /s/ William A. Lackey
-----------------------------
Title: President
--------------------------
"PARENT"
IXL HOLDINGS, INC., a Delaware corporation
By: /s/ James V. Sandry
-----------------------------
Title: Executive Vice President
--------------------------
"SUB"
iXL - CHARLOTTE, INC., A DELAWARE CORPORATION
BY: /s/ James V. Sandry
-----------------------------
TITLE: Executive Vice President
--------------------------
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
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<PAGE>
"INTOUCH SHAREHOLDERS"
/s/ William A. Lackey
---------------------------------
William A. Lackey
Address: InTouch Interactive, Inc.
700 East Blvd., Ste. 4
Charlotte, NC 28203-5156
/s/ William M. Lackey
----------------------------------
William M. Lackey
Address: InTouch Interactive, Inc.
700 East Blvd., Ste. 4
Charlotte, NC 28203-5156
/s/ Steven P. Amedio
----------------------------------
Steven P. Amedio
Address: InTouch Interactive, Inc.
700 East Blvd., Ste. 4
Charlotte, NC 28203-5156
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<PAGE>
EXHIBITS
--------
Parent's Closing Certificate.................................... Exhibit A-1
Sub's Closing Certificate....................................... Exhibit A-2
Agreement to Be Bound to the Registration Rights Agreement...... Exhibit B
Option Agreement................................................ Exhibit C
Legal Opinion of Parent and Sub................................. Exhibit D
InTouch Closing Certificate..................................... Exhibit E
Agreement to be Bound to the Stockholders' Agreement............ Exhibit F
Legal Opinion of InTouch........................................ Exhibit G
Purchaser Representative Questionnaire and Acknowledgement...... Exhibit H
<PAGE>
SCHEDULE 3.1(B)
---------------
MERGER CONSIDERATION
(See attached Schedule 3.1(B)
SCHEDULE 4.1
------------
ARTICLES AND BYLAWS OF INTOUCH
SCHEDULE 4.3(A)
---------------
CAPITALIZATION OF INTOUCH
SCHEDULE 4.3(B)
---------------
LIENS ON STOCK OF INTOUCH
SCHEDULE 4.5
------------
Conflicts/Consents of InTouch
SCHEDULE 4.6
------------
EXCEPTIONS TO ACCURACY OF FINANCIAL STATEMENTS OF INTOUCH
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF INTOUCH
<PAGE>
SCHEDULE 3.1(b)
---------------
MICRO SHAREHOLDERS RECEIVING CASH
Micro Shareholders IXL Shares Cash
------------------------ ---------------------- --------------------
Alfred Ricciardi 0 $ 79,968.00
Alice Baum 0 $ 104,522.00
Ann McLaughlin 0 $ 19,992.00
Lynn Shostack 0 $ 99,960.00
Scott F. Smith 0 $ 49,980.00
-------------
total: $ 354,422.00
<PAGE>
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF INTOUCH
SCHEDULE 4.9
------------
LIENS OF INTOUCH
SCHEDULE 4.10
-------------
TANGIBLE PERSONAL PROPERTY OF INTOUCH
SCHEDULE 4.12
-------------
LIENS ON REAL PROPERTY OF INTOUCH
SCHEDULE 4.13
-------------
LEASES OF INTOUCH
SCHEDULE 4.14
-------------
CONTRACTS OF INTOUCH
<PAGE>
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF INTOUCH
SCHEDULE 4.16
-------------
PAYROLL OF INTOUCH
SCHEDULE 4.17
-------------
LITIGATION OF INTOUCH
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF INTOUCH
SCHEDULE 4.19
-------------
ERISA OF INTOUCH
SCHEDULE 4.21
-------------
PERMITS OF INTOUCH
SCHEDULE 4.23
-------------
BROKERS OF INTOUCH
<PAGE>
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS & COMPETITORS OF INTOUCH
SCHEDULE 4.28
-------------
INSURANCE POLICIES OF INTOUCH
SCHEDULE 4.31(B)
----------------
ACCREDITED INVESTORS OF INTOUCH
SCHEDULE 4.31(C)
----------------
NON-ACCREDITED INVESTORS OF INTOUCH
SCHEDULE 5.1
------------
CERTIFICATE OF INCORPORATION AND BYLAWS OF PARENT AND SUB
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
<PAGE>
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
CAPITALIZATION OF PARENT
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES OF PARENT
SCHEDULE 6.6
------------
PARENT OPTIONS' RECIPIENTS
SCHEDULE 7.1(C)
---------------
PARENT CONSENTS
<PAGE>
SCHEDULE 7.2(D)
---------------
INTOUCH CONSENTS
SCHEDULE 10.11
--------------
PERMITTED LIENS OF INTOUCH
<PAGE>
EXHIBIT 2.18
DATED 11 May 1998
AGREEMENT
for the sale and purchase
of the issued share capital
of
Denovo New Media Limited
DEREK SCANLON (1)
IXL LONDON LIMITED (2)
<PAGE>
SHARE SALE AND PURCHASE AGREEMENT
DATE
11 May 1998
PARTIES
(1) DEREK SCANLON of 2 Braydon Road, London N16 6QB ("the Vendor"); and
(2) IXL LONDON LIMITED (No.3435961) whose registered office is at 2nd Floor,
Tower House, 8-14 Southampton Street, London WC2E 7HA ("the Purchaser").
INTRODUCTION
The Company was incorporated in England and Wales on 26 July 1996 under the
Companies Act 1985 and is registered under number 3229920 as a private
company. It has at the date of this Agreement an authorised share capital
of (Pounds)100,000 divided into 100,000 ordinary shares of (Pounds)1 each,
of which 25,000 of the ordinary shares have been issued and are fully paid
or credited as being fully paid. All the shares in issue are legally and
beneficially held by the Vendor.
OPERATIVE PROVISIONS
1 INTERPRETATION
1.1 In this Agreement (including the Introduction and Schedules), except where
a different interpretation is necessary in the context, the following
expressions shall have the following meanings:
Accounts Date 31 March 1998
Company Denovo New Media Limited of which short
particulars are set out in Schedule 1
<PAGE>
Completion completion of the acquisition of the Shares in
accordance with the terms of clause 4
Connected Person a connected person as determined in accordance
with Section 839 of the Income and Corporation
Taxes Act 1988
Consideration the consideration referred to in clause 3
Consideration Shares the number of shares of IXL Holdings, Inc. class B
common stock $0.1 par value to be calculated in
accordance with clause 3
Deed of Covenant the deed of covenant relating to Taxation in the
agreed form
Disclosure Letter a letter in the agreed form bearing the same date
as this Agreement from the Vendor to the Purchaser
Intellectual Property copyrights, trade and service marks, trade names,
rights in logos and get-up, inventions,
confidential information, trade secrets and know-
how, registered designs, design rights, letters
patent, utility models, semi-conductor
topographies, all rights of whatsoever nature in
computer software and data, all rights in plant
varieties, all rights of privacy and all
intangible rights and privileges of a nature
similar to any of the foregoing, in every case in
any part of the world and whether or not
registered; and including all granted
registrations and all applications for
registration in respect of any of the same
-3-
<PAGE>
IXL Stockholders' Agreement a stockholders agreement dated 17
December 1997 between IXL Holdings, Inc.
and IXL Holdings, Inc.'s Shareholders
Management Accounts the balance sheet of the Company as at
the Accounts Date and the profit and
loss account of the Company for the
period ended on the Accounts Date in the
agreed form
Relief the same meaning as in the Deed of
Covenant
Restricted Business a business in competition with the
business carried out by the Company at
the date of this Agreement
Shares the 25,000 issued ordinary shares of
(Pounds)1 each in the capital of the
Company
Taxation and Taxing Authority the same respective meanings as in the
Deed of Covenant
Turnover invoices issued by the Company less VAT
for the period from 1 January 1997 to 31
December 1997 to arms length customers
and clients of the Company where such
invoices have been paid or, in the
prudent opinion of the Company's
auditors, are collectable and for these
purposes there shall be deducted any bad
debts and this figure shall be subject
to any other adjustments to be agreed by
the parties
VAT Value Added Tax
Warranty the warranty, representation and
undertaking given in clause 5.1
-4-
<PAGE>
Warranty Statements the statements set out in Schedule 2
2 SALE AND PURCHASE OF THE SHARES
The Vendor will sell as legal and beneficial owner and with full title
guarantee and the Purchaser will purchase the Shares free from all options,
liens, charges and other encumbrances and with all rights attaching to the
Shares with effect from Completion.
3 CONSIDERATION
3.1 In consideration for the sale of the Shares, the Purchaser shall procure
the issue of the Consideration Shares to the Vendor.
3.2 The Vendor shall be entitled to the Consideration Shares issued as fully
paid and nonassessable based on the following equation:
CS = W-(X+Y+Z)
-----------
$5
where:
CS = the number of Consideration Shares to which the Vendor shall be
entitled
W = the Turnover of the Company expressed in US dollars
X = all or any liabilities, costs and expenses of the Company incurred at
any time prior to the issue of the Consideration Shares other than
with the prior written consent of Steve Smith or John Raymond of the
Purchaser where such sum has not been included or accounted for in
the accounts to be prepared in accordance with clause 3.3, to include
without limitation rates on premises previously occupied by the
Company and any fees due to previous directors expressed in US
dollars
-5-
<PAGE>
Y = the net outstanding indebtedness of the Company (including, without
limitation, debt for borrowed money) as at the Accounts Date
expressed in US dollars
Z = (Pounds)30,000 being the amount paid by the Vendor to Interactive
Communications Limited in respect of the purchase of the Shares by
the Vendor expressed in US dollars
$5 = the value per share to be attributed to each Consideration Share
where all sums in pounds stirling for the purposes of this clause 3.2 shall
be converted into US dollars at the rate of 1.65 US dollars to one pound
stirling
3.3 The Vendor shall procure that the Company's auditors prepare and audit the
Company's accounts in respect of the financial period to 31 March 1998 and
certify to the Purchaser the number of Consideration Shares to be issued
and allotted to the Vendor pursuant to clause 3.2 within 30 days of the
date of this Agreement the costs of such audit and certification to be at
the expense of the Vendor. The Purchaser shall have a period of twenty one
business days from the date of such notification to raise any objection in
relation to the number of such shares to be issued. If no such objection is
made by the Purchaser, the determination of the Company's auditors shall be
deemed final. In the event of dispute, the parties shall use their
reasonable endeavors to settle such dispute but if it shall not have been
settled within twenty eight days of the notification by the Purchaser to
the Vendor of any objection to the Company's auditors certification then
the number of Consideration Shares shall be determined by the Purchaser's
auditors, who shall act as experts and not arbitrators, and whose decision
shall be final.
4 COMPLETION
4.1 Completion of this Agreement is to take place at 222 Grays Inn Road, London
WC1X 8HB (or such other location as the Vendor and the Purchaser shall
agree) immediately following exchange this Agreement.
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<PAGE>
4.2 At Completion, the Vendor shall deliver to the Purchaser the following:
(a) share certificates in respect of the Shares;
(b) duly executed transfers in respect of the Shares in favour of the
Purchaser (or as it may direct);
(c) the resignations of each of the directors and the secretary confirming
that there are no claims against the Company in a form reasonably
required by the Purchaser;
(d) an irrevocable power of attorney executed by the Vendor to enable the
Purchaser (during the period prior to the registration of the transfer
of the Shares) to exercise all voting and other rights attaching to
the Shares;
(e) an acknowledgement from the Vendor in a form reasonably required by
the Purchaser confirming that at and immediately after Completion
nothing is owing nor are there any outstanding claims between the
Vendor and the Company and to the extent that there are possible
claims, then these are waived;
(f) certificate of incorporation, certificate of incorporation on change
of name, common seal, statutory register, minute books, share
certificate book, books of account and all other books (all duly
written up to date);
(g) any service agreements to which the Company is a party;
(h) releases and discharges from the Company's bankers and all other
persons of any fixed or floating charges over any property or any
other assets of the Company;
(i) a tax deed of covenant in a form reasonably required by the Purchaser;
(j) the Disclosure Letter duly signed by the Vendor;
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<PAGE>
(k) all waivers and consents in a form reasonably required by the
Purchaser signed by the Vendor or any third party to enable the
Purchaser or its nominee to be registered as the holder of the Shares
(the Vendor hereby irrevocably waiving all and any rights of pre-
emption to which it may be entitled under any articles of association,
agreement, law or otherwise in respect of the transfer of the Shares
delivered under this Agreement); and
(l) certified copies of board resolutions of the Company in a form
reasonably required by the Purchaser between the parties to approve,
inter alia, the transfer of the Shares, the appointment of such new
directors, secretary and auditors as the Purchaser shall direct and
the adoption of new bank mandates.
4.3 If for any reason the provisions of clause 4.2 are not fully complied with,
the Purchaser shall be entitled (in addition and without prejudice to any
other right or remedy available to it) to elect:
(a) to rescind this Agreement in which case the Purchaser shall not be
obliged to purchase any of the Shares or issue any of the
Consideration Shares; or
(b) to fix a new date for Completion; or
(c) to proceed to Completion so far as practicable, the Vendor then being
obliged to use its best endeavors to perform or procure the
performance of any of the outstanding provisions of clause 4.2
4.4 Following Completion the Vendor hereby agrees to enter into the following
documents forthwith upon request by the Purchaser:
(a) a service agreement between the Vendor and the Purchaser in a form to
be agreed between the parties; and
(b) following issue of the Consideration Shares, the IXL Stockholders'
Agreement.
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<PAGE>
4.5 The Purchaser shall procure the issue and allotment to the Vendor of the
Consideration Shares as soon as reasonably practicable following agreement
or determination of the number of Consideration Shares to be issued in
accordance with clause 3.3.
5 WARRANTY
5.1 The Vendor hereby:
(a) acknowledges that the Purchaser has been induced to enter into this
Agreement and to purchase the Shares on the basis of the Warranty; and
(b) warrants, represents and undertakes to the Purchaser that each and
every Warranty Statement in schedule 2 is true, correct, accurate and
not misleading at the date of this Agreement, subject only to the
matters stated in the Disclosure Letter, provided that such matters
will be treated as qualifying or limiting the application of any
Warranty Statement only to the extent that such disclosure is fair,
accurate, and relates specifically to the subject matter thereof and
does not omit any fact which may render the same untrue, incorrect,
inaccurate or misleading.
5.2 The Warranty is a separate and independent warranty, representation and
undertaking in relation to each of the Warranty Statements and no Warranty
Statement shall be limited by reference to any other Warranty Statement or
by the other terms of this Agreement.
5.3 No claim may be made against the Vendor pursuant to the Warranty in respect
of any matter of which the Purchaser has knowledge at the date of this
Agreement.
5.4 No claim may be made against the Vendor pursuant to the Warranty and any
breaches thereof unless notice of such claim is served on the Vendor in
writing specifying the nature of such claim and the amount of such claim
within two years of the date of this Agreement.
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5.5 The total amount of liability of the Vendor in respect of all claims shall
not exceed the Consideration Shares valued at the date of this Agreement at
US$5 per share.
6 REMEDIES OF THE PURCHASER
6.1 If any Warranty Statement shall prove to be untrue, inaccurate, incorrect
or misleading, the Purchaser may at its option and without prejudice to any
other right or remedy which may be available to it:
(a) claim for all loss suffered by it in consequence of such breach of
Warranty (and for this purpose an amount equal to, without limitation,
the amount of any stamp duty (including any penalty for late stamping)
payable on any document in respect of the title of the Company to any
property which ought to be in the possession of the Company as at the
date of Completion and which has not been properly stamped shall be
deemed to be a loss suffered by the Purchaser (whether or not that
Company has a legal obligation to present or re-present the same for
stamping); and
(b) require the Vendor to pay to the Company or the Purchaser (as the
Purchaser may require) such sum as is equal to the amount by which:
(i) the assets of the Company are less, or less valuable, or their
liabilities greater, than:
(a) either the values at which the same were included in the
Accounts; or
(b) if the Purchaser so elects, than they would have been if
the statement concerned had been true, accurate and correct
and not misleading;
and for these purposes, without limitation, an amount equal to the
amount of any such stamp duty as is described in paragraph (a) of this
clause 6.1 shall be deemed to be a liability of the Company; and
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<PAGE>
(c) claim for all reasonable legal costs, charges and expenses incurred or
payable by the Purchaser or the Company either before or after the
commencement of any action in connection with any matter referred to
in this clause 6.1;
and so that the exercise by the Purchaser of any of the additional remedies
set out in this clause 6.1 shall be without prejudice to any other of them.
6.2 No provision of this Agreement shall operate to exclude, restrict or
otherwise impair any right or remedy (including, without limitation any
right to damages and equitable remedies of all kinds) other than any right
to rescission following Completion to which the Purchaser is or becomes
entitled (or, but for the provision in question, would be or become
entitled) by virtue of legislation or otherwise under the general law
applicable in England or elsewhere.
6.3 If the Vendor is required by law to make any deduction or withholding from
any payment due under the terms of this Agreement, it shall do so and the
sum due from the Vendor in respect of such payment shall be increased to
the extent necessary to ensure that after the making of such deduction or
withholding the Purchaser receives and retains (free of any liability in
respect of any such deduction or withholding) a net sum equal to the sum
the Purchaser would have received and retained had no such deduction or
withholding been required to be made.
6.4 If any sum payable by the Vendor to the Purchaser under this Agreement
shall be subject to a tax liability in the hands of the Purchaser, the
Vendor shall be under the same obligation to make an increased payment in
relation to that tax liability as if the liability were a deduction or
withholding required by law.
7 INDEMNITY
The Vendor hereby agrees and undertakes to indemnify and keep the Purchaser
fully indemnified from and against all actions proceedings costs claims and
demands which may be suffered or incurred by the Purchaser by reason of any
default on the part of the Vendor in the performance or observance of any
undertakings covenants and
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<PAGE>
obligations contained in any lease of any property occupied at any time
prior to Completion by the Company and will pay and make good to the
Purchaser the amount of any losses damages costs and reasonable and proper
expenses suffered by the Purchaser thereby.
8 RESTRICTIONS
8.1 To ensure that the Purchaser receives the full benefit of the goodwill of
the business of the Company, the Vendor hereby represents and undertakes
that he will not for a period of one year from Completion either alone or
for, together with or as agent, officer or employee of any other person,
firm or company or through the medium of any company directly or indirectly
for the purposes of the Restricted Business:
(a) solicit, interfere with or attempt to entice away from the Company any
person who is at the date hereof or was within the previous 12 months
an employee, consultant or agent of the Company on the date of this
Agreement or during the 12 months immediately preceding the date of
this Agreement; or
(b) solicit, interfere with or attempt to entice away from the Company any
person who is reasonably considered by the Company to be or have been
a regular client or customer of the Company on the date of this
Agreement or during the 12 months immediately preceding the date of
this Agreement; or
(c) carry on or be engaged, concerned, interested or hold shares or other
securities in any company or businesses which competes in the United
Kingdom with the business of the Company at the date of this
Agreement.
8.2 Each of the restrictions contained in each paragraph of clause 8.1 is a
separate and distinct restriction and is to be construed separately from
the other restrictions. The Vendor acknowledges that the restrictions are
reasonable when taken together as well as individually, that the duration,
extent and application of each restriction are no greater than is necessary
for the protection of the goodwill of the businesses of the
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<PAGE>
Company and that the consideration paid by the Purchaser for the Shares
takes into account and provides adequate compensation for the restraints
and restrictions imposed. Should any restriction be found to be void or
unenforceable without the deletion of some part of it or the reduction in
area or duration specified, that restriction shall apply with such
modification as may be necessary to make it valid.
8.3 The parties agree that the benefit of the covenants and undertakings given
in this clause shall be assignable in whole or in part by the Purchaser to
and become enforceable by the Company and any subsidiary or holding company
of any of the Company or the Purchaser which from time to time is the
holder of the Shares or to which any part of the business(es) of the
Company has been transferred.
9 GENERAL PROVISIONS
9.1 Without prejudice to any right or remedy available to the Purchaser under
this Agreement or otherwise, the Vendor shall be liable on an indemnity
basis for all reasonable costs, claims and expenses incurred by the
Purchaser in connection with any claim arising out of any warranty,
undertaking or indemnity contained in this Agreement or any document
specified herein (or any breach thereof).
9.2 The waiver by the Purchaser of any right or breach, default or omission by
the Vendor of any of the terms of this Agreement or any document specified
herein shall not take effect unless in writing and shall not constitute a
continuing waiver of the right waived or apply to, or operate as a waiver
of, any other breach, default or omission and any forbearance in enforcing
any right shall not constitute a waiver.
9.3 No party shall divulge to any third party (other than their respective
professional advisers or insurers) the fact that this Agreement or any
document specified herein has been entered into or any information
regarding its terms or any matters contemplated by this transaction or make
any announcement relating to it without the prior agreement (not to be
unreasonably withheld or delayed) of the other parties unless such
announcement is required by law. Any announcement shall in any event
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<PAGE>
be made or issued only in a form approved by the Purchaser and with the
consent of the Vendor (not to be unreasonably withheld or delayed).
9.4 This Agreement, together with any document expressly referred to in any of
its terms, contains the entire agreement between the parties relating to
the subject matter covered. No oral explanation or oral information given
by any party shall alter the interpretation of this Agreement.
9.5 The Vendor hereby undertakes with the Purchaser at the request of the
Purchaser and at the expense of the Vendor to do or procure to be done all
such further acts and things and execute or procure to be executed all such
further deeds and documents as may be necessary or desirable fully and
effectively to vest in the Purchaser the legal and beneficial ownership of
the Shares and the benefits of this Agreement and any document specified
herein and, pending such vesting, the Vendor shall hold such Shares and
benefits in trust for the Purchaser and shall receive all monies in
connection therewith as trustee of the Purchaser and shall account to the
Purchaser forthwith on receipt.
9.6 This Agreement may be executed in two or more counterparts each of which
shall be deemed an original but which taken together shall constitute a
single agreement.
9.7 This Agreement and all documents supplemental thereto are governed by and
are to be construed in accordance with English law.
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<PAGE>
SCHEDULE 1
PARTICULARS OF THE COMPANY
Number: 3229920
Status: a private company limited by shares
Registered Office: Second Floor, Tower House, 8-14 Southampton
Street, London WC2E 7HA
Authorized share capital: 100,000 (Pounds) divided into 100,000 shares
of 1 (Pounds) each
Issued share capital: 25,000 shares of (Pounds)1 each
Shareholders and shareholdings: Derek Scanlon 25,000 shares
Director: Derek Scanlon
Secretary: Hassy Patel
Charges: None
<PAGE>
SCHEDULE 2
WARRANTY STATEMENTS
1 INFORMATION, FORMAL AND LEGAL
1.1 All information supplied by the Vendor, the Company or its directors,
employees or advisers to the Purchaser or its advisers concerning the
Company prior to Completion (including without limitation the information
referred to in the Introduction and Schedule 1) is and will be true,
complete, accurate and not misleading in all respects.
1.2 The Vendor is not aware of any fact or matter not disclosed in writing to
the Purchaser, the disclosure of which might reasonably affect the
willingness of the Purchaser to acquire the Shares or the price at or terms
upon which the Purchaser would be willing to acquire them.
1.3 All statutory, municipal, governmental, court and other requirements
applicable to the formation, continuance in existence, creation and issue
of securities, management, property or operations of the Company have been
complied with and all licences and consents (including planning consents)
involved in the carrying on of the business of the Company, have been
obtained and complied with and the Vendor is not aware of any contemplated
revocation of any such licence or consent. The Company's books of accounts
and other records are complete and accurate and the Company has not
committed any illegal or unlawful act and is not liable for any breach of
covenant, consent, licence, permission, contract or statutory duty (all
requisite or necessary consents, licences and permissions having been
obtained).
2 THE SHARES
The Vendor is the sole legal and beneficial owner of all the Shares (that
represent the entire issued share capital of the Company, there being no
other share or loan capital in the Company or any share or loan capital
under option (actual, contingent or otherwise) to purchase or subscribe)
and will at Completion have the right and power
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to sell and transfer or procure the transfer of, unencumbered, the entire
legal and beneficial ownership of the Shares with full title guarantee free
of all options, liens, charges or other encumbrances and together with all
dividends, distributions, rights declared, paid, credited or arising to the
Purchaser in accordance with the provisions of this Agreement.
3 ACCOUNTS
3.1 The Management Accounts and the accounting records of the Company have been
prepared in accordance with generally accepted accountancy principles. They
give a true and fair view of the state of affairs and the assets and
liabilities of the Company as at the Accounts Date and of the profits or
losses of the Company for the period concerned.
3.2 The Management Accounts make proper provision for and (where appropriate)
disclose and take into account as at the Accounts Date, all liabilities
(actual, contingent or disputed), all capital commitments (actual or
contingent) (if any) and all bad and doubtful debts.
3.3 Since the Accounts Date no dividend or other distribution has been declared
or paid on, and no capital distribution made or agreed to be made in
respect of, any share capital of the Company and all amounts received by
the Company have been paid into its account and appear in the Company's
books of account.
3.4 Since the Accounts Date the Company has carried on in the ordinary and
usual course the business carried on by it at that date.
3.5 Since the Accounts Date there has been no material adverse change in the
Company's financial position the value of the Company's net assets has not
reduced and no material liabilities (actual, contingent or disputed) have
arisen or been incurred.
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3.6 All the book and other debts of the Company outstanding at Completion are
the absolute property of the Company and will (save insofar as a specific
provision has been made in the Accounts therefor) be good and collectable
in the ordinary course of business and in any event not later than two
months after Completion.
4 CONTRACTS
4.1 Save as disclosed to the Purchaser, the Company is not a party to any
material, unprofitable or onerous contract or any contract not on arm's
length terms and has not guaranteed any other person's liabilities nor is
it a party to any contract or arrangement with a Connected Person or a
director, employee or consultant of a Connected Person.
4.2 The Company is not in breach of any contract with any other party and no
other party has any right to terminate any agreement to which the Company
is a party.
4.3 Neither the Company nor the Vendor has any reason to believe that the
transactions contemplated by this Agreement will result in either loss of
business with any of the Company's present suppliers or customers or a
breach of any contract, covenant or licence or an employee handing in
notice.
5 STOCKS, ASSETS AND INSURANCE
5.1 All the assets of the Company are properly insured to their full
reinstatement value and all insurance policies of the Company are in full
force and effect and all premiums have been paid and there are no insurance
claims or possible insurance claims by the Company in existence.
5.2 The Company is the owner of and has good and marketable title to all the
assets used in its business and has all assets necessary to carry on its
business.
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<PAGE>
5.3 The Company does not have outstanding any commitment for capital
expenditure. There is not outstanding any mortgage, charge or other
encumbrance on the whole or any part of the undertaking, property or assets
of the Company.
6 INTELLECTUAL PROPERTY
6.1 The businesses of the Company and the processes, data, material and
software employed by it and the goods, services and software supplied by it
in the United Kingdom or elsewhere in the world do not infringe, use,
involve the misappropriation of, or embody the subject matter of, or
require a licence under any Intellectual Property in which any other person
has rights of any nature; and no claims have been made by any person which,
if pursued, might be in breach of or be otherwise material to any of the
warranties in this or any other part of this paragraph 6.
6.2 No plant or equipment, goods, services, documentation, software, data or
other items used by the Company in the course of its businesses has or have
been supplied under any agreement or arrangement which precludes its or
their sale, transfer, assignment, disposal or use by any other person.
6.3 No Intellectual Property in which the Company has any interest and which
is, or is likely to be, material to the business of the Company is:
(a) being infringed, misappropriated or used without permission by any
other person; or
(b) subject to any licence, estoppel or authority or similar right in
favour of any other person.
6.4 All Intellectual Property which is registered in the name of the Company,
or in respect of which the Company has made application for registration,
is:
(a) legally and beneficially vested in the Company; and
(b) valid and enforceable.
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6.5 No other person has registered or applied to register in any country any
invention, topography, copyright work, design, trade or service mark or
name, plant variety, trade secret or know-how made, or claimed to be owned,
by the Company.
6.6 The licenses, agreements and arrangements have been entered into in the
ordinary course of business, are in full force and effect and no notice has
been given on either side to terminate any of them and no amendment made or
accepted to their terms since they were first entered into; and the
obligations of all parties under each of the same have been fully complied
with and no disputes exist or are anticipated in respect of any of them.
6.7 Other than to the Purchaser and the agents, employees or professional
advisers of the Purchaser and the Vendor, the Company has not knowingly
disclosed, or knowingly or recklessly permitted to be disclosed, or
undertaken or arranged to disclose, to any person any of their know-how,
trade secrets, confidential information or lists of customers or suppliers.
6.8 No claim has been made, and the Vendor is not aware of the possibility of
any claim for compensation by an employee of the Company carrying on trade
in the UK under Section 40 of the Patents Act 1977.
6.9 The Company does not operate as a computer bureau, as that term is defined
in the Data Protection Act 1984, in the United Kingdom and no notice of any
kind has been served on the Company under any provision under any part of
that Act or any analogous legislation in any part of the world. Insofar as
the Company is a "Data User" under the Act:
(a) all necessary applications for registration have been duly made; and
(b) the details supplied to the Registrar in relation to each application
are accurate and complete.
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6.10 The software, hardware and firmware referred to in the licenses,
agreements and arrangements is able, without upgrade or alteration and
without loss of performance or functionality or loss of or adverse effect
on any data to correctly receive, process and provide information
regarding or containing:
(a) dates prior to, during and after the year 2000; and
(b) currencies now used or due to be implemented throughout the European
Union.
7 TAXATION
7.1 Full provision or reserve for Taxation and deferred Taxation assessed or
likely to be assessed on the Company has been made in the Management
Accounts and the Company has within the relevant time limits therefor
correctly made all returns and payments required to be made by the Company
for any Taxation purposes and none of such returns or payments is the
subject of any dispute with any Taxing Authority and the Vendor is not
aware of any circumstance likely to give rise to such dispute.
7.2 The Company has duly paid all Taxation for which it is liable.
7.3 The Company has obtained full, complete, correct and up to date records,
invoices and other documents appropriate or requisite for establishing VAT
on supplies made to and by the Company.
7.4 All payments by the Company to any person which ought to have been made
under deduction of Taxation have been so made and the Company has (if
required by law so to do) accounted to the Inland Revenue for the Taxation
so deducted.
7.5 No Relief has been claimed by and/or given to the Company, or taken into
account in determining the provision for Taxation in the Management
Accounts, which could be withdrawn, postponed or restricted as a result of
any act, omission, or circumstance arising or occurring at or at any time
after Completion.
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7.6 No liability of the Company to Taxation has arisen or will arise up to
Completion save for corporation tax payable in respect of normal trading
profits earned by it or income tax deducted under the Pay as You Earn
system or national insurance contributions or VAT for which it is
accountable to any Taxing Authority.
7.7 The Company has made no loan, advance, release or given consideration or
effected a transaction falling within Sections 418 to 422 (inclusive) of
the Income and Corporation Taxes Act 1988.
7.8 The Company is resident in the United Kingdom for Taxation purposes and
will be so resident at Completion and is not and never has been resident
for any purpose in any other country and does not have and has never had
any permanent establishment in any other company.
7.9 No amount of an income nature which has been paid or is payable by the
Company or which it is under an obligation entered into before Completion
to pay is wholly or partly disallowable as a deduction, charge on income
or otherwise in computing its liability to Taxation.
7.10 All documents in the possession of the Company or to the production of
which it is entitled and which attract stamp or transfer duty in the
United Kingdom or elsewhere have been properly stamped.
8 LITIGATION
The Company is not involved in any litigation, prosecution, arbitration or
any other proceedings for the enforcement of rights or settlement of
disputes and no act, omission or event has occurred which has given rise
to a threat of such proceedings or which is likely to result in the
Company being involved in any such proceedings.
9 EMPLOYEES
9.1 The Company has no liability whatsoever (whether legally binding or not)
to make any payment to or for the benefit of any employee, officer,
consultant, independent
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contractor or agent in respect of past service, pension or the termination
of the employment or engagement of that or any other person (including,
without limitation, payments for wrongful or unfair dismissal, loss of
office or redundancy) and the Company has no superannuation fund,
retirement benefit or other pension schemes or arrangements and no
liability to make any payment in respect of any of the same.
9.2 Full details of all employment, engagement, remuneration and notice terms
of all employees, directors, consultants, independent contractors or
agents of the Company have been disclosed to the Purchaser and all
remuneration due to them up to Completion has been paid and all of their
employment, engagement and office terms can be terminated by the Company
on less than three months' notice.
9.3 There is no outstanding commitment (whether legally binding or not) to
increase the remuneration of any officer, employee, consultant,
independent contractor or agent of the Company.
10 PROPERTIES
The Company does not own or have any interest in any land or building and
the Company has not entered into any legally binding agreement for the
purchase of any such interest.
11 BORROWINGS
Full details of all limits on the Company's bank overdraft facilities and
all borrowings of the Company have been disclosed to the Purchaser and the
Company is not in breach of any of their terms and none of such facilities
or terms of borrowing will be terminated as a result of the acquisition of
the Shares.
12 INSOLVENCY
12.1 No administrator, administrative receiver, receiver, manager of assets,
liquidator or any other similar officer has ever been appointed in respect
of the whole or any part
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of the assets or undertaking of the Company and no order has been made,
petition presented or resolution passed for the purpose of the making of
any order in relation to administration, administrative receivership,
receivership, liquidation, management of assets or any other similar
situation of the Company.
12.2 The Company is neither insolvent nor unable to pay its debts as they fall
due (as such expression is defined in either sub-section (1)(a) to (d)
(inclusive) or sub-section (2) of Section 123 of the Insolvency Act
1986)..
12.3 No voluntary arrangement (as referred to in the Insolvency Act 1986) or
scheme of arrangement as regards its creditors has been proposed by the
Directors or is in operation in relation to the Company.
12.4 The Company has not entered into any transaction nor been given a
preference to which Sections 238, 239 or 423 of the Insolvency Act 1986
apply or which may otherwise be liable to be set aside or avoided for any
reason.
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ATTESTATIONS
/s/ Derek Scanlon
-------------------------------------
DEREK SCANLON
IXL LONDON LIMITED
by: U. Bertram Ellis Jr.
by: /s/ James S. Allenbach
---------------------------------
James S. Allenbach
Secretary
<PAGE>
EXHIBIT 2.19
AGREEMENT AND PLAN OF MERGER
by and between
IXL HOLDINGS, INC.,
iXL SAN DIEGO, INC.,
CommerceWAVE, INC.
AND
THE CommerceWAVE SHAREHOLDERS
Dated as of JULY 2, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 2nd day of July,
1998, by and between CommerceWAVE, Inc., a California corporation
("CommerceWAVE"), IXL Holdings, Inc., a Delaware corporation ("Parent"), iXL-San
Diego, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent, or
its successors or assigns ("Sub"), and the shareholders of CommerceWAVE as
listed on the signature page hereto (the "CommerceWAVE Shareholders").
R E C I T A L S:
- - - - - - - -
A. CommerceWAVE is engaged in the business of electronic commerce solutions,
including developing internet sites and furnishing internet services, including
website design and maintenance (the "CommerceWAVE Business").
B. CommerceWAVE and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The CommerceWAVE Shareholders collectively own 100% of the issued and
outstanding capital stock of CommerceWAVE (the "CommerceWAVE Stock").
D. The respective Boards of Directors of Parent, Sub and CommerceWAVE, and
the respective shareholders of Sub and CommerceWAVE, have approved the Merger,
upon the terms and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal income
tax purposes, as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits, conditions
and agreements set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is hereby
agreed as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, at the
Effective Time (as defined in Section 1.3 hereof), (a) CommerceWAVE shall be
merged with and into Sub, (b) the separate existence of CommerceWAVE shall
cease, and (c) Sub shall continue as the surviving corporation in the Merger
under the laws of the State of Delaware under the name iXL-
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San Diego, Inc. For purposes of this Agreement, Sub shall be referred to, for
the period commencing on the Effective Time, as the "Surviving Corporation."
1.2 Closing and Closing Date. Unless this Merger Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9.1 hereof, and subject to the satisfaction or waiver of the
conditions set forth in Article VII hereof, the closing of the Merger (the
"Closing") will take place as promptly as practicable (and in any event within
five business days after satisfaction of the conditions set forth in Sections
7.1 and 7.2 hereof) (the "Closing Date") at the offices of Minkin & Snyder, A
Professional Corporation, One Buckhead Plaza, 3060 Peachtree Rd., Ste. 1100,
Atlanta, GA 30305, unless another date, time or place is agreed to by the
parties.
1.3 Effective Time of the Merger. At the Closing, the parties hereto shall
cause (a) a certificate of merger (the "Delaware Certificate of Merger") to be
filed with the office of the Secretary of State of Delaware in accordance with
the provisions of the Delaware General Corporation Law, as amended (the "DGCL");
and (b) a copy of the Delaware Certificate of Merger (the "California
Certificate of Merger"; collectively with the Delaware Certificate of Merger,
the "Certificate of Merger") to be filed with the office of the Secretary of
State of California in accordance with the provisions of the California General
Corporation Law (the "GCL"). When used herein, the term "Effective Time" shall
mean the time when the Delaware Certificate of Merger has been accepted for
filing by the Secretary of State of Delaware, or such time as otherwise
specified therein.
1.4 Effect of the Merger. The Merger shall, from and after the Effective
Time, have all the effects provided by the DGCL and the GCL. If at any time
after the Effective Time, any further action is deemed necessary or desirable to
carry out the purposes of this Agreement, the parties hereto agree that the
Surviving Corporation and its proper officers and directors shall be authorized
to take, and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of Sub, a
form of which is attached hereto on Schedule 5.1, shall be the Certificate of
------------
Incorporation of the Surviving Corporation after the Effective Time, until
thereafter changed or amended as provided therein or by applicable law.
2.2 Bylaws. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is included on Schedule 5.1 hereto.
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2.3 Board of Directors; Officers. The Board of Directors and officers of Sub
immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
3.1 Merger Consideration. As of the Effective Time:
(a) All shares of CommerceWAVE Stock owned by CommerceWAVE shall, by
virtue of the Merger and without any action on the part of any shareholder,
officer or director of CommerceWAVE or Sub, be canceled and retired and shall
cease to exist, and no consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding share of CommerceWAVE common stock, no
par value ("CommerceWAVE Common Stock") (other than any Dissenting Shares, as
defined in Section 3.2 hereof) shall, upon surrender to Sub, at the Closing, of
the underlying share certificates, be converted into, and become exchangeable
for, a number of shares of validly issued, fully paid and nonassessable Class B
Common Stock of Parent, $.01 par value (the "Parent Stock") based on the
following equation:
PSc = 910,000 - D - ([C + (90% x ARc)])
-----------------------
$10
---------------------------------
S + O
where:
PSc = the number of shares of Parent Stock (valued, as of the
Closing, at $10 per share) for which each share of
CommerceWAVE Common Stock shall be exchanged pursuant to the
Merger
D = the outstanding indebtedness of CommerceWAVE (the
"CommerceWAVE Debt"), including debt for borrowed money and
accrued interest thereon, capital leases, accounts payable
and accrued expenses, and any unpaid legal, accounting or
other fees of Commerce, but excluding convertible debt
instruments to be converted into shares of CommerceWAVE
Common Stock at or prior to the Closing, all to be
determined as of three business days prior to the Closing
Date and all as determined in accordance with generally
accepted accounting principles ("GAAP")
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C = the cash balance of CommerceWAVE, to be determined as of
three business days prior to the Closing Date in accordance
with GAAP
S = the number of issued and outstanding shares of CommerceWAVE
Common Stock, plus the number of shares of CommerceWAVE
Common Stock issuable on conversion of CommerceWAVE Series A
Preferred Stock ("CommerceWAVE Preferred Stock") and
convertible notes, on the Closing Date
O = the total number of options to purchase CommerceWAVE Stock
outstanding on the Closing Date, to be exchanged for options
to acquire Parent Stock pursuant to Section 6.6(c) hereof
ARc = CommerceWAVE's accounts receivable less than 90 days' old,
to be determined as of three business days prior to the
Closing Date in accordance with GAAP;
provided, however, that for the purpose of the above formula, regardless of
whether D exceeds the sum of C plus 90% of ARc, the maximum, aggregate Parent
Stock issuable pursuant to both this Section and Section 3.1(c) is one million
shares.
(c) Each issued and outstanding share of CommerceWAVE Preferred Stock
(other than any Dissenting Shares, as defined in Section 3.2 hereof) shall, upon
surrender to Sub, at the Closing, of the underlying share certificates, be
converted into, and become exchangeable for, a number of shares of validly
issued, fully paid and nonassessable Parent Stock based on the following
equation:
PSp= 910,000 - (D - [C + (90% x ARc)])
-----------------------
.02222 + $10
---------------------------------
S + O
where:
PSp = the number of shares of Parent Stock (valued, as of the
Closing, at $10 per share) for which each share of
CommerceWAVE Preferred Stock shall be exchanged pursuant to
the Merger
and all other terms are as defined above; provided, however, that for the
purpose of the above formula, regardless of whether D exceeds the sum of C plus
90% of ARc, the maximum, aggregate Parent Stock issuable pursuant to both this
Section and Section 3.1(b) is one million shares.
(d) Each issued and outstanding share of common stock of Sub shall, by
virtue of the Merger and without any action on the part of any shareholder,
officer or director of
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CommerceWAVE or Sub, be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
3.2 Dissenting Shares. Notwithstanding any provision hereof to the
contrary, any shares of CommerceWAVE Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be converted as described in Section 3.1(b) or
(c) hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Shareholder pursuant to the DGCL or GCL, as
applicable; provided, however, that if a Dissenting Shareholder shall fail to
perfect his demand, withdraw his demand or otherwise lose his right for
appraisal under the terms of the DGCL or the GCL, as applicable, the
CommerceWAVE Stock held by such Dissenting Shareholder (the "Dissenting Shares")
shall be deemed to be converted as of the Effective Time in accordance with the
provisions of Section 3.1 hereof. CommerceWAVE shall not voluntarily make any
payment with respect to, settle, or offer to settle or otherwise negotiate, any
such demands. All amounts paid to Dissenting Shareholders shall be paid without
interest thereon (to the extent permitted by applicable law) by the Surviving
Corporation. For purposes hereof, the term "Dissenting Shareholder" shall mean
a CommerceWAVE Shareholder who (a) does not vote in favor of the Merger; and (b)
complies with the applicable provisions of the DGCL or GCL concerning
dissenter's rights.
3.3 No Further Rights. Subject to Section 3.4 hereof, from and after the
Effective Time, holders of certificates theretofore evidencing CommerceWAVE
Stock shall cease to have any rights as stockholders of CommerceWAVE, except as
provided herein or by applicable law.
3.4 Closing of CommerceWAVE's Transfer Books. At the Effective Time, the
stock transfer books of CommerceWAVE shall be closed and no transfer of
CommerceWAVE Stock shall be made thereafter. If after the Effective Time,
certificates for CommerceWAVE Stock are presented to Parent or the Surviving
Corporation, they shall be canceled and exchanged for a consideration as set
forth in Section 3.1 hereof, subject to applicable law in the case of Dissenting
Shareholders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMMERCEWAVE
CommerceWAVE, and Randall Pipp and Garland Wong (collectively, the
"Controlling Shareholders"), severally but not jointly represent and warrant to
Parent and Sub all of the representations and warranties in this Article IV. In
addition, each other CommerceWAVE Shareholder severally but not jointly makes
the representations and warranties with respect to such CommerceWAVE Shareholder
in Sections 4.2, 4.3(b), 4.5, 4.31, 4.32, 4.33 and 4.34 hereof. All
representations and warranties in this Article IV shall survive the Closing in
accordance with Section 10.1 hereof.
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4.1 Organization and Qualification. CommerceWAVE is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. CommerceWAVE has the requisite corporate power and authority to
carry on the CommerceWAVE Business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Articles of Incorporation and Bylaws of CommerceWAVE as in
effect on the date hereof are attached as Schedule 4.1 hereto. The minute book
------------
of CommerceWAVE, a true and complete copy of which has been delivered to Parent,
(a) accurately reflects all action taken by the directors and shareholders of
CommerceWAVE at meetings of CommerceWAVE's Board of Directors or shareholders,
as the case may be; and (b) contains true and complete copies, or originals, of
the respective minutes of all meetings or consent actions of the directors or
shareholders.
4.2 Authority. CommerceWAVE has the necessary corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery hereof and the consummation of
the transactions contemplated hereby by CommerceWAVE have been duly and validly
authorized and approved by CommerceWAVE's Board of Directors and the
CommerceWAVE Shareholders, and no other corporate or shareholder proceedings on
the part of CommerceWAVE, its Board of Directors or the CommerceWAVE
Shareholders is necessary to authorize or approve this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by CommerceWAVE and each CommerceWAVE Shareholder, and
assuming the due authorization, execution and delivery by Parent and Sub,
constitutes the valid and binding obligation of CommerceWAVE and each
CommerceWAVE Shareholder, enforceable against CommerceWAVE and each CommerceWAVE
Shareholder in accordance with its terms subject, in each case, to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights and to general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing.
4.3 Capitalization.
(a) The authorized capital stock of CommerceWAVE consists of (i) 16
million shares of CommerceWAVE Common Stock, of which eight million shares are
validly issued and outstanding, fully paid and nonassessable; and (ii) 4,050,405
shares of CommerceWAVE Preferred Stock, of which all 4,050,405 shares are
validly issued and outstanding, fully paid and nonassessable. All outstanding
capital stock of CommerceWAVE was issued in accordance with applicable federal
and state securities laws. Except as set forth on Schedule 4.3(a) hereto, there
---------------
are no options, warrants, calls, convertible notes, agreements, commitments or
other rights presently outstanding that would obligate CommerceWAVE or any of
the CommerceWAVE Shareholders to issue, deliver or sell shares of its capital
stock, or to grant, extend or enter into any such option, warrant, call,
convertible note, agreement, commitment or other right. In addition to the
foregoing, as of the date hereof, CommerceWAVE has no bonds, debentures, notes
or other indebtedness issued or outstanding that have voting rights in
CommerceWAVE. Schedule 4.3(a) sets forth a list
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<PAGE>
of (i) all holders of record of (A) CommerceWAVE Stock, and (B) options,
warrants, convertible notes or other rights to purchase capital stock of
CommerceWAVE (collectively, "CommerceWAVE Stock Rights"); (ii) the number of
shares held by each CommerceWAVE Shareholder and the number of shares of capital
stock of CommerceWAVE represented by the CommerceWAVE Stock Rights; and (iii)
the exercise price for each CommerceWAVE Stock Right.
(b) All of the issued and outstanding shares of capital stock of
CommerceWAVE are validly issued, fully paid and nonassessable. Except as set
forth on Schedule 4.3(b) hereto, each CommerceWAVE Shareholder represents and
---------------
warrants that the CommerceWAVE Stock held by such CommerceWAVE Shareholder is
free and clear of any lien, charge, security interest, pledge, option, right of
first refusal, voting proxy or other voting agreement, or encumbrance of any
kind or nature other than restrictions on transfer imposed by federal and state
securities laws (any of the foregoing, a "Lien").
4.4 Subsidiaries. CommerceWAVE has no subsidiaries and does not otherwise
own or control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
- ------------
CommerceWAVE or the CommerceWAVE Shareholders, (ii) the consummation by
CommerceWAVE and the CommerceWAVE Shareholders of the transactions contemplated
hereby or (iii) compliance by CommerceWAVE with any of the provisions hereof
will:
(a) conflict with or violate the Articles of Incorporation or Bylaws of
CommerceWAVE;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to CommerceWAVE or any of the CommerceWAVE
Shareholders, or by which CommerceWAVE or any of its properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which CommerceWAVE is a party or by which
CommerceWAVE or any of its properties or assets may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of CommerceWAVE; or
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<PAGE>
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), (i) any government or subdivision thereof, whether
domestic or foreign, or any administrative, governmental, or regulatory
authority, agency, commission, court, tribunal or body, whether domestic,
foreign or multinational (any of the foregoing, a "Governmental Entity"), except
for the filing of the Certificate of Merger pursuant to the DGCL and the GCL; or
(ii) any other individual or Entity (collectively, a "Person").
4.6 Financial Statements. CommerceWAVE has heretofore furnished Parent with
a true and complete copy of the unaudited financial statements of CommerceWAVE
for the years ended December 31, 1995, 1996 and 1997 and for the four month
period ended April 30, 1998 (all of the foregoing collectively herein referred
to as the "CommerceWAVE Financial Statements"). Except as disclosed therein,
the CommerceWAVE Financial Statements have been prepared in accordance with GAAP
(except for the absence of footnotes and normal year end adjustments)
consistently followed throughout the period indicated, and present fairly, in
all material respects, the financial position and operating results of
CommerceWAVE as of the dates, and during the periods, indicated therein.
4.7 Absence of Changes. Except as provided in Schedule 4.7 hereto and except
------------
as contemplated hereby, since December 31, 1997 (a) CommerceWAVE has not entered
into any transaction that was not in the ordinary course of business; (b) except
for sales of services and licenses of software in the ordinary course of
business, there has been no sale, assignment, transfer, mortgage, pledge,
encumbrance or lease of any material asset or property of CommerceWAVE; (c)
there has been (i) no declaration or payment of a dividend, or any other
declaration, payment or distribution of any type or nature to any shareholder of
CommerceWAVE in respect of its stock, whether in cash or property, and (ii) no
purchase or redemption of any share of the capital stock of CommerceWAVE; (d)
there has been no declaration, payment, or commitment for the payment, by
CommerceWAVE, of a bonus or other additional salary, compensation, or benefit to
any employee of CommerceWAVE that was not in the ordinary course of business,
except for normal bonuses paid in the ordinary course of business; (e) there has
been no release, compromise, waiver or cancellation of any debt to or claim by
CommerceWAVE, or waiver of any right of CommerceWAVE; (f) there have been no
capital expenditures in excess of $10,000 for any single item, or $25,000 in the
aggregate; (g) there has been no change in accounting methods or practices or
revaluation of any asset of CommerceWAVE (other than CommerceWAVE Accounts
Receivable as defined in Section 4.26 hereof) written down in the ordinary
course of business in excess of $10,000 for any single CommerceWAVE Accounts
Receivable, or $25,000 in the aggregate); (h) there has been no material damage,
or destruction to, or loss of, physical property (whether or not covered by
insurance) adversely affecting the CommerceWAVE Business or the operations of
CommerceWAVE; (i) there has been no loan by CommerceWAVE, or guaranty by
CommerceWAVE of any loan, to any employee of CommerceWAVE, except for travel-
related expenses in the ordinary course of business; (j) CommerceWAVE has not
ceased to transact business with any customer that, as of the date of such
cessation, represented more than 5% of the annual gross revenues of CommerceWAVE
in 1997; (k) there has been no termination or resignation of any key employee or
officer of CommerceWAVE, and to the knowledge of
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CommerceWAVE, no such termination or resignation is threatened; (l) there has
been no amendment or termination of any material oral or written contract,
agreement or license related to the CommerceWAVE Business, to which CommerceWAVE
is a party or by which it is bound, except in the ordinary course of business,
or except as expressly contemplated hereby; (m) CommerceWAVE has not failed to
satisfy any of its debts, obligations or liabilities related to the CommerceWAVE
Business or the assets of CommerceWAVE as the same become due and owing (except
for CommerceWAVE Accounts Payable (as defined in Section 4.27 hereof) payable in
accordance with past practices and in the ordinary course of business); (n)
there has been no agreement or commitment by CommerceWAVE to do any of the
foregoing; and (o) there has been no other event or condition of any character
pertaining to and materially and adversely affecting the assets, business or
financial condition of CommerceWAVE.
4.8 Undisclosed Liabilities. Except as set forth on Schedule 4.8 hereto,
------------
CommerceWAVE has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including any liability or obligation on account of taxes
or any governmental charge or penalty, interest or fine, except (a) liabilities
incurred in the ordinary course of business after December 31, 1997, that would
not, whether individually or in the aggregate, have a material adverse impact on
the business or financial condition of CommerceWAVE; (b) liabilities reflected
on the CommerceWAVE Financial Statements; and (c) liabilities incurred as a
result of the transactions contemplated hereby.
4.9 Title to Properties. Except as set forth on Schedule 4.9 hereto,
------------
CommerceWAVE has good and marketable title to all tangible property and assets
used in the CommerceWAVE Business, and good and valid title to its leasehold
interests, in each case, free and clear of any and all Liens other than
Permitted Liens (as defined in Section 10.11 hereof).
4.10 Equipment. CommerceWAVE has heretofore furnished Parent with a true and
correct list of all items of tangible personal property (including computer
hardware) necessary for or used in the operation of the CommerceWAVE Business in
the manner in which it has been and is now operated by CommerceWAVE ("the
CommerceWAVE Equipment"), except for personal property having a net book value
of less than $1,000. Except as set forth on Schedule 4.10 hereto, each material
-------------
item of CommerceWAVE Equipment is in good condition and repair, ordinary wear
and tear excepted.
4.11 Intellectual Property.
(a) CommerceWAVE has heretofore furnished Parent with a true and
complete description of all material proprietary technology, patents, patent
rights, trademarks, trademark rights, trade names, trade name rights, service
marks, service mark rights, and copyrights (and all pending applications for any
of the foregoing) used by CommerceWAVE in the conduct of the CommerceWAVE
Business (together with trade secrets and know how used in the conduct of the
CommerceWAVE Business, the "CommerceWAVE Intellectual Property Rights").
CommerceWAVE owns, or is validly licensed or otherwise has the right to use or
exploit, as currently used or exploited, all of the CommerceWAVE Intellectual
Property Rights, free of any
9
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obligation to make any payment (whether of a royalty, license fee, compensation
or otherwise). Except as set forth in Schedule 4.11(a), no claims are pending
----------------
or, to the knowledge of CommerceWAVE, threatened, that CommerceWAVE is
infringing or otherwise adversely affecting the rights of any Person with regard
to any CommerceWAVE Intellectual Property Right. To the knowledge of
CommerceWAVE, no Person is infringing the rights of CommerceWAVE with respect to
any CommerceWAVE Intellectual Property Right. Neither CommerceWAVE nor, to the
knowledge of CommerceWAVE, any employee, agent or independent contractor of
CommerceWAVE, in connection with the performance of such Person's services with
CommerceWAVE, has used, appropriated or disclosed, directly or indirectly, any
trade secret or other proprietary or confidential information of any other
Person, or otherwise violated any confidential relationship with any other
Person.
(b) CommerceWAVE has heretofore furnished Parent with a true and
complete description of all material computer software used by CommerceWAVE in
the conduct of the CommerceWAVE Business (the "CommerceWAVE Software").
CommerceWAVE currently licenses, or otherwise has the legal right to use, all of
the CommerceWAVE Software (including any upgrade, alteration or enhancement with
respect thereto), and all of the CommerceWAVE Software is being used in
compliance with any applicable license or other agreement.
4.12 Real Property. Except as set forth on Schedule 4.12 hereto:
-------------
(a) CommerceWAVE has a good and valid leasehold interest in all real
property (including all buildings, improvements and fixtures thereon) used in
the operation of the CommerceWAVE Business (the "CommerceWAVE Real Property").
CommerceWAVE owns no real property. Except for Permitted Liens, and for the
items set forth on Schedule 4.12, there are no Liens on CommerceWAVE's interest
-------------
in any of the CommerceWAVE Real Property.
(b) There are no parties in possession of any portion of the
CommerceWAVE Real Property other than CommerceWAVE, whether as sublessees,
subtenants at will or trespassers.
(c) To the knowledge of CommerceWAVE, there is no law, ordinance,
order, regulation or requirement now in existence or under active consideration
by any Governmental Entity, that would require, under the provisions of any of
the CommerceWAVE Leases (as hereinafter defined), any material expenditure by
CommerceWAVE to modify or improve any of the CommerceWAVE Real Property to bring
it into compliance therewith.
4.13 Leases. Schedule 4.13 hereto sets forth a list of all leases pursuant
-------------
to which CommerceWAVE leases, as lessor or lessee, real or personal property
used in operating the CommerceWAVE Business or otherwise (the "CommerceWAVE
Leases"). Copies of the CommerceWAVE Leases, all of which have previously been
provided to Parent, are true and complete copies thereof. All of the
CommerceWAVE Leases are valid, binding and enforceable against CommerceWAVE and,
to the knowledge of CommerceWAVE, against the other parties thereto, in
accordance with their respective terms, and there is not under any such
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CommerceWAVE Lease any existing default by CommerceWAVE, or, to the knowledge of
CommerceWAVE, by any other party thereto, or any condition or event that, with
notice or lapse of time or both, would constitute a default. CommerceWAVE has
not received notice that the lessor of any of the CommerceWAVE Leases intends to
cancel, suspend or terminate such CommerceWAVE Lease or to exercise or not
exercise any option thereunder.
4.14 Contracts. Schedule 4.14 hereto sets forth a true and complete list of
-------------
all contracts, agreements and commitments (whether written or oral) to which
CommerceWAVE is, directly or indirectly, a party (in its own name or as a
successor in interest), or by which it or any of its properties or assets is
otherwise bound, including any service agreements, customer agreements, supplier
agreements, agreements to lend or borrow money, shareholder agreements,
employment agreements, agreements relating to CommerceWAVE Intellectual Property
Rights and the like (collectively, the "CommerceWAVE Contracts"); excepting only
those CommerceWAVE Contracts which involve less than $25,000 and are cancelable,
without penalty, on no more than 90 days' notice. The aggregate value of all
payment obligations and rights to receive payments, under agreements, contracts
and commitments (whether oral or in writing) to which CommerceWAVE is a party or
by which it or any of its properties or assets is otherwise bound, and that are
not listed on Schedule 4.14, is less than $100,000 (calculating such value by
-------------
adding together the value of rights and obligations, and not by determining the
net amount thereof).
True and complete copies of all CommerceWAVE Contracts (or a true and complete
narrative description of any oral CommerceWAVE Contract) have previously been
provided to Parent. Neither CommerceWAVE nor, to the knowledge of CommerceWAVE,
any other party to any of the CommerceWAVE Contracts (x) is in material default
under (nor does there exist any condition that, with notice or lapse of time or
both, would cause such a default under) any of the CommerceWAVE Contracts, or
(y) has waived any right it may have under any of the CommerceWAVE Contracts,
the waiver of which would have a material adverse effect on the business, assets
or financial condition or prospects of CommerceWAVE. All of the CommerceWAVE
Contracts constitute the valid and binding obligations of CommerceWAVE,
enforceable in accordance with their respective terms, and, to the knowledge of
CommerceWAVE, of the other parties thereto.
4.15 Directors and Officers. Schedule 4.15 hereto sets forth a list, as of
-------------
the Closing Date, of the name of each director and officer of CommerceWAVE and
the position(s) held by each.
4.16 Payroll Information. CommerceWAVE has previously provided Parent with a
true and complete copy of the payroll report of CommerceWAVE dated May 31, 1998,
showing all current employees of CommerceWAVE and their current levels of
compensation, other than bonuses and other extraordinary compensation.
CommerceWAVE has paid all compensation required to be paid to employees of
CommerceWAVE on or prior to the date hereof other than compensation accrued in
the current pay period.
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4.17 Litigation. Except as set forth on Schedule 4.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
CommerceWAVE, threatened against or affecting CommerceWAVE or the CommerceWAVE
Business, nor is there any judgment, decree, injunction or order of any
applicable Governmental Entity or arbitrator outstanding against CommerceWAVE.
4.18 Employee Benefit Plans/Labor Relations.
(a) Except as disclosed in Schedule 4.18 hereto, there are no employee
-------------
benefit plans, agreements or arrangements maintained by CommerceWAVE, including
(i) "employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); (ii) current or
deferred compensation, pension, profit sharing, vacation or severance plans or
programs; or (iii) medical, hospital, accident, disability or death benefit
plans (collectively, "CommerceWAVE Benefit Plans"). All CommerceWAVE Benefit
Plans are administered in accordance with, and are in material compliance with,
all applicable laws and regulations. No material default exists with respect to
the obligations of CommerceWAVE under any CommerceWAVE Benefit Plan.
(b) CommerceWAVE is not a party to any collective bargaining agreement;
no collective bargaining agent has been certified as a representative of any of
the employees of CommerceWAVE; no representation campaign or election is now in
progress with respect to any employee of CommerceWAVE; and there are no labor
disputes, grievances, controversies, strikes or requests for union
representation pending, or, to the knowledge of CommerceWAVE, threatened,
relating to or affecting the CommerceWAVE Business. To the knowledge of
CommerceWAVE, no event has occurred that could give rise to any such dispute,
controversy, strike or request for representation.
4.19 ERISA.
(a) All CommerceWAVE Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the CommerceWAVE Benefit Plans that is
intended to meet the requirements of Section 401(a) of the Code has been
determined by the Internal Revenue Service to meet such requirements within the
meaning of such provision. No CommerceWAVE Benefit Plan is subject to Title IV
of ERISA or Section 412 of the Code. CommerceWAVE has not engaged in any
nonexempt "prohibited transactions," as such term is defined in Section 4975 of
the Code or Section 406 of ERISA, involving CommerceWAVE Benefit Plans that
would subject CommerceWAVE to the penalty or tax imposed under Section 502(i) of
ERISA or Section 4975 of the Code. CommerceWAVE has not engaged in any
transaction described in Section 4069 of ERISA within the last five years.
Except as disclosed in Schedule 4.19 hereto or pursuant to the terms of the
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CommerceWAVE Benefit Plans, neither the execution and delivery hereof nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation or golden parachute)
becoming due to any director or other employee of CommerceWAVE, (ii) increase
any benefit otherwise payable under any
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CommerceWAVE Benefit Plan or (iii) result in the acceleration of the time of
payment or vesting of any such benefit to any extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA, for which the 30-day reporting requirement has not been waived,
has been required to be filed for any CommerceWAVE Benefit Plan that is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA and
that is intended to meet the requirements of Section 401(a) of the Code, or by
any entity that is considered one employer with CommerceWAVE under Section 4001
of ERISA or Section 414 of the Code, within the 12-month period ending on the
Closing Date. CommerceWAVE has not incurred any liability to the Pension Benefit
Guaranty Corporation in respect of any CommerceWAVE Benefit Plan that remains
unpaid.
4.20 Taxes.
(a) CommerceWAVE has duly and timely filed all federal, state and local
income, franchise, excise, real and personal property and other tax returns and
reports, including extensions, required to have been filed by CommerceWAVE on or
prior to the Closing Date. CommerceWAVE has duly and timely paid all taxes and
other governmental charges, and all interest and penalties with respect thereto,
required to be paid by CommerceWAVE (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the CommerceWAVE Financial Statements). As of the Closing Date, all
deficiencies proposed as a result of any audit have been paid or settled.
(b) CommerceWAVE is not a party to, or bound by, or otherwise in any
way obligated under, any tax sharing or similar agreement.
(c) CommerceWAVE has not consented to have the provisions of Section
341(f)(2) of the Code (or comparable state law provisions) apply to it, and
CommerceWAVE has not agreed or been requested to make any adjustment under
Section 481(c) of the Code by reason of a change in accounting method or
otherwise.
4.21 Compliance with Applicable Laws. CommerceWAVE holds all material
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of CommerceWAVE, as appropriate, and to carry on the CommerceWAVE
Business as now conducted (the "CommerceWAVE Permits"). To the knowledge of
CommerceWAVE, CommerceWAVE is in material compliance with all applicable laws,
ordinances and regulations and the terms of the CommerceWAVE Permits. Except as
set forth on Schedule 4.21 hereto, all of the CommerceWAVE Permits are fully
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assignable by CommerceWAVE in connection with the Merger. Schedule 4.21 sets
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forth a true and complete list of all CommerceWAVE Permits, true and complete
copies of which have previously been provided to Parent.
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4.22 Board of Directors/Shareholder Consent. Both the Board of Directors of
CommerceWAVE and the CommerceWAVE Shareholders have adopted and approved this
Agreement and the transactions contemplated hereby (including the Merger).
4.23 Brokers. Except as set forth on Schedule 4.23 hereto, no broker or
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finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of CommerceWAVE.
4.24 Environmental Matters.
(a) To the knowledge of CommerceWAVE, no real property currently or
formerly owned or operated by CommerceWAVE is contaminated with any Hazardous
Substance (as hereinafter defined);
(b) CommerceWAVE is not a party to any litigation or administrative
proceeding nor, to the knowledge of CommerceWAVE, is any litigation or
administrative proceeding threatened against it, that, in either case, asserts
or alleges that CommerceWAVE (i) violated any Environmental Law (as hereinafter
defined); (ii) is required to clean up, remove or take remedial or other
responsive action due to the disposal, deposit, discharge, leak or other release
of any Hazardous Substance; or (iii) is required to pay all or a portion of the
cost of any past, present or future cleanup, removal or remedial or other action
that arises out of or is related to the disposal, deposit, discharge, leak or
other release of any Hazardous Substance.
(c) To the knowledge of CommerceWAVE, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by CommerceWAVE containing materials that, if
known to be present in soil or ground water, would require cleanup, removal or
other remedial action under Environmental Law.
(d) To the knowledge of CommerceWAVE, CommerceWAVE is not subject to
any judgment, order or citation related to or arising out of any Environmental
Law and has not been named or listed as a potentially responsible party by any
Governmental Entity in a matter related to or arising out of any Environmental
Law.
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including any petroleum products, asbestos or polychlorinated biphenyls.
4.25 Interest in Customers, Suppliers and Competitors. Except as provided
in Schedule 4.25 hereto, no officer, director, shareholder or, to the knowledge
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of CommerceWAVE, employee of CommerceWAVE or family member (including a spouse,
parent, sibling or lineal
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descendent of any of the foregoing), has any direct or indirect material
interest in any material customer, supplier or competitor of CommerceWAVE, or in
any Person from whom or to whom CommerceWAVE leases any real or personal
property, or in any other Person with whom CommerceWAVE is doing business
whether directly or indirectly (including as a debtor or creditor), whether in
existence as of the Closing Date or proposed, other than the ownership of stock
of publicly traded corporations.
4.26 Accounts Receivable. All accounts, notes, contracts and other
receivables of CommerceWAVE (collectively, "CommerceWAVE Accounts Receivable")
were acquired by CommerceWAVE in the ordinary course of business arising from
bona fide transactions. To the knowledge of CommerceWAVE, there are no set-
offs, counterclaims or disputes asserted with respect to any CommerceWAVE
Accounts Receivable that would result in claims in excess of the reserve for bad
debts set forth on the CommerceWAVE Financial Statements and, to the knowledge
of CommerceWAVE and subject to such reserve, all CommerceWAVE Accounts
Receivable are collectible in full. CommerceWAVE has previously provided Parent
with a true and complete aging report prepared as of April 30, 1998 which shows
the time elapsed since invoice date for all CommerceWAVE Accounts Receivable as
of such date.
4.27 Accounts Payable. All material accounts, notes, contracts and other
amounts payable of CommerceWAVE (collectively, "CommerceWAVE Accounts Payable")
are currently within their respective terms, and are neither in default nor
otherwise past due by more than 90 days. CommerceWAVE has previously provided
Parent with a true and complete aging report prepared as of April 30, 1998 which
shows the time elapsed since invoice date for all CommerceWAVE Accounts Payable
as of such date.
4.28 Insurance. CommerceWAVE currently maintains, in full force and effect,
all insurance policies that are required to be maintained for the conduct of the
CommerceWAVE Business or the ownership of CommerceWAVE's property (both real and
personal) (collectively, the "CommerceWAVE Insurance Policies"). The
CommerceWAVE Insurance Policies are listed on Schedule 4.28 hereto, and true and
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complete copies of all CommerceWAVE Insurance Policies have previously been
provided to Parent. CommerceWAVE (a) is not in default regarding the provisions
of any CommerceWAVE Insurance Policy; (b) has paid all premiums due thereunder;
and (c) has not failed to present any notice or material claim thereunder in a
due and timely fashion.
4.29 Bankruptcy. CommerceWAVE has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 CommerceWAVE Debt. As of the date hereof, the CommerceWAVE Debt is not
in excess of $800,000.
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4.31 Accredited Investors; Investment Purpose. Each CommerceWAVE Shareholder
represents that he (a) is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"); (b) is
acquiring the Parent Stock solely for his own account for investment and not
with a view to, or for sale in connection with, any distribution thereof; and
(c) will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate
or otherwise dispose of any Parent Stock (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of any such shares) except in compliance
with the Securities Act and the rules and regulations thereunder, other
applicable laws, rules and regulations, and the Second Amended and Restated
Stockholders' Agreement of Parent, dated December 17, 1997 (the "Stockholders'
Agreement).
4.32 Restrictions on Transfer. Each CommerceWAVE Shareholder acknowledges
that (a) the Parent Stock received by him hereunder has not been registered
under the Securities Act; (b) the Parent Stock may be required to be held
indefinitely, and he must continue to bear the economic risk of the investment
in such shares unless such shares are subsequently registered under the
Securities Act or an exemption from such registration is available; (c) there
may not be any public market for the Parent Stock in the foreseeable future; (d)
Rule 144 promulgated under the Securities Act is not presently available with
respect to sales of any securities of Parent, and such Rule is not anticipated
to be available in the foreseeable future; (e) when and if Parent Stock may be
disposed of without registration in reliance upon Rule 144, such disposition can
be made only in limited amounts and in accordance with the terms and conditions
of such Rule; (f) if the exemption afforded by Rule 144 is not available, public
sale without registration will require the availability of an exemption under
the Securities Act; (g) the Parent Stock is subject to the terms and conditions
of the Stockholders' Agreement; (h) restrictive legends shall be placed on the
certificates representing Parent Stock; and (i) a notation shall be made in the
appropriate records of Parent indicating that Parent Stock is subject to
restrictions on transfer and, if Parent should in the future engage the services
of a stock transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to Parent Stock.
4.33 Ability to Bear Risk; Access to Information; Sophistication. Each
CommerceWAVE Shareholder represents and warrants that (a) his financial
situation is such that he can afford to bear the economic risk of holding Parent
Stock acquired by him hereunder for an indefinite period; (b) he can afford to
suffer the complete loss of such Parent Stock; (c) he has been granted the
opportunity to ask questions of, and receive answers from, representatives of
Parent concerning the terms and conditions of the Parent Stock and to obtain any
additional information that he deems necessary; (d) his knowledge and experience
in financial business matters is such that he is capable of evaluating the
merits and risk of ownership of the Parent Stock; (e) he has carefully reviewed
the terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; and (f) he (i) has reviewed the Private Placement
Memorandum of Parent dated June 25, 1998 (the "Memorandum"), (ii) has carefully
examined the Memorandum and has had an opportunity to ask questions of, and
receive answers from, representatives of Parent, and to obtain additional
information concerning Parent and its Subsidiaries (as hereinafter defined), and
(iii) does not require additional information regarding Parent or its
Subsidiaries in connection with the Merger.
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4.34 Disclosure. No statement of fact by CommerceWAVE or any CommerceWAVE
Shareholder contained herein and no written statement of fact furnished by
CommerceWAVE or any CommerceWAVE Shareholder to Parent or Sub in connection
herewith contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein
contained not materially misleading.
4.35 Nature of Liabilities. Any unpaid legal, accounting or other fees of
CommerceWAVE are solely and directly related to the Merger.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to
CommerceWAVE and the CommerceWAVE Shareholders, which representations and
warranties shall survive the Closing in accordance with Section 10.1 hereof, as
follows:
5.1 Organization and Qualification. Each of Parent and its Subsidiaries (as
defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached as Schedule 5.1 hereto.
------------
5.2 Authority. Each of Parent and Sub has the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by CommerceWAVE and the CommerceWAVE
Shareholders, constitutes the valid and binding obligation of each of Parent and
Sub, enforceable against each of Parent and Sub in accordance with its terms,
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
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5.3 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or Bylaws
of Parent or Sub, or the organizational documents of any other Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for (x)
compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL and the
GCL); or (ii) any other Person.
5.4 Litigation. Except as set forth on Schedule 5.4 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 Brokers. Except as disclosed on Schedule 5.5 hereto, no broker or finder
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is entitled to any broker's or finder's fee in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Parent or
Sub.
5.6 Parent Stock.
(a) As of the date hereof, the authorized capital stock of Parent
consists of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 10,319,628 shares are
validly issued and outstanding (without taking into account any shares of Parent
Stock to be issued pursuant hereto), fully paid and nonassessable; (ii) 750,000
shares of
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blank check preferred stock, (A) 250,000 of which have been designated as Class
A Convertible Preferred Stock, of which 174,191 shares are validly issued and
outstanding, fully paid and nonassessable, (B) 200,000 of which have been
designated as Class B Convertible Preferred Stock, of which 98,767 shares are
validly issued and outstanding, fully paid and nonassessable, and (C) 15,000 of
which have been designated as Class C Convertible Preferred Stock, of which
9,232 shares are validly issued and outstanding, fully paid and nonassessable.
Except as set forth on Schedule 5.6 hereto, there are no options, warrants,
------------
calls, agreements, commitments or other rights presently outstanding that would
obligate Parent to issue, deliver or sell shares of its capital stock, or to
grant, extend or enter into any such option, warrant, call, agreement,
commitment or other right. In addition to the foregoing, as of the Closing Date,
Parent has no bonds, debentures, notes or other indebtedness issued or
outstanding that have voting rights in Parent.
(b) When delivered to the CommerceWAVE Shareholders in accordance with
the terms hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
5.7 Subsidiaries. Except as set forth on Schedule 5.7 hereto, Parent has no
------------
subsidiaries and does not otherwise own or control, directly or indirectly, any
equity interest in, or any security convertible into an equity interest in, any
Entity. Schedule 5.7 lists the name of each of the Subsidiaries of Parent, and
------------
indicates their respective jurisdictions of incorporation.
5.8 Financial Statements. Parent has heretofore furnished CommerceWAVE with
a true and complete copy of (a) the audited financial statements of iXL
Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31,
1993, 1994 and 1995, and for the four month period ended April 30, 1996; (b) the
audited combined financial statements for Creative Video, Inc. (n/k/a iXL,
Inc.), Creative Video Library, Inc. and Entrepreneur Television, Inc. for the
years ended December 31, 1993, 1994 and 1995, and for the four month period
ended April 30, 1996; (c) the audited consolidated financial statements for
Parent and its Subsidiaries for the eight months ended December 31, 1996 and for
the year ended December 31, 1997; and (d) the unaudited consolidated financial
statements for Parent and its Subsidiaries for the four month period ended April
30, 1998 (all of the foregoing, collectively, "Parent Financial Statements").
The Parent Financial Statements present fairly in all material respects the
consolidated financial position, results of operations, shareholders' equity and
cash flow of Parent at the respective dates or for the respective periods to
which they apply. Except as disclosed therein, such statements and related
notes have been prepared in accordance with GAAP consistently applied throughout
the periods involved (except, in the case of the unaudited financial statements,
for the exclusion of footnotes and normal year end adjustments).
5.9 Undisclosed Liabilities. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fine, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997 that would not, whether individually or in the
aggregate, have a material
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adverse impact on the business or financial condition of Parent and its
Subsidiaries, taken as a whole; (b) liabilities reflected on the Parent
Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
5.10 Compliance with Applicable Laws. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
5.11 Board of Directors/Shareholder Consent. The board of directors of
Parent, and both the board of directors and shareholder of Sub, have, by
unanimous written consent or other action, adopted and approved this Agreement
and the transactions contemplated hereby (including the Merger).
5.12 Bankruptcy. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 Absence of Changes. Except as provided in Schedule 5.13 hereto, since
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December 31, 1997, there has not been (a) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
material change in Parent's accounting principles, practices or methods; (f) any
split, combination or reclassification of any of Parent's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Parent's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
5.14 Taxes. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports,
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including extensions, required to have been filed by Parent and its Subsidiaries
on or prior to the Closing Date. Parent and its Subsidiaries have duly and
timely paid all taxes and other governmental charges, and all interest and
penalties with respect thereto, required to be paid by Parent and its
Subsidiaries (whether by way of withholding or otherwise) to any federal, state,
local or other taxing authority (except to the extent the same are being
contested in good faith, and adequate reserves therefor have been provided in
the applicable Parent Financial Statement). As of the Closing Date, all
deficiencies proposed as a result of any audits have been paid or settled.
5.15 Disclosure. No statement of fact by Parent or Sub contained herein and
no written statement of fact furnished or to be furnished by Parent or Sub to
CommerceWAVE in connection herewith contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein contained not
misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Conduct of Business by CommerceWAVE Pending the Merger. From and after
the date hereof, prior to the Effective Time, except as contemplated hereby,
unless Parent shall otherwise agree in writing, CommerceWAVE shall carry on its
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, use reasonable efforts to preserve intact its
present business organization, keep available the services of its employees and
preserve its relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with CommerceWAVE to the end
that its goodwill and on-going businesses shall not be impaired in any material
respect at the Effective Time. Without limiting the generality of the
foregoing, and except as contemplated hereby, unless Parent shall otherwise
agree in writing, prior to the Effective Time, CommerceWAVE shall not, directly
or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire, any share of
capital stock of CommerceWAVE or any other equity security thereof or any right,
warrant, or option to acquire any such share or other security;
(b) issue, deliver, sell, pledge or otherwise encumber any share of its
capital stock, any other voting security issued by CommerceWAVE or any security
convertible into, or any right, warrant or option to acquire any such share or
voting security, except as provided in Section 6.6(a) hereof;
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(c) amend its Articles of Incorporation, Bylaws or other comparable
organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to CommerceWAVE;
(e) subject to a Lien or sell, lease or otherwise dispose of any of its
properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of
CommerceWAVE, guarantee any debt security of another Person or enter into any
"keep well" or other agreement to maintain the financial condition of another
Person, make any loan, advance or capital contribution to, or investment in, any
other Person, or settle or compromise any material claim or litigation; or
(g) authorize any of, or commit or agree to take any of, the foregoing
actions.
6.2 Access to Information. From the date hereof through the Effective Time,
CommerceWAVE shall afford to Parent and Parent's accountants, counsel and other
representatives reasonable access during normal business hours (and at such
other times as the parties may mutually agree) upon reasonable prior notice and
approval of CommerceWAVE acting solely through its President, which shall not be
unreasonably withheld, to its properties, books, contracts, commitments, records
and personnel and, during such period, shall furnish promptly to Parent all
information concerning its business, properties and personnel as Parent may
reasonably request. Parent and its accountants, counsel and other
representatives shall, in the exercise of the rights described in this Section
6.2, not unduly interfere with the operation of the business of CommerceWAVE.
6.3 Filings; Tax Elections. CommerceWAVE shall promptly provide Parent with
copies of all filings made by CommerceWAVE with any Governmental Entity in
connection herewith and the transactions contemplated hereby. CommerceWAVE
shall, before settling or compromising any material income tax liability of
CommerceWAVE, consult with Parent and its advisors as to the positions and
elections that will be taken or made with respect to such matter.
6.4 Public Announcements. The parties agree that, except as may otherwise be
required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger. Any such disclosure shall be coordinated by Parent,
and none of the CommerceWAVE Shareholders shall make any such disclosure without
the prior written consent of Parent.
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6.5 Transfer and Gains Taxes and Certain Other Taxes and Expenses. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 Options.
(a) CommerceWAVE hereby covenants and agrees that, prior to Closing, it
shall issue to its employees all unissued options remaining in its option pool,
at the same exercise price and subject to the same vesting schedule as its
issued and outstanding options.
(b) CommerceWAVE hereby covenants and agrees that at the Effective Time,
all of the CommerceWAVE Stock Rights (all of which are set forth on Schedule
--------
4.3(a) hereto) shall have been properly canceled and, except for the right to
- ------
receive options to acquire Parent Stock described in Section 6.6(c) below, all
rights and obligations thereunder shall have been terminated.
(c) Parent hereby covenants and agrees that, at the Effective Time, each
of the holders of CommerceWAVE Stock Rights shall receive options to purchase
the number of shares of validly issued, fully paid and nonassessable Parent
Stock, at the exercise price per share, as set forth on Schedule 6.6(c) hereto,
---------------
all of which options shall have been issued pursuant to the IXL Holdings, Inc.
1996 Stock Option Plan, as amended (the "Parent Stock Option Plan").
6.7 Further Assurances. From time to time after the Effective Time, upon the
reasonable request of any party hereto, the other party or parties hereto shall
execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof.
6.8 State Tax Assumption. CommerceWAVE shall, prior to the Closing, have
obtained a tax clearance certificate (the "Tax Clearance Certificate") from the
California Franchise Tax Board ("FTB") and, in that connection, Randall Pipp
shall execute, and deliver to the FTB, a personal assumption of tax liability
("State Tax Assumption"). Sub agrees to enter into an Assumption Agreement with
Randall Pipp, substantially in the form of Exhibit "H" hereto, whereby Sub will
-----------
assume the State Tax Assumption ("Assumption Agreement").
6.8 No Impairment. From and after the date hereof, prior to the Effective
Time, except as contemplated hereby, Parent will not take any action, including
amending or modifying its Certificate of Incorporation or Bylaws, which would
materially adversely affect the benefits to be received by the CommerceWAVE
Shareholders as a whole hereunder.
6.10 Landlord's Consent. CommerceWAVE shall, prior to the Closing, have
obtained written consent, in accordance with its Office Lease, dated September
8, 1994, with respect to its premises, from the Landlord thereof.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligation of CommerceWAVE and the CommerceWAVE
Shareholders to Effect the Merger. The obligation of CommerceWAVE and the
CommerceWAVE Shareholders to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions:
(a) Parent and Sub shall have performed in all material respects their
respective agreements contained herein required to be performed at or prior to
the Effective Time, and the representations and warranties of Parent and Sub
contained herein shall be true in all material respects when made and (except
for representations and warranties made as of a specified date, which need only
be true as of such date) at and as of the Effective Time as if made at and as of
such time, except as contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to CommerceWAVE at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-1" hereto, and (ii)
-------------
the appropriate officers of Sub shall have executed and delivered to
CommerceWAVE at the Closing, a closing certificate and incumbency certificate,
substantially in the form of Exhibit "A-2" hereto;
-------------
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
- ---------------
(d) CommerceWAVE shall have received corporate certificates of good
standing for Parent and Sub, and a copy of the Certificate of Incorporation for
Parent and Sub, respectively, both as certified by the Secretary of State of
Delaware;
(e) there shall have been delivered to each of the CommerceWAVE
Shareholders at the Closing, duly executed by Parent, an Agreement to be Bound
to the Registration Rights Agreement of Parent, dated as of Closing Date (the
"Agreement to be Bound to the Registration Rights Agreement"), substantially in
the form of Exhibit "B" hereto;
-----------
(f) Parent shall have executed and delivered at the Closing an Option
Agreement for each of the Persons listed on Schedule 6.6(c) hereto receiving
options to purchase Parent Stock, substantially in the form of Exhibit "C"
-----------
hereto;
(g) the CommerceWAVE Shareholders shall have received, at the Closing, a
duly executed opinion of counsel to Parent and Sub, substantially in the form of
Exhibit "D" hereto;
- -----------
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<PAGE>
(h) CommerceWAVE shall have received the Tax Clearance Certificate from
the FTB, and Sub shall have executed and delivered at the Closing the Assumption
Agreement; and
(i) CommerceWAVE shall have received from Parent and Sub such other
documents as CommerceWAVE's counsel shall have reasonably requested, in form and
substance reasonably satisfactory to CommerceWAVE's counsel.
7.2 Conditions to Obligations of Parent and Sub to Effect the Merger. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) CommerceWAVE and the CommerceWAVE Shareholders shall have performed
in all material respects their respective agreements contained herein required
to be performed at or prior to the Effective Time, and the representations and
warranties of CommerceWAVE and the CommerceWAVE Shareholders contained herein
shall be true in all material respects when made and (except for representations
and warranties made as of a specified date, which need only be true as of such
date) at and as of the Effective Time as if made at and as of such time, except
as contemplated hereby;
(b) the appropriate officers of CommerceWAVE shall have executed and
delivered to Parent at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "E" hereto;
-----------
(c) CommerceWAVE and the CommerceWAVE Shareholders shall have obtained
or caused to be obtained all of the Consents, if any, listed on Schedule 7.2(c)
---------------
hereto, including that referred to in Section 6.10 hereof;
(d) there shall have been delivered to Parent at the Closing, duly
executed by each of the CommerceWAVE Shareholders, (i) an Agreement to be Bound
to the Stockholders' Agreement, substantially in the form of Exhibit "F" hereto,
-----------
including for each of the CommerceWAVE Shareholders who is married an executed
Spousal Waiver, substantially in the form attached thereto; and (ii) an
Agreement to be Bound to the Registration Rights Agreement;
(e) Parent shall have received a corporate certificate of good standing
for CommerceWAVE, and a copy of the Articles of Incorporation of CommerceWAVE,
both as certified by the Secretary of State of California;
(f) CommerceWAVE shall have complied with its obligations under Sections
6.6(a) and (b) hereof;
(g) Parent shall have received, at the Closing, a duly executed opinion
of counsel to CommerceWAVE and the CommerceWAVE Shareholders, substantially in
the form of Exhibit "G" hereto;
-----------
25
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(h) Parent shall have received from CommerceWAVE the Tax Clearance
Certificate, indicating that no taxes are owed by CommerceWAVE to state or local
taxing authorities in the State of California, and Randall Pipp shall have
executed and delivered at the Closing the Assumption Agreement;
(i) Parent shall have received from CommerceWAVE or the CommerceWAVE
Shareholders, as the case may be, such other documents as Parent's counsel shall
have reasonably requested, in form and substance reasonably satisfactory to
Parent's counsel; and
(j) Parent shall have received evidence satisfactory to it that at the
Closing the assets and properties used in the CommerceWAVE Business are free and
clear of all Liens other than Permitted Liens (as hereinafter defined).
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Parent.
(a) Parent shall indemnify and hold the CommerceWAVE Shareholders and
CommerceWAVE's directors, officers and employees (collectively, the
"CommerceWAVE Indemnified Parties") harmless from and against, and agree
promptly to defend each of the CommerceWAVE Indemnified Parties from and
reimburse each of the CommerceWAVE Indemnified Parties for, any and all losses,
damages, costs, expenses, liabilities, obligations and claims of any kind
(including reasonable attorney fees and other legal costs and expenses)
(collectively, a "CommerceWAVE Loss") that any of the CommerceWAVE Indemnified
Parties may at any time suffer or incur, or become subject to, as a result of or
in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Parent or Sub at the Closing in accordance
with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform, satisfy
and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations hereunder or under any of the documents and materials
delivered by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary, Parent
shall not have any liability under Section 8.1(a)(i) above (i) unless the
aggregate of all CommerceWAVE Losses for which Parent would be liable but for
this sentence exceeds, on a cumulative basis, an
26
<PAGE>
amount equal to $100,000, and then only to the extent of such excess, (ii) for
amounts in excess of $10,000,000 in the aggregate, and (iii) unless the
CommerceWAVE Shareholders have asserted a claim with respect to the matters set
forth in Section 8.1(a)(i), or 8.1(a)(iii) to the extent applicable to Section
8.1(a)(i), within one year of the Effective Time. Notwithstanding any
implication to the contrary contained herein, the parties acknowledge and agree
that a decrease in the value of Parent Stock would not, by itself, constitute a
CommerceWAVE Loss, unless and to the extent a decrease in the value of Parent
Stock has been demonstrated to be as a result of any event described in Sections
8.1(a)(i), (ii) or (iii) above.
8.2 Indemnification by the CommerceWAVE Shareholders.
(a) Subject to Section 8.2(c) hereof, the CommerceWAVE Shareholders,
severally but not jointly, shall indemnify and hold Parent, Sub, Surviving
Corporation and their respective shareholders, directors, officers and employees
(collectively, the "Parent Indemnified Parties") harmless from and against, and
agree to defend promptly each of the Parent Indemnified Parties from and
reimburse each of the Parent Indemnified Parties for, any and all losses,
damages, costs, expenses, liabilities, obligations and claims of any kind
(including reasonable attorneys' fees and other legal costs and expenses)
(collectively, a "Parent Loss") that any of the Parent Indemnified Parties may
at any time suffer or incur, or become subject to, as a result of or in
connection with:
(i) in the case of the Controlling Shareholders, any breach or
inaccuracy of any of the representations and warranties made by CommerceWAVE or
the CommerceWAVE Shareholders in or pursuant hereto, or in any instrument
certificate or affidavit delivered by any of the same at the Closing in
accordance with the provisions hereof;
(ii) in the case of each other CommerceWAVE Shareholder, any breach
or inaccuracy of any of the representations and warranties made by and with
respect to such CommerceWAVE Shareholder in Sections 4.2, 4.3(b), 4.5, 4.31,
4.32, 4.33 and 4.34 hereof or in any certificate or affidavit delivered by any
of the same at the Closing in accordance herewith;
(iii) any failure by CommerceWAVE or any of the CommerceWAVE
Shareholders to carry out, perform, satisfy and discharge any of their
respective covenants, agreements, undertakings, liabilities or obligations
hereunder or under any of the documents and materials delivered by CommerceWAVE
pursuant hereto; and
(iv) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above, none of the CommerceWAVE Shareholders
shall have any liability under Sections 8.2(a)(i) or (ii) above (i) unless the
aggregate of all Parent Losses for which the CommerceWAVE Shareholders would be
liable but for this sentence exceeds, on a cumulative basis, an amount equal to
$100,000, and then only to the extent of such excess, (ii) for amounts in excess
of $10,000,000 in the aggregate, and (iii) unless Parent has asserted a claim
27
<PAGE>
with respect to the matters set forth in Sections 8.2(a)(i) or 8.2(a)(ii), or
8.2(a)(iv) to the extent applicable to Sections 8.2(a)(i) or 8.2(a)(ii), within
one year of the Effective Time, except (1) with respect to the matters arising
under Sections 4.18, 4.19, 4.20 or 4.24 hereof, and (2) for claims for
indemnification based on (A) fraud, (B) intentional misrepresentation or (C) any
breach of any representation made in Section 4.3(b) hereof or otherwise with
respect to title to any CommerceWAVE Stock, in which events Parent must have
asserted a claim within the applicable statute of limitations. Notwithstanding
any implication to the contrary contained herein, the parties acknowledge and
agree that a decrease in the value of Parent Stock would not, by itself,
constitute a Parent Loss, unless and to the extent a decrease in the value of
Parent Stock has been demonstrated to be as a result of any event described in
Sections 8.2(a)(i), (ii), (iii) or (iv) above.
(c) Notwithstanding the above, except for claims for indemnification
based on (i) fraud, (ii) intentional misrepresentation or (iii) any breach of
any representation made in Section 4.3(b) hereof or otherwise with respect to
title to any CommerceWAVE Stock, the liability of the CommerceWAVE Shareholders
under Section 8.2(a) hereof will not exceed their respective portions of the
merger consideration receivable hereunder.
8.3 Notification of Claims; Election to Defend
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder. Subject to the
Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of any
Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a Claim
asserted by a third party against the Indemnified Party that the Indemnifying
Party acknowledges is a Claim for which it must indemnify or hold harmless the
Indemnified Party under Section 8.1 or 8.2 hereof, as the case may be, the
Indemnifying Party shall have the right, at its sole cost and expense, to employ
counsel of its own choosing to defend any such Claim asserted against the
Indemnified Party. Notwithstanding anything to the contrary in the preceding
sentence, if the Indemnified Party (i) reasonably believes that its interests
with respect to a Claim (or any material portion thereof) are in conflict with
the interests of the Indemnifying Party with respect to such Claim (or portion
thereof), and (ii) promptly notifies the Indemnifying Party, in writing, of the
nature of such conflict, then the Indemnified Party shall be entitled to choose,
at the sole cost and expense of the Indemnifying Party, independent counsel to
defend such Claim (or the conflicting portion thereof). The Indemnified Party
shall have the right to participate in the defense of any Claim at its own
expense (except to the extent provided in the preceding sentence), but the
Indemnifying Party shall retain
28
<PAGE>
control over such litigation (except as provided in the preceding sentence). The
Indemnifying Party shall notify the Indemnified Party in writing, as promptly as
possible (but in any case before the due date for the answer or response to a
Claim) after receipt of the notice of Claim given by the Indemnified Party to
the Indemnifying Party under Section 8.3(a) hereof, of its election to defend in
good faith any such third party Claim. For so long as the Indemnifying Party is
defending in good faith any such Claim asserted by a third party against the
Indemnified Party, the Indemnified Party shall not settle or compromise such
Claim without the prior written consent of the Indemnifying Party. The
Indemnified Party shall cooperate with the Indemnifying Party in connection with
any such defense and shall make available to the Indemnifying Party or its
agents all records and other materials in the Indemnified Party's possession
reasonably required by it for its use in contesting any third party Claim;
provided, however, that the Indemnifying Party shall have agreed, in writing, to
keep such records and other materials confidential except (i) to the extent
required for defense of the relevant Claim, or (ii) as required by law or court
order. Whether or not the Indemnifying Party elects to defend any such Claim,
the Indemnified Party shall have no obligations to do so. Within 30 days after a
final determination (including a settlement) has been reached with respect to
any Claim contested pursuant to this Section 8.3(b), the Indemnifying Party
shall satisfy its obligations hereunder with respect thereto. Any amount paid
thereafter shall include interest thereon for the period commencing at the end
of such 30-day period and ending on the actual date of payment, at a rate of 15%
per annum, or, if lower, at the highest rate of interest permitted by applicable
law at the time of such payment.
8.4 Payment. Any Indemnifying Party may, at such Indemnifying Party's
option, pay all or part of any amount due under this Article VIII by delivery of
shares of Parent Stock having a value equal to the amount due (to the extent
that such Party owns sufficient shares of Parent Stock). For the purpose of
this provision, the value of Parent Stock shall be deemed to be $10 per share.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Merger Agreement may be terminated at any time prior
to the Effective Time:
(a) by mutual written consent of Parent and CommerceWAVE;
(b) by CommerceWAVE, upon a material breach hereof on the part of Parent
or Sub which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by July 31, 1998;
(c) by Parent, upon a material breach hereof on the part of CommerceWAVE
or any of the CommerceWAVE Shareholders which has not been cured and which would
cause any condition set forth in Section 7.2 hereof to be incapable of being
satisfied by July 31, 1998;
29
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(d) by Parent or CommerceWAVE if any court of competent jurisdiction
shall have issued, enacted, entered, promulgated or enforced any order,
judgment, decree, injunction or ruling which restrains, enjoins or otherwise
prohibits the Merger and such order, judgment, decree, injunction or ruling
shall have become final and nonappealable; or
(e) by either Parent or CommerceWAVE if the Merger shall not have been
consummated on or before July 31, 1998 (provided the terminating party is not
otherwise in material breach of its representations, warranties or obligations
hereunder).
9.2 Fees and Expenses.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the Surviving Corporation; provided, however, that the Controlling Shareholders
shall pay all fees and expenses (including agents, counsel and other advisors)
of CommerceWAVE, themselves and the other CommerceWAVE Shareholders that are not
solely and directly related to the Merger.
(b) If the Merger is not consummated for a reason other than the willful
and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
(c) If the Merger is not consummated because of a willful and material
breach hereof by any party, the nonbreaching party or parties shall be entitled
to pursue all legal and equitable remedies against the breaching party for such
breach including specific performance and all fees and expenses incurred by the
nonbreaching party or parties in connection with enforcing its or their rights
hereunder with respect to such breach shall be paid by the breaching party.
9.3 Amendment. This Merger Agreement may be amended by CommerceWAVE, Parent,
Sub and, on behalf of all of the CommerceWAVE Shareholders, the Controlling
Shareholders, at any time before or after approval hereof by the CommerceWAVE
Shareholders, but, after such approval, no amendment shall be made which (i)
changes the form or decreases the amount of the consideration to be received in
the Merger, (ii) in any way materially adversely affects the rights of the
CommerceWAVE Shareholders, or (iii) under applicable law would require approval
of the CommerceWAVE Shareholders, in any such case referred to in clauses (i),
(ii) and (iii), without the further approval of the CommerceWAVE Shareholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of the parties hereto, provided that after the Effective Time, any such
amendment must be signed by the former holders of a majority of the CommerceWAVE
Stock.
9.4 Waiver. At any time prior to the Effective Time, the parties hereto may,
to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with
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any conditions to its own obligations contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival; Recourse. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 10.9 and 10.10 hereof, shall survive the
Merger (except to the extent a shorter period of time is explicitly specified
therein) and (ii) the representations and warranties made in Articles IV and V
hereof shall survive the Merger, and shall survive any independent investigation
by the parties, and any dissolution, merger or consolidation of CommerceWAVE or
Parent, and shall bind the legal representatives, assigns and successors of
CommerceWAVE, the CommerceWAVE Shareholders and Parent, for a period of one year
after the Closing Date (other than (A) the representations and warranties
contained in Sections 4.18, 4.19, 4.20 and 4.24 hereof, and (B) the claims
described in Section 8.2(b)(2) hereof, all of which shall survive for the
applicable statute of limitations).
10.2 Notices. All notices or other communications under this Agreement shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in Person, by telecopy (with confirmation of receipt),
or by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to CommerceWAVE: CommerceWAVE, Inc.
2121 Palomar Airport Rd., Ste. 101
Carlsbad, CA 92009
Attention: Mr. Randall Pipp, Pres. and CEO
Telephone: (760) 931-0070
Telecopy: (760) 931-0999
With a copy to: Gray Cary Ware Friedenrich LLP
4365 Executive Dr., Ste. 1600
San Diego, CA 92121-2189
Attention: Douglas J. Rein, Esq.
Telephone: 619/677-1400
Telecopy: 619/677-1477
If to the CommerceWAVE To the address listed under the signature
Shareholders: line of the applicable CommerceWAVE Shareholder
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If to Parent or Sub: IXL Holdings, Inc.
Two Park Place
1888 Emery St., 2nd Floor
Atlanta, GA 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Rd., Ste. 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Ave., 24th Floor
New York, NY 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 Entire Agreement. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, except for the non-disclosure letter agreement between Parent and
CommerceWAVE dated as of January 16, 1998. There are no other representations
or warranties, whether written or oral, between the parties in connection the
subject matter hereof, except as expressly set forth herein.
10.4 Assignments; Parties in Interest. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the rights, interests, and obligations
of Sub hereunder may be assigned to any direct wholly owned Delaware subsidiary
of Parent without such prior consent. Subject to the preceding sentence, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing herein, express or implied, is intended to or shall confer
upon any Person not a party hereto any right, benefit or remedy of any nature
whatsoever under or by reason hereof, except as otherwise provided herein.
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10.5 Governing Law. This Agreement, except to the extent that the GCL or the
DGCL is mandatorily applicable to the Merger, or to the rights of the
CommerceWAVE Shareholders or the other parties hereto with respect to the
Merger, shall be governed in all respects by the laws of the State of Georgia
(without giving effect to the provisions thereof relating to conflicts of law).
10.6 Headings. The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation hereof.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 Severability. If any term or other provision hereof is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions hereof shall nevertheless remain in full force and
effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.9 Post-Closing Access. For a period of three years after the Closing
Date, the CommerceWAVE Shareholders and their agents and representatives shall
have reasonable access to the books and records of the CommerceWAVE Business.
10.10 Post-Closing Notice. To the extent the Surviving Corporation receives
written notice of any event or circumstance that materially affects any of the
CommerceWAVE Shareholders, the Surviving Corporation shall promptly notify the
affected CommerceWAVE Shareholder of such matter, information, or event and
shall provide them with copies of all relevant documentation or correspondence
in connection thereto.
10.11 Certain Definitions. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the
CommerceWAVE Real Property or interfering with the ordinary conduct of any of
the CommerceWAVE Business; and (e) those Liens listed on Schedule 10.11;
--------------
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(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of CommerceWAVE" shall refer to the
knowledge, subject to clause (i) above, of any of the Controlling Shareholders;
and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of which are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including Sub); provided, however, that
with respect to the Parent, the terms "Subsidiary" and "Subsidiaries" shall not
include CommerceWAVE or University Netcasting, Inc.
- SIGNATURES ON THE FOLLOWING PAGE -
34
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IN WITNESS WHEREOF, Parent, Sub and CommerceWAVE have caused this Agreement to
be signed and delivered by their respective duly authorized officers, and each
CommerceWAVE Shareholder has signed and delivered this Agreement, all as of the
date first written above.
"CommerceWAVE"
CommerceWAVE, Inc., a California corporation
By: /s/ Randall M. Pipp
---------------------------------------
Title: President
"Parent"
IXL Holdings, Inc., a Delaware corporation
By: /s/ James V. Sandry
---------------------------------------
Title:
------------------------------------
"Sub"
iXL-San Diego, Inc., a Delaware corporation
By: /s/ James V. Sandry
---------------------------------------
Title:
------------------------------------
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
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<PAGE>
"CommerceWAVE Shareholders"
/s/ Randall M. Pipp
--------------------------------------------------------
Randall M. Pipp
Address: 1334 Cynthia Lane
Carlsbad, CA 92008
760/434-9091
/s/ Garland Wong
--------------------------------------------------------
Garland Wong
Address: 4682 Robbins Street
San Diego, CA 92122
619/535-9471
/s/ Kandie Hsieh
--------------------------------------------------------
Investar Burgeon Venture Capital, Inc.
Address: Room 1805, 18th Floor
No. 333, Keelung Road
Section 1
Taipei, Taiwan, R.O.C.
886-2-7579585
/s/ William Melton
--------------------------------------------------------
William Melton
Address: 2086 Hunters Crest Way
Vienna, VA 22181
703/620-4200
/s/ Dan Lynch
--------------------------------------------------------
Dan Lynch
Address: 25660 La Lanne Ct.
Los Altos Hills, CA 94022
415/948-1344
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
36
<PAGE>
/s/ Jesse Chen
--------------------------------------------------------
Maton Fund I, L.P. by Jesse Chen
Address: 2880 Lakeside Drive
Suite 237
Santa Clara, CA 95054
408/919-7388
37
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate................................... Exhibit A-1
Sub's Closing Certificate...................................... Exhibit A-2
Agreement to be Bound to Registration Rights Agreement......... Exhibit B
Option Agreement............................................... Exhibit C
Opinion of Counsel to Parent and Sub........................... Exhibit D
CommerceWAVE's Closing Certificate............................. Exhibit E
Agreement to be Bound to Stockholders' Agreement............... Exhibit F
Opinion of Counsel to CommerceWAVE............................. Exhibit G
Assumption Agreement........................................... Exhibit H
<PAGE>
SCHEDULE 4.1
------------
ARTICLES OF INCORPORATION AND BYLAWS OF COMMERCEWAVE
SCHEDULE 4.3(A)
---------------
CAPITALIZATION OF COMMERCEWAVE
SCHEDULE 4.3(B)
---------------
LIENS ON COMMERCEWAVE STOCK
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF COMMERCEWAVE
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF COMMERCEWAVE
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF COMMERCEWAVE
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF COMMERCEWAVE
<PAGE>
SCHEDULE 4.10
-------------
BAD EQUIPMENT OF COMMERCEWAVE
SCHEDULE 4.11(A)
----------------
INFRINGEMENT UPON INTELLECTUAL PROPERTY OF COMMERCEWAVE
SCHEDULE 4.12
-------------
LIENS ON REAL PROPERTY OF COMMERCEWAVE
SCHEDULE 4.13
-------------
LEASES OF COMMERCEWAVE
SCHEDULE 4.14
-------------
CONTRACTS OF COMMERCEWAVE
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF COMMERCEWAVE
SCHEDULE 4.17
-------------
LITIGATION
<PAGE>
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF COMMERCEWAVE
SCHEDULE 4.19
-------------
ERISA ISSUES OF COMMERCEWAVE
SCHEDULE 4.21
-------------
COMMERCEWAVE PERMITS
SCHEDULE 4.23
-------------
COMMERCEWAVE BROKERS
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS, COMPETITORS
SCHEDULE 4.28
-------------
INSURANCE OF COMMERCEWAVE
SCHEDULE 5.1
------------
CERTIFICATE OF INCORPORATION AND BYLAWS OF PARENT AND SUB
<PAGE>
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
OUTSTANDING OBLIGATIONS TO ISSUE OPTIONS, WARRANTS OR
OTHER PARENT STOCK RIGHTS
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS OF ABSENCE OF CHANGES
<PAGE>
SCHEDULE 6.6(C)
---------------
OPTIONS TO HOLDERS OF COMMERCEWAVE STOCK RIGHTS
SCHEDULE 7.1(C)
---------------
PARENT CONSENTS
SCHEDULE 7.2(C)
---------------
COMMERCEWAVE CONSENTS
SCHEDULE 10.11
--------------
PERMITTED LIENS OF COMMERCEWAVE
<PAGE>
EXHIBIT 2.20
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
IXL HOLDINGS, INC.,
IXL-NEW YORK, INC.,
WISSING & LAURENCE, INC.
AND
THE W & L SHAREHOLDERS
DATED AS OF JULY 8, 1998
<PAGE>
PAGE
TABLE OF CONTENTS
<TABLE>
ARTICLE I
THE MERGER
<S> <C>
1.1 THE MERGER.......................................................... 1
1.2 CLOSING AND CLOSING DATE............................................ 2
1.3 EFFECTIVE TIME OF THE MERGER........................................ 2
1.4 EFFECT OF THE MERGER................................................ 2
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION........................................ 2
2.2 BYLAWS.............................................................. 2
2.3 BOARD OF DIRECTORS; OFFICERS........................................ 2
ARTICLE III
CONVERSION OF SHARES
3.1 MERGER CONSIDERATION................................................ 3
3.2 DISSENTING SHARES................................................... 4
3.3 NO FURTHER RIGHTS................................................... 4
3.4 CLOSING OF W & L'S TRANSFER BOOKS................................... 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 ORGANIZATION AND QUALIFICATION.. .................................. 4
4.2 AUTHORITY.......................................................... 5
4.3 CAPITALIZATION..................................................... 5
4.4 SUBSIDIARIES....................................................... 5
4.5 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS........................ 5
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
4.6 FINANCIAL STATEMENTS................................................. 6
4.7 ABSENCE OF CHANGES................................................... 6
4.8 UNDISCLOSED LIABILITIES.............................................. 7
4.9 TITLE TO PROPERTIES.................................................. 7
4.10 EQUIPMENT............................................................ 7
4.11 INTELLECTUAL PROPERTY................................................ 8
4.12 REAL PROPERTY........................................................ 8
4.13 LEASES............................................................... 9
4.14 CONTRACTS............................................................ 9
4.15 DIRECTORS AND OFFICERS............................................... 9
4.16 PAYROLL INFORMATION.................................................. 9
4.17 LITIGATION........................................................... 10
4.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS............................... 10
4.19 ERISA................................................................ 10
4.20 TAXES................................................................ 11
4.21 COMPLIANCE WITH APPLICABLE LAWS...................................... 11
4.22 BOARD OF DIRECTOR/SHAREHOLDER CONSENT................................ 11
4.23 BROKERS.............................................................. 11
4.24 ENVIRONMENTAL MATTERS................................................ 12
4.25 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS..................... 12
4.26 ACCOUNTS RECEIVABLE.................................................. 12
4.27 ACCOUNTS PAYABLE..................................................... 13
4.28 INSURANCE............................................................ 13
4.29 BANKRUPTCY........................................................... 13
4.30 W & L DEBT........................................................... 13
4.31 INVESTMENT PURPOSE; ACCREDITED INVESTOR OR PURCHASER REPRESENTATIVE.. 13
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
4.32 RESTRICTIONS ON TRANSFER............................................. 14
4.33 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION.......... 14
4.34 DISCLOSURE........................................................... 15
4.35 NATURE OF LIABILITIES................................................ 15
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
5.1 ORGANIZATION AND QUALIFICATION....................................... 15
5.2 AUTHORITY............................................................ 15
5.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS.......................... 15
5.4 LITIGATION........................................................... 16
5.5 BROKERS.............................................................. 16
5.6 PARENT STOCK......................................................... 16
5.7 SUBSIDIARIES......................................................... 17
5.8 FINANCIAL STATEMENTS................................................. 17
5.9 UNDISCLOSED LIABILITIES.............................................. 17
5.10 COMPLIANCE WITH APPLICABLE LAWS...................................... 18
5.11 BOARD OF DIRECTOR/SHAREHOLDER CONSENT................................ 18
5.12 BANKRUPTCY........................................................... 18
5.13 ABSENCE OF CHANGES................................................... 18
5.14 TAXES................................................................ 18
5.15 DISCLOSURE........................................................... 19
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 CONDUCT OF BUSINESS BY W & L PENDING THE MERGER...................... 19
6.2 ACCESS TO INFORMATION................................................ 20
6.3 FILINGS; TAX ELECTIONS............................................... 20
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
6.4 PUBLIC ANNOUNCEMENTS................................................. 20
6.5 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND EXPENSES........ 20
6.6 OPTIONS.............................................................. 20
6.7 FURTHER ASSURANCES................................................... 21
6.8 EMPLOYMENT AGREEMENT................................................. 21
6.9 PURCHASER REPRESENTATIVE............................................. 21
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATION OF W & L AND THE W & L SHAREHOLDERS TO
EFFECT THE MERGER.................................................... 21
7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER..... 22
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY PARENT............................................ 23
8.2 INDEMNIFICATION BY THE W & L SHAREHOLDERS............................ 24
8.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND........................... 25
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION.......................................................... 26
9.2 FEES AND EXPENSES.................................................... 26
9.3 AMENDMENT............................................................ 27
9.4 WAIVER............................................................... 27
ARTICLE X
GENERAL PROVISIONS
10.1 SURVIVAL; RECOURSE................................................... 27
10.2 NOTICES.............................................................. 28
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
10.3 ENTIRE AGREEMENT..................................................... 29
10.4 ASSIGNMENTS; PARTIES IN INTEREST..................................... 29
10.5 GOVERNING LAW........................................................ 29
10.6 HEADINGS............................................................. 29
10.7 COUNTERPARTS......................................................... 29
10.8 SEVERABILITY......................................................... 29
10.9 POST-CLOSING ACCESS.................................................. 30
10.10 POST-CLOSING NOTICE................................................. 30
10.11 CERTAIN DEFINITIONS................................................. 30
</TABLE>
-v-
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 8th day of
July, 1998, by and between WISSING & LAURENCE, INC., a New York corporation ("W
& L"), IXL HOLDINGS, INC., a Delaware corporation ("Parent"), IXL NEW YORK,
INC., a Delaware corporation, or its successors or assigns ("Sub"), and Ronald
Wissing ("Wissing") and John Laurence ("Laurence" or, collectively with Wissing,
the "W & L Shareholders").
R E C I T A L S:
- - - - - - - -
A. W & L is engaged in the business of video creation and editing, and
related services (the "W & L Business").
B. W & L and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The W & L Shareholders collectively own 100% of the issued and
outstanding capital stock of W & L (the "W & L Stock").
D. The respective Boards of Directors of Parent, Sub and W & L, and the
respective shareholders of Sub and W & L, have approved the Merger, upon the
terms and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal
income tax purposes, as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, at
the Effective Time (as defined in Section 1.3 hereof), (a) W & L shall be merged
with and into Sub, (b) the separate existence of W & L shall cease, and (c) Sub
shall continue as the surviving corporation in the Merger under the laws of the
State of Delaware under the name iXL-New York, Inc. For
<PAGE>
purposes of this Agreement, Sub shall be referred to, for the period commencing
on the Effective Time, as the "Surviving Corporation."
1.2 CLOSING AND CLOSING DATE. Unless this Merger Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 9.1 hereof, and subject to the satisfaction or
waiver of the conditions set forth in Article VII hereof, the closing of the
Merger (the "Closing") will take place as promptly as practicable (and in any
event within five business days after satisfaction of the conditions set forth
in Sections 7.1 and 7.2 hereof) (the "Closing Date") at the offices of Minkin &
Snyder, A Professional Corporation, One Buckhead Plaza, 3060 Peachtree Rd., Ste.
1100, Atlanta, GA 30305, unless another date, time or place is agreed to by the
parties.
1.3 EFFECTIVE TIME OF THE MERGER. At the Closing, the parties hereto
shall cause (a) a certificate of merger (the "Delaware Certificate of Merger")
to be filed with the office of the Secretary of State of Delaware in accordance
with the provisions of the Delaware General Corporation Law, as amended (the
"DGCL"); and (b) a certificate of merger (the "New York Certificate of Merger;"
collectively with the Delaware Certificate of Merger, the "Certificate of
Merger") to be filed with the office of the Department of State of New York in
accordance with the provisions of the New York Business Corporation Law (the
"BCL"). When used herein, the term "Effective Time" shall mean the time when
the Delaware Certificate of Merger has been accepted for filing by the Secretary
of State of Delaware, or such time as otherwise specified therein.
1.4 EFFECT OF THE MERGER. The Merger shall, from and after the Effective
Time, have all the effects provided by the DGCL and the BCL. If at any time
after the Effective Time, any further action is deemed necessary or desirable to
carry out the purposes of this Agreement, the parties hereto agree that the
Surviving Corporation and its proper officers and directors shall be authorized
to take, and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Sub, a form of which is attached hereto on Schedule 5.1, shall be the
------------
Certificate of Incorporation of the Surviving Corporation after the Effective
Time, until thereafter changed or amended as provided therein or by applicable
law.
2.2 BYLAWS. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is included on Schedule 5.1 hereto.
------------
2.3 BOARD OF DIRECTORS; OFFICERS. The Board of Directors and officers of
Sub immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively,
-2-
<PAGE>
of the Surviving Corporation, until the earlier of their respective resignations
or the time that their respective successors are duly elected or appointed and
qualified.
ARTICLE III.
CONVERSION OF SHARES.
3.1 MERGER CONSIDERATION. As of the Effective Time:
(a) All shares of W & L Stock owned by W & L shall, by virtue of the
Merger and without any action on the part of any stockholder, officer or
director of W & L or Sub, be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(b) Subject to Schedule 3.1(b) hereto, each issued and outstanding
---------------
share of W & L Stock (other than any Dissenting Shares, as defined in Section
3.2 hereof) shall, upon surrender to Sub, at the Closing, of the underlying
share certificates, be converted into, and become exchangeable for a number of
shares of validly issued, fully paid and nonassessable Class B Common Stock of
Parent, $.01 par value ("Parent Stock") based on the following equation:
PS = 50,000 - D
-
$10
----------------
X
where:
PS = the number of shares of Parent Stock for which each share of
W & L Stock shall be exchanged pursuant to the Merger
D = the outstanding indebtedness of W & L (the "W & L Debt"),
including debt for borrowed money and accrued interest
thereon, capital leases, accounts payable and accrued
expenses, and any unpaid legal, accounting or other expenses
of W & L, all to be determined as of three business days
prior to the Closing Date and all as determined in
accordance with generally accepted accounting principles
("GAAP")
X = the number of issued and outstanding shares of W & L Stock
on the Closing Date
(c) Each issued and outstanding share of common stock of Sub shall, by
virtue of the Merger and without any action on the part of any stockholder,
officer or director of W & L or
-3-
<PAGE>
Sub, be converted into and become one fully paid and nonassessable share of
common stock of the Surviving Corporation.
3.2 DISSENTING SHARES. Notwithstanding any provision hereof to the
contrary, any shares of W & L Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be converted as described in Section 3.1(b)
hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Shareholder pursuant to the DGCL or BCL, as
applicable; provided, however, that if a Dissenting Shareholder shall fail to
perfect his demand, withdraw his demand or otherwise lose his right for
appraisal under the terms of the DGCL or the BCL, as applicable, the W & L Stock
held by such Dissenting Shareholder (the "Dissenting Shares") shall be deemed to
be converted as of the Effective Time in accordance with the provisions of
Section 3.1 hereof. W & L shall not voluntarily make any payment with respect
to, settle, or offer to settle or otherwise negotiate, any such demands. All
amounts paid to Dissenting Shareholders shall be paid without interest thereon
(to the extent permitted by applicable law) by the Surviving Corporation. For
purposes hereof, the term "Dissenting Shareholder" shall mean a W & L
Shareholder who (a) objects to the Merger; and (b) complies with the applicable
provisions of the DGCL or BCL concerning dissenter's rights.
3.3 NO FURTHER RIGHTS. From and after the Effective Time, holders of
certificates theretofore evidencing W & L Stock shall cease to have any rights
as stockholders of W & L, except as provided herein or by applicable law.
3.4 CLOSING OF W & L'S TRANSFER BOOKS. At the Effective Time, the stock
transfer books of W & L shall be closed and no transfer of W & L Stock shall be
made thereafter. If after the Effective Time, certificates for W & L Stock are
presented to Parent or the Surviving Corporation, they shall be canceled and
exchanged for a consideration as set forth in Section 3.1 hereof, subject to
applicable law in the case of Dissenting Shareholders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF W & L
W & L and the W & L Shareholders, jointly and severally, represent and
warrant to Parent and Sub as follows, which representations and warranties shall
survive the Closing in accordance with Section 10.1 hereof.
4.1 ORGANIZATION AND QUALIFICATION. W & L is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. W & L has the requisite corporate power and authority to carry on the
W & L Business as it is now being conducted and is duly qualified or licensed to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities
makes such qualification necessary. Complete and correct copies of the
Certificate of Incorporation and Bylaws of W & L as in effect on the date hereof
are attached as Schedule 4.1 hereto. The minute book of W & L, a true and
------------
complete copy of which has been delivered to Parent, (a) accurately
-4-
<PAGE>
reflects all action taken by the directors and shareholders of W & L at meetings
of W & L's Board of Directors or shareholders, as the case may be; and (b)
contains true and complete copies, or originals, of the respective minutes of
all meetings or consent actions of the directors or shareholders.
4.2 AUTHORITY. W & L has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery hereof and the consummation of
the transactions contemplated hereby by W & L have been duly and validly
authorized and approved by W & L's Board of Directors and the W & L
Shareholders, and no other corporate or shareholder proceedings on the part of W
& L, its Board of Directors or the W & L Shareholders is necessary to authorize
or approve this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by W & L and each W & L
Shareholder, and assuming the due authorization, execution and delivery by
Parent and Sub, constitutes the valid and binding obligation of W & L and each W
& L Shareholder, enforceable against W & L and each W & L Shareholder in
accordance with its terms subject, in each case, to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors' rights and to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing.
4.3 CAPITALIZATION.
(a) The authorized capital stock of W & L consists of 200 shares of
common stock, no par value, of which 20 shares are validly issued and
outstanding, fully paid and nonassessable. All outstanding capital stock of W &
L was issued in accordance with applicable federal and state securities laws.
Except as set forth on Schedule 4.3(a) hereto, there are no options, warrants,
---------------
calls, agreements, commitments or other rights presently outstanding that would
obligate W & L or any of the W & L Shareholders to issue, deliver or sell shares
of its capital stock, or to grant, extend or enter into any such option,
warrant, call, agreement, commitment or other right. In addition to the
foregoing, as of the date hereof, W & L has no bonds, debentures, notes or other
indebtedness issued or outstanding that have voting rights in W & L. Schedule
--------
4.3(a) sets forth a list of all holders of record of W & L Stock andthe number
- ------
of shares held by each W & L Shareholder.
(b) All of the issued and outstanding shares of capital stock of W & L
are validly issued, fully paid and nonassessable. Except as set forth on
Schedule 4.3(b) hereto, each W & L Shareholder represents and warrants that the
- ---------------
W & L Stock held by such W & L Shareholder is free and clear of any lien,
charge, security interest, pledge, option, right of first refusal, voting proxy
or other voting agreement, or encumbrance of any kind or nature other than
restrictions on transfer imposed by federal and state securities laws (any of
the foregoing, a "Lien").
4.4 SUBSIDIARIES. W & L has no subsidiaries and does not otherwise own
or control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
-5-
<PAGE>
4.5 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
- ------------
W & L or the W & L Shareholders, (ii) the consummation by W & L and the W & L
Shareholders of the transactions contemplated hereby or (iii) compliance by W &
L with any of the provisions hereof will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of W & L;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to W & L or any of the W & L Shareholders,
or by which W & L or any of its properties or assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which W & L is a party or by which W & L or
any of its properties or assets may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of W & L; or
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), (i) any government or subdivision thereof, whether
domestic or foreign, or any administrative, governmental, or regulatory
authority, agency, commission, court, tribunal or body, whether domestic,
foreign or multinational (any of the foregoing, a "Governmental Entity"), except
for the filing of the Certificate of Merger pursuant to the DGCL and the BCL; or
(ii) any other individual or Entity (collectively, a "Person").
4.6 FINANCIAL STATEMENTS. W & L has heretofore furnished Parent with a
true and complete copy of the unaudited financial statements of W & L for the
years ended December 31, 1997 and for the five month period ended May 31, 1998
(all of the foregoing collectively herein referred to as the "W & L Financial
Statements"). Except as disclosed therein, the W & L Financial Statements have
been prepared in accordance with GAAP (except for the absence of footnotes and
normal year-end adjustments) consistently followed throughout the period
indicated, and present fairly, in all material respects, the financial position
and operating results of W & L as of the dates, and during the periods,
indicated therein.
4.7 ABSENCE OF CHANGES. Except as provided in Schedule 4.7 hereto and
------------
except as contemplated hereby, since December 31, 1997 (a) W & L has not entered
into any transaction that was not in the ordinary course of business; (b) except
for sales of services and licenses of software in the ordinary course of
business, there has been no sale, assignment, transfer, mortgage, pledge,
encumbrance or lease of any material asset or property of W & L; (c) there has
been (i) no declaration or payment of a dividend, or any other declaration,
payment or distribution of any type or nature to any shareholder of W & L in
respect of its stock, whether in cash or property, and (ii)
-6-
<PAGE>
no purchase or redemption of any share of the capital stock of W & L; (d) there
has been no declaration, payment, or commitment for the payment, by W & L, of a
bonus or other additional salary, compensation, or benefit to any employee of W
& L that was not in the ordinary course of business, except for normal year-end
bonuses paid in the ordinary course of business; (e) there has been no release,
compromise, waiver or cancellation of any debt to or claim by W & L, or waiver
of any right of W & L; (f) there have been no capital expenditures in excess of
$10,000 for any single item, or $25,000 in the aggregate; (g) there has been no
change in accounting methods or practices or revaluation of any asset of W & L
(other than W & L Accounts Receivable as defined in Section 4.26 hereof) written
down in the ordinary course of business in excess of $10,000 for any single W &
L Accounts Receivable, or $25,000 in the aggregate); (h) there has been no
material damage, or destruction to, or loss of, physical property (whether or
not covered by insurance) adversely affecting the W & L Business or the
operations of W & L; (i) there has been no loan by W & L, or guaranty by W & L
of any loan, to any employee of W & L; (j) W & L has not ceased to transact
business with any customer that, as of the date of such cessation, represented
more than 5% of the annual gross revenues of W & L; (k) there has been no
termination or resignation of any key employee or officer of W & L, and to the
knowledge of W & L, no such termination or resignation is threatened; (l) there
has been no amendment or termination of any material oral or written contract,
agreement or license related to the W & L Business, to which W & L is a party or
by which it is bound, except in the ordinary course of business, or except as
expressly contemplated hereby; (m) W & L has not failed to satisfy any of its
debts, obligations or liabilities related to the W & L Business or the assets of
W & L as the same become due and owing (except for W & L Accounts Payable (as
defined in Section 4.27 hereof) payable in accordance with past practices and in
the ordinary course of business); (n) there has been no agreement or commitment
by W & L to do any of the foregoing; and (o) there has been no other event or
condition of any character pertaining to and materially and adversely affecting
the assets, business or financial condition of W & L.
4.8 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.8
------------
hereto, W & L has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including, without limitation, any liability or
obligation on account of taxes or any governmental charge or penalty, interest
or fine, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997, that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of W & L; (b) W & L's capital lease obligation, or liabilities reflected on the
W & L Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
4.9 TITLE TO PROPERTIES. Except as set forth on Schedule 4.9 hereto, W
------------
& L has good and marketable title to all tangible property and assets used in
the W & L Business, and good and valid title to its leasehold interests, in each
case, free and clear of any and all Liens other than Permitted Liens (as defined
in Section 10.11 hereof).
4.10 EQUIPMENT. W & L has heretofore furnished Parent with a true and
correct list of all items of tangible personal property (including, without
limitation, computer hardware) necessary for or used in the operation of the W &
L Business in the manner in which it has been and is now operated by W & L ("the
W & L Equipment"), except for personal property having a net book
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value of less than $1,000. Except as set forth on Schedule 4.10 hereto, each
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material item of W & L Equipment is in good condition and repair, ordinary wear
and tear excepted.
4.11 INTELLECTUAL PROPERTY.
(a) W & L has heretofore furnished Parent with a true and
complete list of all material proprietary technology, patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights, and copyrights (and all pending applications for any of the
foregoing) used by W & L in the conduct of the W & L Business (together with
trade secrets and know how used in the conduct of the W & L Business, the "W & L
Intellectual Property Rights"). W & L owns, or is validly licensed or otherwise
has the right to use or exploit, as currently used or exploited, all of the W &
L Intellectual Property Rights, free of any obligation to make any payment
(whether of a royalty, license fee, compensation or otherwise). No claims are
pending or, to the knowledge of W & L, threatened, that W & L is infringing or
otherwise adversely affecting the rights of any Person with regard to any W & L
Intellectual Property Right. No Person is infringing the rights of W & L with
respect to any W & L Intellectual Property Right. Neither W & L nor any
employee, agent or independent contractor of W & L, in connection with the
performance of such Person's services with W & L, has used, appropriated or
disclosed, directly or indirectly, any trade secret or other proprietary or
confidential information of any other Person, or otherwise violated any
confidential relationship with any other Person.
(b) W & L has heretofore furnished Parent with a true and complete
list of all material computer software used by W & L in the conduct of the W & L
Business (the "W & L Software"). W & L currently licenses, or otherwise has the
legal right to use, all of the W & L Software (including any upgrade, alteration
or enhancement with respect thereto), and all of the W & L Software is being
used in compliance with any applicable license or other agreement.
4.12 REAL PROPERTY. Except as set forth on Schedule 4.12 hereto:
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(a) W & L has a good and valid leasehold interest in all real
property (including all buildings, improvements and fixtures thereon) used in
the operation of the W & L Business (the "W & L Real Property"). W & L owns no
real property. Except for Permitted Liens, and for the items set forth on
Schedule 4.12, there are no Liens on W & L's interest in any of the W & L Real
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Property.
(b) There are no parties in possession of any portion of the W & L
Real Property other than W & L, whether as sublessees, subtenants at will or
trespassers.
(c) To the knowledge of W & L, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, under the provisions of any of the W &
L Leases (as hereinafter defined), any material expenditure by W & L to modify
or improve any of the W & L Real Property to bring it into compliance therewith.
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4.13 LEASES. Schedule 4.13 hereto sets forth a list of all leases
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pursuant to which W & L leases, as lessor or lessee, real or personal property
used in operating the W & L Business or otherwise (the "W & L Leases"). Copies
of the W & L Leases, all of which have previously been provided to Parent, are
true and complete copies thereof. All of the W & L Leases are valid, binding
and enforceable against W & L and, to the knowledge of W & L, against the other
parties thereto, in accordance with their respective terms, and there is not
under any such W & L Lease any existing default by W & L, or, to the knowledge
of W & L, by any other party thereto, or any condition or event that, with
notice or lapse of time or both, would constitute a default. W & L has not
received notice that the lessor of any of the W & L Leases intends to cancel,
suspend or terminate such W & L Lease or to exercise or not exercise any option
thereunder.
4.14 CONTRACTS. Schedule 4.14 hereto sets forth a true and complete list
-------------
of all contracts, agreements and commitments (whether written or oral) to which
W & L is, directly or indirectly, a party (in its own name or as a successor in
interest), or by which it or any of its properties or assets is otherwise bound,
including, without limitation, any service agreements, customer agreements,
supplier agreements, agreements to lend or borrow money, shareholder agreements,
employment agreements, agreements relating to W & L Intellectual Property Rights
and the like (collectively, the "W & L Contracts"); excepting only those W & L
Contracts which involve less than $10,000 and are cancelable, without penalty,
on no more than 90 days' notice. The aggregate value of all payment obligations
and rights to receive payments, under agreements, contracts and commitments
(whether oral or in writing) to which W & L is a party or by which it or any of
its properties is otherwise bound, and that are not listed on Schedule 4.14, is
-------------
less than $50,000 (calculating such value by adding together the value of rights
and obligations, and not by determining the net amount thereof).
True and complete copies of all W & L Contracts (or a true and complete
narrative description of any oral W & L Contract) have previously been provided
to Parent. Neither W & L nor, to the knowledge of W & L, any other party to any
of the W & L Contracts (x) is in default under (nor does there exist any
condition that, with notice or lapse of time or both, would cause such a default
under) any of the W & L Contracts, or (y) has waived any right it may have under
any of the W & L Contracts, the waiver of which would have a material adverse
effect on the business, assets or financial condition or prospects of W & L.
All of the W & L Contracts constitute the valid and binding obligations of W &
L, enforceable in accordance with their respective terms, and, to the knowledge
of W & L, of the other parties thereto.
4.15 DIRECTORS AND OFFICERS. Schedule 4.15 hereto sets forth a list, as
-------------
of the Closing Date, of the name of each director and officer of W & L and the
position(s) held by each.
4.16 PAYROLL INFORMATION. W & L has previously provided Parent with a
true and complete copy of the payroll report of W & L dated April 30, 1998,
showing all current employees of W & L and their current levels of compensation,
other than bonuses and other extraordinary compensation. W & L has paid all
compensation required to be paid to employees of W & L on or prior to the date
hereof other than compensation accrued in the current pay period.
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4.17 LITIGATION. Except as set forth on Schedule 4.17 hereto, there is
-------------
no suit, action, claim, investigation or proceeding pending or, to the knowledge
of W & L, threatened against or affecting W & L or the W & L Business, nor is
there any judgment, decree, injunction or order of any applicable Governmental
Entity or arbitrator outstanding against W & L.
4.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 4.18 hereto, there are no employee
-------------
benefit plans, agreements or arrangements maintained by W & L, including,
without limitation, (i) "employee benefit plans" within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"); (ii) current or deferred compensation, pension, profit sharing,
vacation or severance plans or programs; or (iii) medical, hospital, accident,
disability or death benefit plans (collectively, "W & L Benefit Plans"). All W
& L Benefit Plans are administered in accordance with, and are in material
compliance with, all applicable laws and regulations. No default exists with
respect to the obligations of W & L under any W & L Benefit Plan.
(b) W & L is not a party to any collective bargaining agreement; no
collective bargaining agent has been certified as a representative of any of the
employees of W & L; no representation campaign or election is now in progress
with respect to any employee of W & L; and there are no labor disputes,
grievances, controversies, strikes or requests for union representation pending,
or, to the knowledge of W & L, threatened, relating to or affecting the W & L
Business. To the knowledge of W & L, no event has occurred that could give rise
to any such dispute, controversy, strike or request for representation.
4.19 ERISA.
(a) All W & L Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the W & L Benefit Plans that is
intended to meet the requirements of Section 401(a) of the Code has been
determined by the Internal Revenue Service to meet such requirements within the
meaning of such provision. No W & L Benefit Plan is subject to Title IV of
ERISA or Section 412 of the Code. W & L has not engaged in any nonexempt
"prohibited transactions," as such term is defined in Section 4975 of the Code
or Section 406 of ERISA, involving W & L Benefit Plans that would subject W & L
to the penalty or tax imposed under Section 502(i) of ERISA or Section 4975 of
the Code. W & L has not engaged in any transaction described in Section 4069 of
ERISA within the last five years. Except as disclosed in Schedule 4.19 hereto
-------------
or pursuant to the terms of the W & L Benefit Plans, neither the execution and
delivery hereof nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including, without limitation, severance,
unemployment compensation or golden parachute) becoming due to any director or
other employee of W & L, (ii) increase any benefit otherwise payable under any W
& L Benefit Plan or (iii) result in the acceleration of the time of payment or
vesting of any such benefit to any extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA, for which the 30-day reporting requirement has not been waived,
has been required to be
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<PAGE>
filed for any W & L Benefit Plan that is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA and that is intended to meet the
requirements of Section 401(a) of the Code, or by any entity that is considered
one employer with W & L under Section 4001 of ERISA or Section 414 of the Code,
within the 12-month period ending on the Closing Date. W & L has not incurred
any liability to the Pension Benefit Guaranty Corporation in respect of any W &
L Benefit Plan that remains unpaid.
4.20 TAXES.
(a) W & L has duly and timely filed all federal, state and local
income, franchise, excise, real and personal property and other tax returns and
reports, including extensions, required to have been filed by W & L on or prior
to the Closing Date. W & L has duly and timely paid all taxes and other
governmental charges, and all interest and penalties with respect thereto,
required to be paid by W & L (whether by way of withholding or otherwise) to any
federal, state, local or other taxing authority (except to the extent the same
are being contested in good faith, and adequate reserves therefor have been
provided in the W & L Financial Statements). As of the Closing Date, all
deficiencies proposed as a result of any audit have been paid or settled.
(b) W & L is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) W & L has not consented to have the provisions of Section
341(f)(2) of the Code (or comparable state law provisions) apply to it, and W &
L has not agreed or been requested to make any adjustment under Section 481(c)
of the Code by reason of a change in accounting method or otherwise.
4.21 COMPLIANCE WITH APPLICABLE LAWS. W & L holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
W & L, as appropriate, and to carry on the W & L Business as now conducted (the
"W & L Permits"). To the knowledge of W & L, W & L is in material compliance
with all applicable laws, ordinances and regulations and the terms of the W & L
Permits. Except as set forth on Schedule 4.21 hereto, all of the W & L Permits
-------------
are fully assignable by W & L in connection with the Merger. Schedule 4.21 sets
-------------
forth a true and complete list of all W & L Permits, true and complete copies of
which have previously been provided to Parent.
4.22 BOARD OF DIRECTORS/SHAREHOLDER CONSENT. Both the Board of Directors
of W & L and the W & L Shareholders have adopted and approved this Agreement and
the transactions contemplated hereby (including, without limitation, the
Merger).
4.23 BROKERS. Except as set forth on Schedule 4.23 hereto, no broker or
-------------
finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of W & L.
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<PAGE>
4.24 ENVIRONMENTAL MATTERS.
(a) To the knowledge of W & L, no real property currently or formerly
owned or operated by W & L is contaminated with any Hazardous Substance (as
hereinafter defined);
(b) W & L is not a party to any litigation or administrative
proceeding nor, to the knowledge of W & L, is any litigation or administrative
proceeding threatened against it, that, in either case, asserts or alleges that
W & L (i) violated any Environmental Law (as hereinafter defined); (ii) is
required to clean up, remove or take remedial or other responsive action due to
the disposal, deposit, discharge, leak or other release of any Hazardous
Substance; or (iii) is required to pay all or a portion of the cost of any past,
present or future cleanup, removal or remedial or other action that arises out
of or is related to the disposal, deposit, discharge, leak or other release of
any Hazardous Substance.
(c) To the knowledge of W & L, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by W & L containing materials that, if known to
be present in soil or ground water, would require cleanup, removal or other
remedial action under Environmental Law.
(d) To the knowledge of W & L, W & L is not subject to any judgment,
order or citation related to or arising out of any Environmental Law and has not
been named or listed as a potentially responsible party by any Governmental
Entity in a matter related to or arising out of any Environmental Law.
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including, without limitation, any petroleum products, asbestos or
polychlorinated biphenyls.
4.25 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as
provided in Schedule 4.25 hereto, no officer, director, shareholder or employee
-------------
of W & L and no family member (including a spouse, parent, sibling or lineal
descendent of any of the foregoing), has any direct or indirect material
interest in any material customer, supplier or competitor of W & L, or in any
Person from whom or to whom W & L leases any real or personal property, or in
any other Person with whom W & L is doing business whether directly or
indirectly (including, without limitation, as a debtor or creditor), whether in
existence as of the Closing Date or proposed, other than the ownership of stock
of publicly traded corporations.
4.26 ACCOUNTS RECEIVABLE. All accounts, notes, contracts and other
receivables of W & L (collectively, "W & L Accounts Receivable") were acquired
by W & L in the ordinary course of business arising from bona fide transactions.
To the knowledge of W & L, all W & L Accounts Receivable have been collected in
full. There are no set-offs, counterclaims or disputes asserted
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with respect to any W & L Accounts Receivable that would result in claims
against amounts previously collected.
4.27 ACCOUNTS PAYABLE. All material accounts, notes, contracts and other
amounts payable of W & L (collectively, "W & L Accounts Payable") except amounts
due under lease are paid in full.
4.28 INSURANCE. W & L currently maintains, in full force and effect, all
insurance policies that are required to be maintained for the conduct of the W &
L Business or the ownership of W & L's property (both real and personal)
(collectively, the "W & L Insurance Policies"). The W & L Insurance Policies
are listed on Schedule 4.28 hereto, and true and complete copies of all W & L
-------------
Insurance Policies have previously been provided to Parent. W & L (a) is not in
default regarding the provisions of any W & L Insurance Policy; (b) has paid all
premiums due thereunder; and (c) has not failed to present any notice or
material claim thereunder in a due and timely fashion.
4.29 BANKRUPTCY. W & L has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 W & L DEBT. As of the date hereof, the W & L Debt is not in excess
of $0, excluding capital lease obligations of approximately $210,000.
4.31 INVESTMENT PURPOSE; ACCREDITED INVESTOR OR PURCHASER REPRESENTATIVE.
(a) Each W & L Shareholder represents that he (i) is acquiring the Parent Stock
solely for his own account for investment and not with a view to, or for sale in
connection with, any distribution thereof; and (ii) will not, directly or
indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of
any Parent Stock (or solicit any offers to buy, purchase or otherwise acquire or
take a pledge of any such shares) except in compliance with the Securities Act
of 1933, as amended (the "Securities Act"), and the rules and regulations
thereunder, other applicable laws, rules and regulations, and the Second Amended
and Restated Stockholders' Agreement of Parent, dated December 17, 1997 (the
"Stockholders' Agreement"); (b) Laurence further represents that he is an
"accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act;
and (c) Wissing further represents that (i) Jeff Wolf is his Purchaser
representative (the "Purchaser representative") as such term is defined in Rule
501 of Regulation D under the Securities Act; and (ii) the Purchaser
representative (A) is not an affiliate, director, officer or other employee of
Parent, or beneficial owner of 10% or more of any class of the equity securities
of, or 10% or more of the equity interest in, Parent; (B) has such knowledge and
experience in financial and business matters that he is capable of evaluating,
alone, or together with Wissing, the merits and risks of the prospective
investment in Parent Stock; (C) has been acknowledged by Wissing in writing,
during the course of the Merger, to be his purchaser representative in
connection with evaluating the merits and risks of the prospective investment in
Parent Stock; and (D) has disclosed to Wissing in writing a reasonable time
prior to the Closing any material relationship between the Purchaser
representative or his affiliates and Parent or its affiliates that exists, is
mutually understood to be contemplated, or has existed at any time
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during the previous two years, and any compensation received or to be received
as a result of such relationship.
4.32 RESTRICTIONS ON TRANSFER. Each W & L Shareholder acknowledges that
(a) the Parent Stock received by him hereunder has not been registered under the
Securities Act; (b) the Parent Stock may be required to be held indefinitely,
and he must continue to bear the economic risk of the investment in such shares
unless such shares are subsequently registered under the Securities Act or an
exemption from such registration is available; (c) there may not be any public
market for the Parent Stock in the foreseeable future; (d) Rule 144 promulgated
under the Securities Act is not presently available with respect to sales of any
securities of Parent, and such Rule is not anticipated to be available in the
foreseeable future; (e) when and if Parent Stock may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
limited amounts and in accordance with the terms and conditions of such Rule;
(f) if the exemption afforded by Rule 144 is not available, public sale without
registration will require the availability of an exemption under the Securities
Act; (g) the Parent Stock is subject to the terms and conditions of the
Stockholders' Agreement; (h) restrictive legends shall be placed on the
certificates representing Parent Stock; and (i) a notation shall be made in the
appropriate records of Parent indicating that Parent Stock is subject to
restrictions on transfer and, if Parent should in the future engage the services
of a stock transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to Parent Stock.
4.33 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION. (a)
Each W & L Shareholder represents and warrants that (i) his financial situation
is such that he can afford to bear the economic risk of holding Parent Stock
acquired by him hereunder for an indefinite period; and (ii) he can afford to
suffer the complete loss of such Parent Stock; (b) Laurence further represents
that (i) he has been granted the opportunity to ask questions of, and receive
answers from, representatives of Parent concerning the terms and conditions of
the Parent Stock and to obtain any additional information that he deems
necessary; (ii) his knowledge and experience in financial business matters is
such that he is capable of evaluating the merits and risk of ownership of the
Parent Stock; (iii) he has carefully reviewed the terms of the Stockholders'
Agreement and has evaluated the restrictions and obligations contained therein;
and (iv) he (A) has reviewed the Private Placement Memorandum of Parent dated as
of June 26, 1998 (the "Memorandum"); (B) has carefully examined the Memorandum
and has had an opportunity to ask questions of, and receive answers from,
representatives of Parent, and to obtain additional information concerning
Parent and its Subsidiaries (as hereinafter defined); and (C) does not require
additional information regarding Parent or its Subsidiaries in connection with
the Merger; and (c) Wissing further represents that, either alone or with the
Purchaser representative, (i) he has been granted the opportunity to ask
questions of, and receive answers from, representatives of Parent concerning the
terms and conditions of the Parent Stock and to obtain any additional
information that he deems necessary; (ii) his knowledge and experience in
financial business matters is such that he is capable of evaluating the merits
and risk of ownership of the Parent Stock; (iii) he has carefully reviewed the
terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; and (iv) he (A) has reviewed the Memorandum; (B)
has carefully examined the Memorandum and has had an opportunity to ask
questions of, and receive answers from, representatives of Parent, and to obtain
additional information concerning Parent and its Subsidiaries; and (C) does not
require additional information regarding Parent or its Subsidiaries in
connection with the Merger.
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4.34 DISCLOSURE. No statement of fact by W & L or any W & L Shareholder
contained herein and no written statement of fact furnished by W & L or any W &
L Shareholder to Parent or Sub in connection herewith contains any untrue
statement of any material fact or omits to state any material fact necessary in
order to make the statements herein or therein contained not misleading.
4.35 NATURE OF LIABILITIES. Any unpaid legal, accounting or other fees of
W & L are solely and directly related to the Merger.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to W &
L and the W & L Shareholders, which representations and warranties shall survive
the Closing in accordance with Section 10.1 hereof, as follows:
5.1 ORGANIZATION AND QUALIFICATION. Each of Parent and its Subsidiaries
(as defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached as Schedule 5.1 hereto.
------------
5.2 AUTHORITY. Each of Parent and Sub has the necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by W & L and the W & L Shareholders,
constitutes the valid and binding obligation of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms,
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
5.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
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(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Parent or Sub, or the organizational documents of any other
Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for (x)
compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL and the
BCL); or (ii) any other Person.
5.4 LITIGATION. Except as set forth on Schedule 5.4 hereto, there is no
------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 BROKERS. Except as disclosed on Schedule 5.5 hereto, no broker or
------------
finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Parent or Sub.
5.6 PARENT STOCK.
(a) As of the date hereof the authorized capital stock of Parent
consists of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 11,197,506 shares are
validly issued and outstanding (without taking into account any shares of Parent
Stock to be issued pursuant hereto), fully paid and nonassessable; (ii) 750,000
shares of blank check preferred stock, (A) 250,000 of which have been designated
as Class A Convertible Preferred Stock, of which 174,061 shares are validly
issued and outstanding, fully paid and nonassessable, (B) 200,000 of which have
been designated as Class B Convertible Preferred Stock, of which 98,767 shares
are validly issued and outstanding, fully paid and nonassessable, and (C) 15,000
of which have been designated as Class C Convertible Preferred Stock, of which
9,232
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shares are validly issued and outstanding, fully paid and nonassessable. Except
as set forth on Schedule 5.6 hereto, there are no options, warrants, calls,
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agreements, commitments or other rights presently outstanding that would
obligate Parent to issue, deliver or sell shares of its capital stock, or to
grant, extend or enter into any such option, warrant, call, agreement,
commitment or other right. In addition to the foregoing, as of the Closing Date,
Parent has no bonds, debentures, notes or other indebtedness issued or
outstanding that have voting rights in Parent.
(b) When delivered to the W & L Shareholders in accordance with the
terms hereof, the Parent Stock will (i) be duly authorized, fully paid and
nonassessable, and (ii) be free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
5.7 SUBSIDIARIES. Except as set forth on Schedule 5.7 hereto, Parent has
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no subsidiaries and does not otherwise own or control, directly or indirectly,
any equity interest in, or any security convertible into an equity interest in,
any Entity. Schedule 5.7 lists the name of each of the Subsidiaries of Parent,
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and indicates their respective jurisdictions of incorporation. Parent owns 100%
of each Subsidiary (including all of Sub's outstanding shares, consisting of 100
shares of common stock, $.01 par value) or other Entity listed on Schedule 5.7
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hereto, except as indicated on such Schedule.
5.8 FINANCIAL STATEMENTS. Parent has heretofore furnished W & L with a
true and complete copy of (a) the audited financial statements of iXL
Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31,
1993, 1994 and 1995, and for the four-month period ended April 30, 1996; (b)
audited combined financial statements for Creative Video, Inc. (n/k/a iXL,
Inc.), Creative Video Library, Inc. and Entrepreneur Television, Inc. for the
years ended December 31, 1993, 1994 and 1995, and for the four-month period
ended April 30, 1996; (c) the audited consolidated financial statements for
Parent and its Subsidiaries for the eight months ended December 31, 1996; and
for the year ended December 31, 1997; and (d) the unaudited consolidated
financial statements for Parent and its Subsidiaries for the four month period
ended April 30, 1998 (all of the foregoing, collectively, "Parent Financial
Statements"). The Parent Financial Statements present fairly in all material
respects the consolidated financial position, results of operations,
shareholders' equity and cash flow of Parent at the respective dates or for the
respective periods to which they apply. Except as disclosed therein, such
statements and related notes have been prepared in accordance with GAAP
consistently applied throughout the periods involved (except, in the case of the
unaudited financial statements, for the exclusion of footnotes and normal year
end adjustments).
5.9 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 5.9 hereto,
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neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charge or penalty, interest
or fine, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997 that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Parent and its Subsidiaries, taken as a whole; (b) liabilities reflected on
the Parent Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
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5.10 COMPLIANCE WITH APPLICABLE LAWS. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
5.11 BOARD OF DIRECTORS/SHAREHOLDER CONSENT. Both the Board of Directors
of Parent and the Board of Directors and shareholder of Sub have, by unanimous
written consent, adopted and approved this Agreement and the transactions
contemplated hereby (including, without limitation, the Merger).
5.12 BANKRUPTCY. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 ABSENCE OF CHANGES. Except as provided in Schedule 5.13 hereto, since
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December 31, 1997, there has not been (a) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
material change in Parent's accounting principles, practices or methods; (f) any
split, combination or reclassification of any of Parent's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Parent's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
5.14 TAXES. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent
and its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state,
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local or other taxing authority (except to the extent the same are being
contested in good faith, and adequate reserves therefor have been provided in
the applicable Parent Financial Statement). As of the Closing Date, all
deficiencies proposed as a result of any audits have been paid or settled.
5.15 DISCLOSURE. No statement of fact by Parent or Sub contained herein
and no written statement of fact furnished or to be furnished by Parent or Sub
to W & L in connection herewith contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make the statements herein or therein contained not misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 CONDUCT OF BUSINESS BY W & L PENDING THE MERGER. From and after the
date hereof, prior to the Effective Time, except as contemplated hereby, unless
Parent shall otherwise agree in writing, W & L shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, use reasonable efforts to preserve intact its present
business organization, keep available the services of its employees and preserve
its relationships with customers, suppliers, licensors, licensees, distributors
and others having business dealings with W & L to the end that its goodwill and
on-going businesses shall not be impaired in any material respect at the
Effective Time. Without limiting the generality of the foregoing, and except as
contemplated hereby, unless Parent shall otherwise agree in writing, prior to
the Effective Time, W & L shall not, directly or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire, any share of
capital stock of W & L or any other equity security thereof or any right,
warrant, or option to acquire any such share or other security;
(b) issue, deliver, sell, pledge or otherwise encumber any share of
its capital stock, any other voting security issued by W & L or any security
convertible into, or any right, warrant or option to acquire any such share or
voting security;
(c) amend its Certificate of Incorporation, Bylaws or other
comparable organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to W & L;
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(e) subject to a Lien or sell, lease or otherwise dispose of any of
its properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of W & L,
guarantee any debt security of another Person or enter into any "keep well" or
other agreement to maintain the financial condition of another Person, make any
loan, advance or capital contribution to, or investment in, any other Person, or
settle or compromise any material claim or litigation; or
(g) authorize any of, or commit or agree to take any of, the
foregoing actions.
6.2 ACCESS TO INFORMATION. From the date hereof through the Effective
Time, W & L shall afford to Parent and Parent's accountants, counsel and other
representatives reasonable access during normal business hours (and at such
other times as the parties may mutually agree) upon reasonable prior notice and
approval of W & L, which shall not be unreasonably withheld, to its properties,
books, contracts, commitments, records and personnel and, during such period,
shall furnish promptly to Parent all information concerning its business,
properties and personnel as Parent may reasonably request. Parent and its
accountants, counsel and other representatives shall, in the exercise of the
rights described in this Section 6.2, not unduly interfere with the operation of
the business of W & L.
6.3 FILINGS; TAX ELECTIONS. W & L shall promptly provide Parent with
copies of all filings made by W & L with any Governmental Entity in connection
herewith and the transactions contemplated hereby. W & L shall, before settling
or compromising any material income tax liability of W & L, consult with Parent
and its advisors as to the positions and elections that will be taken or made
with respect to such matter.
6.4 PUBLIC ANNOUNCEMENTS. The parties agree that, except as may otherwise
be required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger. Any such disclosure shall be coordinated by Parent,
and none of the W & L Shareholders shall make any such disclosure without the
prior written consent of Parent.
6.5 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND EXPENSES. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 OPTIONS. At the Effective Time, Parent shall issue options to
purchase 30,000 shares of validly issued, fully paid and nonassessable Parent
Stock, at an exercise price of $6.00 per share and subject to a five year
vesting schedule, to the W & L Shareholders, pursuant to the IXL Holdings, Inc.
1996 Stock Option Plan, as amended, in accordance with Schedule 6.6 hereto and
------------
in the form of Exhibit "C" hereto ("Option Agreement").
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6.7 FURTHER ASSURANCES. From time to time after the Effective Time, upon
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof.
6.8 EMPLOYMENT AGREEMENT. Wissing shall, at the Closing, enter into an
employment agreement with Sub, substantially in the form of Exhibit "I" hereto.
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6.9 PURCHASER REPRESENTATIVE. The Purchaser representative shall furnish
to Parent, to Parent's satisfaction, a completed Purchaser Representative
Questionnaire, substantially in the form of Exhibit "H" hereto, and Wissing
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shall furnish to Parent a signed Purchaser Acknowledgement in connection
therewith.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATION OF W & L AND THE W & L SHAREHOLDERS TO EFFECT
THE MERGER. The obligation of W & L and the W & L Shareholders to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) Parent and Sub shall have performed in all material respects
their respective agreements contained herein required to be performed at or
prior to the Effective Time, and the representations and warranties of Parent
and Sub contained herein shall be true when made and (except for representations
and warranties made as of a specified date, which need only be true as of such
date) at and as of the Effective Time as if made at and as of such time, except
as contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to W & L at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-1" hereto, and (ii) the
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appropriate officers of Sub shall have executed and delivered to W & L at the
Closing, a closing certificate and incumbency certificate, substantially in the
form of Exhibit "A-2" hereto;
-------------
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
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(d) W & L shall have received corporate certificates of good standing
for Parent and Sub, and a copy of the Certificate of Incorporation for Parent
and Sub, respectively, both as certified by the Secretary of State of Delaware;
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(e) Parent shall have executed and delivered at the Closing an Option
Agreement for each of Wissing and Laurence, and Sub shall have executed and
delivered at the Closing the employment agreement for Wissing referred to in
Section 6.8 hereof;
(f) W & L shall have received, at the Closing, a duly executed
opinion of counsel to Parent and Sub, substantially in the form of Exhibit "D"
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hereto; and
(g) W & L shall have received from Parent and Sub such other
documents as W & L's counsel shall have reasonably requested, in form and
substance reasonably satisfactory to W & L's counsel.
7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER.
The obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) W & L and the W & L Shareholders shall have performed in all
material respects their respective agreements contained herein required to be
performed at or prior to the Effective Time, and the representations and
warranties of W & L and the W & L Shareholders contained herein shall be true
when made and (except for representations and warranties made as of a specified
date, which need only be true as of such date) at and as of the Effective Time
as if made at and as of such time, except as contemplated hereby;
(b) Parent shall have completed its due diligence review of W & L and
shall, in its sole and absolute discretion, be satisfied with the results of
such review;
(c) the appropriate officers of W & L shall have executed and
delivered to Parent at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "E" hereto.
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(d) W & L and the W & L Shareholders shall have obtained or caused to
be obtained all of the Consents, if any, listed on Schedule 7.2(d) hereto;
---------------
(e) Parent shall have received a corporate certificate of good
standing for W & L, and a copy of the Certificate of Incorporation of W & L,
both as certified by the Secretary of State of New York;
(f) as of three business days prior to the Closing Date, the W & L
Debt shall be no greater than $0;
(g) Each of Wissing and Laurence shall have executed and delivered an
Option Agreement, and Wissing shall have executed and delivered his employment
agreement referred to in Section 6.8 hereof;
(h) Parent shall have received, at the Closing, a duly executed
opinion of counsel to W & L and the W & L Shareholders, substantially in the
form of Exhibit "G" hereto;
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(i) Parent shall have received evidence satisfactory to it that W & L
has filed, pursuant to Section 907(e)(2)(H) of the BCL, an estimated cessation
franchise tax report through the anticipated Closing Date;
(j) there shall have been delivered to Parent, duly executed by each
of Wissing and Laurence, (i) an Agreement to be Bound to the Stockholders'
Agreement, in the form of Exhibit "F" hereto; and (ii) an Agreement to be Bound
-----------
to the Registration Rights Agreement, in the form of Exhibit "B" hereto;
-------------------
(k) W & L shall have furnished evidence to Parent's satisfaction of
performance under Section 6.9 hereof, and Parent shall have received from W & L
or the W & L Shareholders, as the case may be, such other documents as Parent's
counsel shall have reasonably requested, in form and substance reasonably
satisfactory to Parent's counsel; and
(l) Parent shall have received evidence satisfactory to it that at
the Closing the assets and properties used in the W & L Business are free and
clear of all Liens other than Permitted Liens.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY PARENT.
(a) Parent shall indemnify and hold the W & L Shareholders and W &
L's directors, officers and employees (collectively, the "W & L Indemnified
Parties") harmless from and against, and agree promptly to defend each of the W
& L Indemnified Parties from and reimburse each of the W & L Indemnified Parties
for, any and all losses, damages, costs, expenses, liabilities, obligations and
claims of any kind (including, without limitation, reasonable attorney fees and
other legal costs and expenses) (collectively, a "W & L Loss") that any of the W
& L Indemnified Parties may at any time suffer or incur, or become subject to,
as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations
and warranties made by Parent or Sub in or pursuant hereto, or in any
instrument, certificate or affidavit delivered by Parent or Sub at the Closing
in accordance with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform,
satisfy and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations hereunder or under any of the documents and materials
delivered by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.1(a).
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(b) Notwithstanding any other provision hereof to the contrary,
Parent shall not have any liability under Section 8.1(a)(i) above (i) unless the
aggregate of all W & L Losses for which Parent would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $25,000, and then
only to the extent of such excess, (ii) for amounts in excess of $500,000 in the
aggregate, and (iii) unless the W & L Shareholders have asserted a claim with
respect to the matters set forth in Section 8.1(a)(i), or 8.1(a)(iii) to the
extent applicable to Section 8.1(a)(i), within two years of the Effective Time.
Notwithstanding any implication to the contrary contained herein, the parties
acknowledge and agree that a decrease in the value of Parent Stock would not, by
itself, constitute a W & L Loss, unless and to the extent a decrease in the
value of Parent Stock has been demonstrated to be as a result of any event
described in Sections 8.1(a)(i), (ii) or (iii) above.
8.2 INDEMNIFICATION BY THE W & L SHAREHOLDERS.
(a) The W & L Shareholders shall, jointly and severally, indemnify
and hold Parent, Sub, Surviving Corporation and their respective shareholders,
directors, officers and employees (collectively, the "Parent Indemnified
Parties") harmless from and against, and agree to defend promptly each of the
Parent Indemnified Parties from and reimburse each of the Parent Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including, without limitation, reasonable
attorneys' fees and other legal costs and expenses (collectively, a "Parent
Loss") that any of the Parent Indemnified Parties may at any time suffer or
incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations
and warranties made by W & L or the W & L Shareholders in or pursuant hereto, or
in any instrument, certificate or affidavit delivered by any of the same at the
Closing in accordance with the provisions hereof;
(ii) any failure by W & L or any of the W & L Shareholders
to carry out, perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations hereunder or under any of
the documents and materials delivered by W & L pursuant hereto; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above, none of the W & L Shareholders shall
have any liability under Section 8.2(a)(i) above (i) unless the aggregate of all
Parent Losses for which the W & L Shareholders would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $25,000, and then
only to the extent of such excess, (ii) for amounts in excess of $500,000 in the
aggregate, and (iii) unless Parent has asserted a claim with respect to the
matters set forth in Sections 8.2(a)(i) or 8.2(a)(ii), or 8.2(a)(iii) (to the
extent applicable to Section 8.2(a)(i) or 8.2(a)(ii) within two years of the
Effective Time, except with respect to the matters arising under Sections 4.18,
4.19, 4.20 or 4.24 hereof, in which event Parent must have asserted a claim
within the
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applicable statute of limitations. Notwithstanding any implication to the
contrary contained herein, the parties acknowledge and agree that a decrease in
the value of Parent Stock would not, by itself, constitute a Parent Loss, unless
and to the extent a decrease in the value of Parent Stock has been demonstrated
to be as a result of any event described in Sections 8.2(a)(i), (ii) or (iii)
above.
8.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder. Subject to the
Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section 8.1 or 8.2 hereof, as the case may
be, the Indemnifying Party shall have the right, at its sole cost and expense,
to employ counsel of its own choosing to defend any such Claim asserted against
the Indemnified Party. Notwithstanding anything to the contrary in the
preceding sentence, if the Indemnified Party (i) reasonably believes that its
interests with respect to a Claim (or any material portion thereof) are in
conflict with the interests of the Indemnifying Party with respect to such Claim
(or portion thereof), and (ii) promptly notifies the Indemnifying Party, in
writing, of the nature of such conflict, then the Indemnified Party shall be
entitled to choose, at the sole cost and expense of the Indemnifying Party,
independent counsel to defend such Claim (or the conflicting portion thereof).
The Indemnified Party shall have the right to participate in the defense of any
Claim at its own expense (except to the extent provided in the preceding
sentence), but the Indemnifying Party shall retain control over such litigation
(except as provided in the preceding sentence). The Indemnifying Party shall
notify the Indemnified Party in writing, as promptly as possible (but in any
case before the due date for the answer or response to a Claim) after receipt of
the notice of Claim given by the Indemnified Party to the Indemnifying Party
under Section 8.3(a) hereof, of its election to defend in good faith any such
third party Claim. For so long as the Indemnifying Party is defending in good
faith any such Claim asserted by a third party against the Indemnified Party,
the Indemnified Party shall not settle or compromise such Claim without the
prior written consent of the Indemnifying Party. The Indemnified Party shall
cooperate with the Indemnifying Party in connection with any such defense and
shall make available to the Indemnifying Party or its agents all records and
other materials in the Indemnified Party's possession reasonably required by it
for its use in contesting any third party Claim; provided, however, that the
Indemnifying Party shall have agreed, in writing, to keep such records and other
materials confidential except (i) to the extent required for defense of
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the relevant Claim, or (ii) as required by law or court order. Whether or not
the Indemnifying Party elects to defend any such Claim, the Indemnified Party
shall have no obligations to do so. Within 30 days after a final determination
(including a settlement) has been reached with respect to any Claim contested
pursuant to this Section 8.3(b), the Indemnifying Party shall satisfy its
obligations hereunder with respect thereto. Any amount paid thereafter shall
include interest thereon for the period commencing at the end of such 30-day
period and ending on the actual date of payment, at a rate of 15% per annum, or,
if lower, at the highest rate of interest permitted by applicable law at the
time of such payment.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Merger Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of Parent and W & L;
(b) by W & L, upon a material breach hereof on the part of Parent or
Sub which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by July 31, 1998;
(c) by Parent, upon a material breach hereof on the part of W & L or
any of the W & L Shareholders which has not been cured and which would cause any
condition set forth in Section 7.2 hereof to be incapable of being satisfied by
July 31, 1998;
(d) by Parent, if the condition set forth in Section 7.2(b) hereof
shall not have been satisfied in Parent's sole and absolute discretion;
(e) by Parent or W & L if any court of competent jurisdiction shall
have issued, enacted, entered, promulgated or enforced any order, judgment,
decree, injunction or ruling which restrains, enjoins or otherwise prohibits the
Merger and such order, judgment, decree, injunction or ruling shall have become
final and nonappealable; or
(f) by either Parent or W & L if the Merger shall not have been
consummated on or before July 31, 1998 (provided the terminating party is not
otherwise in material breach of its representations, warranties or obligations
hereunder).
9.2 FEES AND EXPENSES.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the Surviving Corporation; provided, however, that the W & L Shareholders shall
pay all fees and expenses (including agents,
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counsel and other advisors) of W & L and themselves that are not solely and
directly related to the Merger.
(b) If the Merger is not consummated for a reason other than the
willful and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
(c) If the Merger is not consummated because of a willful and
material breach hereof by any party, the nonbreaching party or parties shall be
entitled to pursue all legal and equitable remedies against the breaching party
for such breach including specific performance and all fees and expenses
incurred by the nonbreaching party or parties in connection with enforcing its
or their rights hereunder with respect to such breach shall be paid by the
breaching party.
9.3 AMENDMENT. This Merger Agreement may be amended by the parties hereto
at any time before or after approval hereof by the W & L Shareholders, but,
after such approval, no amendment shall be made which (i) changes the form or
decreases the amount of the consideration to be received in the Merger, (ii) in
any way materially adversely affects the rights of the W & L Shareholders, or
(iii) under applicable law would require approval of the W & L Shareholders, in
any such case referred to in clauses (i), (ii) and (iii), without the further
approval of the W & L Shareholders. This Agreement may not be amended except by
an instrument in writing signed on behalf of the parties hereto, provided that
after the Effective Time, any such amendment must be signed by the former
holders of a majority of the W & L Stock.
9.4 WAIVER. At any time prior to the Effective Time, the parties hereto
may, to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 SURVIVAL; RECOURSE. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 10.9 and 10.10 hereof, shall survive the
Merger (except to the extent a shorter period of time is explicitly specified
therein) and (ii) the representations and warranties made in Articles IV and V
hereof shall survive the Merger, and shall survive any independent investigation
by the parties, and any dissolution, merger or consolidation of W & L or Parent,
and shall bind the legal representatives, assigns and successors of W & L, the
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<PAGE>
W & L Shareholders and Parent, for a period of two years after the Effective
Time (other than the representations and warranties contained in Sections 4.18,
4.19, 4.20 and 4.24 hereof, which shall survive for the applicable statute of
limitations).
10.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in Person, by telecopy (with confirmation of
receipt), by courier service, or by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
If to W & L : Wissing & Laurence, Inc.
305 E. 40th St.
New York, NY 10016
Attention: Mr. John Laurence
Telephone: 212/682-4973
With copies to: Howard Hirschfeld, P.C.
24 E. 39th St.
New York, NY 10016
Telephone: 212/983-0330
Telecopy: 212/983-0472
If to the W & L To the address listed under the signature
Shareholders: line of the applicable W & L Shareholder
If to Parent or Sub: IXL Holdings, Inc.
Two Park Place
1888 Emery Street, 2nd Floor
Atlanta, GA 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
-28-
<PAGE>
and to: Kelso & Company
320 Park Avenue, 24th Floor
New York, NY 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 ENTIRE AGREEMENT. The exhibits and schedules hereto are incorporated
herein. This Agreement and the documents, schedules and instruments referred to
herein and to be delivered pursuant hereto constitute the entire agreement
between the parties pertaining to the subject matter hereof, and supersede all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof, except for
the non-disclosure letter agreement, dated as of June 1, 1998, between Parent
and W & L. There are no other representations or warranties, whether written or
oral, between the parties in connection the subject matter hereof, except as
expressly set forth herein.
10.4 ASSIGNMENTS; PARTIES IN INTEREST. Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests, and
obligations of Sub hereunder may be assigned to any direct wholly owned Delaware
subsidiary of Parent without such prior consent. Subject to the preceding
sentence, this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing herein, express or implied, is intended to or
shall confer upon any Person not a party hereto any right, benefit or remedy of
any nature whatsoever under or by reason hereof, except as otherwise provided
herein.
10.5 GOVERNING LAW. This Agreement, except to the extent that the BCL or
the DGCL is mandatorily applicable to the Merger or the rights of the W & L
Shareholders or the other parties hereto with respect to the Merger, shall be
governed in all respects by the laws of the State of Georgia (without giving
effect to the provisions thereof relating to conflicts of law).
10.6 HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation hereof.
10.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 SEVERABILITY. If any term or other provision hereof is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions hereof shall nevertheless remain in full force
and effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party.
-29-
<PAGE>
Upon determination that any term or other provision hereof is invalid, illegal
or incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as
closely as possible to the fullest extent permitted by applicable law in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.9 POST-CLOSING ACCESS. For a period of three years after the Closing
Date, the W & L Shareholders and their agents and representatives shall have
reasonable access to the books and records of the W & L Business.
10.10 POST-CLOSING NOTICE. To the extent the Surviving Corporation
receives written notice of any event or circumstance that materially affects any
of the W & L Shareholders, the Surviving Corporation shall promptly notify the
affected W & L Shareholder of such matter, information, or event and shall
provide them with copies of all relevant documentation or correspondence in
connection thereto.
10.11 CERTAIN DEFINITIONS. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the W & L
Real Property or interfering with the ordinary conduct of any of the W & L
Business; and (e) those Liens listed on Schedule 10.11 hereto;
--------------
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of W & L" shall refer to the knowledge,
subject to clause (i) above, of any of the W & L Shareholders; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of
which Parent (either alone or through or together with any other Subsidiary)
owns, directly or indirectly, stock or other equity interests the holders of
which are entitled to more than 50% of the vote for the election of the board of
directors or other governing body of such Entity (including, without limitation,
Sub); provided, however, that with respect to the Parent, the terms "Subsidiary"
and "Subsidiaries" shall not include University Netcasting, Inc. or W & L.
- SIGNATURES ON THE FOLLOWING PAGE -
-30-
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and W & L have caused this Agreement to be
signed and delivered by their respective officers duly authorized, and each W &
L Shareholder has signed and delivered this Agreement, all as of the date first
written above.
"W & L"
WISSING & LAURENCE, INC., a New York corporation
By: /s/ John Laurence
-------------------------------------------
Title: President
----------------------------------------
"PARENT"
IXL HOLDINGS, INC., a Delaware corporation
By: /s/ James V Sandry
-------------------------------------------
Title:________________________________________
"SUB"
iXL-NEW YORK, INC., a Delaware corporation
By: /s/ James V Sandry
-------------------------------------------
Title:________________________________________
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
-31-
<PAGE>
"W & L SHAREHOLDERS"
/s/ Ronald Wissing
---------------------------------------------
Ronald Wissing
Address: 220 East 22nd Street
Apt. 6A
New York, NY 10010
/s/ John Laurence
---------------------------------------------
John Laurence
Address: 305 East 40th Street
New York, NY 10016
-32-
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate..................................... Exhibit A-1
Sub's Closing Certificate........................................ Exhibit A-2
Agreement to be Bound to Registration Rights Agreement........... Exhibit B
Option Agreement................................................. Exhibit C
Opinion of Counsel to Parent and Sub............................. Exhibit D
W&L's Closing Certificate........................................ Exhibit E
Agreement to be Bound to Stockholders' Agreement................. Exhibit F
Opinion of Counsel to W&L........................................ Exhibit G
Purchaser Representative Questionnaire and Acknowledgement....... Exhibit H
Employment Agreement............................................. Exhibit I
<PAGE>
List of Schedules
-----------------
Schedule 3.1(b) Merger Consideration (see attached)
Schedule 4.1 Certificate of Incorporation & Bylaws of W&L
Schedule 4.3(a) Capitalization of W&L
Schedule 4.5 Conflicts, Required Filings & Consents of W&L
Schedule 4.7 Exceptions to Absence of Changes
Schedule 4.8 Undisclosed Liabilities of W&L
Schedule 4.9 Exceptions to Title to Properties
Schedule 4.10 Bad Equipment of W&L
Schedule 4.12 Liens on Real Property of W&L
Schedule 4.13 Leases of W&L
Schedule 4.14 Contracts of W&L
Schedule 4.15 Directors & Officers of W&L
Schedule 4.17 Litigation of W&L
Schedule 4.18 Employee Benefit Plans/Labor Relations
Schedule 4.19 ERISA Issues of W&L
Schedule 4.21 W&L Permits
Schedule 4.23 W&L Brokers
Schedule 4.25 Interest in Customers, Suppliers, Competitors
Schedule 4.28 W&L Insurance
Schedule 5.1 Certificates of Incorporation and Bylaws of Parent and
Sub
Schedule 5.3 Conflicts, Required Filings & Consents of Parent
Schedule 5.4 Parent Litigation
Schedule 5.5 Parent or Sub Brokers
Schedule 5.6 Outstanding Obligations to Issue Options, Warrants or
Other Parent Stock Rights
Schedule 5.7 Parent Subsidiaries
<PAGE>
SCHEDULE 3.1(b)
---------------
PARENT STOCK TO BE ISSUED
HOLDER: NUMBER OF SHARES:
------ ----------------
Ronald Wissing: 25,834
John Laurence: 24,166
<PAGE>
Schedule 5.9......................... Parent Undisclosed Liabilities
Schedule 5.13........................ Exceptions to Absence of Changes
Schedule 6.6......................... Parent Options to W&L Shareholders
Schedule 7.1(c)...................... Parent Consents
Schedule 7.2(d)...................... W&L Consents
Schedule 10.11....................... Permitted Liens
<PAGE>
EXHIBIT 2.21
ASSET PURCHASE AGREEMENT
BY AND AMONG
IXL HOLDINGS, INC.,
IXL-NEW YORK, INC.,
AND
ROBERT ORTIZ AND JOHN TIERNEY
DATED AS OF JULY 16, 1998
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT is entered into as of this 16th day of July,
1998, by and among IXL-NEW YORK, INC., a Delaware corporation, or its successors
or assigns ("Buyer"), IXL HOLDINGS, INC., a Delaware corporation ("IXL"), and
JOHN TIERNEY AND ROBERT ORTIZ (collectively, the "Sellers").
R E C I T A L S:
- - - - - - - -
A. Sellers have been and are now engaged in the business of video editing
and creation, and furnishing related services (the "Design Business").
B. Sellers are willing to sell to Buyer and Buyer is willing to purchase
from Sellers (the "Acquisition"), substantially all of the assets, business,
properties and rights of Sellers related to the Design Business, on the terms
and subject to the conditions set forth herein.
C. The respective Boards of Directors of IXL and Buyer have approved the
Acquisition on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
PURCHASE AND SALE
-----------------
1.1 PURCHASE AND SALE. Contemporaneously with the execution and delivery
hereof, and upon the terms and conditions hereof, Sellers shall sell and deliver
to Buyer, and Buyer shall purchase, all of Sellers' right, title and interest in
and to the Design Equipment (as defined in Section 2.9 hereof), the Design
Intellectual Property (as defined in Section 2.10(a) hereof), and all other
assets, tangible and intangible, used or useable in the operation of the Design
Business and as described in Schedule 1.1 hereto (the "Design Miscellaneous
------------
Assets"). The Design Equipment, the Design Intellectual Property, and the Design
Miscellaneous Assets are collectively referred to herein as the "Purchased
Assets."
1.2 THE CLOSING. The closing of the Acquisition (the "Closing") shall take
at the offices of Minkin & Snyder, A Professional Corporation, One Buckhead
Plaza, 3060 Peachtree Road, Suite 1100, Atlanta, Georgia 30305, or at such other
place as the parties may mutually agree. The date upon which the Closing occurs
is hereinafter referred to as the "Closing Date."
1.3 ACQUISITION CONSIDERATION. As consideration for the purchase of the
Purchased Assets, Buyer shall issue to the Sellers, in equal portions (the
"Acquisition Consideration"), (i) that
<PAGE>
number of shares of validly issued, fully paid and nonassessable Class B Common
Stock of IXL, $.01 par value (the "IXL Shares"), valued as of the Closing at $5
per share, based on the following equation:
200,000 - D
--
$5
where:
D = Any outstanding indebtedness of Sellers related to the Design
Business (the "Design Debt"), including debt for borrowed money
and accrued interest thereon, capital leases and accrued
expenses, all as of three business days prior to the Closing Date
and as determined in accordance with generally accepted
accounting principles ("GAAP);
and (ii) $50,000 in cash.
1.4 ASSUMPTION OF LIABILITIES. In addition to the Acquisition
Consideration, as additional consideration for the purchase of the Purchased
Assets, Buyer will assume no liabilities whatsoever unless specified in
Schedule 1.4 hereto. There are no "Assumed Liabilities." Sellers shall be
- ------------
responsible for all of the obligations and liabilities of Sellers whether now
existing or previously or hereafter incurred, including (a) all taxes that
result from or have accrued in connection with the operation of the Design
Business prior to the Closing Date; (b) liabilities and obligations arising
under Design Contracts and Design Leases (as defined, respectively, in Sections
2.13 and 2.12 hereof); (c) all liabilities and obligations accruing with respect
to the operation of the Design Business prior to the Closing Date; (d) all
liabilities incurred related to the Design Benefit Plans (as defined in Section
2.16(a) hereof); (e) all liabilities and obligations of Sellers hereunder or
under any other agreement entered into in connection herewith ; (f) all Design
Accounts Payable (as defined in Section 2.24 hereof); and (g) any deferred
revenues of Sellers attributable to the Design Business (all of the foregoing,
(a) through (g) collectively, the "Retained Liabilities").
1.5 ALLOCATION OF ACQUISITION CONSIDERATION. The Acquisition Consideration
will be allocated among the items of Design Equipment in accordance with their
respective net book values, as reflected on the most recent Design Financial
Statement (as defined in Section 2.4 hereof); or as determined by IXL for items
of Design Equipment not so reflected. The remainder of the Acquisition
Consideration will be allocated to goodwill and other intangible assets. Each of
the parties hereto agrees to report the federal, state and local income and
other tax consequences of the transactions contemplated hereby in a manner
consistent with such allocation.
1.6 OTHER DELIVERIES. In addition to the foregoing, at the Closing, each
of Buyer, IXL, and Sellers shall make the deliveries described in Article V
hereof.
2
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
The Sellers, jointly and severally, represent and warrant to IXL and Buyer,
which representations and warranties shall survive the Closing in accordance
with Section 7.1 hereof, as follows:
2.1 QUALIFICATION. Sellers have the requisite power and authority to carry
on the Design Business as it is now being conducted and are duly qualified or
licensed to do business in each jurisdiction where the character of their
properties owned or held under lease or the nature of their activities makes
such qualification necessary.
2.2 AUTHORITY. Sellers have the necessary power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Sellers, and
assuming the due authorization, execution and delivery by Buyer and IXL,
constitutes the valid and binding obligation of each of the Sellers, enforceable
against each of the Sellers in accordance with its terms subject, in each case,
to bankruptcy, insolvency, reorganization, moratorium and similar laws of
general application relating to or affecting creditors' rights and to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing.
2.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 2.3 hereto, none of the execution and delivery hereof by Sellers, the
- ------------
consummation by Sellers of the transactions contemplated hereby or compliance by
Sellers with any of the provisions hereof will:
(a) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to any of Sellers or to any of
the Purchased Assets;
(b) result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, contract, agreement,
arrangement, lease, license, permit, judgment, decree, franchise or other
instrument or obligation to which any of Sellers is a party or by which any of
the Purchased Assets may be bound or affected;
(c) result in the creation of any lien, charge, security interest,
pledge, option, right of first refusal, voting proxy or other voting agreement
or encumbrance of any kind or nature (any of the foregoing, a "Lien") on any of
the Purchased Assets; or
(d) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), of (i) any government or subdivision thereof,
whether domestic, foreign or multinational, or any administrative, governmental,
or regulatory authority, agency, commission, court, tribunal or body, whether
domestic, foreign or multinational (a "Governmental Entity"); or (ii) any other
individual, corporation, trust, partnership, limited liability company or other
entity (collectively, a "Person").
3
<PAGE>
2.4 FINANCIAL STATEMENTS. Sellers have heretofore furnished Buyer with a
true and complete copy of the unaudited balance sheet and income statement for
the Design Business for the year ended December 31, 1997 and for the five month
period ended May 31, 1998 (the "Design Financial Statements"). The Design
Financial Statements present fairly, in all material respects, the financial
position and operating results of Design as of the dates, and during the
periods, indicated therein.
2.5 ABSENCE OF CHANGES. Except as provided in Schedule 2.5 hereto, since
------------
December 31, 1997, (a) Sellers have not entered into any transaction that was
not in the ordinary course of business; (b) there has been no material damage,
destruction or loss of any of the Purchased Assets (whether or not covered by
insurance); (c) Sellers have not failed to satisfy any of their debts,
obligations or liabilities related to the Design Business or the Purchased
Assets as the same become due and owing; (d) there have been no capital
expenditures related to the Design Business in excess of $10,000 for any single
item, or $25,000 in the aggregate; (e) Sellers have not ceased to transact
business with any customer that, as of the date of such cessation, represented
more than 5% of the annual gross revenues of the Design Business; (f) there has
been no termination or resignation of any key employee or officer of the Design
Business, and to the knowledge of Sellers, no such termination or resignation is
threatened; (g) there has been no change in accounting methods or practices of
the Design Business, or revaluation of any of the Purchased Assets; (h) there
has been no amendment or termination of any material oral or written contract,
agreement or license related to the Design Business, to which any of Sellers is
a party or by which any of them is bound, except in the ordinary course of
business, or except as expressly contemplated hereby; (i) there has been no
agreement or commitment to do any of the foregoing; and (j) there has been no
other event or condition pertaining to and affecting the Purchased Assets or the
ability of Sellers to consummate the transactions contemplated hereby. Sellers'
liabilities described on Schedule 2.5 are among the Retained Liabilities.
------------
2.6 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 2.6 hereto,
------------
the Design Business has no debt, liability or obligation of any kind, whether
accrued, absolute or otherwise, including, without limitation, any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997 that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Design; (b) liabilities reflected on the Design Financial Statements; and (c)
liabilities incurred as a result of the transactions contemplated hereby.
Sellers' liabilities described on Schedule 2.6 are among the Retained
------------
Liabilities.
2.7 PURCHASED ASSETS. Except as set forth on Schedule 2.7 hereto, the
-------------------
Purchased Assets include all of the assets, properties and rights of every type
and description, real, personal and mixed, tangible and intangible, that are
necessary for, or used in, the conduct of the Design Business as conducted by
Sellers or any of them.
2.8 TITLE TO PROPERTIES. Except as set forth on Schedule 2.8 hereto,
------------
Sellers have good and marketable title to all of the Purchased Assets (other
than leasehold interests), and good and valid title to all leasehold interests
included as part of the Purchased Assets, in each case, free and clear of any
and all Liens other than Permitted Liens (as defined in Section 7.10 hereof).
4
<PAGE>
2.9 EQUIPMENT. Schedule 2.9 hereto sets forth a true and correct list of
------------
all items of tangible personal property (including computer hardware), excluding
items furnished by Buyer, necessary for or used in the operation of the Design
Business in the manner in which it has been and is now operated by Sellers (the
"Design Equipment"), all of which is included as part of the Purchased Assets,
except for personal property having a net book value of less than $1,000. Each
item of Design Equipment included in the Purchased Assets is in good condition
and repair, ordinary wear and tear excepted.
2.10 INTELLECTUAL PROPERTY.
(a) Sellers have heretofore furnished IXL with a true and complete
list or description of all proprietary technology, patents, patent rights,
trademarks, logos, trademark rights, trade names, trade name rights, service
marks, service mark rights, and copyrights used or required to be used by
Sellers in the operation of the Design Business (together with trade secrets and
know how used in the conduct o f said Business, the "Design Intellectual
Property"), all of which is included as part of the Purchased Assets. Except as
set forth on Schedule 2.10 hereto, Sellers own, or are validly licensed or
-------------
otherwise have the right to use or exploit, all of the Design Intellectual
Property, free of any obligation to make any payment (whether of a royalty,
license fee, compensation or otherwise). No claims are pending or, to the
knowledge of Sellers, threatened, that any of Sellers is infringing or otherwise
adversely affecting the rights of any Person with regard to any of the
Intellectual Property. Sellers have used their reasonable best efforts to
protect their rights in the Design Intellectual Property, and no Person is
infringing the rights of Sellers with respect to any Design Intellectual
Property. No intangible property is required for the conduct of the Design
Business other than the Design Intellectual Property. To the knowledge of
Sellers, use of the name "601 Design" (or the logo in Exhibit A to Schedule
--------
2.10) or "601 Design,Inc."does not infringe upon the rights of any Person.
- -----
Neither Design nor the Stockholders nor any employee, agent or
independent contractor of Design, in connection with the performance of such
Person's services with Design, has used, appropriated or disclosed, directly or
indirectly, any trade secret or other proprietary or confidential information of
any other Person, or otherwise violated any confidential relationship with any
other Person.
(b) There is no computer software used or required to be used by
Sellers in the conduct of the Design Business. Accordingly, there is no need to
license, or otherwise have the legal right to use any other software in the
conduct of the Design Business (including any upgrades, alterations or
enhancements with respect thereto), and no need to be in compliance with any
applicable licenses or other agreements.
2.11 REAL PROPERTY.
Except as set forth on Schedule 2.11 hereto, there is no real
-------------
property (including all buildings, improvements and fixtures thereon) owned,
leased or used in the operation of the Design Business (the "Design Real
Property"). There are no Liens on Sellers' interest in any Design Real Property.
2.12 LEASES. Except as set forth on Schedule 2.12 hereto, there are no
-------------
leases pursuant to which any of the Sellers leases, as lessor or lessee, real or
personal property used in operating the
5
<PAGE>
Design Business (the "Design Leases"). Accordingly, there is no need to assign
any Design Leases to Buyer.
2.13 CONTRACTS. Except as set forth on Schedule 2.13 hereto, there are no
-------------
contracts, agreements and commitments (whether written or oral) related to the
Design Business and to which any of Sellers is, directly or indirectly, a party
(in his own name or as a successor in interest), or by which any of them or any
of the Purchased Assets is otherwise bound, including any service agreements,
customer agreements, supplier agreements, agreements to lend or borrow money,
shareholder agreements, employment agreements, agreements relating to the Design
Intellectual Property and the like (collectively, the "Design Contracts").
Sellers' interests and liabilities under the contract referred to in Schedule
--------
2.13 are among the Retained Liabilities. Accordingly, there is no need to
- ----
assign any Design Contracts to Buyer.
2.14 PAYROLL INFORMATION. Schedule 2.14 hereto sets forth a true and
-------------
complete payroll report of the Design Business dated as of June 30, 1998,
showing all current employees of the Design Business and their current levels of
compensation, other than bonuses and other extraordinary compensation, all of
which bonuses and extraordinary compensation, through June 30, 1998 are
reflected in Schedule 2.14. Sellers have paid all compensation required to be
-------------
paid to employees of the Design Business on or prior to the date hereof other
than compensation accrued in the current pay period.
2.15 LITIGATION. Except as set forth on Schedule 2.15 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Sellers, threatened against or affecting any of Sellers or the Purchased Assets,
nor is there any judgment, decree, injunction or order of any applicable
Governmental Entity or arbitrator outstanding against any of Sellers.
2.16 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 2.16 hereto, there are no
-------------
employee benefit plans, agreements or arrangements maintained by the Design
Business, including (i) "employee benefit plans," within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"); (ii) affirmative action plans; (iii) current or deferred
compensation, pension, profit sharing, vacation or severance plans or programs;
or (iv) medical, hospital, accident, disability or death benefit plans
(collectively, "Design Benefit Plans").
(b) Sellers are not a party to any collective bargaining agreement,
no such agreement determines the terms and conditions of employment of any
employee of the Design Business, no collective bargaining agent has been
certified as a representative of any of the employees of the Design Business, no
representation campaign or election is now in progress with respect to any
employee of the Design Business and there are no labor disputes, grievances,
controversies, strikes or requests for union representation pending, or, to the
knowledge of Sellers, threatened, relating to or affecting the Design Business.
To the knowledge of Sellers, no event has occurred that could give rise to any
such dispute, controversy, strike or request for representation.
6
<PAGE>
2.17 ERISA.
(a) As set forth on Schedule 2.17 hereto, there are no Design
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Benefit Plans.All Design Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the Design Benefit Plans that is
intended to meet the requirements of Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), is the subject of a favorable determination or
notification letter issued by the Internal Revenue Service. No Design Benefit
Plan is subject to Title IV of ERISA or Section 412 of the Code. Design has not
engaged in any non-exempt "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA involving Design Benefit Plans
that would subject Design to the penalty or tax imposed under Section 502(i) of
ERISA or Section 4975 of the Code. Sellers have not engaged in any transaction
described in Section 4069 of ERISA within the last five years. Except as
disclosed in Schedule 2.17 hereto, neither the execution and delivery hereof
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nor the consummation of the transactions contemplated hereby will (i) result in
any payment (including, without limitation, severance, unemployment compensation
or golden parachute) becoming due to any employee of the Design Business, (ii)
increase any benefits otherwise payable under any Design Benefit Plan or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits to any extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA, for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Design Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code (a "Pension
Plan"), or by any entity that is considered one employer with Design under
Section 4001 of ERISA or Section 414 of the Code (an "ERISA Affiliate"), within
the 12-month period ending on the date hereof. The Design Business has not
incurred any liability to the Pension Benefit Guaranty Corporation in respect of
any Design Benefit Plan that remains unpaid.
2.18 TAXES. Except as set forth on Schedule 2.18 hereto, Sellers have
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duly and timely filed all federal, state and local income, franchise, excise,
real and personal property and other tax returns and reports, including
extensions, related to the Design Business and required to have been filed by
Sellers or any of them on or prior to the date hereof. Sellers have duly and
timely paid all taxes and other governmental charges, and all interest and
penalties with respect thereto, related to the Design Business and required to
be paid by Sellers or any of them (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Design Financial Statement). As of the date hereof,
all deficiencies proposed as a result of any audits have been paid or settled.
There are, and after the date hereof will be, no tax deficiencies (including
penalties and interest) of any kind assessed against or relating to Sellers with
respect to any taxable periods ending on or before, or including, the Closing
Date of a character or nature that would result in Liens or claims on any of the
Purchased Assets or on Buyer's title or use of the Purchased Assets or that
would result in any claim against Buyer. Any liabilities relating to Schedule
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2.18 are among the Retained Liabilities.
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2.19 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth on Schedule 2.19
-------------
hereto, there are no permits, licenses, variances, exemptions, orders and
approvals of all Governmental
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Entities necessary to own, lease or operate all of the Purchased Assets, as
appropriate, and to carry on the Design Business as now conducted (the "Design
Permits"), except for such permits which are not material to the Design
Business. Accordingly, there is no need to assign any Design Permits to Buyer.
2.20 BROKERS. Except as set forth on Schedule 2.20 hereto, no broker or
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finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of any of Sellers.
2.21 ENVIRONMENTAL MATTERS.
(a) To the knowledge of Sellers, no real property currently or
formerly owned or operated by Sellers or the Design Business is contaminated
with any Hazardous Substances (as hereinafter defined);
(b) None of Sellers is a party to any litigation or administrative
proceeding nor, to the knowledge of Sellers, is any litigation or administrative
proceeding threatened against any of them, that, in either case, asserts or
alleges that any of Sellers (i) violated any Environmental Laws (as hereinafter
defined); (ii) is required to clean up, remove or take remedial or other
responsive action due to the disposal, deposit, discharge, leak or other release
of any Hazardous Substances; or (iii) is required to pay all or a portion of the
cost of any past, present or future cleanup, removal or remedial or other action
that arises out of or is related to the disposal, deposit, discharge, leak or
other release of any Hazardous Substances.
(c) To the knowledge of Sellers, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by Sellers or the Design Business containing
materials that, if known to be present in soils or ground water, would require
cleanup, removal or other remedial action under Environmental Laws.
(d) To the knowledge of Sellers, none of Sellers is subject to any
judgment, order or citation related to or arising out of any Environmental Laws
and has not been named or listed as a potentially responsible party by any
Governmental Entity in a matter related to or arising out of any Environmental
Laws.
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements),
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including, without limitation, any petroleum products, asbestos or
polychlorinated biphenyls.
2.22 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as provided
in Schedule 2.22 hereto, no employee of the Design Business and no family
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member thereof
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(including a spouse, parent, sibling or lineal descendent of any of the
foregoing), has any direct or indirect material interest in any material
customer, supplier or competitor of Sellers, or in any Person from whom or to
whom Sellers lease any real or personal property, or in any other Person with
whom any of Sellers is doing business whether directly or indirectly (including
as a debtor or creditor), whether in existence as of the date hereof or
proposed, other than the ownership of stock of publicly traded outstanding stock
of such corporation.
2.23 ACCOUNTS RECEIVABLE. No accounts, notes, contracts and other
receivables of Sellers related to the Design Business (collectively, "Design
Accounts Receivable") have arisen from the Design Business since June 30, 1998.
Sellers are not conveying any Design Accounts Receivable hereunder.
2.24 ACCOUNTS PAYABLE. No accounts, notes, contracts and other amounts
payable by any of Sellers related to the Design Business (collectively, "Design
Accounts Payable") have arisen from the Design Business since June 30, 1998.
Neither Parent nor Sub is assuming any Design Accounts Payable.
2.25 INSURANCE. Through June 30, 1998, Sellers maintained, in full force
and effect, all insurance policies that are required to be maintained for the
conduct of the Design Business or the ownership of Sellers' property (both real
and personal) (collectively, the "Design Insurance Policies"). All of the Design
Insurance Policies are listed on Schedule 2.25 hereto, and true and compete
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copies of all Design Insurance Policies have previously been furnished to IXL.
Sellers (i) are not in default regarding the provisions of any Design Insurance
Policy; (ii) have paid all premiums due thereunder; and (iii) have not failed to
present any notice or material claim thereunder in a due and timely fashion.
2.26 BANKRUPTCY. Neither of Sellers, nor any entity affiliated, related or
controlled by any of such parties has filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
2.27 SELLER DEBT. As of the date hereof, the Design Debt is not in excess
of $0.
2.28 ACCREDITED INVESTORS; INVESTMENT PURPOSE. Each of the Sellers
represents that he (a) is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"); (b) is
acquiring the IXL Shares solely for his own account for investment and not with
a view to, or for sale in connection with, any distribution thereof; and (c)
will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate or
otherwise dispose of any IXL Shares (or solicit any offers to buy, purchase or
other acquire or take a pledge of any such shares) except in compliance with the
Securities Act and the rules and regulations thereunder, other applicable laws,
rules and regulations, and IXL's Second Amended and Restated Stockholders'
Agreement (the "Stockholders' Agreement").
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2.29 RESTRICTIONS ON TRANSFER. Each of the Sellers acknowledges that (a)
the IXL Shares received by him hereunder have not been registered under the
Securities Act; (b) the IXL Shares may be required to be held indefinitely, and
he must continue to bear the economic risk of the investment in such shares
unless such shares are subsequently registered under the Securities Act or an
exemption from such registration is available; (c) there may not be any public
market for the IXL Shares in the foreseeable future; (d) Rule 144 promulgated
under the Securities Act is not presently available with respect to sales of any
securities of IXL, and said Rule is not anticipated to be available in the
foreseeable future; (e) when and if IXL Shares may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
limited amounts and in accordance with the terms and conditions of said Rule;
(f) if the exemption afforded by Rule 144 is not available, then public sale
without registration will require the availability of an exemption under the
Securities Act; (g) the IXL Shares are subject to the terms and conditions of
the Stockholders' Agreement; (h) restrictive legends shall be placed on the
certificates representing the IXL Shares; and (i) a notation shall be made in
the appropriate records of IXL indicating that the IXL Shares are subject to
restrictions on transfer and, if IXL should in the future engage the services of
a stock transfer agent, then appropriate stop-transfer instructions will be
issued to such transfer agent with respect to the IXL Shares.
2.30 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION. Each of
the Sellers represents and warrants that (a) his financial situation is such
that he can afford to bear the economic risk of holding the IXL Shares acquired
by him hereunder for an indefinite period; (b) he can afford to suffer the
complete loss of such IXL Shares; (c) he has been granted the opportunity to ask
questions of, and receive answers from, representatives of IXL concerning the
terms and conditions of the IXL Shares and to obtain any additional information
that he deems necessary; (d) his knowledge and experience in financial business
matters are such that he is capable of evaluating the merits and risk of
ownership of the IXL Shares; (e) he has carefully reviewed the terms of the
Stockholders' Agreement and has evaluated the restrictions and obligations
contained therein; and (f) he (i) has reviewed the Private Placement Memorandum
of IXL dated June 26, 1998 (the "Memorandum"), (ii) has carefully examined the
Memorandum and has had an opportunity to ask questions of, and receive answers
from, representatives of IXL, and to obtain additional information concerning
IXL and its Subsidiaries (as hereinafter defined), and (iii) does not require
additional information regarding IXL or its Subsidiaries in connection with the
Acquisition.
2.31 DISCLOSURE. No statement of fact by any of Sellers contained herein
and no written statement of fact furnished or to be furnished by any of Sellers
to Buyer or IXL in connection herewith contains or will contain any untrue
statement of any material fact or omits or will omit to state any material fact
necessary in order to make the statements herein or therein contained not
misleading.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF IXL AND BUYER
-----------------------------------------------
Each of IXL and Buyer jointly and severally represents and warrants to
Sellers, which representations and warranties shall survive the Closing in
accordance with Section 7.1 hereof, as follows:
3.1 ORGANIZATION AND QUALIFICATION. Each of IXL and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation. Each of IXL and its Subsidiaries has the
requisite corporate power and authority to carry on its business as it is now
being conducted and is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary. Complete and correct copies of the respective Certificates of
Incorporation and Bylaws of IXL and Buyer as in effect on the date hereof are
attached to the IXL and Buyer closing certificates provided for in Section 5.1
hereof.
3.2 AUTHORITY. Each of IXL and Buyer has the necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of IXL and Buyer
have been duly and validly authorized and approved by their respective Boards of
Directors and by Buyer's sole shareholder, and no other corporate or shareholder
proceedings on the part of either IXL or Buyer, or their respective boards of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of IXL and Buyer, and assuming the due
authorization, execution and delivery by Sellers, constitutes the valid and
binding obligation of each of IXL and Buyer, enforceable against each of IXL and
Buyer in accordance with its terms, subject, in each case, to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights and to general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing.
3.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 3.3 hereto, none of the execution and delivery hereof by IXL or Buyer,
- ------------
the consummation by IXL and Buyer of the transactions contemplated hereby, or
compliance by IXL and Buyer with any of the provisions hereof, will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of IXL or Buyer, or the organizational documents of any other
Subsidiaries;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to IXL or its Subsidiaries, or
by which IXL, any of its Subsidiaries, or their respective properties or assets
may be bound or affected;
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(c) result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage or indenture, or any material
contract, agreement, arrangement, lease, license, permit, judgment, decree,
franchise or other instrument or obligation to which IXL or any of its
Subsidiaries is a party or by which IXL, any of its Subsidiaries or their
respective properties may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of IXL or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for
compliance with any applicable requirements of any applicable securities laws),
or (ii) any other Person.
3.4 LITIGATION. Except as set forth on Schedule 3.4 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
IXL, threatened against or affecting IXL or its Subsidiaries, nor is there any
judgment, decree, injunction or order of any applicable Governmental Entity or
arbitrator outstanding against IXL or its Subsidiaries that, either individually
or in the aggregate, would have a material adverse effect on the assets,
business or financial condition of IXL and its Subsidiaries, taken as a whole.
3.5 BROKERS. Except as disclosed on Schedule 3.5 hereto, no broker or
------------
finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of IXL or Buyer.
3.6 IXL STOCK.
(a) As of the date hereof, the authorized capital stock of IXL
consists of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 11,247,526 shares are
validly issued and outstanding (without taking into account any IXL Shares to be
issued pursuant hereto), fully paid and nonassessable; (ii) 750,000 shares of
blank check preferred stock, (A) 250,000 of which have been designated as Class
A Convertible Preferred Stock, of which 174,191 shares are validly issued and
outstanding, fully paid and nonassessable, (B) 200,000 of which have been
designated as Class B Convertible Preferred Stock, of which 98,767 shares are
validly issued and outstanding, fully paid and nonassessable, and (C) 15,000 of
which have been designated as Class C Convertible Preferred stock, of which
9,232 shares are validly issued and outstanding, fully paid and nonassessable.
Except as set forth on Schedule 3.6 hereto, there are no options, warrants,
------------
calls, agreements, commitments or other rights presently outstanding
that would obligate IXL to issue, deliver or sell shares of its capital stock,
or to grant, extend or enter into any such option, warrant, call, agreement,
commitment or other right. In addition to the foregoing, as of the date hereof,
IXL has no bonds, debentures, notes or other indebtedness issued or outstanding
that have voting rights in IXL.
(b) When delivered to the Sellers in accordance with the terms
hereof, the IXL Shares will be (i) duly authorized, fully paid and
nonassessable, and (ii) free and clear of all Liens
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other than restrictions imposed by the Stockholders' Agreement and by federal
and state securities laws.
3.7 SUBSIDIARIES. Except as set forth on Schedule 3.7 hereto, IXL has no
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subsidiaries and does not otherwise own or control, directly or indirectly, any
equity interest in, or any security convertible into an equity interest in, any
Entity. Schedule 3.7 lists the name of each of the Subsidiaries of IXL, and
------------
indicates their respective jurisdictions of incorporation.
3.8 FINANCIAL STATEMENTS. IXL has heretofore furnished Sellers with a true
and complete copy of (a) the audited financial statements of IXL Interactive
Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31, 1993, 1994
and 1995, and for the four-month period ended April 30, 1996; (b) audited
combined financial statements for Creative Video, Inc. (n/k/a iXL, Inc.),
Creative Video Library, Inc. and Entrepreneur Television, Inc. for the years
ended December 31, 1993, 1994 and 1995, and for the four-month period ended
April 30, 1996; (c) the audited consolidated financial statements for IXL and
its Subsidiaries for the eight months ended December 31, 1996 and for the year
ended December 31, 1997; and (d) the unaudited consolidated financial statements
for IXL and its Subsidiaries for the three-month period ended March 31, 1998
(all of the foregoing, collectively, the "IXL Financial Statements"). The IXL
Financial Statements present fairly in all material respects the consolidated
financial position, results of operations, shareholders' equity and cash flow of
IXL at the respective dates or for the respective periods to which they apply.
Except as disclosed therein, such statements and related notes have been
prepared in accordance with GAAP consistently applied throughout the periods
involved (except, in the case of the unaudited financial statements, for the
exclusion of footnotes and normal year end adjustments).
3.9 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 3.9 hereto,
------------
neither IXL nor any of its Subsidiaries has any debt, liability or obligation of
any kind, whether accrued, absolute or otherwise, including, any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fine, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997 that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of IXL and its Subsidiaries, taken as a whole; (b) liabilities reflected on the
IXL Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
3.10 COMPLIANCE WITH APPLICABLE LAWS. IXL or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of IXL and its Subsidiaries, as appropriate, and to carry on IXL's
business as now conducted (the "IXL Permits"). To the knowledge of IXL, IXL and
its Subsidiaries are in material compliance with all applicable laws and
regulations and the terms of the IXL Permits.
3.11 BANKRUPTCY. Neither IXL nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
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3.12 ABSENCE OF CHANGES. Except as provided in Schedule 3.12 hereto, since
-------------
December 31, 1997, there has not been (a) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of IXL and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of IXL and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to IXL and its
Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to IXL's capital stock; (e) any
material change in IXL's accounting principles, practices or methods; (f) any
split, combination or reclassification of any of IXL's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of IXL's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
3.13 TAXES. IXL and its Subsidiaries have duly and timely filed all federal,
state and local income, franchise, excise, real and personal property and other
tax returns and reports, including extensions, required to have been filed by
IXL and its Subsidiaries on or prior to the date hereof. IXL and its
Subsidiaries have duly and timely paid all taxes and other governmental charges,
and all interest and penalties with respect thereto, required to be paid by IXL
and its Subsidiaries (whether by way of withholding or otherwise) to any
federal, state, local or other taxing authority (except to the extent the same
are being contested in good faith, and adequate reserves therefor have been
provided in the applicable IXL Financial Statement). As of the date hereof, all
deficiencies proposed as a result of any audits have been paid or settled.
3.14 DISCLOSURE. No statement of fact by IXL or Buyer contained herein and no
written statement of fact furnished or to be furnished by IXL or Buyer to
Sellers in connection herewith contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make the statements herein or therein contained not misleading.
ARTICLE IV
ADDITIONAL AGREEMENTS
---------------------
4.1 PUBLIC ANNOUNCEMENTS. The parties agree that, except as may otherwise be
required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the transactions contemplated hereby. Any such disclosure shall
be coordinated by IXL, and none of Sellers shall make any such disclosure
without the prior written consent of IXL.
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4.2 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND EXPENSES. Sellers on
the one hand and Buyer on the other will each pay 50% of all transfer, gains and
other similar taxes and all documentary stamps, filing fees, recording fees and
sales and use taxes, if any, and any penalties or interest with respect thereto,
payable in connection with consummation of the transactions contemplated hereby.
4.3 FURTHER ASSURANCES. From time to time after the date hereof, upon the
reasonable request of any party hereto, the other party or parties hereto shall
execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof.
4.4 OPTIONS. IXL hereby covenants and agrees that, at the Closing, it will
issue to Sellers, or to such other employees of the Design Business as
designated by Sellers and approved by IXL, options to purchase an aggregate of
50,000 validly issued, fully paid and nonassessable IXL Shares, at an exercise
price per share of $6 and vesting as to 20% on December 31st of 1998 through
2002, in the form of Exhibit "H" hereto ("Option Agreement"), all of which shall
-----------
have been issued pursuant to the IXL's 1996 Stock Option Plan, as amended, the
number of Options per Person as specified in Schedule 4.4 hereto.
------------
4.5 EMPLOYMENT AGREEMENTS. Buyer and each of the Sellers will enter into an
employment agreement, substantially in the form of Exhibit "I" hereto
-----------
("Employment Agreements").
ARTICLE V
DELIVERIES AT CLOSING
---------------------
5.1 DELIVERIES OF SELLER.
(a) At the Closing, and as a condition to Buyer's and IXL's obligations
to consummate the transactions contemplated hereby, Sellers shall deliver, or
cause to be delivered, to Buyer, properly executed and dated as of the date
hereof: (i) the Bill of Sale and Assignment, in the form of Exhibit "A" hereto
----------
(the "Bill of Sale"); (ii) the Trademark Assignment in the form of Exhibit "B"
----------
hereto (the "Trademark Assignment"); (iii) for each of the Sellers, an Agreement
to be Bound to Registration Rights Agreement, in the form of Exhibit "C" hereto
----------
(the "Agreement to be Bound to Registration Rights Agreement"); (iv) for each of
the Sellers, an Agreement to be Bound to Stockholders Agreement, in the form of
Exhibit "D" hereto; (v) Sellers' opinion of counsel, substantially in the form
- ----------
of Exhibit "E" hereto; (vi) an Option Agreement for each of the recipients of
----------
Options, in accordance with Section 4.4 hereof; (vii) for each of the Sellers,
an Employment Agreement; and (viii) such other documents as provided in this
Article V or as Buyer or IXL shall reasonably request, including evidence
satisfactory to Buyer that the Sellers are "accredited investors" in accordance
with Section 2.30 hereof.
(b) In addition to the foregoing, and as a further condition to Buyer's
and IXL's obligation to consummate the transactions contemplated hereby, at or
prior to the Closing, (i)
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Sellers shall have obtained or caused to be obtained all of the Consents listed
on Schedule 5.1(b) hereto; and (ii) Buyer shall have received evidence
---------------
satisfactory to it that at the Closing the Purchased Assets are free and clear
of all Liens other than Permitted Liens.
5.2 DELIVERIES OF BUYER.
(a) In addition to the payment of the Acquisition Consideration in
accordance with Section 1.3 hereof (including the delivery of certificates
representing the IXL Shares being delivered to Sellers in connection therewith),
at the Closing, and as a condition to Sellers' obligations to consummate the
transactions contemplated hereby, Buyer shall deliver, or cause to be delivered,
to Sellers, properly executed and dated as of the date hereof: (i) the Bill of
Sale; (ii) a closing certificate of IXL, substantially in the form of Exhibit
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"F-1" hereto, and a closing certificate of Buyer, substantially in the form of
---
Exhibit "F-2" hereto; (iii) the Trademark Assignment; (iv) Agreements to be
- ------------
Bound to Registration Rights Agreement; (v) Buyer's opinion of counsel,
substantially in the form of Exhibit "G" hereto; (vi) an Option Agreement for
----------
each of the recipients of Options, in accordance with Section 4.4 hereof; (vii)
an Employment Agreement for each of them; and (viii) such other documents as
provided in this Article V or as Sellers shall reasonably request.
(b) In addition to the foregoing, and as a further condition to Sellers'
obligation to consummate the transactions contemplated hereby, at or prior to
the Closing, Buyer shall have (i) obtained or caused to be obtained all of the
Consents listed on Schedule 5.2(b) hereto; and (ii) delivered to Seller a
---------------
Certificate of Good Standing for each of IXL and Buyer, and a copy of the
Certificate of Incorporation of each of IXL and Buyer, all as certified by the
Secretary of State of Delaware.
ARTICLE VI
INDEMNIFICATION
---------------
6.1 INDEMNIFICATION BY BUYER.
(a) Each of IXL and Buyer shall jointly and severally indemnify and hold
Sellers harmless from and against, and agree promptly to defend each of the
Sellers from and reimburse each of the Sellers for, any and all losses, damages,
costs, expenses, liabilities, obligations and claims of any kind (including
reasonable attorney fees and other legal costs and expenses) (collectively, a
"Seller Loss") that any of the Sellers may at any time suffer or incur, or
become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Buyer or IXL in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Buyer or IXL at the Closing in accordance
with the provisions hereof;
16
<PAGE>
(ii) any failure by Buyer or IXL to carry out, perform, satisfy
and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations hereunder or under any of the documents and materials
delivered by Buyer or IXL pursuant hereto;
(iii) the Assumed Liabilities; and
(iv) any suit, action or other proceeding arising out of, or in
any way related to, any of the matters referred to in this Section 6.1(a).
(b) Notwithstanding any other provision hereof to the contrary, neither
Buyer nor IXL shall have any liability under Section 6.1(a)(i) above (i) unless
the aggregate of all Seller Losses for which IXL and Buyer would be liable but
for this sentence exceeds, on a cumulative basis, an amount equal to $50,000 and
then only to the extent of such excess, (ii) for amounts in excess of $1,050,000
in the aggregate, and (iii) unless a claim has been asserted with respect to the
matters set forth in Section 6.1(a)(i), or 6.1(a)(iv) to the extent applicable
to Section 6.1(a)(i), within two years of the date hereof. Notwithstanding any
implication to the contrary contained herein, the parties acknowledge and agree
that a decrease in the value of the IXL Shares would not, by itself, constitute
a Seller Loss, unless and to the extent a decrease in the value of the IXL
Shares has been demonstrated to be as a result of any event described in
Sections 6.1(a)(i), (ii), (iii) or (iv) above.
6.2 INDEMNIFICATION BY SELLERS. (a) Each of the Sellers shall, jointly and
severally, indemnify and hold IXL, Buyer and their respective shareholders,
directors, officers and employees (collectively, the "Buyer Indemnified
Parties") harmless from and against, and agree to defend promptly each of the
Buyer Indemnified Parties from and reimburse each of the Buyer Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorneys' fees and
other legal costs and expenses) (collectively, a "Buyer Loss") that any of the
Buyer Indemnified Parties may at any time suffer or incur, or become subject to,
as a result of or in connection with:
(i) any breach or inaccuracy of any representations and
warranties made by Design or Stockholders in or pursuant hereto, or in any
instrument, certificate or affidavit delivered by any of them at the Closing in
accordance with the provisions hereof;
(ii) any failure by any of Sellers to carry out, perform,
satisfy and discharge any of their respective covenants, agreements,
undertakings, liabilities or obligations hereunder or under any of the documents
and materials delivered by Sellers pursuant hereto;
(iii) the Retained Liabilities; and
(iv) any suit, action or other proceeding arising out of, or in
any way related to, any of the matters referred to in this Section 6.2(a).
(b) Notwithstanding any other provision to the contrary Sellers shall
not have any liability under Section 6.2(a)(i) above (i) unless the aggregate of
all Buyer Losses for which Sellers would be liable but for this sentence
exceeds, on a cumulative basis, an amount equal to
17
<PAGE>
$50,000, and then only to the extent of such excess, (ii) for amounts in excess
of $1,050,000 in the aggregate, and (iii) unless a claim has been asserted with
respect to the matters set forth in Section 6.2(a)(i), or 6.2(a)(iv) to the
extent applicable to Section 6.2(a)(i), within two years of the date hereof,
except with respect to the matters arising under Sections 2.18, 2.19, 2.20 or
2.23 hereof, in which event IXL must have asserted a claim within the applicable
statute of limitations.
6.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND.
(a) A party entitled to be indemnified pursuant to Section 6.1 or 6.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder. Subject to the
Indemnifying Party's right to defend in good faith third party Claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VI within 30 days after the receipt of written notice thereof from
the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of any
Claim pursuant to Section 6.3(a) hereof, and if such Claim relates to a Claim
asserted by a third party against the Indemnified Party that the Indemnifying
Party acknowledges is a Claim for which it must indemnify or hold harmless the
Indemnified Party under Section 6.1 or 6.2 hereof, as the case may be, the
Indemnifying Party shall have the right, at its sole cost and expense, to employ
counsel of its own choosing to defend any such Claim asserted against the
Indemnified Party. Notwithstanding anything to the contrary in the preceding
sentence, if the Indemnified Party (i) reasonably believes that its interests
with respect to a Claim (or any material portion thereof) are in conflict with
the interests of the Indemnifying Party with respect to such Claim (or portion
thereof), and (ii) promptly notifies the Indemnifying Party, in writing, of the
nature of such conflict, then the Indemnified Party shall be entitled to choose,
at the sole cost and expense of the Indemnifying Party, independent counsel to
defend such Claim (or the conflicting portion thereof). The Indemnified Party
shall have the right to participate in the defense of any Claim at its own
expense (except to the extent provided in the foregoing sentence), but the
Indemnifying Party shall retain control over such litigation (except as provided
in the foregoing sentence). The Indemnifying Party shall notify the Indemnified
Party in writing, as promptly as possible (but in any case before the due date
for the answer or response to a claim) after the date of the notice of claim
given by the Indemnified Party to the Indemnifying Party under Section 6.3(a)
hereof of its election to defend in good faith any such third party Claim. For
so long as the Indemnifying Party is defending in good faith any such Claim
asserted by a third party against the Indemnified Party, the Indemnified Party
shall not settle or compromise such Claim without the prior written consent of
the Indemnifying Party. The Indemnified Party shall cooperate with the
Indemnifying Party in connection with any such defense and shall make available
to the Indemnifying Party or its agents all records and other materials in the
Indemnified Party's possession reasonably required by it for its use in
contesting any third party Claim; provided, however, that the Indemnifying Party
-------- -------
shall have agreed, in writing, to keep such records and other materials
confidential except (i) to the extent required for defense of the relevant
Claim, or (ii) as required by law or court order. Whether or not the
Indemnifying Party
18
<PAGE>
elects to defend any such Claim, the Indemnified Party shall have no obligations
to do so. Within 30 days after a final determination (including a settlement)
has been reached with respect to any Claim contested pursuant to this Section
6.3(b), the Indemnifying Party shall satisfy its obligations hereunder with
respect thereto. Any amount paid thereafter shall include interest thereon for
the period commencing at the end of such 30-day period and ending on the actual
date of payment, at a rate of 15% per annum, or, if lower, at the highest rate
of interest permitted by applicable law at the time of such payment.
ARTICLE VII
GENERAL PROVISIONS
------------------
7.1 SURVIVAL; RECOURSE. None of the agreements contained herein shall
survive the Closing, except that (i) the covenants contained in Article IV
hereof and the obligations to indemnify contained in Article VI hereof shall
survive indefinitely (except to the extent a shorter period of time is
explicitly specified therein) and (ii) the representations and warranties made
in Articles II and III hereof shall survive the Closing, and shall survive any
independent investigation by the parties, and any dissolution, merger or
consolidation of IXL or Buyer, and shall bind the legal representatives, assigns
and successors of Sellers, IXL and Buyer for a period of two years after the
Closing Date (other than representations and warranties contained in Sections
2.16, 2.17, 2.18 and 2.21 hereof, which shall survive for the applicable statute
of limitations).
7.2 NOTICES. All notices or other communications under this Agreement shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by personal delivery, by telecopy (with confirmation of receipt),
by courier service, or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to Sellers: 35-33 211th Street
Bayside, NY 11361
Attention: Rob Ortiz
and 105 Frost Ct.
Wyckoff, NJ 07481
Attention: John Tierney
With copies to: Nims Howes Collison Hansen & Lackert
605 Third Ave.
New York, NY 10158
Attention: Bruce J. Grossman, Esq.
Telecopy: 212/661-9213
Telephone: 212/661-9700
19
<PAGE>
If to IXL or Buyer: IXL Holdings, Inc.
Two Park Place
1888 Emery St.
Atlanta, GA 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Avenue, 24th Floor
New York, NY 10032
Attention: James J. Connors, II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
7.3 ENTIRE AGREEMENT. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and instruments
referred to herein and to be delivered pursuant hereto constitute the entire
agreement among the parties pertaining to the subject matter hereof, and
supersede all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
except for the non-disclosure agreement, dated May 14, 1998, between IXL and 601
Design, Inc.; Sellers expressly assume all of the obligations of 601 Design,
Inc. thereunder. There are no other representations or warranties, whether
written or oral, among the parties in connection the subject matter hereof,
except as expressly set forth herein.
7.4 ASSIGNMENTS; PARTIES IN INTEREST. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the rights, interests and obligations
of Buyer hereunder may be assigned to any wholly owned subsidiary of IXL without
such prior consent. Subject to the preceding sentence, this Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
herein, express or implied, is intended to or shall confer upon any Person not a
party hereto any right, benefit or remedy of any nature whatsoever under or by
reason hereof, except as otherwise provided herein.
20
<PAGE>
7.5 GOVERNING LAW. This Agreement shall be governed in all respects by the
laws of the State of Georgia (without giving effect to the provisions thereof
relating to conflicts of law).
7.6 HEADINGS. The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation hereof.
7.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
7.8 SEVERABILITY. If any term or other provision hereof is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions hereof shall nevertheless remain in full force and
effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
7.9 FEES AND EXPENSES. All fees and expenses incurred in connection herewith
and the transactions contemplated hereby shall be paid by the party incurring
such fees or expenses.
7.10 CERTAIN DEFINITIONS. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the Design
Real Property or interfering with the ordinary conduct of any of the Design
Business; and (e) those Liens listed on Schedule 7.10;
-------------
(b) the term "Subsidiary" or "Subsidiaries" means any Entity of which
IXL (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of which are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including Buyer); provided, however,
-------- -------
that with respect to IXL, the terms "Subsidiary" and "Subsidiaries" shall not
include University Netcasting, Inc.; and
(c) any representation or warranty stated to be made "to the knowledge"
of a party shall refer to such party's knowledge following reasonable inquiry as
to the matter in question; furthermore, any representation or warranty stated to
be made "to the knowledge of Sellers" shall include the knowledge of the
Stockholders.
21
<PAGE>
7.11 AMENDMENT; WAIVER. This Agreement may only be amended by an instrument
signed by all of the parties hereto. The waiver of any right hereunder or
condition hereof must be in an instrument signed by the party(ies) to be bound
thereby, and shall not apply to any similar or other waiver.
- SIGNATURES ON THE FOLLOWING PAGE -
22
<PAGE>
IN WITNESS WHEREOF, Buyer and IXL have caused this Agreement to be signed
and delivered by their respective duly authorized officers, and the Sellers have
signed and delivered this Agreement, all as of the date first written above.
"SELLERS"
/s/ Robert Ortiz
-------------------------------------------------
Robert Ortiz
/s/ John Tierney
-------------------------------------------------
John Tierney
"BUYER"
iXL-New York, Inc.
By: /s/ James V. Sandry
--------------------------------------------
James V. Sandry, Executive Vice President
"IXL"
IXL Holdings, Inc.
By: /s/ James V. Sandry
--------------------------------------------
James V. Sandry, Executive Vice President
23
<PAGE>
EXHIBITS
--------
Bill of Sale and Assignment........................................ Exhibit A
Assignment and Assumption of Registered Trademarks................. Exhibit B
Agreement to be Bound to Registration Rights Agreement............. Exhibit C
Agreement to be Bound to Stockholders' Agreement................... Exhibit D
Opinion of Sellers' Counsel........................................ Exhibit E
IXL Closing Certificate............................................ Exhibit F-1
Buyer's Closing Certificate........................................ Exhibit F-2
Opinion of Buyer's Counsel......................................... Exhibit G
Form of Incentive Option Agreement................................. Exhibit H
Employment Agreement............................................... Exhibit I
<PAGE>
SCHEDULE 1.1
------------
DESIGN MISCELLANEOUS ASSETS
SCHEDULE 1.4
------------
ASSUMED LIABILITIES
SCHEDULE 2.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS
SCHEDULE 2.5
------------
EXCEPTIONS TO ABSENCE OF CHANGES
SCHEDULE 2.6
------------
UNDISCLOSED LIABILITIES
SCHEDULE 2.7
------------
EXCEPTIONS TO PURCHASED ASSETS
<PAGE>
SCHEDULE 2.8
------------
EXCEPTIONS TO TITLE TO PROPERTIES
SCHEDULE 2.9
------------
EQUIPMENT
SCHEDULE 2.10
-------------
EXCEPTIONS TO INTELLECTUAL PROPERTY RIGHTS
SCHEDULE 2.11
-------------
REAL PROPERTY
SCHEDULE 2.12
-------------
LEASES
SCHEDULE 2.13
-------------
CONTRACTS
SCHEDULE 2.14
-------------
PAYROLL INFORMATION
<PAGE>
SCHEDULE 2.15
-------------
LITIGATION
SCHEDULE 2.16
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS
SCHEDULE 2.17
-------------
ERISA
SCHEDULE 2.18
-------------
EXCEPTIONS TO TAXES BEING TIMELY FILED
SCHEDULE 2.19
-------------
PERMITS
SCHEDULE 2.20
-------------
BROKERS
SCHEDULE 2.22
-------------
INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS
<PAGE>
SCHEDULE 2.25
-------------
Insurance
SCHEDULE 3.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS
SCHEDULE 3.4
------------
IXL LITIGATION
SCHEDULE 3.5
------------
IXL BROKERS
SCHEDULE 3.6
------------
OBLIGATIONS TO ISSUE IXL OPTIONS, WARRANTS OR OTHER IXL STOCK RIGHTS
SCHEDULE 3.7
------------
IXL SUBSIDIARIES
SCHEDULE 3.9
------------
IXL UNDISCLOSED LIABILITIES
<PAGE>
SCHEDULE 3.12
-------------
EXCEPTIONS TO ABSENCE OF CHANGE
SCHEDULE 4.4
------------
OPTIONS TO SELLERS
SCHEDULE 5.1(B)
---------------
CONSENTS OF SELLER
SCHEDULE 5.2(B)
---------------
CONSENTS OF BUYER
SCHEDULE 7.10
-------------
PERMITTED LIENS
<PAGE>
EXHIBIT 2.22
AGREEMENT AND PLAN OF MERGER
by and between
IXL HOLDINGS, INC.,
iXL-DC, INC.,
IMAGE COMMUNICATIONS, INC.
AND
THE IMAGE SHAREHOLDERS
Dated as of July 13, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 13th day of July,
1998, by and between Image Communications, Inc., a Virginia corporation
("Image"), IXL Holdings, Inc., a Delaware corporation ("Parent"), iXL-DC, Inc.,
a Delaware corporation, or its successors or assigns ("Sub"), and the
shareholders of Image as listed on the signature page hereto (the "Image
Shareholders").
R E C I T A L S:
- - - - - - - -
A. Image is engaged in the business of developing internet sites and
furnishing internet services, including website design and maintenance (the
"Image Business").
B. Image and Sub each desire to merge their respective companies and business
operations, all on the terms and subject to the conditions set forth herein (the
"Merger").
C. The Image Shareholders collectively own 100% of the issued and outstanding
capital stock of Image (the "Image Stock").
D. The respective Boards of Directors of Parent, Sub and Image, and the
respective shareholders of Sub and Image, have approved the Merger, upon the
terms and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal income
tax purposes, as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits, conditions
and agreements set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is hereby
agreed as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, at the
Effective Time (as defined in Section 1.3 hereof), (a) Image shall be merged
with and into Sub, (b) the separate existence of Image shall cease, and (c) Sub
shall continue as the surviving corporation in the Merger under the laws of the
State of Delaware under the name iXL-DC, Inc. For purposes of this Agreement,
Sub shall be referred to, for the period commencing on the Effective Time, as
the "Surviving Corporation."
<PAGE>
1.2 Closing and Closing Date. Unless this Merger Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9.1 hereof, and subject to the satisfaction or waiver of the
conditions set forth in Article VII hereof, the closing of the Merger (the
"Closing") will take place as promptly as practicable (and in any event within
five business days after satisfaction of the conditions set forth in Sections
7.1 and 7.2 hereof) (the "Closing Date") at the offices of Minkin & Snyder, A
Professional Corporation, One Buckhead Plaza, 3060 Peachtree Rd., Ste. 1100,
Atlanta, GA 30305, unless another date or place is mutually agreed to by the
parties.
1.3 Effective Time of the Merger. At the Closing, the parties hereto shall
cause (a) a certificate of merger (the "Delaware Certificate of Merger") to be
filed with the office of the Secretary of State of Delaware in accordance with
the provisions of the Delaware General Corporation Law, as amended (the "DGCL");
and (b) Articles of Merger (the "Virginia Articles of Merger"; collectively with
the Delaware Certificate of Merger, the "Certificate of Merger") to be filed
with the office of the State Corporation Commission of Virginia in accordance
with the provisions of the Virginia Stock Corporation Act (the "VSCA"). When
used herein, the term "Effective Time" shall mean the time when the Certificate
of Merger has been accepted for filing by the Secretary of State of Delaware and
the State Corporation Commission of Virginia, respectively, or such time as
otherwise specified therein.
1.4 Effect of the Merger. The Merger shall, from and after the Effective Time,
have all the effects provided by the DGCL and the VSCA. If at any time after the
Effective Time, any further action is deemed necessary or desirable to carry out
the purposes of this Agreement, the parties hereto agree that the Surviving
Corporation and its proper officers and directors shall be authorized to take,
and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of Sub, a
form of which is attached hereto on Schedule 5.1, shall be the Certificate of
------------
Incorporation of the Surviving Corporation after the Effective Time, until
thereafter changed or amended as provided therein or by applicable law.
2.2 Bylaws. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is included on Schedule 5.1 hereto.
------------
2.3 Board of Directors; Officers. The Board of Directors and officers of Sub
immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified.
2
<PAGE>
ARTICLE III
CONVERSION OF SHARES
3.1 Merger Consideration. As of the Effective Time:
(a) All shares of Image Stock owned by Image shall, by virtue of the
Merger and without any action on the part of any shareholder, officer or
director of Image or Sub, be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding share of Image Stock (other than any
Dissenting Shares, as defined in Section 3.2 hereof) shall, upon surrender to
Sub, at the Closing, of the underlying share certificates, be converted into,
and become exchangeable for, (i) a number of shares of validly issued, fully
paid and nonassessable Class B Common Stock of Parent, $.01 par value (the
"Parent Stock") based on the following equation:
PS= [(300,000 x 1.875) + X] - D
-- --
$10 $10
-------------------------------
S + O
where:
PS = the number of shares of Parent Stock (valued, as of the
Closing, at $10 per share) for which each share of Image
Stock shall be exchanged pursuant to the Merger
D = the outstanding indebtedness of Image (the "Image Debt"),
including debt for borrowed money and accrued interest
thereon, capital leases, any unpaid legal, accounting or
other fees of Image, and that portion of accounts payable
and accrued expenses that exceeds the 12 month average
during Image's most recent fiscal year, all to be determined
as of three business days prior to the Closing Date and all
as determined in accordance with generally accepted
accounting principles ("GAAP")
S = the number of issued and outstanding shares of Image Stock
on the Closing Date
O = the total number of options to purchase Image Stock
outstanding on the Closing Date, to be exchanged for options
to acquire Parent Stock pursuant to Section 6.6(b) hereof
3
<PAGE>
X = one-half of the aggregate exercise price of O, as set forth
on Schedule 3.1(b) hereto; and
(ii) the Escrowed Stock (as hereinafter defined), if any, to be determined
pursuant to Section 6.8 hereof.
(c) Each issued and outstanding share of common stock of Sub shall, by
virtue of the Merger and without any action on the part of any shareholder,
officer or director of Image or Sub, be converted into and become one fully paid
and nonassessable share of common stock of the Surviving Corporation.
3.2 Dissenting Shares. Notwithstanding any provision hereof to the
contrary, any shares of Image Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be converted as described in Section 3.1(b)
hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Shareholder pursuant to the DGCL or VSCA, as
applicable, provided, however, that if a Dissenting Shareholder shall fail to
perfect his demand, withdraw his demand or otherwise lose his right for
appraisal under the terms of the DGCL or VSCA, as applicable, then the Image
Stock held by such Dissenting Shareholder (the "Dissenting Shares") shall be
deemed to be converted as of the Effective Time in accordance with the
provisions of Section 3.1 hereof. Image shall not voluntarily make any payment
with respect to, settle, or offer to settle or otherwise negotiate, any such
demands. All amounts paid to Dissenting Shareholders shall be paid without
interest thereon (to the extent permitted by applicable law) by the Surviving
Corporation. For purposes hereof, the term "Dissenting Shareholder" shall mean
a Image Shareholder who (a) objects to the Merger; and (b) complies with the
applicable provisions of the DGCL or VSCA concerning dissenter's rights.
3.3 No Further Rights. From and after the Effective Time, holders of
certificates theretofore evidencing Image Stock shall cease to have any rights
as stockholders of Image, except as provided herein or by applicable law.
3.4 Closing of Image's Transfer Books. At the Effective Time, the stock
transfer books of Image shall be closed and no transfer of Image Stock shall be
made thereafter. If after the Effective Time, certificates for Image Stock are
presented to Parent or the Surviving Corporation, they shall be canceled and
exchanged for a consideration as set forth in Section 3.1 hereof, subject to
applicable law in the case of Dissenting Shareholders.
4
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF IMAGE
Image, and Jeff Gordon and Randy Coppersmith (collectively, the "Controlling
Shareholders"), jointly and severally, represent and warrant to Parent and Sub
all of the representations and warranties in this Article IV. In addition, each
other Image Shareholder severally but not jointly makes the representations and
warranties solely with respect to such Image Shareholder in Sections 4.2,
4.3(c), 4.5, 4.31, 4.32, 4.33 and 4.34 hereof. All representations and
warranties in this Article IV shall survive the Closing in accordance with
Section 10.1 hereof.
4.1 Organization and Qualification. Image is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia. Image has the requisite corporate power and authority to carry on the
Image Business as it is now being conducted and is duly qualified or licensed to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities
makes such qualification necessary. Complete and correct copies of the Articles
of Incorporation and Bylaws of Image as in effect on the date hereof are
attached as Schedule 4.1 hereto. The minute book of Image, a true and complete
------------
copy of which has been delivered to Parent, (a) accurately reflects all action
taken by the directors and shareholders of Image at meetings of Image's Board of
Directors or shareholders, as the case may be; and (b) contains true and
complete copies, or originals, of the respective minutes of all meetings or
consent actions of the directors or shareholders.
4.2 Authority. Image has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery hereof and the consummation of
the transactions contemplated hereby by Image have been duly and validly
authorized and approved by Image's Board of Directors and the Image
Shareholders, and no other corporate or shareholder proceedings on the part of
Image, its Board of Directors or the Image Shareholders is necessary to
authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Image and each Image Shareholder, and assuming the due authorization, execution
and delivery by Parent and Sub, constitutes the valid and binding obligation of
Image and each Image Shareholder, enforceable against Image and each Image
Shareholder in accordance with its terms subject, in each case, to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights and to general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing.
4.3 Capitalization.
(a) The authorized capital stock of Image consists of (i) 5,000 shares of
common stock, $1 par value, of which 1,395.3 shares are validly issued and
outstanding, fully paid and nonassessable, of which the Image Shareholders own
100%; and (ii) 5,000 shares of Preferred Stock, of which no shares are validly
issued and outstanding, fully paid and nonassessable. All outstanding capital
stock of Image was issued in accordance with applicable federal and state
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securities laws. Except as set forth on Schedule 4.3(a) hereto, there are no
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options, warrants, calls, convertible notes, agreements, commitments or other
rights presently outstanding that would obligate Image or any of the Image
Shareholders to issue, deliver or sell shares of its capital stock, or to grant,
extend or enter into any such option, warrant, call, convertible note,
agreement, commitment or other right. In addition to the foregoing, as of the
date hereof, Image has no bonds, debentures, notes or other indebtedness issued
or outstanding that have voting rights in Image. Schedule 4.3(a) sets forth a
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list of (i) all holders of record of (A) Image Stock, and (B) options, warrants,
convertible notes or other rights to purchase capital stock of Image
(collectively, "Image Stock Rights"); (ii) the number of shares held by each
Image Shareholder and the number of shares of capital stock of Image represented
by the Image Stock Rights; and (iii) the exercise price for each Image Stock
Right.
(b) All of the issued and outstanding shares of capital stock of Image
are validly issued, fully paid and nonassessable.
(c) Except as set forth on Schedule 4.3(c) hereto, each Image Shareholder
---------------
represents and warrants that the Image Stock held by such Image Shareholder is
free and clear of any lien, charge, security interest, pledge, option, right of
first refusal, voting proxy or other voting agreement, or encumbrance of any
kind or nature other than restrictions on transfer imposed by federal and state
securities laws (any of the foregoing, a "Lien").
4.4 Subsidiaries. Image has no subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
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Image or the Image Shareholders, (ii) the consummation by Image and the Image
Shareholders of the transactions contemplated hereby or (iii) compliance by
Image with any of the provisions hereof will:
(a) conflict with or violate the Articles of Incorporation or Bylaws of
Image;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Image or any of the Image Shareholders,
or by which Image or any of its properties or assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which Image is a party or by which Image or
any of its properties or assets may be bound or affected;
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(d) result in the creation of any Lien on any of the property or assets of
Image; or
(e) require any consent, waiver, license, approval, authorization, order,
permit, registration or filing with, or notification to (any of the foregoing
being a "Consent"), (i) any government or subdivision thereof, whether domestic
or foreign, or any administrative, governmental, or regulatory authority,
agency, commission, court, tribunal or body, whether domestic, foreign or
multinational (any of the foregoing, a "Governmental Entity"), except for the
filing of the Certificate of Merger pursuant to the DGCL and the VSCA; or (ii)
any other individual or Entity (collectively, a "Person").
4.6 Financial Statements. Image has heretofore furnished Parent with a true
and complete copy of (a) the audited financial statements of Image for the years
ended December 31, 1995, 1996 and 1997; and (b) the unaudited financial
statements of Image for the four month period ended April 30, 1998 (all of the
foregoing collectively herein referred to as the "Image Financial Statements").
Except as disclosed therein, the Image Financial Statements have been prepared
in accordance with GAAP (except for the absence of footnotes and normal year end
adjustments in the case of the Image Financial Statements for the period ended
April 30, 1998) consistently followed throughout the period indicated, and
present fairly, in all material respects, the financial position and operating
results of Image as of the dates, and during the periods, indicated therein.
4.7 Absence of Changes. Except as provided in Schedule 4.7 hereto and except
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as contemplated hereby, since December 31, 1997 (a) Image has not entered into
any transaction that was not in the ordinary course of business; (b) except for
sales of services and licenses of software in the ordinary course of business,
there has been no sale, assignment, transfer, mortgage, pledge, encumbrance or
lease of any material asset or property of Image; (c) there has been (i) no
declaration or payment of a dividend, or any other declaration, payment or
distribution of any type or nature to any shareholder of Image in respect of its
stock, whether in cash or property, and (ii) no purchase or redemption of any
share of the capital stock of Image; (d) there has been no declaration, payment,
or commitment for the payment, by Image, of a bonus or other additional salary,
compensation, or benefit to any employee of Image that was not in the ordinary
course of business, except for normal year-end bonuses paid in the ordinary
course of business; (e) there has been no release, compromise, waiver or
cancellation of any debt to or claim by Image, or waiver of any right of Image;
(f) there have been no capital expenditures in excess of $10,000 for any single
item, or $25,000 in the aggregate; (g) there has been no change in accounting
methods or practices or revaluation of any asset of Image (other than Image
Accounts Receivable as defined in Section 4.26 hereof) written down in the
ordinary course of business in excess of $10,000 for any single Image Accounts
Receivable, or $25,000 in the aggregate); (h) there has been no material damage,
or destruction to, or loss of, physical property (whether or not covered by
insurance) adversely affecting the Image Business or the operations of Image;
(i) there has been no loan by Image, or guaranty by Image of any loan, to any
employee of Image (other than travel and similar advances in the ordinary course
of business); (j) Image has not ceased to transact business with any customer
that, as of the date of such cessation, represented more than 5% of the annual
gross revenues of Image; (k) there has been no termination or resignation of any
key employee or officer of Image,
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and to the knowledge of Image, no such termination or resignation is threatened;
(l) there has been no amendment or termination of any material oral or written
contract, agreement or license related to the Image Business, to which Image is
a party or by which it is bound, except in the ordinary course of business, or
except as expressly contemplated hereby; (m) Image has not failed to satisfy any
of its debts, obligations or liabilities related to the Image Business or the
assets of Image as the same become due and owing (except for Image Accounts
Payable (as defined in Section 4.27 hereof) payable in accordance with past
practices and in the ordinary course of business, or being contested in good
faith); (n) there has been no agreement or commitment by Image to do any of the
foregoing; and (o) there has been no other event or condition of any character
pertaining to and materially and adversely affecting the assets, business or
financial condition of Image.
4.8 Undisclosed Liabilities. Except as set forth on Schedule 4.8 hereto,
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Image has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including any liability or obligation on account of taxes
or any governmental charge or penalty, interest or fine, except (a) liabilities
incurred in the ordinary course of business after December 31, 1997, that would
not, whether individually or in the aggregate, have a material adverse impact on
the business or financial condition of Image; (b) liabilities reflected on the
Image Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
4.9 Title to Properties. Except as set forth on Schedule 4.9 hereto, Image
------------
has good and marketable title to all tangible property and assets used in the
Image Business, and good and valid title to its leasehold interests, in each
case, free and clear of any and all Liens other than Permitted Liens (as defined
in Section 10.11 hereof).
4.10 Equipment. Image has heretofore furnished Parent with a true and
correct list of all items of tangible personal property (including computer
hardware) necessary for or used in the operation of the Image Business in the
manner in which it has been and is now operated by Image ("the Image
Equipment"), except for personal property having a net book value of less than
$1,000. Except as set forth on Schedule 4.10 hereto, each material item of
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Image Equipment is in good condition and repair, ordinary wear and tear
excepted.
4.11 Intellectual Property.
(a) Image has heretofore furnished Parent with a true and complete list
of all material proprietary technology, patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights, and copyrights (and all pending applications for any of the foregoing)
used by Image in the conduct of the Image Business (together with trade secrets
and know how used in the conduct of the Image Business, the "Image Intellectual
Property Rights"). Image owns, or is validly licensed or otherwise has the right
to use or exploit, as currently used or exploited, all of the Image Intellectual
Property Rights, free of any obligation to make any payment (whether of a
royalty, license fee, compensation or otherwise). No claims are pending or, to
the knowledge of Image, threatened, that Image is infringing or otherwise
adversely affecting the rights of any Person with regard to any Image
Intellectual Property Right. To the knowledge of Image, no Person is infringing
the rights of Image with respect to any Image Intellectual Property
8
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Right. Neither Image nor, to the knowledge of Image, any employee, agent or
independent contractor of Image, in connection with the performance of such
Person's services with Image, has used, appropriated or disclosed, directly or
indirectly, any trade secret or other proprietary or confidential information of
any other Person, or otherwise violated any confidential relationship with any
other Person.
(b) Image has heretofore furnished Parent with a true and complete list
of all material computer software used by Image in the conduct of the Image
Business (the "Image Software"). Image currently licenses, or otherwise has the
legal right to use, all of the Image Software (including any upgrade, alteration
or enhancement with respect thereto), and all of the Image Software is being
used in compliance in all material respects with any applicable license or other
agreement.
4.12 Real Property. Except as set forth on Schedule 4.12 hereto:
-------------
(a) Image has a good and valid leasehold interest in all real property
(including all buildings, improvements and fixtures thereon) used in the
operation of the Image Business (the "Image Real Property"). Image owns no real
property. Except for Permitted Liens, and for the items set forth on Schedule
4.12, there are no Liens on Image's interest in any of the Image Real Property.
(b) There are no parties in possession of any portion of the Image Real
Property other than Image, whether as sublessees, subtenants at will or
trespassers.
(c) To the knowledge of Image, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, under the provisions of any of the
Image Leases (as hereinafter defined), any material expenditure by Image to
modify or improve any of the Image Real Property to bring it into compliance
therewith.
4.13 Leases. Schedule 4.13 hereto sets forth a list of all leases pursuant
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to which Image leases, as lessor or lessee, real or personal property used in
operating the Image Business or otherwise (the "Image Leases"). Copies of the
Image Leases, all of which have previously been provided to Parent, are true and
complete copies thereof. All of the Image Leases are valid, binding and
enforceable against Image and, to the knowledge of Image, against the other
parties thereto, in accordance with their respective terms, and there is not
under any such Image Lease any existing default by Image, or, to the knowledge
of Image, by any other party thereto, or any condition or event that, with
notice or lapse of time or both, would constitute a default. Image has not
received notice that the lessor of any of the Image Leases intends to cancel,
suspend or terminate such Image Lease or to exercise or not exercise any option
thereunder.
4.14 Contracts. Schedule 4.14 hereto sets forth a true and complete list of
-------------
all contracts, agreements and commitments (whether written or oral) to which
Image is, directly or indirectly, a party (in its own name or as a successor in
interest), or by which it or any of its properties or assets
9
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is otherwise bound, including any service agreements, customer agreements,
supplier agreements, agreements to lend or borrow money, shareholder agreements,
employment agreements, agreements relating to Image Intellectual Property Rights
and the like (collectively, the "Image Contracts"); excepting only those Image
Contracts which involve less than $10,000 and are cancelable, without penalty,
on no more than 90 days' notice. The aggregate value of all payment obligations
and rights to receive payments, under agreements, contracts and commitments
(whether oral or in writing) to which Image is a party or by which it or any of
its properties or assets is otherwise bound, and that are not listed on Schedule
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4.14, is less than $50,000 (calculating such value by adding together the value
- ----
of rights and obligations, and not by determining the net amount thereof).
True and complete copies of all Image Contracts (or a true and complete
narrative description of any oral Image Contract) have previously been provided
to Parent. Neither Image nor, to the knowledge of Image, any other party to any
of the Image Contracts (x) is in material default under (nor does there exist
any condition that, with notice or lapse of time or both, would cause such a
default under) any of the Image Contracts, or (y) has waived any right it may
have under any of the Image Contracts, the waiver of which would have a material
adverse effect on the business, assets or financial condition or prospects of
Image. All of the Image Contracts constitute the valid and binding obligations
of Image, enforceable in accordance with their respective terms, and, to the
knowledge of Image, of the other parties thereto.
4.15 Directors and Officers. Schedule 4.15 hereto sets forth a list, as of
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the Closing Date, of the name of each director and officer of Image and the
position(s) held by each.
4.16 Payroll Information. Image has previously provided Parent with a true
and complete copy of the payroll report of Image dated June 30, 1998, showing
all current employees of Image and their current levels of compensation, other
than bonuses and other extraordinary compensation, all of which bonuses and
other extraordinary compensation is set forth in Schedule 4.16 hereto. Image
-------------
has paid all compensation required to be paid to employees of Image on or prior
to the date hereof other than compensation (and bonuses pursuant to arrangements
described in Schedule 4.16) accrued in the current pay period.
-------------
4.17 Litigation. Except as set forth on Schedule 4.17 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
Image, threatened against or affecting Image or the Image Business, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Image.
4.18 Employee Benefit Plans/Labor Relations.
(a) Except as disclosed in Schedule 4.18 hereto, there are no employee
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benefit plans, agreements or arrangements maintained by Image, including (i)
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); (ii) current or
deferred compensation, pension, profit sharing, vacation or severance plans or
programs; or (iii) medical, hospital, accident, disability or death benefit
plans (collectively, "Image Benefit Plans"). All Image Benefit Plans are
administered in accordance with,
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and are in material compliance with, all applicable laws and regulations. No
material default exists with respect to the obligations of Image under any Image
Benefit Plan.
(b) Image is not a party to any collective bargaining agreement; no
collective bargaining agent has been certified as a representative of any of the
employees of Image; no representation campaign or election is now in progress
with respect to any employee of Image; and there are no labor disputes,
grievances, controversies, strikes or requests for union representation pending,
or, to the knowledge of Image, threatened, relating to or affecting the Image
Business. To the knowledge of Image, no event has occurred that could give rise
to any such dispute, controversy, strike or request for representation.
4.19 ERISA.
(a) All Image Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the Image Benefit Plans that is intended
to meet the requirements of Section 401(a) of the Code has been determined by
the Internal Revenue Service to meet such requirements within the meaning of
such provision. No Image Benefit Plan is subject to Title IV of ERISA or Section
412 of the Code. Image has not engaged in any nonexempt "prohibited
transactions," as such term is defined in Section 4975 of the Code or Section
406 of ERISA, involving Image Benefit Plans that would subject Image to the
penalty or tax imposed under Section 502(i) of ERISA or Section 4975 of the
Code. Image has not engaged in any transaction described in Section 4069 of
ERISA within the last five years. Except as disclosed in Schedule 4.19 hereto or
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pursuant to the terms of the Image Benefit Plans, neither the execution and
delivery hereof nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including severance, unemployment compensation
or golden parachute) becoming due to any director or other employee of Image,
(ii) increase any benefit otherwise payable under any Image Benefit Plan or
(iii) result in the acceleration of the time of payment or vesting of any such
benefit to any extent.
(b) No notice of a "reportable event," within the meaning of Section 4043 of
ERISA, for which the 30-day reporting requirement has not been waived, has been
required to be filed for any Image Benefit Plan that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA and that is intended
to meet the requirements of Section 401(a) of the Code, or by any entity that is
considered one employer with Image under Section 4001 of ERISA or Section 414 of
the Code, within the 12-month period ending on the Closing Date. Image has not
incurred any liability to the Pension Benefit Guaranty Corporation in respect of
any Image Benefit Plan that remains unpaid.
4.20 Taxes.
(a) Image has duly and timely filed all federal, state and local income,
franchise, excise, real and personal property and other tax returns and reports,
including extensions, required to have been filed by Image on or prior to the
Closing Date. Image has duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to
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be paid by Image (whether by way of withholding or otherwise) to any federal,
state, local or other taxing authority (except to the extent the same are being
contested in good faith, and adequate reserves therefor have been provided in
the Image Financial Statements). As of the Closing Date, all deficiencies
proposed as a result of any audit have been paid or settled.
(b) Image is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) Image has not consented to have the provisions of Section 341(f)(2)
of the Code (or comparable state law provisions) apply to it, and Image has not
agreed or been requested to make any adjustment under Section 481(c) of the Code
by reason of a change in accounting method or otherwise.
4.21 Compliance with Applicable Laws. Image holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
Image, as appropriate, and to carry on the Image Business as now conducted (the
"Image Permits"). To the knowledge of Image, Image is in material compliance
with all applicable laws, ordinances and regulations and the terms of the Image
Permits. Except as set forth on Schedule 4.21 hereto, all of the Image Permits
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are fully assignable by Image in connection with the Merger. Schedule 4.21 sets
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forth a true and complete list of all Image Permits, true and complete copies of
which have previously been provided to Parent.
4.22 Board of Directors/Shareholder Consent. Both the Board of Directors of
Image and the Image Shareholders have adopted and approved this Agreement and
the transactions contemplated hereby (including the Merger).
4.23 Brokers. Except as set forth on Schedule 4.23 hereto, no broker or
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finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of Image.
4.24 Environmental Matters.
(a) To the knowledge of Image, no real property currently or formerly
owned or operated by Image is contaminated with any Hazardous Substance (as
hereinafter defined);
(b) Image is not a party to any litigation or administrative proceeding
nor, to the knowledge of Image, is any litigation or administrative proceeding
threatened against it, that, in either case, asserts or alleges that Image (i)
violated any Environmental Law (as hereinafter defined); (ii) is required to
clean up, remove or take remedial or other responsive action due to the
disposal, deposit, discharge, leak or other release of any Hazardous Substance;
or (iii) is required to pay all or a portion of the cost of any past, present or
future cleanup, removal or remedial or other action that arises out of or is
related to the disposal, deposit, discharge, leak or other release of any
Hazardous Substance.
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(c) To the knowledge of Image, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by Image containing materials that, if known to
be present in soil or ground water, would require cleanup, removal or other
remedial action under Environmental Law.
(d) To the knowledge of Image, Image is not subject to any judgment,
order or citation related to or arising out of any Environmental Law and has not
been named or listed as a potentially responsible party by any Governmental
Entity in a matter related to or arising out of any Environmental Law.
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including any petroleum products, asbestos or polychlorinated biphenyls.
4.25 Interest in Customers, Suppliers and Competitors. Except as provided
in Schedule 4.25 hereto, no officer, director, shareholder or employee of Image
-------------
and no family member (including a spouse, parent, sibling or lineal descendent
of any of the foregoing), has any direct or indirect material interest in any
material customer, supplier or competitor of Image, or in any Person from whom
or to whom Image leases any real or personal property, or in any other Person
with whom Image is doing business whether directly or indirectly (including as a
debtor or creditor), whether in existence as of the Closing Date or proposed,
other than the ownership of stock of publicly traded corporations.
4.26 Accounts Receivable. All accounts, notes, contracts and other
receivables of Image (collectively, "Image Accounts Receivable") were acquired
by Image in the ordinary course of business arising from bona fide transactions.
To the knowledge of Image, there are no set-offs, counterclaims or disputes
asserted with respect to any Image Accounts Receivable that would result in
claims in excess of the reserve for bad debts set forth on the Image Financial
Statements and, to the knowledge of Image and subject to such reserve, all Image
Accounts Receivable are collectible in full. Image has previously provided
Parent with a true and complete aging report prepared as of April 30, 1998 which
shows the time elapsed since invoice date for all Image Accounts Receivable as
of such date.
4.27 Accounts Payable. All material accounts, notes, contracts and other
amounts payable of Image (collectively, "Image Accounts Payable") are currently
within their respective terms, and are neither in default nor otherwise past due
by more than 90 days. Image has previously provided Parent with a true and
complete aging report prepared as of April 30, 1998 which shows the time elapsed
since invoice date for all Image Accounts Payable as of such date.
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4.28 Insurance. Image currently maintains, in full force and effect, all
insurance policies that are required to be maintained for the conduct of the
Image Business or the ownership of Image's property (both real and personal)
(collectively, the "Image Insurance Policies"). The Image Insurance Policies
are listed on Schedule 4.28 hereto, and true and complete copies of all Image
-------------
Insurance Policies have previously been provided to Parent. Image (a) is not in
default in any material respect regarding the provisions of any Image Insurance
Policy; (b) has paid all premiums due thereunder; and (c) has not failed to
present any notice or material claim thereunder in a due and timely fashion.
4.29 Bankruptcy. Image has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 Image Debt. As of the date hereof, the Image Debt, as detailed in
Schedule 4.30 hereto, is not in excess of $800,000.
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4.31 Accredited Investors; Investment Purpose. Each Image Shareholder
represents that he (a) is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"); (b) is
acquiring the Parent Stock solely for his own account for investment and not
with a view to, or for sale in connection with, any distribution thereof; and
(c) will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate
or otherwise dispose of any Parent Stock (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of any such shares) except in compliance
with the Securities Act and the rules and regulations thereunder, other
applicable laws, rules and regulations, and the Second Amended and Restated
Stockholders' Agreement of Parent, dated December 17, 1997 (the "Stockholders'
Agreement).
4.32 Restrictions on Transfer. Each Image Shareholder acknowledges that (a)
the Parent Stock received by him hereunder has not been registered under the
Securities Act; (b) the Parent Stock may be required to be held indefinitely,
and he must continue to bear the economic risk of the investment in such shares
unless such shares are subsequently registered under the Securities Act or an
exemption from such registration is available; (c) there may not be any public
market for the Parent Stock in the foreseeable future; (d) Rule 144 promulgated
under the Securities Act is not presently available with respect to sales of any
securities of Parent, and such Rule is not anticipated to be available in the
foreseeable future; (e) when and if Parent Stock may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
limited amounts and in accordance with the terms and conditions of such Rule;
(f) if the exemption afforded by Rule 144 is not available, public sale without
registration will require the availability of an exemption under the Securities
Act; (g) the Parent Stock is subject to the terms and conditions of the
Stockholders' Agreement; (h) restrictive legends shall be placed on the
certificates representing Parent Stock; and (i) a notation shall be made in the
appropriate records of Parent indicating that Parent Stock is subject to
restrictions on transfer and, if Parent should in the future engage the
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services of a stock transfer agent, appropriate stop-transfer instructions will
be issued to such transfer agent with respect to Parent Stock.
4.33 Ability to Bear Risk; Access to Information; Sophistication. Each Image
Shareholder represents and warrants that (a) his financial situation is such
that he can afford to bear the economic risk of holding Parent Stock acquired by
him hereunder for an indefinite period; (b) he can afford to suffer the complete
loss of such Parent Stock; (c) he has been granted the opportunity to ask
questions of, and receive answers from, representatives of Parent concerning the
terms and conditions of the Parent Stock and to obtain any additional
information that he deems necessary; (d) his knowledge and experience in
financial business matters is such that he is capable of evaluating the merits
and risk of ownership of the Parent Stock; (e) he has carefully reviewed the
terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; and (f) he (i) has reviewed the Private Placement
Memorandum of Parent dated June 30, 1998 (the "Memorandum"), (ii) has carefully
examined the Memorandum and has had an opportunity to ask questions of, and
receive answers from, representatives of Parent, and to obtain additional
information concerning Parent and its Subsidiaries (as hereinafter defined), and
(iii) does not require additional information regarding Parent or its
Subsidiaries in connection with the Merger.
4.34 Disclosure. No statement of fact by Image or any Image Shareholder
contained herein and no written statement of fact furnished by Image or any
Image Shareholder to Parent or Sub in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein contained not materially
misleading.
4.35 Projection of Image 1998 Gross Revenue. The projected gross revenue of
Image for calendar year 1998 is $3,000,000 (the "Projection").
4.36 Nature of Liabilities. Any unpaid legal, accounting or other fees of
Image are solely and directly related to the Merger.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to Image
and the Image Shareholders, which representations and warranties shall survive
the Closing in accordance with Section 10.1 hereof, as follows:
5.1 Organization and Qualification. Each of Parent and its Subsidiaries (as
defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
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qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached as Schedule 5.1 hereto.
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5.2 Authority. Each of Parent and Sub has the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by Image and the Image Shareholders,
constitutes the valid and binding obligation of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms,
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
5.3 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or Bylaws
of Parent or Sub, or the organizational documents of any other Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of Parent or any of its Subsidiaries; or
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(e) require any Consent of (i) any Governmental Entity (except for (x)
compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL and the
VSCA); or (ii) any other Person.
5.4 Litigation. Except as set forth on Schedule 5.4 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 Brokers. Except as disclosed on Schedule 5.5 hereto, no broker or finder
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is entitled to any broker's or finder's fee in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Parent or
Sub.
5.6 Parent Stock.
(a) As of the date hereof the authorized capital stock of Parent consists
of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value, of which
no shares are validly issued and outstanding, and (B) 100,000,000 shares of
Class B Common Stock, $.01 par value, of which 10,319,628 shares are validly
issued and outstanding (without taking into account any shares of Parent Stock
to be issued pursuant hereto, or pursuant to any of the Potential Acquisitions
as defined in the Memorandum), fully paid and nonassessable; (ii) 750,000 shares
of blank check preferred stock, (A) 250,000 of which have been designated as
Class A Convertible Preferred Stock, of which 174,061 (as of the Closing Date,
174,526) shares are validly issued and outstanding, fully paid and
nonassessable, (B) 200,000 of which have been designated as Class B Convertible
Preferred Stock, of which 98,767 shares are validly issued and outstanding,
fully paid and nonassessable, and (C) 15,000 of which have been designated as
Class C Convertible Preferred Stock, of which 9,232 shares are validly issued
and outstanding, fully paid and nonassessable. Except as set forth on Schedule
--------
5.6 hereto, there are no options, warrants, calls, agreements, commitments or
- ---
other rights presently outstanding that would obligate Parent to issue, deliver
or sell shares of its capital stock, or to grant, extend or enter into any such
option, warrant, call, agreement, commitment or other right. In addition to the
foregoing, as of the Closing Date, Parent has no bonds, debentures, notes or
other indebtedness issued or outstanding that have voting rights in Parent.
(b) When delivered to the Image Shareholders in accordance with the terms
hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
5.7 Subsidiaries. Except as set forth on Schedule 5.7 hereto, Parent has no
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subsidiaries and does not otherwise own or control, directly or indirectly, any
equity interest in,
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or any security convertible into an equity interest in, any Entity. Schedule 5.7
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lists the name of each of the Subsidiaries of Parent, and indicates their
respective jurisdictions of incorporation.
5.8 Financial Statements. Parent has heretofore furnished Image with a true
and complete copy of (a) the audited financial statements of iXL Interactive
Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31, 1993, 1994
and 1995, and for the four month period ended April 30, 1996; (b) the audited
combined financial statements for Creative Video, Inc. (n/k/a iXL, Inc.),
Creative Video Library, Inc. and Entrepreneur Television, Inc. for the years
ended December 31, 1993, 1994 and 1995, and for the four month period ended
April 30, 1996; (c) the audited consolidated financial statements for Parent and
its Subsidiaries for the eight months ended December 31, 1996 and for the year
ended December 31, 1997; and (d) the unaudited consolidated financial statements
for Parent and its Subsidiaries for the four month period ended March 31, 1998
(all of the foregoing, collectively, "Parent Financial Statements"). The Parent
Financial Statements present fairly in all material respects the consolidated
financial position, results of operations, shareholders' equity and cash flow of
Parent at the respective dates or for the respective periods to which they
apply. Except as disclosed therein, such statements and related notes have been
prepared in accordance with GAAP consistently applied throughout the periods
involved (except, in the case of the unaudited financial statements, for the
exclusion of footnotes and normal year end adjustments).
5.9 Undisclosed Liabilities. Except as set forth on Schedule 5.9 hereto,
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neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997 that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Parent and its Subsidiaries, taken as a whole; (b) liabilities reflected on
the Parent Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
5.10 Compliance with Applicable Laws. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
5.11 Board of Directors/Shareholder Consent. The board of directors of
Parent, and both the board of directors and shareholder of Sub, have, by
unanimous written consent or other action, adopted and approved this Agreement
and the transactions contemplated hereby (including the Merger).
5.12 Bankruptcy. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented
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to the appointment of a receiver or trustee, including a custodian under the
United States bankruptcy laws, whether such receiver or trustee is appointed in
a voluntary or involuntary proceeding.
5.13 Absence of Changes. Except as provided in Schedule 5.13 hereto, since
-------------
December 31, 1997, there has not been (a) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
material change in Parent's accounting principles, practices or methods; (f) any
split, combination or reclassification of any of Parent's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Parent's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
5.14 Taxes. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent
and its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the Closing Date,
all deficiencies proposed as a result of any audits have been paid or settled.
5.15 Disclosure. No statement of fact by Parent or Sub contained herein and
no written statement of fact furnished or to be furnished by Parent or Sub to
Image in connection herewith contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements herein or therein contained not misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
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6.1 Conduct of Business by Image Pending the Merger. From and after the date
hereof, prior to the Effective Time, except as contemplated hereby, unless
Parent shall otherwise agree in writing, Image shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, use reasonable efforts to preserve intact its present
business organization, keep available the services of its employees and preserve
its relationships with customers, suppliers, licensors, licensees, distributors
and others having business dealings with Image to the end that its goodwill and
on-going businesses shall not be impaired in any material respect at the
Effective Time. Without limiting the generality of the foregoing, and except as
contemplated hereby, unless Parent shall otherwise agree in writing, prior to
the Effective Time, Image shall not, directly or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire, any share of
capital stock of Image or any other equity security thereof or any right,
warrant, or option to acquire any such share or other security;
(b) issue, deliver, sell, pledge or otherwise encumber any share of its
capital stock, any other voting security issued by Image or any security
convertible into, or any right, warrant or option to acquire any such share or
voting security;
(c) amend its Articles of Incorporation, Bylaws or other comparable
organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to Image;
(e) subject to a Lien or sell, lease or otherwise dispose of any of its
properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of Image,
guarantee any debt security of another Person or enter into any "keep well" or
other agreement to maintain the financial condition of another Person, make any
loan, advance or capital contribution to, or investment in, any other Person, or
settle or compromise any material claim or litigation, or enter into or extend
any employment agreement; or
(g) authorize any of, or commit or agree to take any of, the foregoing
actions.
6.2 Access to Information. From the date hereof through the Effective Time,
Image and Parent shall afford to the other of them and the other's accountants,
counsel and other representatives reasonable access during normal business hours
(and at such other times as the
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parties may mutually agree) upon reasonable prior notice and approval, which
shall not be unreasonably withheld, to its properties, books, contracts,
commitments, records and personnel and, during such period, shall furnish
promptly to the other of them all information concerning its business,
properties and personnel as the other may reasonably request. Parent and Image,
and their respective accountants, counsel and other representatives, shall, in
the exercise of the rights described in this Section 6.2, not unduly interfere
with the operation of the business of the other of them.
6.3 Filings; Tax Elections. Image shall promptly provide Parent with copies
of all filings made by Image with any Governmental Entity in connection herewith
and the transactions contemplated hereby. Image shall, before settling or
compromising any material income tax liability of Image, consult with Parent and
its advisors as to the positions and elections that will be taken or made with
respect to such matter.
6.4 Public Announcements. The parties agree that, except as may otherwise be
required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger. Any such disclosure shall be coordinated by Parent,
and none of the Image Shareholders shall make any such disclosure without the
prior written consent of Parent.
6.5 Transfer and Gains Taxes and Certain Other Taxes and Expenses. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 Options.
(a) Image hereby covenants and agrees that at the Effective Time, all of
the Image Stock Rights (all of which are set forth on Schedule 4.3(a) hereto)
--------------
shall have been properly canceled and, except for the right to receive options
to acquire Parent Stock described in Section 6.6(b) below, all rights and
obligations thereunder shall have been terminated.
(b) Parent hereby covenants and agrees that, at the Effective Time, each
of the holders of Image Stock Rights shall receive options to purchase the
number of shares of validly issued, fully paid and nonassessable Parent Stock,
at the exercise price per share, as set forth on Schedule 6.6(b) hereto, all of
---------------
which options shall have been issued pursuant to the IXL Holdings, Inc. 1996
Stock Option Plan, as amended (the "Parent Stock Option Plan").
6.7 Further Assurances. From time to time after the Effective Time, upon the
reasonable request of any party hereto, the other party or parties hereto shall
execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the
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requesting party may reasonably request in order to effectuate fully the
purposes, terms and conditions hereof.
6.8 Escrowed Stock. Parent covenants that, at Closing and until March 1,
1999, it will escrow 350,000 shares of Parent Stock, at $10.00 per share (the
"Escrowed Stock"), pursuant to the terms of an Escrow Agreement substantially in
the form attached hereto as Exhibit "H" among the Image Shareholders, SunTrust
----------
Bank, Atlanta ("Escrow Agent"), and Parent ("Escrow Agreement"). Image's
Shareholders will be entitled to all, none or a portion of the Escrowed Stock on
March 1, 1999, depending upon the gross revenue, as reflected on Parent's books,
of for the fiscal year ending December 31, 1998 ("Actual Revenue") relative to
the Projection, as follows:
(a) If Actual Revenue is between $3,000,000 and $4,000,000, then Image's
Shareholders will be entitled to a pro rata portion of the Escrowed Stock,
determined by multiplying by 1.5 the amount by which Actual Revenue exceeds
the Projection, and dividing the product by $10 per share; and
(b) If Actual Revenue is between $4,000,000 and $5,000,000, then Image's
Shareholders will be entitled, in addition to the 150,000 shares of
Escrowed Stock for the first $1 million by which Actual Revenue exceeds the
Projection, in accordance with Section 6.8(a) above, to a pro rata portion
of the Escrowed Stock determined by multiplying the amount by which Actual
Revenue exceeds $4,000,000 (with such excess capped at $1,000,000 for this
purpose) by: (i) 2.0, if Image is profitable for fiscal year 1998, as
reflected on Parent's books and as determined in accordance with EBITDA
(earnings before interest, taxes, depreciation and amortization); or (ii)
1.0, if Image is not profitable as so reflected and as so determined, with
the product of either of the multiplications described in Sections
6.8(b)(i) or (ii), whichever is applicable, being divided by $10 per share.
Parent and Image's Shareholders shall notify the Escrow Agent accordingly and,
pursuant to the Escrow Agreement, (i) the portion of the Escrowed Stock to which
the Image Shareholders are entitled, as determined by Parent in the foregoing
manner, will be delivered to them, pro rata in accordance with their respective
Image shareholdings immediately prior to the Effective Time; and (ii) any
remaining Escrowed Stock shall be returned to Parent.
6.9 Image Terminations or Amendments. Image shall, prior to or at the
Closing, have (a) terminated its employment agreements (i) dated April 15, 1998
with Randall S. Coppersmith, including any entitlement of Mr. Coppersmith to an
increased salary, or to have Image (or any successor thereto) loan him money to
exercise options, in the event of a merger; and (ii) dated February 26, 1998
with Jeffrey R. Gordon, including any entitlement of Mr. Gordon to a percentage
of gross sales; (b) amended its employment agreement dated September 15, 1996
with Pava Cohen, to delete any provision entitling Ms. Cohen to any commission
or other payment based on a percentage of gross receipts or of net profits of
Image (or any successor thereto); and (c) terminated any outstanding warrants of
Image, except that Morino Enterprises, Inc. and Burton
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Technology Partners, Ltd. shall have exercised their warrants to receive 80 and
19 shares of Company Stock, respectively.
6.10 Payment of Image Debt. Parent will, at or promptly after the Effective
Time, pay the amounts to the respective Image creditors set forth on Schedule
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4.30 hereto (excluding (i) "Excess Estimated Accounts Payable" and (ii) any of
- ----
the five amounts payable to First Union National Bank), provided that (a) all
such amounts have been included as Image Debt and therefore deducted from the
Merger consideration payable hereunder; (b) any unpaid legal, accounting or
other fees of Image are solely and directly related to the Merger; and (c)
Parent shall have received, with respect to each item of indebtedness, a UCC
termination, note cancellation or other evidence to Parent's satisfaction that
such payment will extinguish the underlying debt, and that the respective
creditor has no further claim against Image, Sub or Parent thereunder.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligation of Image and the Image Shareholders to Effect
the Merger. The obligation of Image and the Image Shareholders to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) Parent and Sub shall have performed in all material respects their
respective agreements contained herein required to be performed at or prior to
the Effective Time, and the representations and warranties of Parent and Sub
contained herein shall be true when made and (except for representations and
warranties made as of a specified date, which need only be true as of such date)
at and as of the Effective Time as if made at and as of such time, except as
contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to Image at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-1" hereto, and (ii) the
------------
appropriate officers of Sub shall have executed and delivered to Image at the
Closing, a closing certificate and incumbency certificate, substantially in the
form of Exhibit "A-2" hereto;
------------
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
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(d) Image shall have received corporate certificates of good standing for
Parent and Sub, and a copy of the Certificate of Incorporation for Parent and
Sub, respectively, both as certified by the Secretary of State of Delaware;
(e) there shall have been delivered to each of the Image Shareholders at
the Closing, duly executed by Parent, an Agreement to be Bound to the
Registration Rights Agreement
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of Parent, dated as of Closing Date (the "Agreement to be Bound to the
Registration Rights Agreement"), substantially in the form of Exhibit "B"
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hereto;
(f) Parent shall have executed and delivered at the Closing an Option
Agreement for each of the Persons listed on Schedules 6.6(b) hereto receiving
---------------
options to purchase Parent Stock, substantially in the form of Exhibit "C"
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hereto, and a Warrant for each of the Persons listed on Schedule 6.6(b) hereto
--------------
receiving a warrants to purchase Parent Stock;
(g) Image shall have received, at the Closing, a duly executed opinion of
counsel to Parent and Sub, substantially in the form of Exhibit "D" hereto;
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(h) Image shall have received from Parent and Sub such other documents as
Image's counsel shall have reasonably requested, in form and substance
reasonably satisfactory to Image's counsel;
(i) The Escrow Agreement shall have been executed and delivered at the
Closing by Parent and the Escrow Agent; and
(j) Image shall have completed its due diligence review of Parent and
shall, in its sole and absolute discretion, be satisfied with the results
thereof.
7.2 Conditions to Obligations of Parent and Sub to Effect the Merger. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) Image and the Image Shareholders shall have performed in all material
respects their respective agreements contained herein required to be performed
at or prior to the Effective Time, and the representations and warranties of
Image and the Image Shareholders contained herein shall be true when made and
(except for representations and warranties made as of a specified date, which
need only be true as of such date) at and as of the Effective Time as if made at
and as of such time, except as contemplated hereby;
(b) the appropriate officers of Image shall have executed and delivered
to Parent at the Closing, a closing certificate and incumbency certificate,
substantially in the form of Exhibit "E" hereto.
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(c) Image and the Image Shareholders shall have obtained or caused to be
obtained all of the Consents, if any, listed on Schedule 7.2(c) hereto;
--------------
(d) there shall have been delivered to Parent at the Closing, duly
executed by each of the Image Shareholders, (i) an Agreement to be Bound to the
Stockholders' Agreement, substantially in the form of Exhibit "F" hereto; and
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(ii) an Agreement to be Bound to the Registration Rights Agreement;
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(e) Parent shall have received a corporate certificate of good standing
for Image, and a copy of the Articles of Incorporation of Image, both as
certified by the State Corporation Commission of Virginia;
(f) as of the date three business days prior to the Closing Date the
Image Debt shall be no greater than $800,000;
(g) Image shall have complied with its obligations under Sections 6.6(a)
and 6.9 hereof;
(h) Parent shall have received, at the Closing, a duly executed opinion
of counsel to Image, substantially in the form of Exhibit "G" hereto;
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(i) Parent shall have received from Image or the Image Shareholders, as
the case may be, such other documents as Parent's counsel shall have reasonably
requested, in form and substance reasonably satisfactory to Parent's counsel;
(j) Parent shall have received evidence satisfactory to it that at the
Closing the assets and properties used in the Image Business are free and clear
of all Liens other than Permitted Liens (as hereinafter defined);
(k) Parent shall have received, at the Closing, the Escrow Agreement
executed and delivered by the Image Shareholders and the Escrow Agent,
respectively; and
(l) Parent shall have completed its due diligence review of Image and
shall, in its sole and absolute discretion, be satisfied with the results
thereof.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Parent.
(a) Parent shall indemnify and hold the Image Shareholders and Image's
directors, officers and employees (collectively, the "Image Indemnified
Parties") harmless from and against, and agree promptly to defend each of the
Image Indemnified Parties from and reimburse each of the Image Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorney fees and other
legal costs and expenses) (collectively, a "Image Loss") that any of the Image
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with:
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(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Parent or Sub at the Closing in accordance
with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform, satisfy
and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations hereunder or under any of the documents and materials
delivered by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary, Parent
shall not have any liability under Section 8.1(a)(i) above (i) unless the
aggregate of all Image Losses for which Parent would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $200,000, and then
only to the extent of such excess, (ii) for amounts in excess of, in the
aggregate, the amount (the "Cap") determined by multiplying the aggregate value,
at $10 per share, of the Parent Stock actually issued at the Closing pursuant to
Section 3.1(b) hereof, by a percentage equal to the aggregate Image
Shareholdings, at the Closing, of the Controlling Shareholders relative to the
holdings of all Image Shareholders, and (iii) unless the Image Shareholders have
asserted a claim with respect to the matters set forth in Section 8.1(a)(i), or
8.1(a)(iii) to the extent applicable to Section 8.1(a)(i), within 18 months of
the Effective Time. Notwithstanding any implication to the contrary contained
herein, the parties acknowledge and agree that a decrease in the value of Parent
Stock would not, by itself, constitute an Image Loss, unless and to the extent a
decrease in the value of Parent Stock has been demonstrated to be as a result of
any event described in Sections 8.1(a)(i), (ii) or (iii) above.
8.2 Indemnification by the Image Shareholders.
(a) The Controlling Shareholders, jointly and severally, and in addition
the other Image Shareholders, severally but not jointly, shall indemnify and
hold Parent, Sub, Surviving Corporation and their respective shareholders,
directors, officers and employees (collectively, the "Parent Indemnified
Parties") harmless from and against, and agree to defend promptly each of the
Parent Indemnified Parties from and reimburse each of the Parent Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorneys' fees and
other legal costs and expenses) (collectively, a "Parent Loss") that any of the
Parent Indemnified Parties may at any time suffer or incur, or become subject
to, as a result of or in connection with:
(i) in the case of the Controlling Shareholders, any breach or
inaccuracy of any of the representations and warranties made by Image or the
Image Shareholders in or pursuant hereto, or in any instrument certificate or
affidavit delivered by any of the same at the Closing in accordance with the
provisions hereof;
26
<PAGE>
(ii) in the case of each other Image Shareholder, any breach or
inaccuracy of any of the representations and warranties made by and with respect
to such Image Shareholder in Sections 4.2, 4.3(c), 4.5, 4.31, 4.32, 4.33 and
4.34 hereof or in any certificate or affidavit delivered by any of the same at
the Closing in accordance herewith;
(iii) any failure by Image or any of the Image Shareholders
to carry out, perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations hereunder or under any of
the documents and materials delivered by Image pursuant hereto; and
(iv) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above, none of the Image Shareholders shall
have any liability under Sections 8.2(a) above (i) unless the aggregate of all
Parent Losses for which the Image Shareholders would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $200,000, and then
only to the extent of such excess, (ii) for amounts in excess of the Cap in the
aggregate, and (iii) unless Parent has asserted a claim with respect to the
matters set forth in Sections 8.2(a)(i) or (ii), or 8.2(a)(iv) to the extent
applicable to Sections 8.2(a)(i) or (ii), within 18 months of the Effective
Time, except with respect to the matters arising under Sections 4.18, 4.19, 4.20
or 4.24 hereof, in which event Parent must have asserted a claim within the
applicable statute of limitations. Notwithstanding any implication to the
contrary contained herein, the parties acknowledge and agree that (A) a decrease
in the value of Parent Stock would not, by itself, constitute a Parent Loss,
unless and to the extent a decrease in the value of Parent Stock has been
demonstrated to be as a result of any event described in Sections 8.2(a)(i),
(ii), (iii) or (iv) above, and (B) failure to meet the Projection would not, by
itself, constitute a Parent Loss, unless the Projection was not made in good
faith.
8.3 Notification of Claims; Election to Defend
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder. Subject to the
Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of any
Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a Claim
asserted by a third party against the Indemnified Party that the Indemnifying
Party acknowledges is a Claim for which it
27
<PAGE>
must indemnify or hold harmless the Indemnified Party under Section 8.1 or 8.2
hereof, as the case may be, the Indemnifying Party shall have the right, at its
sole cost and expense, to employ counsel of its own choosing to defend any such
Claim asserted against the Indemnified Party. Notwithstanding anything to the
contrary in the preceding sentence, if the Indemnified Party (i) reasonably
believes that its interests with respect to a Claim (or any material portion
thereof) are in conflict with the interests of the Indemnifying Party with
respect to such Claim (or portion thereof), and (ii) promptly notifies the
Indemnifying Party, in writing, of the nature of such conflict, then the
Indemnified Party shall be entitled to choose, at the sole cost and expense of
the Indemnifying Party, independent counsel to defend such Claim (or the
conflicting portion thereof). The Indemnified Party shall have the right to
participate in the defense of any Claim at its own expense (except to the extent
provided in the preceding sentence), but the Indemnifying Party shall retain
control over such litigation (except as provided in the preceding sentence). The
Indemnifying Party shall notify the Indemnified Party in writing, as promptly as
possible (but in any case before the due date for the answer or response to a
Claim) after receipt of the notice of Claim given by the Indemnified Party to
the Indemnifying Party under Section 8.3(a) hereof, of its election to defend in
good faith any such third party Claim. For so long as the Indemnifying Party is
defending in good faith any such Claim asserted by a third party against the
Indemnified Party, the Indemnified Party shall not settle or compromise such
Claim without the prior written consent of the Indemnifying Party. The
Indemnified Party shall cooperate with the Indemnifying Party in connection with
any such defense and shall make available to the Indemnifying Party or its
agents all records and other materials in the Indemnified Party's possession
reasonably required by it for its use in contesting any third party Claim;
provided, however, that the Indemnifying Party shall have agreed, in writing, to
keep such records and other materials confidential except (i) to the extent
required for defense of the relevant Claim, or (ii) as required by law or court
order. Whether or not the Indemnifying Party elects to defend any such Claim,
the Indemnified Party shall have no obligations to do so. Within 30 days after a
final determination (including a settlement) has been reached with respect to
any Claim contested pursuant to this Section 8.3(b), the Indemnifying Party
shall satisfy its obligations hereunder with respect thereto. Any amount paid
thereafter shall include interest thereon for the period commencing at the end
of such 30-day period and ending on the actual date of payment, at a rate of 15%
per annum, or, if lower, at the highest rate of interest permitted by applicable
law at the time of such payment.
8.4 Payment. Any Indemnifying Party may, at such Indemnifying Party's
option, pay all or part of any amount due under this Article VIII by delivery of
shares of Parent Stock having a value equal to the amount due (to the extent
that such Party owns sufficient shares of Parent Stock). For the purpose of
this provision, the value of Parent Stock shall be deemed to be $10 per share.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Merger Agreement may be terminated at any time prior to
the Effective Time:
28
<PAGE>
(a) by mutual written consent of Parent and Image;
(b) by Image, upon a material breach hereof on the part of Parent or Sub
which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by July 31, 1998;
(c) by Parent, upon a material breach hereof on the part of Image or any
of the Image Shareholders which has not been cured and which would cause any
condition set forth in Section 7.2 hereof to be incapable of being satisfied by
July 31, 1998;
(d) by Parent or Image if any court of competent jurisdiction shall have
issued, enacted, entered, promulgated or enforced any order, judgment, decree,
injunction or ruling which restrains, enjoins or otherwise prohibits the Merger
and such order, judgment, decree, injunction or ruling shall have become final
and nonappealable; or
(e) by either Parent or Image if the Merger shall not have been
consummated on or before July 31, 1998 (provided the terminating party is not
otherwise in material breach of its representations, warranties or obligations
hereunder).
9.2 Fees and Expenses.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the Surviving Corporation; provided, however, that the Image Shareholders shall
pay all fees and expenses (including agents, counsel and other advisors) of
Image and themselves that are not solely and directly related to the Merger.
(b) If the Merger is not consummated for a reason other than the willful
and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
(c) If the Merger is not consummated because of a willful and material
breach hereof by any party, the nonbreaching party or parties shall be entitled
to pursue all legal and equitable remedies against the breaching party for such
breach including specific performance and all fees and expenses incurred by the
nonbreaching party or parties in connection with enforcing its or their rights
hereunder with respect to such breach shall be paid by the breaching party.
9.3 Amendment. This Merger Agreement may be amended by Parent, Sub, Image
and, on behalf of all of the Image Shareholders, the Controlling Shareholders,
at any time before or after approval hereof by the Image Shareholders, but,
after such approval, no amendment shall be made which (i) changes the form or
decreases the amount of the consideration to be received in the Merger, (ii) in
any way materially adversely affects the rights of the Image Shareholders, or
(iii) under applicable law would require approval of the Image Shareholders, in
any such case referred
29
<PAGE>
to in clauses (i), (ii) and (iii), without the further approval of the Image
Shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of the parties hereto, provided that after the
Effective Time, any such amendment must be signed by the former holders of a
majority of the Image Stock.
9.4 Waiver. At any time prior to the Effective Time, the parties hereto may,
to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival; Recourse. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 10.9 and 10.10 hereof, shall survive the
Merger (except to the extent a shorter period of time is explicitly specified
therein) and (ii) the representations and warranties made in Articles IV and V
hereof shall survive the Merger, and shall survive any independent investigation
by the parties, and any dissolution, merger or consolidation of Image or Parent,
and shall bind the legal representatives, assigns and successors of Image, the
Image Shareholders and Parent, for a period of 18 months after the Closing Date
(other than the representations and warranties contained in Sections 4.18, 4.19,
4.20 and 4.24 hereof, which shall survive for the applicable statute of
limitations).
10.2 Notices. All notices or other communications under this Agreement shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in Person, by telecopy (with confirmation of receipt),
or by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Image : Image Communications, Inc.
1919 Gallows Rd., 10th Floor
Vienna, VA 22182
Attention: Mr. Jeffrey R. Gordon, Chairman and CEO
Telephone: 703/848-2700
Telecopy: 703/848-0770
30
<PAGE>
With a copy to: Hunton & Williams
1751 Pinnacle Dr., Ste. 1700
McLean, VA 22102
Attention: Michael R. Lincoln, Esq.
Telephone: 703/714-7446
Telecopy: 703/714-7410
If to the Image To the address listed under the signature
Shareholders: line of the applicable Image Shareholder
If to Parent or Sub: IXL Holdings, Inc.
Two Park Place
1888 Emery St., 2nd Floor
Atlanta, GA 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Rd., Ste. 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Ave., 24th Floor
New York, NY 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 Entire Agreement. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, except for the non-disclosure letter agreement between Parent and
Image dated as of April 28, 1998. There are no other representations or
warranties, whether written or oral, between the parties in connection the
subject matter hereof, except as expressly set forth herein.
31
<PAGE>
10.4 Assignments; Parties in Interest. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the rights, interests, and obligations
of Sub hereunder may be assigned to any direct wholly owned Delaware subsidiary
of Parent without such prior consent. Subject to the preceding sentence, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing herein, express or implied, is intended to or shall confer
upon any Person not a party hereto any right, benefit or remedy of any nature
whatsoever under or by reason hereof, except as otherwise provided herein.
10.5 Governing Law. This Agreement, except to the extent that the VSCA or
the DGCL is mandatorily applicable to the Merger, or to the rights of the Image
Shareholders or the other parties hereto with respect to the Merger, shall be
governed in all respects by the laws of the State of Georgia (without giving
effect to the provisions thereof relating to conflicts of law).
10.6 Headings. The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation hereof.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 Severability. If any term or other provision hereof is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions hereof shall nevertheless remain in full force and
effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.9 Post-Closing Access. For a period of three years after the Closing
Date, the Image Shareholders and their agents and representatives shall have
reasonable access to the books and records of the Image Business.
10.10 Post-Closing Notice. To the extent the Surviving Corporation receives
written notice of any event or circumstance that materially affects any of the
Image Shareholders, the Surviving Corporation shall promptly notify the affected
Image Shareholder of such matter, information, or event and shall provide them
with copies of all relevant documentation or correspondence in connection
thereto.
10.11 Certain Definitions. As used herein:
32
<PAGE>
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the Image
Real Property or interfering with the ordinary conduct of any of the Image
Business; and (e) those Liens listed on Schedule 10.11;
--------------
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of Image" shall refer to the knowledge,
subject to clause (i) above, of any of the Controlling Shareholders; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of which are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including Sub); provided, however, that
with respect to the Parent, the terms "Subsidiary" and "Subsidiaries" shall not
include Image or University Netcasting, Inc.
- SIGNATURES ON THE FOLLOWING PAGE -
33
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and Image have caused this Agreement to be
signed and delivered by their respective duly authorized officers, and each
Image Shareholder has signed and delivered this Agreement, all as of the date
first written above.
"Image"
Image Communications, Inc., a Virginia corporation
By: /s/ Jeffrey R. Gordon
----------------------------------
Title: Chairman
"Parent"
IXL Holdings, Inc., a Delaware corporation
By: /s/ James V. Sandry
----------------------------------
Title: Executive Vice President
"Sub"
iXL-DC, Inc., a Delaware corporation
By: /s/ James V. Sandry
----------------------------------
Title: Executive Vice President
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
34
<PAGE>
"Image Shareholders"
/s/ Jeffrey R. Gordon
-------------------------------------------------
Jeffrey R. Gordon
Address: 8120 Boss St.
Vienna, VA 22182
/s/ Randall S. Coppersmith
-------------------------------------------------
Randall S. Coppersmith
Address: 18908 Woodburn Rd.
Leesburg, VA 02175
/s/ Nicholas Perrins
-------------------------------------------------
M.R.W. Ventures, LLC, by Nicholas Perrins,
its manager
Address: 204 N. Union St., Ste. 300
Alexandria, VA 22314
/s/ Tony Carter
-------------------------------------------------
IBG, Inc. by Tony Carter, its
--------
Address: 1919 Gallows Rd., 10th Floor
Vienna, VA 22182
/s/ Mario Morino
-------------------------------------------------
Morino Enterprises, Inc., by Mario Morino,
its president
Address: 1801 Robert Fulton Dr.
Reston, VA 20191
/s/ John Burton
-------------------------------------------------
Burton Technology Partners, Ltd., by John Burton,
its president
Address: 1110 Harvey Rd.
McLean, VA 22101
35
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate..................................... Exhibit A-1
Sub's Closing Certificate........................................ Exhibit A-2
Agreement to be Bound to Registration Rights Agreement........... Exhibit B
Option Agreement................................................. Exhibit C
Opinion of Counsel to Parent and Sub............................. Exhibit D
Parent's Closing Certificate..................................... Exhibit E
Agreement to be Bound to Stockholders' Agreement................. Exhibit F
Opinion of Counsel to Image...................................... Exhibit G
Escrow Agreement................................................. Exhibit H
<PAGE>
SCHEDULE 3.1(B)
---------------
MERGER CONSIDERATION
(See attached Schedule 3.1(B))
SCHEDULE 4.1
------------
ARTICLES OF INCORPORATION AND BYLAWS OF IMAGE
SCHEDULE 4.3(A)
---------------
CAPITALIZATION OF IMAGE
SCHEDULE 4.3(C)
---------------
LIENS ON IMAGE STOCK
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF IMAGE
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF IMAGE
<PAGE>
SCHEDULE 3.1(B)
---------------
IMAGE/IXL MERGER CONSIDERATION
CONVERSION OF SHARES CALCULATION
PS = the number of shares of Parent Stock (valued, as of the
Closing, at $10 per share) for which each share of Image
Stock shall be exchanged pursuant to the Merger
D = the outstanding indebtedness of Image (the "Image Debt"),
including debt for borrowed money and accrued interest
thereon, capital leases, any unpaid legal, accounting or
other fees of Image, and that portion of accounts payable
and accrued expenses that exceeds the 12 month average
during Image's most recent fiscal year, all to be determined
as of three business days prior to the Closing Date and all
as determined in accordance with generally accepted
accounting principles ("GAAP")
S = the number of issued and outstanding shares of Image Stock
on the Closing Date
O = the total number of options to purchase Image Stock
outstanding on the Closing Date, to be exchanged for options
to acquire Parent Stock pursuant to Section 6.6(b) hereof
X = one-half of the aggregate exercise price of O, as set forth
on Schedule 3.1(b) hereto; and
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PS = Projected 1998 Revenue Deal Multiple 1/2 of X D
3,000,000.00 x 1.875 + $ 212,844.69 - $ 797,290.88
----------------------- ------------- ------------
$ 10.00 $ 10.00 $ 10.00
---------------------------------------------------------------------------------
a o
1,395.30 + 460.40
PS = 562,500.00 + 21,284.469 = 79,729.09
-----------------------------------------------------------------
1,855.70
PS = 504,055.38
-----------
1,855.70
PS = 271.6255
. Image Stock:
Aggregate
Image Shares Exchange Ratio iXL Shares Deemed Value Consideration
1,395.30 x 271.6255 = 378,999.0155 x $ 10.00 = 3,789,990.16
. Image Options:
Initial Aggregate
Image Options Exchange Ratio iXL Shares Deemed Value Consideration
460.40 x 271.6255 = 125,056.3665 x $ 10.00 = 1,250,563.65
Less aggregate exercise price = (423,375.46)
Total aggregate consideration = 5,040,553.81
Adjusted aggregate consideration = 827,188.19
</TABLE>
<PAGE>
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF IMAGE
SCHEDULE 4.10
-------------
BAD EQUIPMENT OF IMAGE
SCHEDULE 4.12
-------------
LIENS ON REAL PROPERTY OF IMAGE
SCHEDULE 4.13
-------------
LEASES OF IMAGE
SCHEDULE 4.14
-------------
CONTRACTS OF IMAGE
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF IMAGE
SCHEDULE 4.16
-------------
PAYROLL INFORMATION OF IMAGE
<PAGE>
SCHEDULE 4.17
-------------
LITIGATION
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF IMAGE
SCHEDULE 4.19
-------------
ERISA ISSUES OF IMAGE
SCHEDULE 4.21
-------------
IMAGE PERMITS
SCHEDULE 4.23
-------------
IMAGE BROKERS
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS, COMPETITORS
SCHEDULE 4.28
-------------
INSURANCE
<PAGE>
SCHEDULE 4.30
-------------
IMAGE DEBT
SCHEDULE 5.1
------------
CERTIFICATE OF INCORPORATION AND BYLAWS OF SUB
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
OUTSTANDING OBLIGATIONS TO ISSUE OPTIONS, WARRANTS
OR OTHER PARENT STOCK RIGHTS
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
<PAGE>
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES
SCHEDULE 6.6(B)
---------------
OPTIONS RECEIVED BY HOLDERS OF IMAGE STOCK RIGHTS
SCHEDULE 7.1(C)
---------------
PARENT CONSENTS
SCHEDULE 7.2(C)
---------------
IMAGE AND IMAGE SHAREHOLDERS CONSENTS
SCHEDULE 10.11
--------------
PERMITTED LIENS OF IMAGE
<PAGE>
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT TO AGREEMENT AND PLAN OF MERGER (the "Amendment") is
entered into as of this 22nd day of July, 1998, by and between IMAGE
COMMUNICATIONS, INC., a Virginia corporation ("Image"), IXL HOLDINGS, INC., a
Delaware corporation ("Parent") iXL-DC, INC., a Delaware corporation ("Sub"),
and the shareholders of Image as listed on the signature page hereto (the "Image
Shareholders").
R E C I T A L S:
- - - - - - - -
WHEREAS, Image, Parent, Sub and the Image Shareholders previously
entered into that certain Agreement and Plan of Merger, dated the 13th day of
July, 1998 (the "Merger Agreement");
WHEREAS, Image, Parent, Sub and the Image Shareholders each desire to
amend the Merger Agreement in accordance with the terms set forth below;
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is hereby agreed as follows:
1. AMENDMENT TO SECTION 3.1(b)(ii). Section 3.1(b)(ii) of the Merger
-------------------------------
Agreement shall be deleted in its entirety and the following shall
be substituted therefor:
"INTENTIONALLY LEFT BLANK."
2. AMENDMENT TO SECTION 6.8. Section 6.8 of the Merger Agreement shall
------------------------
be deleted in its entirety and the following shall be substituted
therefor:
"INTENTIONALLY LEFT BLANK."
3. AMENDMENT TO SECTION 7.1(i). Section 7.1(i) of the Merger
---------------------------
Agreement shall be deleted in its entirety and the following shall
be substituted therefor:
"INTENTIONALLY LEFT BLANK."
4. AMENDMENT TO SECTION 7.2(k). Section 7.2(k) of the Merger Agreement
---------------------------
shall be deleted in its entirety and the following shall be
substituted therefor:
"INTENTIONALLY LEFT BLANK."
5. AMENDMENT TO EXHIBIT H. Exhibit H attached to the Merger Agreement
----------------------
shall be deleted in it entirety and the following shall be
substituted therefor:
"INTENTIONALLY LEFT BLANK."
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and Image have caused this Amendment to
be signed and delivered by their respective duly authorized officers, and each
Image Shareholder has signed and delivered this Amendment, all as of the date
first written above.
"IMAGE"
Image Communications, Inc., a Virginia corporation
By: /s/ Jeffrey R. Gordon
-----------------------------------------------
Title: Chairman
"PARENT"
IXL Holdings, Inc., a Delaware corporation
By: /s/ James V. Sandry
-----------------------------------------------
Title: Executive Vice President
"SUB"
iXL-DC, Inc., a Delaware corporation
By: /s/ James V. Sandry
-----------------------------------------------
Title: Executive Vice President
-SIGNATURES CONTINUE ON THE FOLLOWING PAGE-
<PAGE>
"IMAGE SHAREHOLDERS"
/s/ Jeffrey R. Gordon
--------------------------------------------------
Jeffrey R. Gordon
/s/ Randall S. Coppersmith
--------------------------------------------------
Randall S. Coppersmith
M.R.W. VENTURES, LLC
By: /s/ R. Scott Mackay
-----------------------------------------------
Name: R. Scott Mackay
Title: Vice President
IBG, INC.
By: /s/ Patti Bylund
-----------------------------------------------
Name: Patti Bylund
Title: Chief Financial Officer and Director
MORINO ENTERPRISES, INC.
By: /s/ S.W. Comiskey
-----------------------------------------------
Name: S.W. Comiskey
Title: Secretary
BURTON TECHNOLOGY PARTNERS, LTD.
By: /s/ John F. Burton
-----------------------------------------------
Name: John F. Burton
Title: President
<PAGE>
EXHIBIT 2.23
SHARE PURCHASE AGREEMENT
BY AND AMONG
IXL HOLDINGS, INC.,
iXL-MADRID, S.A.,
CAMPANA NEW MEDIA, S.L.
THE OTHER MEDIA, S.L.
AND
THE CAMPANA COMPANIES BENEFICIAL OWNERS
THE CAMPANA COMPANIES SHAREHOLDERS
DATED AS OF JULY 28, 1998
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SHARE PURCHASE AGREEMENT
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THIS SHARE PURCHASE AGREEMENT is entered into as of this 28th day of July,
1998, by and among Campana New Media, S.L., a Spanish corporation ("Campana"),
The Other Media, S.L., a Spanish corporation ("The Other Media"; collectively
with Campana, the "Campana Companies"), IXL Holdings, Inc., a Delaware
corporation ("Parent"), iXL-Madrid, S.A., a Spanish corporation, or its
successors or assigns ("Sub"), the respective shareholders of the Campana
Companies as listed on the signature page hereto (collectively, the "Campana
Companies Shareholders"), and the beneficial owners of the Campana Companies as
listed on the signature page hereto (collectively, the "Campana Companies
Owners"; collectively with the Campana Companies Shareholders, the "Campana
Companies Sellers").
R E C I T A L S:
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A. The Campana Companies are engaged in the business of programming for
electronic equipment, electronic commerce, interactive marketing, developing
internet sites and furnishing internet services, including website design and
maintenance (the "Campana Companies Business").
B. Parent and the Campana Companies have entered into a Letter of Intent,
dated March 6, 1998, with respect to the purchase, by Sub from the Campana
Companies Shareholders, of all of the Campana Companies Stock (the
"Acquisition").
C. Parent and the Campana Companies Sellers have entered into a non-
disclosure agreement dated as of June 25, 1998 (the "Confidentiality
Agreement").
D. The Campana Companies Shareholders collectively own 100% of the issued
and outstanding capital stock of the Campana Companies (the "Campana Companies
Stock").
E. The Campana Companies Owners beneficially own, collectively, 100% of
the Campana Companies Stock.
F. On July 23, 1998, Sub was incorporated as a vehicle for the
Acquisition.
G. The respective Boards of Directors of Parent, Sub and each of the
Campana Companies, and the respective shareholders of Sub and each of the
Campana Companies, have approved the Acquisition, upon the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
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ARTICLE I
THE ACQUISITION
1.1 CLOSING AND CLOSING DATE. Unless this Share Purchase Agreement shall
have been terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 7.1 hereof, and subject to the satisfaction or
waiver of the conditions set forth in Article V hereof; the closing of the
Acquisition (the "Closing") will take place as promptly as practicable (and in
any event within five business days after satisfaction of the conditions set
forth in Sections 5.1 and 5.2 hereof) (the "Closing Date") at the offices of
Price Waterhouse Juridico y Fiscal, Paseo de la Castellana 43,28046 Madrid,
Spain, unless another date or place is agreed to by the parties.
1.2 ACQUISITION CONSIDERATION. As of the Closing Date:
(a) All shares of Campana Companies Stock owned by Campana Companies
shall be canceled and retired and shall cease to exist, and no consideration
shall be delivered in exchange therefor.
(b) Each issued and outstanding share of Campana Companies Stock
shall, when the public deed of purchase of shares is granted and, accordingly,
the transfer of shares is officially consummated, be exchanged for, (i) a number
of shares of validly issued, fully paid and nonassessable Class B Common Stock
of Parent, $.01 par value (the "Parent Stock") based on the following equation:
PS= 40,800-D
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$5
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S
where:
PS = the number of shares of Parent Stock (valued, as of the
Closing, at $5 per share) for which each share of Campana
Companies Stock shall be exchanged pursuant to the
Acquisition
D = the outstanding indebtedness of the Campana Companies (the
"Campana Companies Debt"), including debt for borrowed money
and accrued interest thereon, capital leases, accounts
payable and accrued expenses, all to be determined as of
three business days prior to the Closing Date and all as
determined in accordance with generally accepted accounting
principles ("GAAP")
S = the number of issued and outstanding shares of Campana
Companies Stock on the Closing Date; and
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(ii) an amount of cash based on the following equation:
C= $36,000
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S
where:
C = the amount of cash for which each share of Campana Companies
Stock shall be exchanged pursuant to the Acquisition
and other terms are as defined above.
1.3 CLOSING OF CAMPANA COMPANIES' TRANSFER BOOKS. As of the Closing Date,
the stock transfer books of the Campana Companies shall be closed and no
transfer of Campana Companies Stock shall be made thereafter. If thereafter,
certificates for Campana Companies Stock are presented to Sub, they shall be
canceled and exchanged for a consideration as set forth in Section 1.2 hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CAMPANA COMPANIES
The Campana Companies, and the Campana Companies Sellers, jointly and
severally, represent and warrant to Parent and Sub as follows, which
representations and warranties shall survive the Closing in accordance with
Section 8.1 hereof.
2.1 ORGANIZATION AND QUALIFICATION. Each of the Campana Companies is a
corporation duly organized, validly existing and in good standing under the laws
of Spain. Campana was incorporated on 3rd December, 1996 and The Other Media on
27th October, 1995. Campana's and The Other Media's constitutions are entered
in the Madrid Mercantile Register, at volume 11645, folio 92, section 8, item
number M-182870, entry 1, and at volume 10730, folio 86, section 8, item number
M-169766, entry 1, respectively. Each of the Campana Companies has the requisite
corporate power and authority to carry on the Campana Companies Business as it
is now being conducted and is duly qualified or licensed to do business and is
in good standing, in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary. Complete and correct copies of the By-Laws of the
Campana Companies as in effect on the date hereof are attached to Exhibits "C-1"
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and "C-2" hereto. The minute books of the Campana Companies, a true and
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complete copy of each of which has been delivered to Parent, (a) accurately
reflect all action taken by the directors and shareholders of the respective
Campana Companies at meetings of the Campana Companies' respective Board of
Directors or shareholders, as the case may be; and (b) contain true and complete
copies, or originals, of the respective minutes of all meetings or consent
actions of the directors or
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shareholders. The Campana Companies have deposited their annual accounts with
the Mercantile Registry of Madrid on a timely basis since their respective dates
of incorporation, and there will not be any fine in respect thereof.
2.2 AUTHORITY. Each of the Campana Companies has the necessary corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by the Campana Companies
have been duly and validly authorized and approved by Campana Companies'
respective Boards of Directors and Shareholders, and no other corporate or
shareholder proceedings on the part of the Campana Companies, their respective
Boards of Directors or any of the Campana Companies Shareholders is necessary to
authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Campana Companies and each Campana Companies Seller, and assuming the due
authorization, execution and delivery hereof by Parent and Sub, constitutes the
valid and binding obligation of Campana Companies and each Campana Companies
Seller, enforceable against Campana Companies and each Campana Companies Seller
in accordance with its terms, subject, in each case, to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors' rights and to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing.
2.3 CAPITALIZATION
(a) The authorized capital stock of the Campana Companies consists
of (i) for Campana, share capital of 500,000 Pesetas, comprising 500 shares of
1,000 Pesetas face value each, all of which are validly issued and outstanding,
fully paid and nonassessable; and (ii) for The Other Media, share capital of
600,000 Pesetas, comprising 600 shares of 1,000 Pesetas face value each, all of
which are validly issued and outstanding, fully paid and nonassessable. This is
as reflected in the public deeds of incorporation. All outstanding capital stock
of the Campana Companies was issued in accordance with applicable securities
laws. No share certificates have been issued. There are no options, warrants,
calls, convertible notes, agreements, commitments or other rights presently
outstanding that would obligate the Campana Companies or any of the Campana
Companies Shareholders to issue, deliver or sell shares of its capital stock, or
to grant, extend or enter into any such option, warrant, call, convertible note,
agreement, commitment or other right. In addition to the foregoing, as of the
date hereof; the Campana Companies have no bonds, debentures, notes or other
indebtedness issued or outstanding that have voting rights in either of the
Campana Companies. Schedule 2.3(a) sets forth a list of (i) all holders of
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record of Campana Companies Stock; (ii) the number of shares held by each
Campana Companies Shareholder; and (iii) which shares are held by which such
Shareholder.
(b) All of the issued and outstanding shares of capital stock of the
Campana Companies are validly issued, fully paid and nonassessable. Except as
set forth on Schedule 2.3(b) hereto, each Campana Companies Shareholder
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represents and warrants that the Campana Companies Stock held by such Campana
Companies Shareholder is free and clear of any lien,
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charge, security interest, pledge, option, right of first refusal, voting proxy
or other voting agreement, or encumbrance of any kind or nature other than
restrictions on transfer imposed by applicable securities laws (any of the
foregoing, a "Lien").
(c) The Campana Companies Owners are not the official owners of
Campana Companies Stock. Nonetheless, such Owners hereby consent to the
Acquisition. Such Owners do not claim any entitlement to any payment or other
consideration from Parent or Sub hereunder, or otherwise, in connection with the
Acquisition. Upon Closing of the Acquisition, such Owners hereby waive any
right, title or interest in any such Stock.
2.4 SUBSIDIARIES. The Campana Companies have no subsidiaries and do not
otherwise own or control, directly or indirectly, any equity interest, or any
security convertible into an equity interest, in any corporation, partnership,
limited liability company, joint venture, association or other business entity
(any of the foregoing, an "Entity").
2.5 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 2.5 hereto, none of (i) the execution and delivery of this Agreement
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by the Campana Companies or the Campana Companies Sellers, (ii) the consummation
by the Campana Companies and the Campana Companies Sellers of the transactions
contemplated hereby or (iii) compliance by the Campana Companies with any of the
provisions hereof will:
(a) conflict with or violate the public deed of incorporation or By-
Laws of the Campana Companies;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to the Campana Companies or any
of the Campana Companies Sellers, or by which the Campana Companies or any of
their properties or assets may be bound or affected;
(c) result in a violation or breach of; or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to any other any right of termination, amendment, acceleration or
cancellation of; any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which either of the Campana Companies is a
party or by which either of the Campana Companies or any of their properties or
assets may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of the Campana Companies; or
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), (i) any government or subdivision thereof; whether
domestic or foreign, or any administrative, governmental, or regulatory
authority, agency, commission, court, tribunal or body, whether Spanish, foreign
or multinational (any of the foregoing, a "Governmental Entity"); or (ii) any
other
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individual or Entity (collectively, a "Person").
2.6 FINANCIAL STATEMENTS. Attached as Schedule 2.6 hereto are, for each
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of the Campana Companies, (i) balance sheet as of three business days prior to
the Closing Date, (ii) unaudited financial statement (including profit and loss
accounts and notes) for the year ended December 31, 1997, and (iii) unaudited
financial statement for the six month period ended June 30, 1998. The Campana
Companies have heretofore furnished Parent with a true and complete copy of (a)
the unaudited financial statements of each of the Campana Companies for the
years ended December 31, 1995, 1996 and 1997; and (b) the unaudited financial
statements of each of the Campana Companies for the four month period ended
April 30, 1998 (all of the foregoing collectively herein referred to as the
"Campana Companies Financial Statements"). Except as disclosed therein, the
Campana Companies Financial Statements have been prepared in accordance with
GAAP (except for the absence of footnotes and normal year end adjustments)
consistently followed throughout the period indicated, and present fairly, in
all material respects, the financial position and operating results of Campana
Companies as of the dates, and during the periods, indicated therein.
2.7 ABSENCE OF CHANGES. Except as provided in Schedule 2.7 hereto and
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except as contemplated hereby, since December 31, 1997 (a) neither of the
Campana Companies has entered into any transaction that was not in the ordinary
course of business; (b)except for sales of services and licenses of software in
the ordinary course of business, there has been no sale, assignment, transfer,
mortgage, pledge, encumbrance or lease of any material asset or property of the
Campana Companies; (c) there has been (i) no declaration or payment of a
dividend, or any other declaration, payment or distribution of any type or
nature to any shareholder of the Campana Companies in respect of their stock,
whether in cash or property, and (ii) no purchase or redemption of any share of
the capital stock of the Campana Companies; (d) there has been no declaration,
payment, or commitment for the payment, by either of the Campana Companies, of a
bonus or other additional salary, compensation, or benefit to any employee or
administrator of the Campana Companies that was not in the ordinary course of
business, except for normal year-end bonuses paid in the ordinary course of
business; (e) there has been no release, compromise, waiver or cancellation of
any debt to or claim by the Campana Companies, or waiver of any right of the
Campana Companies; (f) there have been no capital expenditures in excess of
$10,000 for any single item, or $25,000 in the aggregate; (g) there has been no
change in accounting methods or practices or revaluation of any asset of the
Campana Companies (other than Campana Companies Accounts Receivable as defined
in Section 2.26 hereof) written down in the ordinary course of business in
excess of $10,000 for any single Campana Companies Accounts Receivable, or
$25,000 in the aggregate); (h) there has been no material damage, or
destruction to, or loss of, physical property (whether or not covered by
insurance) adversely affecting the Campana Companies Business or the operations
of the Campana Companies; (i) there has been no loan by the Campana Companies,
or guaranty by the Campana Companies of any loan, to any employee or
administrator of the Campana Companies; (j)neither of the Campana Companies has
ceased to transact business with any customer that, as of the date of such
cessation, represented more than 5% of the annual gross revenues of that Campana
Company; (k) there has been no termination or resignation of any key employee,
administrator or officer of the Campana Companies, and to the knowledge of
Campana Companies, no such termination or
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resignation is threatened; (1) there has been no amendment or termination of any
material oral or written contract, agreement or license related to the Campana
Companies Business, to which either of the Campana Companies is a party or by
which it is bound, except in the ordinary course of business, or except as
expressly contemplated hereby; (m) neither of the Campana Companies has failed
to satisfy any of its debts, obligations or liabilities related to the Campana
Companies Business or the assets of the Campana Companies as the same become due
and owing (except for Campana Companies Accounts Payable (as defined in Section
2.27 hereof) payable in accordance with past practices and in the ordinary
course of business); (n) there has been no agreement or commitment by Campana
Companies to do any of the foregoing; and (o) there has been no other event or
condition of any character pertaining to and materially and adversely affecting
the assets, business or financial condition of the Campana Companies.
2.8 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 2.8 hereto,
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neither of the Campana Companies has any debt, liability or obligation of any
kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charge or penalty, interest
or fine, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997, that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of that Campana Company; (b) liabilities reflected on the Campana Companies
Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
2.9 TITLE TO PROPERTIES. Except as set forth on Schedule 2.9 hereto, the
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Campana Companies have good and marketable title to all tangible property and
assets used in the Campana Companies Business, and good and valid title to their
leasehold interests, in each case, free and clear of any and all Liens other
than Permitted Liens (as defined in Section 8.9 hereof).
2.10 EQUIPMENT. Campana Companies have heretofore furnished Parent with a
true and correct list of all items of tangible personal property (including
computer hardware) necessary for or used in the operation of the Campana
Companies Business in the manner in which it has been and is now operated by
Campana Companies ("the Campana Companies Equipment"), except for personal
property having a net book value of less than $1,000. Except as set forth on
Schedule 2.10 hereto, each material item of Campana Companies Equipment is in
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good condition and repair, ordinary wear and tear excepted.
2.11 INTELLECTUAL PROPERTY.
(a) The Campana Companies have heretofore furnished Parent with a
true and complete list of all material proprietary technology, patents, patent
rights, trademarks, trademark rights, trade names, trade name rights, service
marks, service mark rights, and copyrights (and all pending applications for any
of the foregoing) used by Campana Companies in the conduct of the Campana
Companies Business (together with trade secrets and know how used in the conduct
of the Campana Companies Business, the "Campana Companies Intellectual Property
Rights"). The Campana Companies own, or are validly licensed or otherwise have
the right to use or exploit, as currently used or exploited, all of the Campana
Companies Intellectual Property Rights, free of any
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obligation to make any payment (whether of a royalty, license fee, compensation
or otherwise). No claims are pending or, to the knowledge of Campana Companies,
threatened, that either of the Campana Companies is infringing or otherwise
adversely affecting the rights of any Person with regard to any Campana
Companies Intellectual Property Right. No Person is infringing the rights of
either of the Campana Companies with respect to any Campana Companies
Intellectual Property Right. Neither the Campana Companies nor any employee,
administrator, agent or independent contractor of the Campana Companies, in
connection with the performance of such Person's services with the Campana
Companies, has used, appropriated or disclosed, directly or indirectly, any
trade secret or other proprietary or confidential information of any other
Person, or otherwise violated any confidential relationship with any other
Person.
(b) The Campana Companies have heretofore furnished Parent with a
true and complete list of all material computer software used by the Campana
Companies in the conduct of the Campana Companies Business (the "Campana
Companies Software"). Campana Companies currently licenses, or otherwise has the
legal right to use, all of the Campana Companies Software (including any
upgrade, alteration or enhancement with respect thereto), and all of the Campana
Companies Software is being used in compliance with any applicable license or
other agreement.
2.12 REAL PROPERTY. Except as set forth on Schedule 2.12 hereto:
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(a) The Campana Companies have a good and valid leasehold interest
in all real property (including all buildings, improvements and fixtures
thereon) used in the operation of the Campana Companies Business (the "Campana
Companies Real Property"). The Campana Companies own no real property. Except
for Permitted Liens, and for the items set forth on Schedule 2.12, there are no
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Liens on Campana Companies' interest in any of the Campana Companies Real
Property.
(b) There are no parties in possession of any portion of the Campana
Companies Real Property other than Campana Companies, whether as sublessees,
subtenants at will or trespassers.
(c) To the knowledge of Campana Companies, there is no law,
ordinance, order, regulation or requirement now in existence or under active
consideration by any Governmental Entity, that would require, under the
provisions of any of the Campana Companies Leases (as hereinafter defined), any
material expenditure by the Campana Companies to modify or improve any of the
Campana Companies Real Property to bring it into compliance therewith.
2.13 LEASES. Schedule 2.13 hereto sets forth a list of all leases pursuant
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to which either of the Campana Companies leases, as lessor or lessee, real or
personal property used in operating the Campana Companies Business or otherwise
(the "Campana Companies Leases"). Copies of the Campana Companies Leases, all of
which have previously been provided to Parent, are true and complete copies
thereof. All of the Campana Companies Leases are valid, binding and enforceable
against Campana Companies and, to the knowledge of Campana Companies, against
the other parties thereto, in accordance with their respective terms, and there
is not under any such Campana
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Companies Lease any existing default by Campana Companies, or, to the knowledge
of Campana Companies, by any other party thereto, or any condition or event
that, with notice or lapse of time or both, would constitute a default. The
Campana Companies have not received notice that the lessor of any of the Campana
Companies Leases intends to cancel, suspend or terminate such Campana Companies
Lease or to exercise or not exercise any option thereunder.
2.14 CONTRACTS. Schedule 2.14 hereto sets forth a true and complete list
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of all contracts, agreements and commitments (whether written or oral) to which
either of the Campana Companies is, directly or indirectly, a party (in its own
name or as a successor in interest), or by which it or any of its properties or
assets is otherwise bound, including any service agreements, customer
agreements, supplier agreements, agreements to lend or borrow money, shareholder
agreements, employment agreements, agreements relating to Campana Companies
Intellectual Property Rights and the like (collectively, the "Campana Companies
Contracts"); excepting only those Campana Companies Contracts which involve less
than $10,000 and are cancelable, without penalty, on no more than 90 days'
notice. The aggregate value of all payment obligations and rights to receive
payments, under agreements, contracts and commitments (whether oral or in
writing) to which Campana Companies is a party or by which it or any of its
properties or assets is otherwise bound, and that are not listed on Schedule
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2.14, is less than $50,000 (calculating such value by adding together the value
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of rights and obligations, and not by determining the net amount thereof).
True and complete copies of all Campana Companies Contracts (or a true and
complete narrative description of any oral Campana Companies Contract) have
previously been provided to Parent. Neither the Campana Companies nor, to the
knowledge of Campana Companies, any other party to any of the Campana Companies
Contracts (x) is in default under (nor does there exist any condition that, with
notice or lapse of time or both, would cause such a default under) any of the
Campana Companies Contracts, or (y) has waived any right it may have under any
of the Campana Companies Contracts, the waiver of which would have a material
adverse effect on the business, assets or financial condition or prospects of
Campana Companies. All of the Campana Companies Contracts constitute the valid
and binding obligations of the Campana Company that is a party thereto,
enforceable in accordance with their respective terms, and, to the knowledge of
Campana Companies, of the other parties thereto.
2.15 DIRECTORS AND OFFICERS. Schedule 2.15 hereto sets forth a list, as of
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the Closing Date, of the name of each director and officer of the Campana
Companies and the position(s) held by each.
2.16 PAYROLL INFORMATION. Attached to Schedule 2.16 hereto is a true and
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complete copy of the payroll report of the Campana Companies dated June 30,
1998, showing all current employees and administrators of Campana Companies and
their current levels of compensation, other than bonuses and other extraordinary
compensation, all of which bonuses and extraordinary compensation are set forth
on Schedule 2.16. Campana Companies has paid all compensation required to be
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paid to employees or administrators of Campana Companies on or prior to the date
hereof other than compensation accrued in the current pay period.
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2.17 LITIGATION. Except as set forth on Schedule 2.17 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
Campana Companies, threatened against or affecting either of the Campana
Companies or the Campana Companies Business, nor is there any judgment, decree,
injunction or order of any applicable Governmental Entity, mediator or
arbitrator outstanding against either of the Campana Companies.
2.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 2.18 hereto, there are no
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employee benefit plans, agreements or arrangements maintained by the Campana
Companies (collectively, "Campana Companies Benefit Plans"), including (i)
current or deferred compensation, pension, profit sharing, vacation or severance
plans or programs; or (ii) medical, hospital, accident, disability or death
benefit plans. All Campana Companies Benefit Plans are administered in
accordance with, and are in material compliance with, all applicable laws and
regulations. No default exists with respect to the obligations of the Campana
Companies under any Campana Companies Benefit Plan.
(b) Neither of the Campana Companies is a party to any collective
bargaining agreement; no collective bargaining agent has been certified as a
representative of any of the employees of the Campana Companies; no
representation campaign or election is now in progress with respect to any
employee of the Campana Companies; and there are no labor disputes, grievances,
controversies, strikes or requests for union representation pending, or, to the
knowledge of Campana Companies, threatened, relating to or affecting the Campana
Companies Business. To the knowledge of Campana Companies, no event has occurred
that could give rise to any such dispute, controversy, strike or request for
representation.
2.19 LIABILITY UNDER BENEFIT PLANS.
(a) Except as disclosed in Schedule 2.19 hereto or pursuant to the
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terms of the Campana Companies Benefit Plans, neither the execution and delivery
hereof nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including severance, unemployment compensation or golden
parachute) becoming due to any director, administrator or other employee of the
Campana Companies, (ii) increase any benefit otherwise payable under any Campana
Companies Benefit Plan or (iii) result in the acceleration of the time of
payment or vesting of any such benefit to any extent.
(b) Neither of the Campana Companies has incurred any liability to
any Governmental Entity in respect of (i) social security withholdings or
payments, or (ii) any Campana Companies Benefit Plan, that remains unpaid.
2.20 TAXES.
(a) Each of the Campana Companies has duly and timely filed all
federal, provincial and local income, value added, economic activities,
franchise, excise, real and personal property and other tax returns and reports,
including extensions, required to have been filed by it on
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or prior to the Closing Date. Each of the Campana Companies has duly and timely
paid all taxes and other governmental charges, and all interest and penalties
with respect thereto, required to be paid by it (whether by way of withholding
or otherwise) to any federal, provincial, local or other taxing authority
(except to the extent the same are being contested in good faith, and adequate
reserves therefor have been provided in the Campana Companies Financial
Statements). As of the Closing Date, all deficiencies proposed as a result of
any audit have been paid or settled.
(b) Neither of the Campana Companies is a party to, or bound by, or
otherwise in any way obligated under, any tax sharing or similar agreement.
2.21 COMPLIANCE WITH APPLICABLE LAWS. The Campana Companies hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Campana Companies, as appropriate, and to carry on the Campana
Companies Business as now conducted (the "Campana Companies Permits"). To the
knowledge of Campana Companies, the Campana Companies are in material compliance
with all applicable laws, ordinances and regulations and the terms of the
Campana Companies Permits. Except as set forth on Schedule 2.21 hereto, the
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Acquisition and the transactions contemplated hereby do not violate, or
necessitate any notice, consent or approval under, any of the Campana Companies
Permits. Schedule 2.21 sets forth a true and complete list of all Campana
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Companies Permits, true and complete copies of which have previously been
provided to Parent.
2.22 BOARD OF DIRECTORS/SHAREHOLDER CONSENT. The respective Boards of
Directors of the Campana Companies, and the Campana Companies Shareholders, have
adopted and approved this Agreement and the transactions contemplated hereby
(including the Acquisition).
2.23 BROKERS. Except as set forth on Schedule 2.23 hereto, no broker or
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finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of the Campana Companies.
2.24 ENVIRONMENTAL MATTERS.
(a) To the knowledge of Campana Companies, no real property currently
or formerly owned or operated by either of the Campana Companies is contaminated
with any Hazardous Substance (as hereinafter defined).
(b) Neither of the Campana Companies is a party to any litigation or
administrative proceeding nor, to the knowledge of Campana Companies, is any
litigation or administrative proceeding threatened against it, that, in either
case, asserts or alleges that it (i) violated any Environmental Law (as
hereinafter defined); (ii) is required to clean up, remove or take remedial or
other responsive action due to the disposal, deposit, discharge, leak or other
release of any Hazardous Substance; or (iii) is required to pay all or a portion
of the cost of any past, present or future cleanup, removal or remedial or other
action that arises out of or is related to the disposal, deposit, discharge,
leak or other release of any Hazardous Substance.
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(c) To the knowledge of Campana Companies, there are not now nor have
there previously been tanks or other facilities on, under, or at any real
property owned, leased, used or occupied by the Campana Companies containing
materials that, if known to be present in soil or ground water, would require
cleanup, removal or other remedial action under Environmental Law.
(d) To the knowledge of Campana Companies, neither of the Campana
Companies is subject to any judgment, order or citation related to or arising
out of any Environmental Law and has not been named or listed as a potentially
responsible party by any Governmental Entity in a matter related to or arising
out of any Environmental Law.
(e) For purposes hereof, (i) the term "Environmental Law" means any
applicable multinational, federal, provincial or local law (including statutes,
regulations, ordinances, codes, rules, judicial opinions and other governmental
restrictions and requirements) relating to the discharge of air pollutants,
water pollutants, noise, odors or process waste water, or otherwise relating to
the environment or hazardous or toxic substances; and (ii) the term "Hazardous
Substance" means any toxic or hazardous substance that is regulated by or under
authority of any Environmental Law, including any petroleum products, asbestos
or polychlorinated biphenyls.
2.25 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as provided
in Schedule 2.25 hereto, no officer, director, administrator, shareholder or
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employee of the Campana Companies and no family member (including a spouse,
parent, sibling or lineal descendent of any of the foregoing), has any direct or
indirect material interest in any material customer, supplier or competitor of
the Campana Companies, or in any Person from whom or to whom the Campana
Companies lease any real or personal property, or in any other Person with whom
the Campana Companies are doing business whether directly or indirectly
(including as a debtor or creditor), whether in existence as of the Closing Date
or proposed, other than the ownership of stock of publicly traded corporations.
2.26 ACCOUNTS RECEIVABLE. All accounts, notes, contracts and other
receivables of the Campana Companies (collectively, "Campana Companies Accounts
Receivable") were acquired by the Campana Companies in the ordinary course of
business arising from bona fide transactions. To the knowledge of Campana
Companies, there are no set-offs, counterclaims or disputes asserted with
respect to any Campana Companies Accounts Receivable that would result in claims
in excess of the reserve for bad debts set forth on the Campana Companies
Financial Statements and, to the knowledge of Campana Companies and subject to
such reserve, all Campana Companies Accounts Receivable are collectible in full.
The Campana Companies have previously furnished Parent with a true and complete
aging report prepared as of April 30, 1998 which shows the time elapsed since
invoice date for all Campana Companies Accounts Receivable as of such date.
2.27 ACCOUNTS PAYABLE. All material accounts, notes, contracts and other
amounts payable of the Campana Companies (collectively, "Campana Companies
Accounts Payable") are currently within their respective terms, and are neither
in default nor otherwise past due by more
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than 90 days. The Campana Companies have previously provided Parent with a true
and complete aging report prepared as of April 30, 1998 which shows the time
elapsed since invoice date for all Campana Companies Accounts Payable as of such
date.
2.28 INSURANCE. The Campana Companies currently maintain, in full force
and effect, all insurance policies that are required to be maintained for the
conduct of the Campana Companies Business or the ownership of Campana Companies'
property (both real and personal) (collectively, the "Campana Companies
Insurance Policies"). The Campana Companies Insurance Policies are listed on
Schedule 2.28 hereto, and true and complete copies of all Campana Companies
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Insurance Policies have previously been provided to Parent. The Campana
Companies (a) are not in default regarding the provisions of any Campana
Companies Insurance Policy; (b) have paid all premiums due thereunder; and (c)
have not failed to present any notice or material claim thereunder in a due and
timely fashion.
2.29 BANKRUPTCY. The Campana Companies have not filed a petition or
request for reorganization or protection or relief under applicable bankruptcy
laws, made any general assignment for the benefit of creditors, or consented to
the appointment of a receiver or trustee, including a custodian under applicable
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
2.30 CAMPANA COMPANIES DEBT. As of the date hereof, the Campana Companies
Debt is not in excess of $18,463.
2.31 NON-U.S. PERSONS; INVESTMENT PURPOSE. Each Campana Companies Seller
represents that he is a Spanish national and not a "U.S. person" as such term is
defined in the Securities Act of 1933, as amended (the "Securities Act"). Each
Campana Companies Shareholder further represents that he (a) has been offered
and is acquiring the Parent Stock outside the United States and solely for his
own account and benefit for investment and not with a view to, or for sale in
connection with, any distribution thereof; and (b) will not, directly or
indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of
any Parent Stock (or solicit any offers to buy, purchase or otherwise acquire or
take a pledge of any such shares) in the United States or to or for the benefit
or account of any U.S. person, or otherwise, or conduct any hedging transaction
involving Parent Stock, except in compliance with the Securities Act and
Regulation S or the other rules and regulations thereunder; other applicable
laws, rules and regulations; and the Second Amended and Restated Stockholders'
Agreement of Parent, dated December 17, 1997 (the "Stockholders' Agreement) It
is understood and agreed by the parties hereto that Parent is required to refuse
to register any transfer of Parent Stock not made in accordance with the
provisions of said Regulation S, or pursuant to registration under the
Securities Act or to an exemption therefrom.
2.32 RESTRICTIONS ON TRANSFER. Each Campana Companies Shareholder
acknowledges that (a) the Parent Stock received by him hereunder has not been
registered under the Securities Act; (b) the Parent Stock may be required to be
held indefinitely, and he must continue to bear the economic risk of the
investment in such shares unless such shares are subsequently registered under
the Securities Act or Regulation S thereunder or another exemption from such
registration is
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available; (c) there may not be any public market for the Parent Stock in the
foreseeable future; (d) Rule 144 promulgated under the Securities Act is not
presently available with respect to sales of any securities of Parent, and such
Rule is not anticipated to be available in the foreseeable future; (e) when and
if Parent Stock may be disposed of without registration in reliance upon Rule
144, such disposition can be made only in limited amounts and in accordance with
the terms and conditions of such Rule; (f) if the exemption afforded by Rule 144
is not available, public sale without registration will require the availability
of an exemption under the Securities Act; (g) the Parent Stock is subject to the
terms and conditions of the Stockholders' Agreement; (h) restrictive legends
shall be placed on the certificates representing Parent Stock; and (i) a
notation shall be made in the appropriate records of Parent indicating that
Parent Stock is subject to restrictions on transfer and, if Parent should in the
future engage the services of a stock transfer agent, appropriate stop-transfer
instructions will be issued to such transfer agent with respect to Parent Stock.
2.33 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION. Each
Campana Companies Shareholder represents and warrants that (a) his financial
situation is such that he can afford to bear the economic risk of holding Parent
Stock acquired by him hereunder for an indefinite period; (b) he can afford to
suffer the complete loss of such Parent Stock; (c) he has been granted the
opportunity to ask questions of, and receive answers from, representatives of
Parent concerning the terms and conditions of the Parent Stock and to obtain any
additional information that he deems necessary; (d) his knowledge and experience
in financial business matters is such that he is capable of evaluating the
merits and risk of ownership of the Parent Stock; (e) he has carefully reviewed
the terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; and (f) he (i) has reviewed the Private Placement
Memorandum of Parent dated July__, 1998 (the "Memorandum"), (ii) has carefully
examined the Memorandum and has had an opportunity to ask questions of; and
receive answers from, representatives of Parent, and to obtain additional
information concerning Parent and its Subsidiaries (as hereinafter defined), and
(iii) does not require additional information regarding Parent or its
Subsidiaries in connection with the Acquisition.
2.34 DISCLOSURE. No statement of fact by either of the Campana Companies
or any Campana Companies Seller contained herein and no written statement of
fact furnished by either of the Campana Companies or any Campana Companies
Seller to Parent or Sub in connection herewith contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements herein or therein contained not materially misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to the
Campana Companies and the Campana Companies Sellers, which representations and
warranties shall survive the Closing in accordance with Section 8.1 hereof, as
follows:
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3.1 ORGANIZATION AND QUALIFICATION. Each of Parent and its Subsidiaries
(as defined in Section 8.9 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Each of Parent and its Subsidiaries has the requisite corporate
power and authority to carry on its business as it is now being conducted and is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and the
public deed of incorporation and By-Laws of Sub, as in effect on the date
hereof, are attached to Exhibits "A-1" and "A-2" hereto, respectively.
-----------------------
3.2 AUTHORITY. Each of Parent and Sub has the necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by the Campana Companies and the Campana
Companies Sellers, constitutes the valid and binding obligation of each of
Parent and Sub, enforceable against each of Parent and Sub in accordance with
its terms, subject, in each case, to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application relating to or affecting
creditors' rights and to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing.
3.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 3.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or Bylaws
of Parent or the public deed of incorporation or By-Laws of Sub, or the
organizational documents of any other Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
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(d) result in the creation of any Lien on any of the property or
assets of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for
compliance with any applicable requirements of any applicable securities laws);
or (ii) any other Person.
3.4 LITIGATION. Except as set forth on Schedule 3.4 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
3.5 BROKERS. Except as disclosed on Schedule 3.5 hereto, no broker or
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finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Parent or Sub.
3.6 PARENT STOCK.
(a) As of the date hereof the authorized capital stock of Parent
consists of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 11,826,525 shares are
validly issued and outstanding (without taking into account any shares of Parent
Stock to be issued pursuant hereto), fully paid and nonassessable; (ii) 750,000
shares of blank check preferred stock, (A) 250,000 of which have been designated
as Class A Convertible Preferred Stock, of which 174,526 shares are validly
issued and outstanding, fully paid and nonassessable, (B) 200,000 of which have
been designated as Class B Convertible Preferred Stock, of which 98,767 shares
are validly issued and outstanding, fully paid and nonassessable, and (C) 15,000
of which have been designated as Class C Convertible Preferred Stock, of which
9,232 shares are validly issued and outstanding, fully paid and nonassessable.
Except as set forth on Schedule 3.6 hereto, there are no options, warrants,
------------
calls, agreements, commitments or other rights presently outstanding that would
obligate Parent to issue, deliver or sell shares of its capital stock, or to
grant, extend or enter into any such option, warrant, call, agreement,
commitment or other right. In addition to the foregoing, as of the Closing Date,
Parent has no bonds, debentures, notes or other indebtedness issued or
outstanding that have voting rights in Parent.
(b) When delivered to the Campana Companies Shareholders in accordance
with the terms hereof, the Parent Stock will be (i) duly authorized, fully paid
and nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by United States federal and state
securities laws.
3.7 SUBSIDIARIES. Except as set forth on Schedule 3.7 hereto, Parent has
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no subsidiaries and does not otherwise own or control, directly or indirectly,
any equity interest in,
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or any security convertible into an equity interest in, any Entity. Schedule 3.7
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lists the name of each of the Subsidiaries of Parent, and indicates their
respective jurisdictions of incorporation.
3.8 FINANCIAL STATEMENTS. Parent has heretofore furnished the Campana
Companies with a true and complete copy of (a) the audited financial statements
of iXL Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended
December 31, 1993, 1994 and 1995, and for the four month period ended April 30,
1996; (b) the audited combined financial statements for Creative Video, Inc.
(n/k/a iXL, Inc.), Creative Video Library, Inc. and Entrepreneur Television,
Inc. for the years ended December 31, 1993, 1994 and 1995, and for the four
month period ended April 30, 1996; (c) the audited consolidated financial
statements for Parent and its Subsidiaries for the eight months ended December
31, 1996 and for the year ended December 31, 1997; and (d) the unaudited
consolidated financial statements for Parent and its Subsidiaries for the three
month period ended March 31, 1998 (all of the foregoing, collectively, "Parent
Financial Statements"). The Parent Financial Statements present fairly in all
material respects the consolidated financial position, results of operations,
shareholders' equity and cash flow of Parent at the respective dates or for the
respective periods to which they apply. Except as disclosed therein, such
statements and related notes have been prepared in accordance with GAAP
consistently applied throughout the periods involved (except, in the case of the
unaudited financial statements, for the exclusion of footnotes and normal year
end adjustments).
3.9 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 3.9 hereto,
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neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997 that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Parent and its Subsidiaries, taken as a whole; (b)liabilities reflected on
the Parent Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
3.10 COMPLIANCE WITH APPLICABLE LAWS. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
3.11 BOARD OF DIRECTORS/SHAREHOLDER CONSENT. The board of directors of
Parent, and both the board of directors and shareholder of Sub, have, by
unanimous written consent or other action, adopted and approved this Agreement
and the transactions contemplated hereby (including the Acquisition).
3.12 BANKRUPTCY. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented
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to the appointment of a receiver or trustee, including a custodian under the
United States bankruptcy laws, whether such receiver or trustee is appointed in
a voluntary or involuntary proceeding.
3.13 ABSENCE OF CHANGES. Except as provided in Schedule 3.13 hereto,
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since December 31, 1997, there has not been (a) any transaction, commitment,
dispute or other event or condition (financial or otherwise) of any character
(whether or not in the ordinary course of business) individually or in the
aggregate that has had, or would reasonably be expected to have, a material
adverse effect on the business, properties, assets, condition (financial or
otherwise), liabilities or results of operations of Parent and its Subsidiaries,
taken as a whole; (b) any damage, destruction or loss, whether or not covered by
insurance, which has had, or would reasonably be expected to have, a material
adverse effect on the business, properties, assets, condition (financial or
otherwise), liabilities or results of operations of Parent and its Subsidiaries,
taken as a whole; (c) any entry into any commitment or transaction material to
Parent and its Subsidiaries, taken as a whole (including any borrowing or sale
of assets) except in the ordinary course of business consistent with past
practice; (d) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) with respect to Parent's
capital stock; (e) any material change in Parent's accounting principles,
practices or methods; (f) any split, combination or reclassification of any of
Parent's capital stock, or the issuance or authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for, shares of
Parent's capital stock; or (g) any agreement (whether or not in writing),
arrangement or understanding to do any of the foregoing.
3.14 TAXES. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent and
its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the Closing Date,
all deficiencies proposed as a result of any audits have been paid or settled.
3.15 DISCLOSURE. No statement of fact by Parent or Sub contained herein
and no written statement of fact furnished or to be furnished by Parent or Sub
to the Campana Companies in connection herewith contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements herein or therein contained not
misleading.
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ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 CONDUCT OF BUSINESS BY THE CAMPANA COMPANIES PENDING THE ACQUISITION.
From and after the date hereof, prior to the Closing Date, except as
contemplated hereby, unless Parent shall otherwise agree in writing, each of the
Campana Companies shall carry on its business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted, use reasonable
efforts to preserve intact its present business organization, keep available the
services of its employees and preserve its relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with the Campana Companies to the end that their goodwill and on-going
businesses shall not be impaired in any material respect at the Closing Date.
Without limiting the generality of the foregoing, and except as contemplated
hereby, unless Parent shall otherwise agree in writing, prior to the Closing
Date, neither of the Campana Companies shall, directly or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities in respect of; in lieu of or in substitution for, shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire, any share of
capital stock of the Campana Companies or any other equity security thereof or
any right, warrant, or option to acquire any such share or other security;
(b) issue, deliver, sell, pledge or otherwise encumber any share of
its capital stock, any other voting security issued by the Campana Companies or
any security convertible into, or any right, warrant or option to acquire any
such share or voting security;
(c) amend its public deed of incorporation, By-Laws or other
comparable organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of; or by any other manner,
any business or any Entity or division thereof; or (ii) any assets that are
material, individually or in the aggregate, to the Campana Companies;
(e) subject to a Lien or sell, lease or otherwise dispose of any of
its properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of the Campana
Companies, guarantee any debt security of another Person or enter into any "keep
well" or other agreement to maintain the financial condition of another Person,
make any loan, advance or capital contribution to, or investment in, any other
Person, or settle or compromise any material claim or litigation; or
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(g) authorize any of; or commit or agree to take any of; the foregoing
actions.
4.2 ACCESS TO INFORMATION. From the date hereof through the Closing Date,
the Campana Companies and Parent shall afford to the other of them and the
other's accountants, counsel and other representatives reasonable access during
normal business hours (and at such other times as the parties may mutually
agree) upon reasonable prior notice and approval, which shall not be
unreasonably withheld, to its properties, books, contracts, commitments, records
and personnel and, during such period, shall furnish promptly to the other of
them all information concerning its business, properties and personnel as the
other may reasonably request. Parent and the Campana Companies, and their
respective accountants, counsel and other representatives, shall, in the
exercise of the rights described in this Section 4.2, not unduly interfere with
the operation of the business of the other of them.
4.3 FILINGS; TAX ELECTIONS. The Campana Companies shall promptly provide
Parent with copies of all filings made by the Campana Companies with any
Governmental Entity in connection herewith and the transactions contemplated
hereby. The Campana Companies shall, before settling or compromising any
material income tax liability of the Campana Companies, consult with Parent and
its advisors as to the positions and elections that will be taken or made with
respect to such matter.
4.4 PUBLIC ANNOUNCEMENTS. The parties agree that, except as may otherwise
be required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Acquisition. Any such disclosure shall be coordinated by
Parent, and none of the Campana Companies Shareholders shall make any such
disclosure without the prior written consent of Parent.
4.5 INDIRECT TAXES AND EXPENSES. Parent agrees that, to the extent it is
legally able to do so, Sub will pay all documentary stamps, filing fees and
recording fees, if any, and any penalties or interest with respect thereto,
payable in connection with consummation of the Acquisition.
4.6 FURTHER ASSURANCES. From time to time after the Closing Date, upon
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof. The Campana Companies Sellers shall cooperate to ensure that
(a) each Sole Administrator of the Campana Companies shall resign as such as
soon as possible; (b) they promptly deliver all documents and items of the
Campana Companies (including, by way of example only, client lists, software,
shareholders books, minute books, keys and invoices) to Sub; (c) they furnish
any information regarding the Campana Companies that is requested by Sub from
time to time; and (d) they cooperate with Sub at its request from time to time
in relationships with banks, clients and other Persons.
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4.7 FUTURE EMPLOYMENT. Messrs. Francisco Dominguez Heredia, Javier
Dominguez Heredia and Victor Manuel Fraile Blanco shall, effective as of the
Closing Date, each enter into an employment agreement with Sub, substantially in
the form of Exhibit "E" hereto ("Employment Agreements") or in such other form
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as agreed between each of them and Sub.
4.8 POST CLOSING.
(a) Within a reasonable period of time after the Closing, Sub will
permit the Campana Companies Shareholders, or one or more Persons designated by
such Shareholders and approved by Parent, to subscribe to up to 10% of Sub's
then issued and outstanding share capital, and will if necessary amend its By-
Laws accordingly to provide for an increase in its share capital.
(b) If; within one year of the Closing Date, Parent receives a written
offer from a third party to Purchase Sub as a stand-alone Entity, then Parent
will furnish the Campana Companies Shareholders notice thereof; providing them a
right of first negotiation. Parent may accept such third party offer unless (i)
within 10 business days of such notice, it has received a written offer from
such Shareholders, which in Parent's reasonable judgment at least matches each
term of such third party offer; and (ii) in accordance with the terms of that
matching offer, the transaction with such Shareholders actually closes within 30
days thereafter.
ARTICLE V
CONDITIONS PRECEDENT
5.1 CONDITIONS TO OBLIGATION OF THE CAMPANA COMPANIES AND THE CAMPANA
COMPANIES SHAREHOLDERS TO EFFECT THE ACQUISITION. The obligations of the Campana
Companies and the Campana Companies Shareholders to effect the Acquisition shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) Parent and Sub shall have performed in all material respects their
respective agreements contained herein required to be performed at or prior to
the Closing Date, and the representations and warranties of Parent and Sub
contained herein shall be true when made and (except for representations and
warranties made as of a specified date, which need only be true as of such date)
at and as of the Closing Date as if made at and as of such time, except as
contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to the Campana Companies at the Closing, a closing certificate and
incumbency certificate, substantially in the form of Exhibit "A-1" hereto, and
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(ii) the appropriate officers of Sub shall have executed and delivered to the
Campana Companies at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-2" hereto;
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(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule
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5.1(c) hereto;
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(d) there shall have been delivered to each of the Campana Companies
Shareholders at the Closing, duly executed by Parent, an Agreement to be Bound
to the Registration Rights Agreement of Parent, dated as of the Closing Date
(the "Agreement to be Bound to the Registration Rights Agreement"), in the form
of Exhibit "B" hereto;
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(e) The Employment Agreements shall have been executed by Sub and
delivered to the respective employees; and
(f) Campana Companies shall have received from Parent and Sub such
other documents as Campana Companies' counsel shall have reasonably requested,
in form and substance reasonably satisfactory to Campana Companies' counsel.
5.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE ACQUISITION.
The obligations of Parent and Sub to effect the Acquisition shall be subject to
the fulfillment, at or prior to the Closing Date, of the following conditions:
(a) The Campana Companies and the Campana Companies Sellers shall have
performed in all material respects their respective agreements contained herein
required to be performed at or prior to the Closing Date, and the
representations and warranties of the Campana Companies and the Campana
Companies Sellers contained herein shall be true when made and (except for
representations and warranties made as of a specified date, which need only be
true as of such date) at and as of the Closing Date as if made at and as of such
time, except as contemplated hereby;
(b) the appropriate officers of each of the Campana Companies shall
have executed and delivered to Parent at the Closing, a closing certificate and
incumbency certificate, substantially in the form of Exhibits "C-1" and "C-2"
------------------------
hereto;
(c) The Campana Companies and the Campana Companies Sellers shall have
obtained or caused to be obtained all of the Consents, if any, listed on
Schedule 5.2(c) hereto;
- --------------
(d) there shall have been delivered to Parent at the Closing, duly
executed by each of the Campana Companies Shareholders and countersigned by
Javier Dominguez Heredia, (i) an Agreement to be Bound to the Stockholders'
Agreement, in the form of Exhibit "D" hereto; and (ii) an Agreement to be Bound
----------
to the Registration Rights Agreement;
(e) as of the date three business days prior to the Closing Date the
Campana Companies Debt shall be no greater than $18,463;
(f) The Employment Agreements shall have been executed by the
respective employees and delivered to Sub;
22
<PAGE>
(g) Parent shall have received from the Campana Companies or the
Campana Companies Sellers, as the case may be, such other documents as Parent's
counsel shall have reasonably requested, in form and substance reasonably
satisfactory to Parent's counsel; and
(h) Parent shall have received evidence satisfactory to it that at the
Closing the assets and properties used in the Campana Companies Business are
free and clear of all Liens other than Permitted Liens (as hereinafter defined).
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION BY PARENT.
(a) Parent shall indemnify and hold the Campana Companies Sellers and
the Campana Companies' directors, officers and employees (collectively, the
"Campana Companies Indemnified Parties") harmless from and against, and agree
promptly to defend each of the Campana Companies Indemnified Parties from and
reimburse each of the Campana Companies Indemnified Parties for, any and all
losses, damages, costs, expenses, liabilities, obligations and claims of any
kind (including reasonable attorney fees and other legal costs and expenses)
(collectively, a "Campana Companies Loss") that any of the Campana Companies
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Parent or Sub at the Closing in accordance
with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform,
satisfy and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations hereunder or under any of the documents and materials
delivered by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of; or in
any way related to, any of the matters referred to in this Section 6.1(a).
(b) Notwithstanding any other provision hereof to the contrary,
Parent shall not have any liability under Section 6.1(a)(i) above (i) unless the
aggregate of all Campana Companies Losses fore which Parent would be liable but
for this sentence exceeds, on a cumulative basis, an amount equal to $25,000,
and then only to the extent of such excess, (ii) for amounts in excess of
$240,000 in the aggregate, and (iii) unless the Campana Companies Shareholders
have asserted a claim with respect to the matters set forth in Section
6.1(a)(i), or 6.1(a)(iii) to the extent applicable to Section 6.1(a)(i), within
two years of the Closing Date. Notwithstanding any implication to the contrary
contained herein, the parties acknowledge and agree that a decrease in the value
of Parent Stock would not, by itself; constitute a Campana Companies Loss,
unless and to the extent a
23
<PAGE>
decrease in the value of Parent Stock has been demonstrated to be as a result of
any event described in Sections 6.1(a)(i), (ii) or (iii) above.
6.2 INDEMNIFICATION BY THE CAMPANA COMPANIES SELLERS.
(a) The Campana Companies Sellers, jointly and severally, shall
indemnify and hold Parent, Sub, Surviving Corporation and their respective
shareholders, directors, officers and employees (collectively, the "Parent
Indemnified Parties") harmless from and against, and agree to defend promptly
each of the Parent Indemnified Parties from and reimburse each of the Parent
Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including reasonable attorneys'
fees and other legal costs and expenses) (collectively, a "Parent Loss") that
any of the Parent Indemnified Parties may at any time suffer or incur, or become
subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations
and warranties made by Campana Companies or the Campana Companies Shareholders
or Owners in or pursuant hereto, or in any instrument certificate or affidavit
delivered by any of the same at the Closing in accordance with the provisions
hereof;
(ii) any failure by Campana Companies or any of the Campana
Companies Shareholders to carry out, perform, satisfy and discharge any of their
respective covenants, agreements, undertakings, liabilities or obligations
hereunder or under any of the documents and materials delivered by Campana
Companies pursuant hereto; and
(iii) any suit, action or other proceeding arising out of;
or in any way related to, any of the matters referred to in this Section 6.2.
(b) Notwithstanding the above, none of the Campana Companies Sellers
shall have any liability under Section 6.2(a)(i) above (i) unless the aggregate
of all Parent Losses for which the Campana Companies Sellers would be liable but
for this sentence exceeds, on a cumulative basis, an amount equal to $25,000,
and then only to the extent of such excess, (ii) for amounts in excess of
$240,000 in the aggregate, and (iii) unless Parent has asserted a claim with
respect to the matters set forth in Sections 6.2(a)(i), or 6.2(a)(iii) (to the
extent applicable to Section 6.2(a)(i)) within two years of the Closing Date,
except with respect to the matters arising under Sections 2.18, 2.19, 2.20 or
2.24 hereof; in which event Parent must have asserted a claim within the
applicable statute of limitations. Notwithstanding any implication to the
contrary contained herein, the parties acknowledge and agree that a decrease in
the value of Parent Stock would not, by itself; constitute a Parent Loss, unless
and to the extent a decrease in the value of Parent Stock has been demonstrated
to be as a result of any event described in Sections 6.2(a)(i), (ii) or (iii)
above.
6.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND
(a) A party entitled to be indemnified pursuant to Section 6.1 or 6.2
hereof; as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the
24
<PAGE>
"Indemnifying Party") in writing of any claim or demand (a "Claim") that the
Indemnified Party has determined has given or could give rise to a rights of
indemnification hereunder. Subject to the Indemnifying Party's rights to defend
in good faith third party claims as hereinafter provided, the Indemnifying Party
shall satisfy its obligations under this Article VI within 30 days after the
receipt of written notice thereof from the Indemnified Party. Any amounts paid
thereafter shall include interest thereon for the period commencing at the end
of such 30-day period and ending on the actual date of payment, at a rate of 15%
per annum, or, if lower, at the highest rate of interest permitted by applicable
law at the time of such payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section a 6.1 or 6.2 hereof, as the case
may be, the Indemnifying Party shall have the right, at its sole cost and
expense, to employ counsel of its own choosing to defend any such Claim asserted
against the Indemnified Party. Notwithstanding anything to the contrary in the
preceding sentence, if the Indemnified Party (i) reasonably believes that its
interests with respect to a Claim (or any material portion thereof) are in
conflict with the interests of the Indemnifying Party with respect to such Claim
(or portion thereof), and (ii) promptly notifies the Indemnifying Party, in
writing, of the nature of such conflict, then the Indemnified Party shall be
entitled to choose, at the sole cost and expense of the Indemnifying Party,
independent counsel to defend such Claim (or the conflicting portion thereof).
The Indemnified Party shall have the right to participate in the defense of any
Claim at its own expense (except to the extent provided in the preceding
sentence), but the Indemnifying Party shall retain control over such litigation
(except as provided in the preceding sentence). The Indemnifying Party shall
notify the Indemnified Party in writing, as promptly as possible (but in any
case before the due date for the answer or response to a Claim) after receipt of
the notice of Claim given by the Indemnified Party to the Indemnifying Party
under Section 6.3(a) hereof, of its election to defend in good faith any such
third party Claim. For so long as the Indemnifying Party is defending in good
faith any such Claim asserted by a third party against the Indemnified Party,
the Indemnified Party shall not settle or compromise, such Claim without the
prior written consent of the Indemnifying Party. The Indemnified Party shall
cooperate with the Indemnifying Party in connection with any such defense and
shall make available to the Indemnifying Party or its agents all records and
other materials in the Indemnified Party's possession reasonably required by it
for its use in contesting any third party Claim; provided, however, that the
Indemnifying Party shall have agreed, in writing, to keep such records and other
materials confidential except (i) to the extent required for defense of the
relevant Claim, or (ii) as required by law or court order. Whether or not the
Indemnifying Party elects to defend any such Claim, the Indemnified Party shall
have no obligations to do so. Within 30 days after a final determination
(including a settlement) has been reached with respect to any Claim contested
pursuant to this Section 6.3(b), the Indemnifying Party shall satisfy its
obligations hereunder with respect thereto. Any amount paid thereafter shall
include interest thereon for the period commencing at the end of such 30-day
period and ending on the actual date of payment, at a rate of 15% per annum, or,
if lower, at the highest rate of interest permitted by applicable law at the
time of such payment.
25
<PAGE>
6.4 PAYMENTS. Any amount payable under this Article VI shall be paid in
U.S. Dollars.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Acquisition Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual written consent of Parent and the Campana Companies;
(b) by the Campana Companies, upon a material breach hereof on the
part of Parent or Sub which has not been cured and which would cause any
condition set forth in Section 5.1 hereof to be incapable of being satisfied by
July 31, 1998;
(c) by Parent, upon a material breach hereof on the part of either of
the Campana Companies or any of the Campana Companies Shareholders which has not
been cured and which would cause any condition set forth in Section 5.2 hereof
to be incapable of being satisfied by July 31, 1998;
(d) by Parent or the Campana Companies if any court of competent
jurisdiction shall have issued, enacted, entered, promulgated or enforced any
order, judgment, decree, injunction or ruling which restrains, enjoins or
otherwise prohibits the Acquisition and such order, judgment, decree, injunction
or ruling shall have become final and nonappealable; or
(e) by either Parent or the Campana Companies if the Acquisition shall
not have been consummated on or before July 31, 1998 (provided the terminating
party is not otherwise in material breach of its representations, warranties or
obligations hereunder).
7.2 FEES AND EXPENSES.
(a) If the Acquisition is consummated, or if the Acquisition is not
consummated for a reason other than the willful and material breach hereof by a
party, all fees and expenses (including agents, counsel and other advisors)
incurred in connection herewith and the transactions contemplated hereby shall
be paid by the party incurring such fees or expenses.
(b) If the Acquisition is not consummated because of a willful and
material breach hereof by any party, the nonbreaching party or parties shall be
entitled to pursue all legal and equitable remedies against the breaching party
for such breach including specific performance and all fees and expenses
incurred by the nonbreaching party or parties in connection with enforcing its
or their rights hereunder with respect to such breach shall be paid by the
breaching party.
26
<PAGE>
7.3 AMENDMENT. This Acquisition Agreement may be amended by Parent, Sub,
the Campana Companies and the Campana Companies Sellers, but only by an
instrument in writing signed on behalf of them.
7.4 WAIVER. At any time prior to the Closing Date, the parties hereto may,
to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 SURVIVAL; RECOURSE. None of the agreements contained herein shall
survive the Acquisition, except that (i) the covenants contained in Article IV
hereof and the obligations to indemnify contained in Article VI hereof shall
survive the Acquisition (except to the extent a shorter period of time is
explicitly specified therein) and (ii) the representations and warranties made
in Articles II and III hereof shall survive the Acquisition, and shall survive
any independent investigation by the parties, and any dissolution, merger or
consolidation of the Campana Companies or Parent, and shall bind the legal
representatives, assigns and successors of the Campana Companies, the Campana
Companies Shareholders and Parent, for a period of two years after the Closing
Date (other than the representations and warranties contained in Sections 2.18,
2.19,2.20 and 2.24 hereof, which shall survive for the applicable statute of
limitations).
8.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in Person, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Campana Companies: Campana New Media, S.L./ The Other Media, S.L.
Tinte no.2,28802 Alcala de Henares
Madrid, Spain
Attn.: Mr. Victor M. Fraile Blanco
Mr. Francisco Dominguez Heredia
Telephone: (34-91) 883-5151
Telecopy: (34-91) 883-6144
If to the Sellers: To the address listed under the signature
line of the applicable Campana Companies Seller
27
<PAGE>
If to Parent or Sub: IXL Holdings, Inc.
Two Park Place
1888 Emery St., 2nd Floor
Atlanta, GA 30318 USA
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Rd., Ste. 1100
Atlanta, GA 30305 USA
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Ave., 24th Floor
New York, NY 10032 USA
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
8.3 ENTIRE AGREEMENT. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and instruments
referred to herein and to be delivered pursuant hereto constitute the entire
agreement between the parties pertaining to the subject matter hereof, and
supersede all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
except for the Non-Disclosure Agreement dated as of June 25, 1998, which is
incorporated herein by reference. There are no other representations or
warranties, whether written or oral, between the parties in connection the
subject matter hereof, except as expressly set forth herein.
8.4 ASSIGNMENTS; PARTIES IN INTEREST. Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests, and
obligations of Sub hereunder may be assigned to any direct wholly owned Spanish
subsidiary of Parent without such prior consent. Subject to the preceding
sentence, this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing herein, express or implied, is intended to or
shall confer upon any Person not a party hereto any right, benefit or remedy of
any nature whatsoever under or by reason hereof, except as otherwise
28
<PAGE>
provided herein.
8.5 GOVERNING LAW; ARBITRATION. The language of this Agreement is English.
This Agreement shall be governed by common Spanish law.
The parties agree to submit the solution of all disputes arisen or which
may arise as a result of the interpretation of or compliance with this Agreement
to legal arbitration, pursuant to Law 36/1988 of 5 December.
(a) The arbitration group and the experts--The parties agree that such
legal arbitration will be resolved by an arbitrator. The arbitrator shall
necessarily be a practicing lawyer with at least 10 years' experience, belonging
to the Professional Association of Lawyers of Madrid. The arbitrator will be
appointed by agreement of the parties and, in default of agreement of the
parties, by the Dean of the Bar Association of Madrid. If the arbitrator is
unable to perform his function, either before the arbitration proceedings begin
or in the course thereof, then his substitute shall be appointed in accordance
with the procedure established for appointing the arbitrator according to the
preceding sentence. In the event that any of the contingencies subject to
arbitration arises, either of the parties may require that the arbitration
proceedings commence, by giving notice hereunder to the other party. The
arbitrator shall be responsible for issuing notices to the parties and for the
receipt of briefs and documents. In the course of its functions, the arbitrator
may obtain the assistance of as many experts as he deems necessary. These
experts shall advise the arbitrator on the issues within their field of
knowledge. Both the arbitrator and the experts, if applicable, shall have the
right to receive fees in remuneration. The arbitrator and, if applicable, the
experts, prior to commencement of the arbitration proceedings, may ask the
parties for a sum on account of their final fees as a provision of funds. Half
of this sum shall be paid by each party. The arbitrator shall be obliged to
carry out his duty of resolving the conflict submitted for his consideration in
the form and term established by law and herein, and the arbitrator who does not
thus comply shall be held liable.
(b) The arbitration proceedings shall take place in Madrid and shall
be conducted in Spanish. The arbitration proceedings shall be subject to the
principles of hearing, contradiction and equality between the parties and shall
be divided into three different phases: allegations, evidence and conclusions.
The maximum term for completing the arbitration proceedings shall be four
calendar months as from the date on which the parties receive notice of the
acceptance by the arbitrator of his position. If they consider it necessary,
then the parties may agree in writing to extend the above mentioned term. The
parties may themselves participate in the proceedings or may be represented by a
practising lawyer.
(i) Allegations. The allegations shall be filed in writing by
the parties within the term indicated by the arbitrator for this purpose. If the
arbitrator considers it convenient, then it may, during this phase, request the
parties to provide complementary clarifications.
(ii) Evidence. The evidence proposed by the parties and admitted
as pertinent by the arbitrator shall be brought. The arbitrator may resolve
whether evidence which has
29
<PAGE>
not been requested by the parties also be brought.
(iii) Conclusions. The conclusion phase may be oral or written, as
decided by the arbitrator.
(c) The award--The proceedings shall conclude with a reasoned majority
award issued by the arbitrator. It shall be put into writing and signed by the
arbitrator. The award shall contain at least the points set forth in Articles 32
and 35 of the Arbitration Law. The award shall be certified by a notary before
the above mentioned period of four months or, if applicable, the extension
thereof, has elapsed. After certification by a notary, the award shall be
notified to the parties hereunder. The parties undertake to accept and comply
with the arbitration award issued.
(d) Subsidiary legislation and jurisdiction--For all issues not
specifically provided for in the present arbitration agreement, the rules and
provisions contained in the Law 36/1988 of 5 December on Arbitration shall be
followed. If, for any reason, the arbitration is not concluded pursuant to the
above, then the parties agree to submit themselves to the jurisdiction and
competency of the Courts and Tribunals of the city of Madrid, expressly waiving
any other jurisdiction.
8.6 HEADINGS. The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation hereof.
8.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
8.8 SEVERABILITY. If any term or other provision hereof is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions hereof shall nevertheless remain in full force
and effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
8.9 CERTAIN DEFINITIONS. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens incurred or deposits made in the ordinary course
of business in connection with worker's compensation, unemployment insurance or
other types of social security; (d) minor defects of title, easements, rights-
of-way, restrictions and
30
<PAGE>
other similar charges or encumbrances not materially detracting from the value
of the Campana Companies Real Property or interfering with the ordinary conduct
of any of the Campana Companies Business; and (e) those Liens listed on Schedule
--------
8.9;
- ---
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of Campana Companies" shall refer to the
knowledge, subject to clause (i) above, of any of the Campana Companies
Shareholders; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of which are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including Sub); provided, however, that
with respect to the Parent, the terms "Subsidiary" and "Subsidiaries" shall not
include the Campana Companies or University Netcasting, Inc.
8.10 CONFIDENTIALITY. The Confidentiality Agreement is incorporated herein
by reference.
- SIGNATURES ON THE FOLLOWING PAGE -
31
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Campana Companies have caused this
Agreement to be signed and delivered by their respective duly authorized
officers, and each Campana Companies Seller has signed and delivered this
Agreement, all as of the date first written above.
"CAMPANA"
Campana New Media, S.L., a Spanish corporation
By: /s/ Victor Manuel Fraile
----------------------------------------------
Title:___________________________________________
"THE OTHER MEDIA"
The Other Media, S.L., a Spanish corporation
By: /s/ Francisco Dominguez Heredia
----------------------------------------------
Title: SOLE ADMINISTRATOR
-------------------------------------------
"PARENT"
IXL Holdings, Inc., a Delaware corporation
By: /s/ James V. Sandry
----------------------------------------------
Title: James V. Sandry, Executive Vice President
"SUB"
iXL-Madrid, S.A., a Spanish corporation
By: John N. Raymond
----------------------------------------------
Title: John N. Raymond, Managing Director
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
32
<PAGE>
"CAMPANA COMPANIES SHAREHOLDERS"
/s/ Victor Manuel Fraile Blanco
--------------------------------------------------
Mr. Victor Manuel Fraile Blanco
Address: Spanish Passport No. 8973423-L
Juan de Austria, 1-5G
Alcala de Henares, E28805, Madrid
/s/ Francisco Dominguez Heredia
--------------------------------------------------
Mr. Francisco Dominguez Heredia
Address: Spanish Passport No. 8975203-M
Luis Astrana Marin, 8-5 Izda.
Alcala de Henares, E28807, Madrid
"CAMPANA COMPANIES OWNERS"
/s/ Francisco Dominguez Heredia
--------------------------------------------------
Mr. Francisco Dominguez Heredia
/s/ Victor Manuel Fraile Blanco
--------------------------------------------------
Mr. Victor Manuel Fraile Blanco
/s/ Javier Dominguez Heredia
--------------------------------------------------
Mr. Javier Dominguez Heredia
Address: Spanish Passport No. 8981868-T
Plaza San Francisco de Asis 14-5D
Alcala de Henares, E28803, Madrid
33
<PAGE>
Exhibits
--------
Parent's Closing Certificate.................................... Exhibit A-1
Sub's Closing Certificate....................................... Exhibit A-2
Agreement to be Bound to the Registration Rights Agreement...... Exhibit B
Closing Certificate of Campana Companies........................ Exhibit C-1
Incumbency Certificate of Campana Companies..................... Exhibit C-2
An Agreement to be Bound to the Stockholders Agreement.......... Exhibit D
Employment Agreements........................................... Exhibit E
<PAGE>
List of Schedules
-----------------
Schedule 2.3(a) Capitalization of Campana
Schedule 2.3(b) Liens on Campana Stock
Schedule 2.5 Conflicts, Required Filings & Consents
Schedule 2.6 Financial Statements
Schedule 2.7 Exceptions to Absence of Changes
Schedule 2.8 Undisclosed Liabilities of Campana
Schedule 2.9 Exceptions to Title to Properties
Schedule 2.10 Bad Equipment of Campana
Schedule 2.12 Liens on Campana Real Property
Schedule 2.13 Leases of Campana
Schedule 2.14 Contracts of Campana
Schedule 2.15 Directors and Officers of Campana
Schedule 2.16 Payroll Report
Schedule 2.17 Litigation of Campana
Schedule 2.18 Employee Benefit Plans/Labor Relations
Schedule 2.19 Liability under Benefit Plans
Schedule 2.21 Campana Permits
Schedule 2.23 Campana Brokers
Schedule 2.25 Interest in Customers, Suppliers & Competition
Schedule 2.28 Campana Insurance
Schedule 3.3 Conflicts, Required Filings & Consents of
Parent or Sub
Schedule 3.4 Parent Litigation
Schedule 3.5 Brokers of Parent or Sub
Schedule 3.6 Outstanding Obligations to issue options,
warrants or other Parent Stock Rights
Schedule 3.7 Parent Subsidiaries
Schedule 3.9 Parent Undisclosed Liabilities
Schedule 3.13 Exceptions to Parent Absence of Changes
Schedule 5.1(c) Parent Consents
Schedule 5.2(c) Campana Companies Consents
Schedule 8.9 Permitted Liens
<PAGE>
EXHIBIT 2.24
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
IXL HOLDINGS, INC.,
iXL-BOSTON, INC.,
SPINNERS INCORPORATED
AND
THE SPINNERS SHAREHOLDERS
DATED AS OF JULY 30, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
ARTICLE I THE MERGER...................................................... 1
1.1 The Merger...................................................... 1
1.2 Closing and Closing Date........................................ 2
1.3 Effective Time of the Merger.................................... 2
1.4 Effect of the Merger............................................ 2
ARTICLE II THE SURVIVING CORPORATION...................................... 2
2.1 Certificate of Incorporation.................................... 2
2.2 Bylaws.......................................................... 2
2.3 Board of Directors; Officers.................................... 2
ARTICLE III CONVERSION OF SHARES.......................................... 3
3.1 Merger Consideration............................................ 3
3.2 Dissenting Shares............................................... 4
3.3 No Further Rights............................................... 4
3.4 Closing of Spinners' Transfer Books............................. 4
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SPINNERS..................... 5
4.1 Organization and Qualification.................................. 5
4.2 Authority....................................................... 5
4.3 Capitalization.................................................. 6
4.4 Subsidiaries.................................................... 6
4.5 No Conflicts, Required Filings and Consents..................... 6
4.6 Financial Statements............................................ 7
4.7 Absence of Changes.............................................. 7
4.8 Undisclosed Liabilities......................................... 8
4.9 Title to Properties............................................. 8
4.10 Equipment....................................................... 8
4.11 Intellectual Property........................................... 8
4.12 Real Property................................................... 9
4.13 Leases.......................................................... 9
4.14 Contracts....................................................... 10
4.15 Directors and Officers.......................................... 10
4.16 Payroll Information............................................. 10
4.17 Litigation...................................................... 10
4.18 Employee Benefit Plans/Labor Relations.......................... 10
4.19 ERISA........................................................... 11
4.20 Taxes........................................................... 12
4.21 Compliance with Applicable Law.................................. 12
4.22 Board of Directors/Shareholder Consent.......................... 12
4.23 Brokers......................................................... 12
4.24 Environmental Matters........................................... 12
4.25 Interest in Customers, Suppliers and Competitors................ 13
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.26 Accounts Receivable.............................................. 13
4.27 Accounts Payable................................................. 13
4.28 Insurance........................................................ 14
4.29 Bankruptcy....................................................... 14
4.30 Spinners Debt and Cash........................................... 14
4.31 Accredited Investors; Investment Purpose......................... 14
4.32 Restrictions on Transfer......................................... 14
4.33 Ability to Bear Risk; Access to Information; Sophistication...... 15
4.34 Disclosure....................................................... 15
4.35 Nature of Liabilities............................................ 15
4.36 Former Option Holders............................................ 15
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB................. 16
5.1 Organization and Qualification................................... 16
5.2 Authority........................................................ 16
5.3 No Conflicts, Required Filings and Consents...................... 16
5.4 Litigation....................................................... 17
5.5 Brokers.......................................................... 17
5.6 Parent Stock..................................................... 17
5.7 Subsidiaries..................................................... 18
5.8 Financial Statements............................................. 18
5.9 Undisclosed Liabilities.......................................... 18
5.10 Compliance with Applicable Laws.................................. 18
5.11 Board of Directors/Shareholder Consent........................... 19
5.12 Bankruptcy....................................................... 19
5.13 Absence of Charges............................................... 19
5.14 Taxes............................................................ 19
5.15 Disclosure....................................................... 19
ARTICLE VI ADDITIONAL AGREEMENTS........................................... 20
6.1 Conduct of Business by Spinners Pending the Merger............... 20
6.2 Access to Information............................................ 21
6.3 Filings; Tax Elections........................................... 21
6.4 Public Announcements............................................. 21
6.5 Transfer and Gains Taxes and Certain Other Taxes and Expenses.... 21
6.6 Options.......................................................... 21
6.7 Further Assurances............................................... 22
6.8 Landlord's Consent............................................... 22
6.9 Section 338 Election; Tax-Free Merger............................ 22
6.10 Personal Guaranties of Spinners Leases........................... 23
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII CONDITIONS PRECEDENT........................................... 23
7.1 Conditions to Obligation of Spinners and
The Spinners Shareholders to Effect the Merger............... 23
7.2 Conditions to Obligations of Parent and Sub
To Effect the Merger......................................... 24
ARTICLE VIII INDEMNIFICATION............................................... 25
8.1 Indemnification by Parent....................................... 25
8.2 Indemnification by the Spinners Shareholders.................... 26
8.3 Notification of Claims; Election to Defend...................... 27
8.4 Payment......................................................... 28
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER............................... 28
9.1 Termination..................................................... 28
9.2 Fees and Expenses............................................... 29
9.3 Amendment....................................................... 29
9.4 Waiver.......................................................... 29
ARTICLE X GENERAL PROVISIONS............................................... 29
10.1 Survival; Recourse.............................................. 29
10.2 Notices......................................................... 30
10.3 Entire Agreement................................................ 31
10.4 Assignments; Parties in Interest................................ 31
10.5 Governing Law................................................... 32
10.6 Headings........................................................ 32
10.7 Counterparts.................................................... 32
10.8 Severability.................................................... 32
10.9 Post-Closing Access............................................. 32
10.10 Post-Closing Notice............................................. 32
10.11 Certain Definitions............................................. 32
</TABLE>
iii
<PAGE>
LIST OF EXHIBITS
TO AGREEMENT AND PLAN OF MERGER
AMONG
IXL HOLDINGS, INC., iXL BOSTON, INC.
SPINNERS INCORPORATED
AND
THE SPINNERS SHAREHOLDERS
EXHIBITS
- --------
Exhibit "A-1" Parent's Closing Certificate
Exhibit "A-2" Sub's Closing Certificate
Exhibit "B" Agreement to be Bound to the Registration Rights Agreement
Exhibit "C" Form of Option Agreement
Exhibit "D" Parent's Opinion of Counsel
Exhibit "E" Spinners' Closing Certificate
Exhibit "F" Agreement to be Bound to the Stockholders' Agreement
Exhibit "G" Spinners' Opinion of Counsel
Exhibit "H" Certificate of Merger
iv
<PAGE>
LIST OF SCHEDULES
TO AGREEMENT AND PLAN OF MERGER
AMONG
IXL HOLDINGS, INC., iXL BOSTON, INC.
SPINNERS INCORPORATED
AND
THE SPINNERS SHAREHOLDERS
SCHEDULES
- ---------
Schedule 3.1(b) Sample Calculation of Parent Stock and Cash Issuable
Schedule 4.3(a) Spinners' Stock and Stock Rights
Schedule 4.3(b) Spinners' Liens
Schedule 4.5 Spinners' Consents
Schedule 4.7 Absence of Changes - Spinners
Schedule 4.8 Spinners' Undisclosed Liabilities
Schedule 4.9 Spinners' Title
Schedule 4.10 Spinners' Equipment
Schedule 4.11(a) Spinners' Intellectual Property Rights
Schedule 4.11(b) Spinners' Software
Schedule 4.12 Spinners' Real Property
Schedule 4.13 Spinners' Leases
Schedule 4.14 Spinners' Contracts
Schedule 4.15 Spinners' Directors and Officers
Schedule 4.16 Spinners' Payroll Report
Schedule 4.17 Spinners' Litigation
V
<PAGE>
Schedule 4.18 Spinners' Employee Benefit Plans
Schedule 4.19 Spinners' ERISA Disclosures
Schedule 4.21 Spinners' Permits
Schedule 4.23 Spinners' Brokers
Schedule 4.25 Spinners' Direct or Indirect Material Interests
Schedule 4.28 Spinners' Insurance
Schedule 5.3 Conflicts, Required Filings and Consents of Parent and Sub
Schedule 5.4 Parent Litigation
Schedule 5.5 Parent and Sub Brokers
Schedule 5.6 Class B Common Stock Options
Schedule 5.7 Subsidiaries
Schedule 5.9 Parent Undisclosed Liabilities
Schedule 5.13 Absence of Changes - Parent
Schedule 6.6(b) Options
Schedule 6.6(c) New Options
Schedule 7.1c Parent Consents
Schedule 7.2(c) Spinners' and Spinners' Shareholders Consents
Schedule 10.11 Permitted Liens
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 30th day of
July, 1998, by and among SPINNERS INCORPORATED, a Delaware corporation
("Spinners"), IXL HOLDINGS, INC., a Delaware corporation ("Parent"), IXL-BOSTON,
INC., a Delaware corporation, or its Successors or assigns ("Sub"), and the
shareholders of Spinners as listed on the signature page hereto (the "Spinners
Shareholders").
RECITALS:
--------
A. Spinners is engaged in the business of developing internet sites and
furnishing internet services, including website design and maintenance (the
"Spinners Business").
B. Spinners and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The Spinners Shareholders collectively own 100% of the issued and
outstanding capital stock of Spinners (the "Spinners Stock").
D. The respective Boards of Directors of Parent, Sub and Spinners, and
the respective shareholders of Sub and Spinners, have approved the Merger, upon
the terms and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal
income tax purposes, as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the respective covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, at
the Effective Time (as defined in Section 1.3 hereof), (a) Spinners shall be
merged with and into Sub, (b) the separate existence of Spinners shall cease,
and (c) Sub shall continue as the surviving corporation in the Merger under the
laws of the State of Delaware under the name iXL-Boston, Inc. For purposes of
this Agreement, Sub shall be referred to, for the period commencing on the
Effective Time, as the "Surviving Corporation."
<PAGE>
1.2 CLOSING AND CLOSING DATE. Unless this Merger Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9.1 hereof, and subject to the satisfaction or waiver of the
conditions set forth in Article VII hereof, the closing of the Merger (the
"Closing") will take place as promptly as practicable (and in any event within
five business days after satisfaction of the conditions set forth in Sections
7.1 and 7.2 hereof) (the "Closing Date") at the offices of Minkin & Snyder, A
Professional Corporation, One Buckhead Plaza, 3060 Peachtree Rd., Ste. 1100,
Atlanta, GA 30305, unless another date, time or place is agreed to by the
parties.
1.3 EFFECTIVE TIME OF THE MERGER. At the Closing, the parties hereto shall
cause a certificate of merger, substantially in the form of Exhibit "H" hereto
----------
(the "Certificate of Merger") to be filed with the office of the Secretary of
State of Delaware in accordance with the provisions of the Delaware General
Corporation Law, as amended (the "DGCL"). When used herein, the term "Effective
Time" shall mean the time when the Certificate of Merger has been accepted for
filing by the Secretary of State of Delaware, or such time as otherwise
specified therein.
1.4 EFFECT OF THE MERGER. The Merger shall, from and after the Effective
Time, have all the effects provided by the DGCL. If at any time after the
Effective Time, any further action is deemed necessary or desirable to carry out
the purposes of this Agreement, the parties hereto agree that the Surviving
Corporation and its officers and directors shall be authorized to take, and
shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of Sub,
a copy of which is attached to a closing certificate and incumbency certificate
of Sub, substantially in the form of Exhibit "A-2" hereto ("Sub's Closing
------------
Certificate"), shall be the Certificate of Incorporation of the Surviving
Corporation after the Effective Time, until thereafter changed or amended as
provided therein or by applicable law.
2.2 BYLAWS. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is attached to Sub's Closing Certificate.
2.3 BOARD OF DIRECTORS; OFFICERS. The Board of Directors and officers of
Sub immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified.
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<PAGE>
ARTICLE III
CONVERSION OF SHARES
3.1 MERGER CONSIDERATION. As of the Effective Time:
(a) All shares of Spinners Stock owned by Spinners shall, by virtue
of the Merger and without any action on the part of any shareholder, officer or
director of Spinners or Sub, be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding share of Spinners Stock (other than
any Dissenting Shares, as defined in Section 3.2 hereof) shall, upon surrender
to Sub, at the Closing, of the underlying share certificates, be converted into,
and become exchangeable for:
(i) a number of shares of validly issued, fully paid and nonassessable Class B
Common Stock of Parent, $.O1 par value (the "Parent Stock") based on the
following equation:
PS= (900,000 + X) - (D + $1 MILLION)
--- ----------------
$10 $10
-----------------------------------
S+O
where:
PS = the number of shares of Parent Stock (valued, as of the
Closing, at $10 per share) for which each share of Spinners
Stock shall be exchanged pursuant to the Merger
D = the outstanding indebtedness of Spinners (the "Spinners
Debt"), including debt for borrowed money and accrued
interest thereon, capital leases, accounts payable and
accrued expenses, any dividends exceeding cash on hand,
approximately $200,000 of fees for Spinners investment
bankers, payable by the Surviving Corporation in accordance
with Section 9.2(a) hereof, and any unpaid legal, accounting
or other fees of Spinners, all to be determined as of three
business days prior to the Closing Date and all as
determined in accordance with generally accepted accounting
principles ("GAAP")
S = the number of issued and outstanding shares of Spinners
Stock on the Closing Date
O = the total number of options to purchase Spinners Stock
outstanding on the Closing Date, to be exchanged for options
to acquire Parent Stock pursuant to Section 6.6(b) hereof;
and
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<PAGE>
x = one-half of the aggregate exercise price of O, as set forth
on Schedule 3.1(b) hereto
----------------------
(ii) an amount of cash based on the following equation:
C= $1 MILLION
----------
S
where:
C = the amount of cash for which each share of Spinners Stock
shall be exchanged pursuant to the Merger
and other terms are as defined above.
Set forth on Schedule 3.1(b) hereto is a calculation of the number of shares of
--------------
Parent Stock and cash into which each issued and outstanding share of Spinners
Stock (except for any Dissenting Shares) is exchangeable, based on the
assumptions set forth in Schedule 3.1(b).
---------------
(c) Each issued and outstanding share of common stock of Sub shall,
by virtue of the Merger and without any action on the part of any shareholder,
officer or director of Spinners or Sub, be converted into and become one fully
paid and nonassessable share of common stock of the Surviving Corporation.
3.2 DISSENTING SHARES. Notwithstanding any provision hereof to the
contrary, any shares of Spinners Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be converted as described in Section 3.1(b)
hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Shareholder pursuant to the DGCL, provided,
however, that if a Dissenting Shareholder shall fail to perfect his demand,
withdraw his demand or otherwise lose his right for appraisal under the terms of
the DGCL, then the Spinners Stock held by such Dissenting Shareholder (the
"Dissenting Shares") shall be deemed to be converted as of the Effective Time in
accordance with the provisions of Section 3.1 hereof. Spinners shall not
voluntarily make any payment with respect to, settle, or offer to settle or
otherwise negotiate, any demands of any Dissenting Shareholder. All amounts paid
to Dissenting Shareholders shall be paid without interest thereon (to the extent
permitted by applicable law) by the Surviving Corporation. For purposes hereof,
the term "Dissenting Shareholder" shall mean a Spinners Shareholder who (a)
objects to the Merger; and (b) complies with the applicable provisions of the
DGCL concerning dissenter's rights.
3.3 NO FURTHER RIGHTS. From and after the Effective Time, holders of
certificates theretofore evidencing Spinners Stock shall cease to have any
rights as stockholders of Spinners, except as provided herein or by applicable
law.
3.4 CLOSING OF SPINNERS' TRANSFER BOOKS. At the Effective Time, the stock
transfer books of Spinners shall be closed and no transfer of Spinners Stock
shall be made thereafter. If
-4-
<PAGE>
after the Effective Time, certificates for Spinners Stock are presented to
Parent or the Surviving Corporation, they shall be canceled and exchanged for a
consideration as set forth in Section 3.1 hereof, subject to applicable law in
the case of Dissenting Shareholders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SPINNERS
Spinners, and the Spinners Shareholders, jointly and severally, represent
and warrant to Parent and Sub as follows, which representations and warranties
shall survive the Closing in accordance with Section 10.1 hereof.
4.1 ORGANIZATION AND QUALIFICATION. Spinners is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Spinners has the requisite corporate power and authority to carry on
the Spinners Business as it is now being conducted and is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary and where the failure to qualify
would have a material adverse effect on Spinners. Complete and correct copies of
the Certificate of Incorporation and Bylaws of Spinners as in effect on the date
hereof are attached to a closing certificate and incumbency certificate of
Spinners, substantially in the form of Exhibit "F" hereto ("Spinners Closing
----------
Certificate"). The minute book of Spinners, a true and complete copy of which
has been delivered to Parent, (a) accurately reflects all action taken by the
directors and shareholders of Spinners at meetings of Spinners' Board of
Directors or shareholders, as the case may be, and (b) contains true and
complete copies, or originals, of the respective minutes of all meetings or
consent actions of the directors or shareholders.
4.2 AUTHORITY. Spinners has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery hereof and the consummation of
the transactions contemplated hereby by Spinners have been duly and validly
authorized and approved by Spinners' Board of Directors and the Spinners
Shareholders, and no other corporate or shareholder proceedings on the part of
Spinners, its Board of Directors or the Spinners Shareholders is necessary to
authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Spinners and each Spinners Shareholder, and assuming the due authorization,
execution and delivery by Parent and Sub, constitutes the valid and binding
obligation of Spinners and each Spinners Shareholder, enforceable against
Spinners and each Spinners Shareholder in accordance with its terms subject, in
each case, to bankruptcy, insolvency, reorganization, moratorium and similar
laws of general application relating to or affecting creditors' rights and to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing.
-5-
<PAGE>
4.3 CAPITALIZATION.
(a) The authorized capital stock of Spinners consists of 10 million
shares of common stock, $.0l par value, of which 7 million shares are validly
issued and outstanding, fully paid and nonassessable. All outstanding capital
stock of Spinners was issued in accordance with applicable federal and state
securities laws. Except as set forth on Schedule 4.3(a) hereto, there are no
--------------
options, warrants, calls, convertible notes, agreements, commitments or other
rights presently outstanding that would obligate Spinners or any of the Spinners
Shareholders to issue, deliver or sell shares of its capital stock, or to grant,
extend or enter into any such option, warrant, call, convertible note,
agreement, commitment or other right. In addition to the foregoing, as of the
date hereof, Spinners has no bonds, debentures, notes or other indebtedness
issued or outstanding that have voting rights in Spinners. Schedule 4.3(a) sets
--------------
forth a list of (i) all holders of record of (A) Spinners Stock, and (B)
options, warrants, convertible notes or other rights to purchase capital stock
of Spinners (collectively, "Spinners Stock Rights"); (ii) the number of shares
held by each Spinners Shareholder and the number of shares of capital stock of
Spinners represented by the Spinners Stock Rights; and (iii) the exercise price
for each Spinners Stock Right.
(b) All of the issued and outstanding shares of capital stock of
Spinners are validly issued, fully paid and nonassessable. Except as set forth
on Schedule 4.3(b) hereto, each Spinners Shareholder represents and warrants
--------------
that the Spinners Stock held by such Spinners Shareholder is free and clear of
any lien, charge, security interest, pledge, option, right of first refusal,
voting proxy or other voting agreement, or encumbrance of any kind or nature
other than restrictions on transfer imposed by federal and state securities laws
(any of the foregoing, a "Lien").
4.4 SUBSIDIARIES. Spinners has no subsidiaries and does not otherwise own
or control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
- ------------
Spinners or the Spinners Shareholders, (ii) the consummation by Spinners and the
Spinners Shareholders of the transactions contemplated hereby or (iii)
compliance by Spinners with any of the provisions hereof will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Spinners;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to Spinners or any of the
Spinners Shareholders, or by which Spinners or any of its properties or assets
may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise
-6-
<PAGE>
or other instrument or obligation, to which Spinners is a party or by which
Spinners or any of its properties or assets may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Spinners; or
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), (i) any government or subdivision thereof, whether
domestic or foreign, or any administrative, governmental, or regulatory
authority, agency, commission, court, tribunal or body, whether domestic,
foreign or multinational (any of the foregoing, a "Governmental Entity"), except
for the filing of the Certificate of Merger pursuant to the DGCL; or (ii) any
other individual or Entity (collectively, a "Person").
4.6 FINANCIAL STATEMENTS. Spinners has heretofore furnished Parent with a
true and complete copy of (a) the audited financial statements of Spinners for
the years ended December 31, 1996 and 1997; and (b) the unaudited financial
statements of Spinners for the five month period ended May 31, 1998 (all of the
foregoing collectively herein referred to as the "Spinners Financial
Statements"). Except as disclosed therein, the Spinners Financial Statements
have been prepared in accordance with GAAP (except for the absence of footnotes
and normal year end adjustments in the case of the Spinners Financial Statements
for the period ended May 31, 1998) consistently followed throughout the period
indicated, and present fairly, in all material respects, the financial position
and operating results of Spinners as of the dates, and during the periods,
indicated therein.
4.7 ABSENCE OF CHANGES. Except as provided in Schedule 4.7 hereto and
------------
except as contemplated hereby, since December 31, 1997 (a) Spinners has not
entered into any transaction that was not in the ordinary course of business;
(b) except for sales of services and licenses of software in the ordinary course
of business, there has been no sale, assignment, transfer, mortgage, pledge,
encumbrance or lease of any material asset or property of Spinners; (c) there
has been (i) no declaration or payment of a dividend, or any other declaration,
payment or distribution of any type or nature to any shareholder of Spinners in
respect of its stock, whether in cash or property, and (ii) no purchase or
redemption of any share of the capital stock of Spinners; (d) there has been no
declaration, payment, or commitment for the payment, by Spinners, of a bonus or
other additional salary, compensation, or benefit to any employee of Spinners
that was not in the ordinary course of business, except for normal year-end
bonuses paid in the ordinary course of business; (e) there has been no release,
compromise, waiver or cancellation of any debt to or claim by Spinners, or
waiver of any right of Spinners; (f) there have been no capital expenditures in
excess of $10,000 for any single item, or $25,000 in the aggregate; (g) there
has been no change in accounting methods or practices or revaluation of any
asset of Spinners (other than Spinners Accounts Receivable as defined in Section
4.26 hereof written down in the ordinary course of business in excess of $10,000
for any single Spinners Accounts Receivable, or $25,000 in the aggregate); (h)
there has been no material damage, or destruction to, or loss of, physical
property (whether or not covered by insurance) adversely affecting the Spinners
Business or the operations of Spinners; (i) there has been no loan by Spinners,
or guaranty by Spinners of any loan, to any employee of Spinners; (j) Spinners
has not ceased to transact business with any customer that, as of the date of
such cessation,
-7-
<PAGE>
represented more than 5% of the annual gross revenues of Spinners; (k) there has
been no termination or resignation of any key employee or officer of Spinners,
and to the knowledge of Spinners, no such termination or resignation is
threatened; (l) there has been no amendment or termination of any material oral
or written contract, agreement or license related to the Spinners Business, to
which Spinners is a party or by which it is bound, except in the ordinary course
of business, or except as expressly contemplated hereby; (m) Spinners has not
failed to satisfy any of its debts, obligations or liabilities related to the
Spinners Business or the assets of Spinners as the same become due and owing
(except for Spinners Accounts Payable (as defined in Section 4.27 hereof)
payable in accordance with past practices and in the ordinary course of
business); (n) there has been no agreement or commitment by Spinners to do any
of the foregoing; and (o) there has been no other event or condition of any
character pertaining to and materially and adversely affecting the assets,
business or financial condition of Spinners.
4.8 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.8 hereto,
------------
Spinners has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including any liability or obligation on account of taxes
or any governmental charge or penalty, interest or fine, except (a) liabilities
incurred in the ordinary course of business after December 31, 1997, that would
not, whether individually or in the aggregate, have a material adverse impact on
the business or financial condition of Spinners; (b) liabilities reflected on
the Spinners Financial Statements; and (c) liabilities incurred as a result of
the transactions contemplated hereby.
4.9 TITLE TO PROPERTIES. Except as set forth on Schedule 4.9 hereto,
------------
Spinners has good and marketable title to, or good and valuable title to its
leasehold interest in, all tangible property and assets used in the Spinners
Business, free and clear of any and all Liens other than Permitted Liens (as
defined in Section 10.11 hereof).
4.10 EQUIPMENT. Schedule 4.10 hereto sets forth a true and correct list of
-------------
all items of tangible personal property (including computer hardware) necessary
for or used in the operation of the Spinners Business in the manner in which it
has been and is now operated by Spinners ("the Spinners Equipment"), except for
personal property having a net book value of less than $1,000. Except as set
forth on Schedule 4.10, each material item of Spinners Equipment is in good
-------------
condition and repair, ordinary wear and tear excepted.
4.11 INTELLECTUAL PROPERTY.
(a) Schedule 4.11(a) hereto sets forth a true and complete list of
----------------
all material proprietary technology, patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights, and copyrights (and all pending applications for any of the foregoing)
used by Spinners in the conduct of the Spinners Business (together with trade
secrets and know how used in the conduct of the Spinners Business, the "Spinners
Intellectual Property Rights"). Spinners owns, or is validly licensed or
otherwise has the right to use or exploit, as currently used or exploited, all
of the Spinners Intellectual Property Rights, free of any obligation to make any
payment (whether of a royalty, license fee, compensation or otherwise). No
claims are pending or, to the knowledge of Spinners, threatened, that Spinners
is infringing or otherwise adversely affecting the rights of any Person with
regard to any Spinners Intellectual Property Right.
-8-
<PAGE>
To the knowledge of Spinners, no Person is infringing the rights of Spinners
with respect to any Spinners Intellectual Property Right. Neither Spinners nor,
to the knowledge of Spinners, any employee, agent or independent contractor of
Spinners, in connection with the performance of such Person's services with
Spinners, has used, appropriated or disclosed, directly or indirectly, any trade
secret or other proprietary or confidential information of any other Person, or
otherwise violated any confidential relationship with any other Person.
(b) Schedule 4.11(b) hereto sets forth a true and complete list of
----------------
all material computer software used by Spinners in the conduct of the Spinners
Business (the "Spinners Software"), other than pre-loaded or shrink-wrap
software, and an estimated aggregate value of all Spinners Software. Spinners
currently licenses, or otherwise has the legal right to use, all of the Spinners
Software (including any upgrade, alteration or enhancement with respect
thereto), and all of the Spinners Software is being used in material compliance
with any applicable license or other agreement.
4.12 REAL PROPERTY. Except as set forth on Schedule 4.12 hereto:
-------- ----
(a) Spinners has a good and valid leasehold interest in all real
property (including all buildings, improvements and fixtures thereon) used in
the operation of the Spinners Business (the "Spinners Real Property"). Spinners
owns no real property. Except for Permitted Liens, and for the items set forth
on Schedule 4.12, there are no Liens on Spinners' interest in any of the
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Spinners Real Property.
(b) There are no parties in possession of any portion of the Spinners
Real Property other than Spinners, whether as sublessees, subtenants at will or
trespassers.
(c) To the knowledge of Spinners, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, under the provisions of any of the
Spinners Leases (as hereinafter defined), any material expenditure by Spinners
to modify or improve any of the Spinners Real Property to bring it into
compliance therewith.
4.13 LEASES. Schedule 4.13 hereto sets forth a list of all leases pursuant
-------------
to which Spinners leases, as lessor or lessee, real or personal property used in
operating the Spinners Business or otherwise (the "Spinners Leases"). Copies of
the Spinners Leases, all of which have previously been provided to Parent, are
true and complete copies thereof. All of the Spinners Leases are valid, binding
and enforceable against Spinners and, to the knowledge of Spinners, against the
other parties thereto, in accordance with their respective terms, and there is
not under any such Spinners Lease any existing default by Spinners, or, to the
knowledge of Spinners, by any other party thereto, or any condition or event
that, with notice or lapse of time or both, would constitute a default. Spinners
has not received notice that the lessor of any of the Spinners Leases intends to
cancel, suspend or terminate such Spinners Lease or to exercise or not exercise
any option thereunder.
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4.14 CONTRACTS. Schedule 4.14 hereto sets forth a true and complete list
-------------
of all contracts, agreements and commitments (whether written or oral) to which
Spinners is, directly or indirectly, a party (in its own name or as a successor
in interest), or by which it or any of its properties or assets is otherwise
bound, including any service agreements, customer agreements, supplier
agreements, agreements to lend or borrow money, shareholder agreements,
employment agreements, agreements relating to Spinners Intellectual Property
Rights and the like, excepting only those Spinners contracts which involve less
than $10,000 and are cancelable, without penalty, on no more than 90 days'
notice (collectively, subject to such exception, the "Spinners Contracts"). The
aggregate value of all payment obligations and rights to receive payments under
agreements, contracts and commitments (whether oral or in writing) to which
Spinners is a party or by which it or any of its properties or assets is
otherwise bound, and that are not listed on Schedule 4.14, is less than $50,000
-------------
(calculating such value by adding together the value of rights and obligations,
and not by determining the net amount thereof).
True and complete copies of all Spinners Contracts (or a true and complete
narrative description of any oral Spinners Contract) have previously been
provided to Parent. Except as set forth on Schedule 4.14, neither Spinners nor,
-------------
to the knowledge of Spinners, any other party to any of the Spinners Contracts
(x) is in default under (nor does there exist any condition that, with notice or
lapse of time or both, would cause such a default under) any of the Spinners
Contracts, or (y) has waived any right it may have under any of the Spinners
Contracts, the waiver of which would have a material adverse effect on the
business, assets or financial condition or prospects of Spinners. All of the
Spinners Contracts constitute the valid and binding obligations of Spinners,
enforceable in accordance with their respective terms, and, to the knowledge of
Spinners, of the other parties thereto.
4.15 DIRECTORS AND OFFICERS. Schedule 4.15 hereto sets forth a list, as of
-------------
the Closing Date, of the name of each director and officer of Spinners and the
position(s) held by each.
4.16 PAYROLL INFORMATION. Schedule 4.16 hereto sets forth a true and
-------------
complete copy of the payroll report of Spinners for the period July 1 -- July
15, 1998, showing all current employees of Spinners and their current levels of
compensation, other than bonuses and other extraordinary compensation, all of
which bonuses and such compensation are set forth on Schedule 4.16. Spinners has
-------------
paid all compensation required to be paid to employees of Spinners on or prior
to the date hereof other than compensation accrued in the current pay period are
reflected in Schedule 4.16.
-------------
4.17 LITIGATION. Except as set forth on Schedule 4.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Spinners, threatened against or affecting Spinners or the Spinners Business, nor
is there any judgment, decree, injunction or order of any applicable
Governmental Entity or arbitrator outstanding against Spinners.
4.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 4.18 hereto, there are no
-------------
employee benefit plans, agreements or arrangements maintained by Spinners,
including (i) "employee benefit plans"
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<PAGE>
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"); (ii) current or deferred compensation,
pension, profit sharing, vacation or severance plans or programs; or (iii)
medical, hospital, accident, disability or death benefit plans (collectively,
"Spinners Benefit Plans"). All Spinners Benefit Plans are administered in
accordance with, and are in material compliance with, all applicable laws and
regulations. No default exists with respect to the obligations of Spinners under
any Spinners Benefit Plan.
(b) Spinners is not a party to any collective bargaining agreement;
no collective bargaining agent has been certified as a representative of any of
the employees of Spinners; no representation campaign or election is now in
progress with respect to any employee of Spinners; and there are no labor
disputes, grievances, controversies, strikes or requests for union
representation pending, or, to the knowledge of Spinners, threatened, relating
to or affecting the Spinners Business. To the knowledge of Spinners, no event
has occurred that could give rise to any such dispute, controversy, strike or
request for representation.
4.19 ERISA.
(a) All Spinners Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the Spinners Benefit Plans that is
intended to meet the requirements of Section 401(a) of the Code has been
determined by the Internal Revenue Service to meet such requirements within the
meaning of such provision. No Spinners Benefit Plan is subject to Title IV of
ERISA or Section 412 of the Code. Spinners has not engaged in any nonexempt
"prohibited transactions," as such term is defined in Section 4975 of the Code
or Section 406 of ERISA, involving Spinners Benefit Plans that would subject
Spinners to the penalty or tax imposed under Section 502(i) of ERISA or Section
4975 of the Code. Spinners has not engaged in any transaction described in
Section 4069 of ERISA within the last five years. Except as disclosed in
Schedule 4.19 hereto or pursuant to the terms of the Spinners Benefit Plans,
- -------------
neither the execution and delivery hereof nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation or golden parachute) becoming due to any
director or other employee of Spinners, (ii) increase any benefit otherwise
payable under any Spinners Benefit Plan or (iii) result in the acceleration of
the time of payment or vesting of any such benefit to any extent.
(b) No notice of a "reportable event," within the meaning of
Section 4043 of ERISA, for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Spinners Benefit Plan that is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA and
that is intended to meet the requirements of Section 401(a) of the Code, or by
any entity that is considered one employer with Spinners under Section 4001 of
ERISA or Section 414 of the Code, within the 12-month period ending at the
Effective Time. Spinners has not incurred any liability to the Pension Benefit
Guaranty Corporation in respect of any Spinners Benefit Plan that remains
unpaid.
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<PAGE>
4.20 TAXES.
(a) Spinners has duly and timely filed all federal, state and local
income, franchise, excise, real and personal property and other tax returns and
reports, including extensions, required to have been filed by Spinners on or
prior to the Effective Time. Spinners has duly and timely paid all taxes and
other governmental charges, and all interest and penalties with respect thereto,
required to be paid by Spinners (whether by way of withholding or otherwise) to
any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the Spinners Financial Statements). As of the Effective Time, all
deficiencies proposed as a result of any audit will have been paid or settled.
(b) Spinners is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) Spinners has not consented to have the provisions of Section 341
(f)(2) of the Code (or comparable state law provisions) apply to it, and
Spinners has not agreed or been requested to make any adjustment under Section
481(c) of the Code by reason of a change in accounting method or otherwise.
4.21 COMPLIANCE WITH APPLICABLE LAWS. Spinners holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
Spinners, as appropriate, and to carry on the Spinners Business as now conducted
(the "Spinners Permits"). To the knowledge of Spinners, Spinners is in material
compliance with all applicable laws, ordinances and regulations and the terms of
the Spinners Permits. Except as set forth on Schedule 4.21 hereto, all of the
-------------
Spinners Permits are fully assignable by Spinners in connection with the Merger.
Schedule 4.21 hereto sets forth a true and complete list of all Spinners
- -------------
Permits, true and complete copies of which have previously been provided to
Parent.
4.22 BOARD OF DIRECTORS/SHAREHOLDER CONSENT. Both the Board of Directors
of Spinners and the Spinners Shareholders have adopted and approved this
Agreement and the transactions contemplated hereby (including the Merger).
4.23 BROKERS. Except as set forth on Schedule 4.23 hereto, no broker or
-------------
finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of Spinners.
4.24 ENVIRONMENTAL MATTERS.
(a) To the knowledge of Spinners, no real property currently or
formerly owned or operated by Spinners is contaminated with any Hazardous
Substance (as hereinafter defined);
(b) Spinners is not a party to any litigation or administrative
proceeding nor, to the knowledge of Spinners, is any litigation or
administrative proceeding threatened against it, that,
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<PAGE>
in either case, asserts or alleges that Spinners (i) violated any Environmental
Law (as hereinafter defined); (ii) is required to clean up, remove or take
remedial or other responsive action due to the disposal, deposit, discharge,
leak or other release of any Hazardous Substance; or (iii) is required to pay
all or a portion of the cost of any past, present or future cleanup, removal or
remedial or other action that arises out of or is related to the disposal,
deposit, discharge, leak or other release of any Hazardous Substance;
(c) To the knowledge of Spinners, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by Spinners containing materials that, if known
to be present in soil or ground water, would require cleanup, removal or other
remedial action under Environmental Law;
(d) To the knowledge of Spinners, Spinners is not subject to any
judgment, order or citation related to or arising out of any Environmental Law
and has not been named or listed as a potentially responsible party by any
Governmental Entity in a matter related to or arising out of any Environmental
Law; and
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including any petroleum products, asbestos or polychlorinated biphenyls.
4.25 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as provided
in Schedule 4.25 hereto, no officer, director, shareholder or, to the knowledge
-------------
of Spinners, employee of Spinners and no family member (including a spouse,
parent, sibling or lineal descendent of any of the foregoing), has any direct or
indirect material interest in any material customer, supplier or competitor of
Spinners, or in any Person from whom or to whom Spinners leases any real or
personal property, or in any other Person with whom Spinners is doing business
whether directly or indirectly (including as a debtor or creditor), whether in
existence as of the Effective Time or proposed, other than the ownership of
stock of publicly traded corporations.
4.26 ACCOUNTS RECEIVABLE. All accounts, notes, contracts and other
receivables of Spinners (collectively, "Spinners Accounts Receivable") were
acquired by Spinners in the ordinary course of business arising from bona fide
transactions. To the knowledge of Spinners, there are no set-offs, counterclaims
or disputes asserted with respect to any Spinners Accounts Receivable that would
result in claims in excess of $10,000 and, to the knowledge of Spinners and
subject to such $10,000 amount, all Spinners Accounts Receivable are collectible
in full. Spinners has previously provided Parent with a true and complete aging
report prepared as of May 31, 1998 which shows the time elapsed since invoice
date for all Spinners Accounts Receivable as of such date.
4.27 ACCOUNTS PAYABLE. All material accounts, notes, contracts and other
amounts payable of Spinners (collectively, "Spinners Accounts Payable") are
currently within their
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<PAGE>
respective terms, and are neither in default nor otherwise past due by more than
90 days. Spinners has previously provided Parent with a true and complete aging
report prepared as of May 31, 1998 which shows the time elapsed since invoice
date for all Spinners Accounts Payable as of such date.
4.28 INSURANCE. Spinners currently maintains in full force and effect, all
insurance policies that are required to be maintained for the conduct of the
Spinners Business or the ownership of Spinners' property (both real and
personal) (collectively, the "Spinners Insurance Policies"). The Spinners
Insurance Policies are listed on Schedule 4.28 hereto, and true and complete
-------------
copies of all Spinners Insurance Policies or certificates of insurance have
previously been provided to Parent. Spinners (a) is not in default regarding the
provisions of any Spinners Insurance Policy; (b)has paid all premiums due
thereunder; and (c) has not failed to present any notice or material claim
thereunder in a due and timely fashion.
4.29 BANKRUPTCY. Spinners has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 SPINNERS DEBT AND CASH. As of the date hereof, the Spinners Debt is
not in excess of $680,000. As of June 30, 1998, Spinners cash on hand,
available for dividends, was $176,316.65.
4.31 ACCREDITED INVESTORS; INVESTMENT PURPOSE. Each Spinners Shareholder
represents that he (a) is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"); (b)is
acquiring the Parent Stock solely for his own account for investment and not
with a view to, or for sale in connection with, any distribution thereof; and
(c) will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate
or otherwise dispose of any Parent Stock (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of any such shares) except in compliance
with the Securities Act and the rules and regulations thereunder, other
applicable laws, rules and regulations, and the Second Amended and Restated
Stockholders' Agreement of Parent, dated December 17, 1997 (the "Stockholders'
Agreement).
4.32 RESTRICTIONS ON TRANSFER. Each Spinners Shareholder acknowledges that
(a) the Parent Stock received by him hereunder has not been registered under the
Securities Act; (b)the Parent Stock may be required to be held indefinitely, and
he must continue to bear the economic risk of the investment in such shares
unless such shares are subsequently registered under the Securities Act or an
exemption from such registration is available; (c) there may not be any public
market for the Parent Stock in the foreseeable future; (d) Rule 144 promulgated
under the Securities Act is not presently available with respect to sales of any
securities of Parent, and such Rule is not anticipated to be available in the
foreseeable future, (e) when and if Parent Stock may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
limited amounts and in accordance with the terms and conditions of such Rule;
(j) if the exemption afforded by Rule 144 is not available, public sale without
registration will require the availability of
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<PAGE>
an exemption under the Securities Act; (g) the Parent Stock is subject to the
terms and conditions of the Stockholders' Agreement; (h) restrictive legends
shall be placed on the certificates representing Parent Stock; and (i) a
notation shall be made in the appropriate records of Parent indicating that
Parent Stock is subject to restrictions on transfer and, if Parent should in the
future engage the services of a stock transfer agent, appropriate stop-transfer
instructions will be issued to such transfer agent with respect to Parent Stock.
4.33 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION. Each
Spinners Shareholder represents and warrants that (a) his financial situation is
such that he can afford to bear the economic risk of holding Parent Stock
acquired by him hereunder for an indefinite period; (b) he can afford to suffer
the complete loss of such Parent Stock; (c) he has been granted the opportunity
to ask questions of, and receive answers from, representatives of Parent
concerning the terms and conditions of the Parent Stock and to obtain any
additional information that he deems necessary; (d) his knowledge and experience
in financial business matters is such that he is capable of evaluating the
merits and risk of ownership of the Parent Stock; (e) he has carefully reviewed
the terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; and (f) he (i) has reviewed the Private Placement
Memorandum of Parent dated June 30, 1998 (the "Memorandum"), (ii) has carefully
examined the Memorandum and has had an opportunity to ask questions of, and
receive answers from, representatives of Parent, and to obtain additional
information concerning Parent and its Subsidiaries (as hereinafter defined), and
(iii) does not require additional information regarding Parent or its
Subsidiaries in connection with the Merger.
4.34 DISCLOSURE. No statement of fact by Spinners or any Spinners
Shareholder contained herein and no written statement of fact furnished by
Spinners or any Spinners Shareholder to Parent or Sub in connection herewith
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein contained not
materially misleading.
4.35 NATURE OF LIABILITIES. The $200,000 of fees for Spinners investment
bankers, payable by the Surviving Corporation in accordance with Section 9.2(a)
hereof, and any unpaid legal, accounting or other fees of Spinners, are solely
and directly related to the Merger.
4.36 FORMER OPTION HOLDERS. The employment of Eric Mauro, Dawn Gabriel and
Abigail Phillips was terminated more than ninety days prior to the Effective
Time and, in accordance with the terms of their respective incentive stock
option certificates and the Spinners stock option plan, none of these
individuals owns, or is entitled to own, any Spinners Stock Rights.
Notwithstanding anything to the contrary herein, any Parent Loss which arises as
a result of a breach of the representations provided in this Section 4.36 shall
not be subject to Section 8.2(b)(i) hereof.
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<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to
Spinners and the Spinners Shareholders, which representations and warranties
shall survive the Closing in accordance with Section 10.1 hereof, as follows:
5.1 ORGANIZATION AND QUALIFICATION. Each of Parent and its Subsidiaries
(as defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached, respectively, to a closing
certificate and incumbency certificate of Parent, substantially in the form of
Exhibit "A-1" hereto ("Parent's Closing Certificate"), and to Sub's Closing
- -------------
Certificate.
5.2 AUTHORITY. Each of Parent and Sub has the necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective boards of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective boards of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by Spinners and the Spinners Shareholders,
constitutes the valid and binding obligation of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms,
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
5.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Parent or Sub, or the organizational documents of any other
Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
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<PAGE>
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for (x)
compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL); or (ii)
any other Person.
5.4 LITIGATION. Except as set forth on Schedule 5.4 hereto, there is no
------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 BROKERS. Except as disclosed on Schedule 5.5 hereto, no broker or
------------
finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Parent or Sub.
5.6 PARENT STOCK.
(a) As of the date hereof, the authorized capital stock of Parent
consists of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 11,863,632 shares are
validly issued and outstanding (without taking into account any shares of Parent
Stock to be issued pursuant hereto, or pursuant to any of the Potential
Acquisitions as defined in the Memorandum), fully paid and nonassessable; (ii)
750,000 shares of blank check preferred stock, (A) 250,000 of which have been
designated as Class A Convertible Preferred Stock, of which 174,526 shares are
validly issued and outstanding, fully paid and nonassessable, (B) 200,000 of
which have been designated as Class B Convertible Preferred Stock, of which
98,767 shares are validly issued and outstanding, fully paid and nonassessable,
and (C) 15,000 of which have been designated as Class C Convertible Preferred
Stock, of which 9,232 shares are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 5.6 hereto, there are no options,
------------
warrants, calls, agreements, commitments or other rights presently outstanding
that would obligate Parent to issue, deliver or sell shares of its capital
stock, or to grant, extend or enter into any such option, warrant, call,
agreement, commitment or other right. In addition to the foregoing, as of the
Closing Date, Parent has no bonds, debentures, notes or other indebtedness
issued or outstanding that have voting rights in Parent.
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<PAGE>
(b) When delivered to the Spinners Shareholders in accordance with the
terms hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
5.7 SUBSIDIARIES. Except as set forth on Schedule 5.7 hereto, Parent has
------------
no subsidiaries and does not otherwise own or control, directly or indirectly,
any equity interest in, or any security convertible into an equity interest in,
any Entity. Schedule 5.7 lists the name of each of the Subsidiaries of Parent,
------------
and indicates their respective jurisdictions of incorporation.
5.8 FINANCIAL STATEMENTS. Parent has heretofore furnished Spinners with a
true and complete copy of (a) the audited financial statements of iXL
Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31,
1993, 1994 and 1995, and for the four month period ended April 30, 1996; (b) the
audited combined financial statements for Creative Video, Inc. (n/k/a iXL,
Inc.), Creative Video Library, Inc. and Entrepreneur Television, Inc. for the
years ended December 31, 1993, 1994 and 1995, and for the four month period
ended April 30, 1996; (c) the audited consolidated financial statements for
Parent and its Subsidiaries for the eight months ended December 31, 1996 and for
the year ended December 31, 1997; and (d) the unaudited consolidated financial
statements for Parent and its Subsidiaries for the four month period ended March
31, 1998 (all of the foregoing, collectively, "Parent Financial Statements").
The Parent Financial Statements present fairly in all material respects the
consolidated financial position, results of operations, shareholders' equity and
cash flow of Parent at the respective dates or for the respective periods to
which they apply. Except as disclosed therein, such statements and related notes
have been prepared in accordance with GAAP consistently applied throughout the
periods involved (except, in the case of the unaudited financial statements, for
the exclusion of footnotes and normal year end adjustments).
5.9 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997 that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Parent and its Subsidiaries, taken as a whole; (b) liabilities reflected on
the Parent Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
5.10 COMPLIANCE WITH APPLICABLE LAWS. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
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<PAGE>
5.11 BOARD OF DIRECTORS/SHAREHOLDER CONSENT. The board of directors of
Parent, and both the board of directors and shareholder of Sub, have, by
unanimous written consent or other action, adopted and approved this Agreement
and the transactions contemplated hereby (including the Merger).
5.12 BANKRUPTCY. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 ABSENCE OF CHANGES. Except as provided in Schedule 5.13 hereto,
-------------
since December 31, 1997, there has not been (a) any transaction, commitment,
dispute or other event or condition (financial or otherwise) of any character
(whether or not in the ordinary course of business) individually or in the
aggregate that has had, or would reasonably be expected to have, a material
adverse effect on the business, properties, assets, condition (financial or
otherwise), liabilities or results of operations of Parent and its Subsidiaries,
taken as a whole; (b) any damage, destruction or loss, whether or not covered by
insurance, which has had, or would reasonably be expected to have, a material
adverse effect on the business, properties, assets, condition (financial or
otherwise), liabilities or results of operations of Parent and its Subsidiaries,
taken as a whole; (c) any entry into any commitment or transaction material to
Parent and its Subsidiaries, taken as a whole (including any borrowing or sale
of assets) except in the ordinary course of business consistent with past
practice; (d) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) with respect to Parent's
capital stock; (e) any material change in Parent's accounting principles,
practices or methods; (f) any split, combination or reclassification of any of
Parent's capital stock, or the issuance or authorization of any issuance of any
other securities in respect of; in lieu of or in substitution for, shares of
Parent's capital stock; or (g) any agreement (whether or not in writing),
arrangement or understanding to do any of the foregoing.
5.14 TAXES. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent and
its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the Closing Date,
all deficiencies proposed as a result of any audits will have been paid or
settled.
5.15 DISCLOSURE. No statement of fact by Parent or Sub contained herein
and no written statement of fact furnished or to be furnished by Parent or Sub
to Spinners in connection herewith
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contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
herein or therein contained not misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 CONDUCT OF BUSINESS BY SPINNERS PENDING THE MERGER. From and after the
date hereof, prior to the Effective Time, except as contemplated hereby, unless
Parent shall otherwise agree in writing, Spinners shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, use reasonable efforts to preserve intact its present
business organization, keep available the services of its employees and preserve
its relationships with customers, suppliers, licensors, licensees, distributors
and others having business dealings with Spinners to the end that its goodwill
and on-going business shall not be impaired in any material respect at the
Effective Time. Without limiting the generality of the foregoing, and except as
contemplated hereby, unless Parent shall otherwise agree in writing, prior to
the Effective Time, Spinners shall not, directly or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of its capital stock; provided, however, that
Spinners may distribute, by way of a dividend to the Spinners Shareholders, an
amount up to its earnings through June 30, 1998, but not in excess of cash on
hand as of June 30, 1998, (ii) split, combine or reclassify any of its capital
stock, or issue or authorize the issuance of any other securities in respect of;
in lieu of or in substitution for, shares of its capital stock, or (iii)
purchase, redeem or otherwise acquire, any share of capital stock of Spinners or
any other equity security thereof or any right, warrant, or option to acquire
any such share or other security;
(b) issue, deliver, sell, pledge or otherwise encumber any share of
its capital stock, any other voting security issued by Spinners or any security
convertible into, or any right, warrant or option to acquire any such share or
voting security;
(c) amend its Certificate of Incorporation, Bylaws or other
comparable organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to Spinners;
(e) subject to a Lien or sell, lease or otherwise dispose of any of
its properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of Spinners,
guarantee any debt security of another Person or enter into any "keep well" or
other agreement to maintain the financial
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condition of another Person, make any loan, advance or capital contribution to,
or investment in, any other person, or settle or compromise any material claim
or litigation; or
(g) authorize any of, or commit or agree to take any of, the
foregoing actions.
6.2 ACCESS TO INFORMATION. From the date hereof through the Effective
Time, Spinners and Parent shall afford to the other of them and the other's
accountants, counsel and other representatives reasonable access during normal
business hours (and at such other times as the parties may mutually agree) upon
reasonable prior notice and approval, which shall not be unreasonably withheld,
to its properties, books, contracts, commitments, records and personnel and,
during such period, shall furnish promptly to the other of them all information
concerning its business, properties and personnel as the other may reasonably
request. Parent and Spinners, and their respective accountants, counsel and
other representatives, shall, in the exercise of the rights described in this
Section 6.2, not unduly interfere with the operation of the business of the
other of them.
6.3 FILINGS; TAX ELECTIONS. Spinners shall promptly provide Parent with
copies of all filings made by Spinners with any Governmental Entity in
connection herewith and the transactions contemplated hereby. Spinners shall,
before settling or compromising any material income tax liability of Spinners,
consult with Parent and its advisors as to the positions and elections that will
be taken or made with respect to such matter.
6.4 PUBLIC ANNOUNCEMENTS. The parties agree that, except as may otherwise
be required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger. Any such disclosure shall be coordinated by Parent,
and none of the Spinners Shareholders shall make any such disclosure without the
prior written consent of Parent.
6.5 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND EXPENSES. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 OPTIONS.
(a) Spinners hereby covenants and agrees that at the Effective Time,
all of the Spinners Stock Rights (all of which are set forth on Schedule 4.3(a)
--------------
hereto) shall have been properly canceled and, except for the right to receive
options to acquire Parent Stock described in Section 6.6(b) below, all rights
and obligations thereunder shall have been terminated.
(b) Parent hereby covenants and agrees that, at the Effective Time,
each of the holders of Spinners Stock Rights shall receive incentive or non-
qualified options (corresponding to whether their previous Spinners Options were
incentive or non-qualified) to purchase the number of
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shares of validly issued, fully paid and nonassessable Parent Stock, at the
exercise price per share, as set forth on Schedule 6.6(b) hereto, all of which
--------------
options shall have been issued pursuant to the IXL Holdings, Inc. 1996 Stock
Option Plan, as amended (the "Parent Stock Option Plan").
(c) Parent further covenants that, at the Effective Time, it will
issue options to purchase up to 250,000 shares of validly issued, fully paid and
nonassessable Parent Stock, at an exercise price of $10 per share and vesting
20% per year over each of five years, to those Persons designated by Spinners,
approved by Parent and listed on Schedule 6.6(c) hereto, all of which options
--------------
shall be issued pursuant to the Parent Stock Option Plan; provided, however,
that if for any reason any such options shall not fully vest in accordance with
the terms of the award thereof, or are not exercised within the time period
provided therein, and therefore expire or are canceled, then in that event non-
qualified options on the number of shares of Parent Stock subject to such
expired or canceled option, and corresponding as to price and vesting, shall be
issued to the Spinners Shareholders without the payment of any additional
consideration therefor, pro rata in accordance with the number of shares of
Parent Stock received in the Merger.
6.7 FURTHER ASSURANCES. From time to time after the Effective Time, upon
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof.
6.8 LANDLORD'S CONSENT. Spinners shall, prior to the Closing, have
obtained written consent from Athenaeum Property LLC, Landlord under a Lease
dated June 12, 1997 with Clam Associates Inc. ("Clam"), with respect to Spinners
premises subleased from Clam pursuant to a Sublease dated April 9, 1998.
6.9 SECTION 338 ELECTION; TAX-FREE MERGER.
(a) The parties agree and acknowledge that the Merger is intended to
qualify, for federal income tax purposes, as a reorganization within the meaning
of Section 368(a) of the Code. Accordingly, none of the parties hereto shall
attempt to file a Section 338 election without the prior written consent of the
other parties hereto.
(b) Parent hereby agrees that it will continue to maintain its
ownership of Sub so as not to violate the continuity of interest requirements
under Section 368 of the Code and the regulations thereunder. If Parent (i)
fails to continue its ownership in accordance with the foregoing sentence, or
(ii) takes any action, or fails to take any reasonable action, and, solely as a
result thereof, the Internal Revenue Service (the "IRS") determines that the
Merger constitutes a taxable event for the Spinners Shareholders, then Parent
shall loan to the Spinners Shareholders, on an interest-free basis, an amount
equal to the federal income tax imposed on the Spinners Shareholders for which
and to the extent that they would not otherwise have been liable; provided,
however, that (1) each Spinners Shareholder shall promptly (and in any event
within five days of his receipt thereof) deliver to Parent a copy of any notice
received from the IRS relating to the taxability of the Merger; (2) Parent shall
have the right, at its discretion, to defend against and/or settle any claim by
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the IRS to the effect that the Merger constitutes a taxable event; (3) each
Spinners Shareholder shall, promptly after receipt of such loan, furnish Parent
with evidence to Parent's satisfaction that such tax liability has been paid in
full; and (4) in consideration therefor, each Spinners Shareholder shall have
executed and delivered a non-interest bearing note, in form and substance
satisfactory to Parent, providing for payment at a date to be agreed upon by the
parties (and in any event if any Spinners Shareholder fails to comply with the
condition specified in the preceding clause (3)), for the full principal amount
so loaned by Parent, the note to be secured by delivery to Parent of Parent
Stock certificates (with executed stock powers in favor of Parent) evidencing
Parent Stock, valued for this purpose at $10 per share, in aggregate at least
equal to the principal amount of the note, the note to be non-recourse except as
to such Parent Stock. Parent and the Spinners Shareholders further agree that
the Spinners Shareholders will be entitled, at any time, subject to applicable
provisions of the Stockholders' Agreement, to sell (but not to assign) such
Parent Stock, and Parent will release such pledged Parent Stock upon receipt of
proceeds from such sale in an amount sufficient to satisfy the unpaid balance of
such note.
6.10 PERSONAL GUARANTIES OF SPINNERS LEASES. Parent shall, as soon as is
practicable after the Effective Time, use its best efforts to attempt to
eliminate any personal guaranty made by any Spinners Shareholder for the
obligations of Spinners under the terms of any Spinners Lease, and, subject to
Parent's other obligations, to substitute itself as guarantor of such
obligations. Parent will indemnify and hold Spinners Shareholders harmless
against liability resulting solely from Sub's or Parent's failure to pay such
obligations when due and payable under the terms thereof.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATION OF SPINNERS AND THE SPINNERS SHAREHOLDERS TO
EFFECT THE MERGER. The obligation of Spinners and the Spinners Shareholders to
effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions:
(a) Parent and Sub shall have performed in all material respects
their respective agreements contained herein required to be performed at or
prior to the Effective Time, and the representations and warranties of Parent
and Sub contained herein shall be true when made and (except for representations
and warranties made as of a specified date, which need only be true as of such
date) at and as of the Effective Time as if made at and as of such time, except
as contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to Spinners at the Closing, Parent's Closing Certificate, and (ii) the
appropriate officers of Sub shall have executed and delivered to Spinners at the
Closing, Sub's Closing Certificate;
(c) Parent shall have obtained all of the Consents, if any, listed
on Schedule 7.1(c) hereto;
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(d) Spinners shall have received corporate certificates of good
standing for Parent and Sub, and a copy of the Certificate of Incorporation for
Parent and Sub, respectively, both as certified by the Secretary of State of
Delaware;
(e) there shall have been delivered to each of the Spinners
Shareholders at the Closing, duly executed by Parent, an Agreement to be Bound
to the Registration Rights Agreement of Parent, dated as of Closing Date (the
"Agreement to be Bound to the Registration Rights Agreement"), substantially in
the form of Exhibit "B" hereto;
----------
(f) Parent shall have executed and delivered at the Closing an
Option Agreement for each of the Persons listed on Schedules 6.6(b) or 6.6(c)
--------------------------
hereto receiving options to purchase Parent Stock, substantially in the form of
Exhibit "C" hereto;
- ----------
(g) Spinners shall have received, at the Closing, a duly executed
opinion of counsel to Parent and Sub, substantially in the form of Exhibit "D"
----------
hereto; and
(h) Spinners shall have received from Parent and Sub such other
documents as Spinners' counsel shall have reasonably requested, in form and
substance reasonably satisfactory to Spinners' counsel.
7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) Spinners and the Spinners Shareholders shall have performed in
all material respects their respective agreements contained herein required to
be performed at or prior to the Effective Time, and the representations and
warranties of Spinners and the Spinners Shareholders contained herein shall be
true when made and (except for representations and warranties made as of a
specified date, which need only be true as of such date) at and as of the
Effective Time as if made at and as of such time, except as contemplated hereby;
(b) the appropriate officers of Spinners shall have executed and
delivered to Parent at the Closing, Spinners Closing Certificate;
(c) Spinners and the Spinners Shareholders shall have obtained or
caused to be obtained all of the Consents, if any, listed on Schedule 7.2(c)
--------------
hereto;
(d) there shall have been delivered to Parent at the Closing, duly
executed by each of the Spinners Shareholders, (i) an Agreement to be Bound to
the Stockholders' Agreement, substantially in the form of Exhibit "F" hereto;
----------
and (ii) an Agreement to be Bound to the Registration Rights Agreement;
(e) Parent shall have received a corporate certificate of good
standing for Spinners, and a copy of the Certificate of Incorporation of
Spinners, both as certified by the Secretary of State of Delaware;
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(f) as of the date three business days prior to the Closing Date the
Spinners Debt shall be no greater than $680,000;
(g) Spinners shall have complied with its obligations under Section
6.6(a) hereof;
(h) Parent shall have received, at the Closing, a duly executed
opinion of counsel to Spinners and the Spinners Shareholders, substantially in
the form of Exhibit "G" hereto;
----------
(i) Parent shall have received from Spinners or the Spinners
Shareholders, as the case may be, such other documents as Parent's counsel shall
have reasonably requested, in form and substance reasonably satisfactory to
Parent's counsel, and Parent shall have completed its due diligence review of
Spinners and shall, in its sole and absolute discretion, be satisfied with the
results thereof; and
(j) Parent shall have received evidence satisfactory to it that at
the Closing the assets and properties used in the Spinners Business are free and
clear of all Liens other than Permitted Liens (as hereinafter defined).
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY PARENT.
(a) Parent shall indemnify and hold the Spinners Shareholders and
Spinners' directors, officers and employees (collectively, the "Spinners
Indemnified Parties") harmless from and against, and agree promptly to defend
each of the Spinners Indemnified Parties from and reimburse each of the Spinners
Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including reasonable attorney
fees and other legal costs and expenses) (collectively, a "Spinners Loss") that
any of the Spinners Indemnified Parties may at any time suffer or incur, or
become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations
and warranties made by Parent or Sub in or pursuant hereto, or in any
instrument, certificate or affidavit delivered by Parent or Sub at the Closing
in accordance with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform,
satisfy and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations hereunder or under any of the documents and materials
delivered by Parent pursuant hereto; and
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(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary,
Parent shall not have any liability under Section 8.1(a)(i) above (i) unless the
aggregate of all Spinners Losses for which Parent would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $100,000, and then
only to the extent of such excess, (ii) for amounts in excess of $9,000,000 in
the aggregate, and (iii) unless the Spinners Shareholders have asserted a claim
with respect to the matters set forth in Section 8.1(a)(i), or 8.1(a)(iii) to
the extent applicable to Section 8.1(a)(i), within two years of the Effective
Time. Notwithstanding any implication to the contrary contained herein, the
parties acknowledge and agree that a decrease in the value of Parent Stock would
not, by itself, constitute a Spinners Loss, unless and to the extent a decrease
in the value of Parent Stock has been demonstrated to be as a result of any
event described in Sections 8.1(a)(i), (ii) or (iii) above.
8.2 INDEMNIFICATION BY THE SPINNERS SHAREHOLDERS.
(a) The Spinners Shareholders, jointly and severally, shall indemnify
and hold Parent, Sub, Surviving Corporation and their respective shareholders,
directors, officers and employees (collectively, the "Parent Indemnified
Parties") harmless from and against, and agree to defend promptly each of the
Parent Indemnified Parties from and reimburse each of the Parent Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorneys' fees and
other legal costs and expenses) (collectively, a "Parent Loss") that any of the
Parent Indemnified Parties may at any time suffer or incur, or become subject
to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the
representations and warranties made by Spinners or the Spinners Shareholders in
or pursuant hereto, or in any instrument certificate or affidavit delivered by
any of the same at the Closing in accordance with the provisions hereof;
(ii) any failure by Spinners or any of the Spinners
Shareholders to carry out, perform, satisfy and discharge any of their
respective covenants, agreements, undertakings, liabilities or obligations
hereunder or under any of the documents and materials delivered by Spinners
pursuant hereto; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above, none of the Spinners Shareholders
shall have any liability under Section 8.2(a)(i) above (i) unless the aggregate
of all Parent Losses for which the Spinners Shareholders would be liable but for
this sentence exceeds, on a cumulative basis, an amount equal to $100,000, and
then only to the extent of such excess, (ii) for amounts in excess of $9,000,000
in the aggregate, and (iii) unless Parent has asserted a claim with respect to
the matters set forth in Sections 8.2(a)(i), or 8.2(a)(iii) (to the extent
applicable to Section 8.2(a)(i)) within two
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years of the Effective Time, except with respect to the matters arising under
(A) Sections 4.18,4.19 or 4.20 hereof, in which event Parent must have asserted
a claim within the applicable statute of limitations; or (B) Section 4.24
hereof, in which event Parent must have asserted a claim within five years of
the Effective Time. Notwithstanding any implication to the contrary contained
herein, the parties acknowledge and agree that a decrease in the value of Parent
Stock would not, by itself, constitute a Parent Loss, unless and to the extent a
decrease in the value of Parent Stock has been demonstrated to be as a result of
any event described in Sections 8.2(a)(i), (ii) or (iii) above.
8.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder. Subject to the
Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section 8.1 or 8.2 hereof, as the case may
be, the Indemnifying Party shall have the right, at its sole cost and expense,
to employ counsel of its own choosing to defend any such Claim asserted against
the Indemnified Party. Notwithstanding anything to the contrary in the preceding
sentence, if the Indemnified Party (i) reasonably believes that its interests
with respect to a Claim (or any material portion thereof) are in conflict with
the interests of the Indemnifying Party with respect to such Claim (or portion
thereof), and (ii) promptly notifies the Indemnifying Party, in writing, of the
nature of such conflict, then the Indemnified Party shall be entitled to choose,
at the sole cost and expense of the Indemnifying Party, independent counsel to
defend such Claim (or the conflicting portion thereof). The Indemnified Party
shall have the right to participate in the defense of any Claim at its own
expense (except to the extent provided in the preceding sentence), but the
Indemnifying Party shall retain control over such litigation (except as provided
in the preceding sentence). The Indemnifying Party shall notify the Indemnified
Party in writing, as promptly as possible (but in any case before the due date
for the answer or response to a Claim) after receipt of the notice of Claim
given by the Indemnified Party to the Indemnifying Party under Section 8.3(a)
hereof, of its election to defend in good faith any such third party Claim. For
so long as the Indemnifying Party is defending in good faith any such Claim
asserted by a third party against the Indemnified Party, the Indemnified Party
shall not settle or compromise such Claim without the prior written consent of
the Indemnifying Party. The Indemnified Party shall cooperate with the
Indemnifying Party in connection with any such defense and shall make available
to the Indemnifying Party or its agents all records and other materials in the
Indemnified Party's possession reasonably required by it for its use in
contesting
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any third party Claim; provided, however, that the Indemnifying Party shall have
agreed, in writing, to keep such records and other materials confidential except
(i) to the extent required for defense of the relevant Claim, or (ii) as
required by law or court order. Whether or not the Indemnifying Party elects to
defend any such Claim, the Indemnified Party shall have no obligations to do so.
Within 30 days after a final determination (including a settlement) has been
reached with respect to any Claim contested pursuant to this Section 8.3(b), the
Indemnifying Party shall satisfy its obligations hereunder with respect thereto.
Any amount paid thereafter shall include interest thereon for the period
commencing at the end of such 30-day period and ending on the actual date of
payment, at a rate of 15% per annum, or, if lower, at the highest rate of
interest permitted by applicable law at the time of such payment.
8.4 PAYMENT. Any Indemnifying Party may, at such Indemnifying Party's
option, pay all or part of any amount due under this Article VIII by delivery of
shares of Parent Stock having a value equal to the amount due (to the extent
that such Party owns sufficient shares of Parent Stock); provided, however, that
the Spinners Shareholders shall only be entitled to this option to the extent
that they have satisfied an aggregate of $1 million of Parent Losses in cash.
For the purpose of this provision, the value of Parent Stock shall be deemed to
be $10 per share; provided, however, that in the event of a Spinners Loss, the
Spinners Indemnified Parties may request in writing that the value of Parent
Stock instead be determined by Price Waterhouse LLP, whose fees and expenses
will be split evenly by Parent, on the one hand, and the Spinners Shareholders,
on the other, and whose determination will be binding in connection with that
Spinners Loss.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Merger Agreement may be terminated at any time prior
to the Effective Time:
(a) by mutual written consent of Parent and Spinners;
(b) by Spinners, upon a material breach hereof on the part of Parent
or Sub which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by July 31, 1998;
(c) by Parent, upon a material breach hereof on the part of Spinners
or any of the Spinners Shareholders which has not been cured and which would
cause any condition set forth in Section 7.2 hereof to be incapable of being
satisfied by July 31, 1998;
(d) by Parent or Spinners if any court of competent jurisdiction
shall have issued, enacted, entered, promulgated or enforced any order,
judgment, decree, injunction or ruling which restrains, enjoins or otherwise
prohibits the Merger and such order, judgment, decree, injunction or ruling
shall have become final and nonappealable; or
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(e) by either Parent or Spinners if the Merger shall not have been
consummated on or before July 31, 1998 (provided the terminating party is not
otherwise in material breach of its representations, warranties or obligations
hereunder).
9.2 FEES AND EXPENSES.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the Surviving Corporation; provided, however, that the Spinners Shareholders
shall pay all fees and expenses (including agents, counsel and other advisors)
of Spinners and themselves that are not solely and directly related to the
Merger.
(b) If the Merger is not consummated for a reason other than the
willful and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
(c) If the Merger is not consummated because of a willful and material
breach hereof by any party, the nonbreaching party or parties shall be entitled
to pursue all legal and equitable remedies against the breaching party for such
breach including specific performance and all fees and expenses incurred by the
nonbreaching party or parties in connection with enforcing its or their rights
hereunder with respect to such breach shall be paid by the breaching party.
9.3 AMENDMENT. This Merger Agreement may be amended by the parties hereto
at any time before or after approval hereof by the Spinners Shareholders, but,
after such approval, no amendment shall be made which (i) changes the form or
decreases the amount of the consideration to be received in the Merger, (ii) in
any way materially adversely affects the rights of the Spinners Shareholders, or
(iii) under applicable law would require approval of the Spinners Shareholders,
in any such case referred to in clauses (i), (ii) and (iii), without the further
approval of the Spinners Shareholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of the parties hereto, provided
that after the Effective Time, any such amendment must be signed by the former
holders of a majority of the Spinners Stock.
9.4 WAIVER. At any time prior to the Effective Time, the parties hereto
may, to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
-29-
<PAGE>
ARTICLE X
GENERAL PROVISIONS
10.1 SURVIVAL; RECOURSE. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 10.9 and 10.10 hereof, shall survive the
Merger (except to the extent a shorter period of time is explicitly specified
therein) and (ii) the representations and warranties made in Articles IV and V
hereof shall survive the Merger, and shall survive any independent investigation
by the parties, and any dissolution, merger or consolidation of Spinners or
Parent, and shall bind the legal representatives, assigns and successors of
Spinners, the Spinners Shareholders and Parent, for a period of two years after
the Effective Time (other than the representations and warranties contained in
(A) Sections 4.18, 4.19 and 4.20 hereof, which shall survive for the applicable
statute of limitations; and (B) Section 4.24 hereof, which shall survive for a
period of five years after the Effective Time).
10.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in Person, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Spinners: Spinners Incorporated
Athenaeum House, 215 First St.
Cambridge, MA 02142
Attention: Mr. Niraj Shah, President
Telephone: 617/225-0901
Telecopy: 617/225-0902
With copies to: Peabody & Brown
101 Federal St.
Boston, MA 02110-1832
Attention: Brian J. Crush, P.C.
Telephone: 617/345-1000
Telecopy: 617/345-1300
and to: First Albany Corporation
One Penn Plaza, 42nd Floor
New York, NY 10119
Attention: Mr. Andrew Lewin, Sr. V.P.
Telephone: 212/273-7141
Telecopy: 212/273-7320
If to the Spinners To the address listed under the signature
Shareholders: line of the applicable Spinners Shareholder
-30-
<PAGE>
If to Parent or Sub: IXL Holdings, Inc.
1888 Emery St., 2nd Floor
Atlanta, GA 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Rd., Ste. 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Ave., 24th Floor
New York, NY 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 ENTIRE AGREEMENT. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and instruments
referred to herein and to be delivered pursuant hereto constitute the entire
agreement between the parties pertaining to the subject matter hereof, and
supersede all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
except for the non-disclosure letter agreement between Parent and Spinners dated
as of April 23, 1998. There are no other representations or warranties, whether
written or oral, between the parties in connection the subject matter hereof,
except as expressly set forth herein.
10.4 ASSIGNMENTS; PARTIES IN INTEREST. Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests, and
obligations of Sub hereunder may be assigned to any direct wholly owned Delaware
subsidiary of Parent without such prior consent. Subject to the preceding
sentence, this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing herein, express or implied, is intended to or
shall confer upon any Person not a party hereto any right, benefit or remedy of
any nature whatsoever under or by reason hereof, except as otherwise provided
herein.
-31-
<PAGE>
10.5 GOVERNING LAW. This Agreement, except to the extent that the DGCL is
mandatorily applicable to the Merger, or to the rights of the Spinners
Shareholders or the other parties hereto with respect to the Merger, shall be
governed in all respects by the laws of the State of Georgia (without giving
effect to the provisions thereof relating to conflicts of law).
10.6 HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation hereof.
10.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 SEVERABILITY. If any term or other provision hereof is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions hereof shall nevertheless remain in full force
and effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.9 POST-CLOSING ACCESS. For a period of seven years after the Closing
Date, the Spinners Shareholders and their agents and representatives shall have
reasonable access to the books and records of the Spinners Business; thereafter,
Sub and Parent will cooperate to furnish the Spinners Shareholders with
information as reasonably necessary for tax or other purposes.
10.10 POST-CLOSING NOTICE. To the extent the Surviving Corporation
receives written notice of any event or circumstance that materially affects any
of the Spinners Shareholders, the Surviving Corporation shall promptly notify
the affected Spinners Shareholder of such matter, information, or event and
shall provide them with copies of all relevant documentation or correspondence
in connection thereto.
10.11 CERTAIN DEFINITIONS. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the Spinners
Real Property or interfering with the ordinary conduct of any of the Spinners
Business; and (e) those Liens listed on Schedule 10.11;
--------------
-32-
<PAGE>
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party Shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of Spinners" shall refer to the knowledge,
subject to clause (i) above, of any of the Spinners Shareholders; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of
which Parent (either alone or through or together with any other Subsidiary)
owns, directly or indirectly, stock or other equity interests the holders of
which are entitled to more than 50% of the vote for the election of the board of
directors or other governing body of such Entity (including Sub); provided,
however, that with respect to the Parent, the terms "Subsidiary" and
"Subsidiaries" shall not include Spinners or University Netcasting, Inc.
- SIGNATURES ON THE FOLLOWING PAGE -
- 33 -
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and Spinners have caused this Agreement to
be signed and delivered by their respective duly authorized officers, and each
Spinners Shareholder has signed and delivered this Agreement, all as of the date
first written above.
"SPINNERS"
Spinners Incorporated, a Delaware corporation
By: /s/ Niraj S. Shah
------------------------------------------
Title: President
"PARENT"
IXL Holdings, Inc., a Delaware corporation
By:
------------------------------------------
Title:
---------------------------------------
"SUB"
iXL-Boston, Inc., a Delaware corporation
By:
------------------------------------------
Title:
---------------------------------------
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
- 34-
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and Spinners have caused this Agreement to
be signed and delivered by their respective duly authorized officers, and each
Spinners Shareholder has signed and delivered this Agreement, all as of the date
first written above.
"SPINNERS"
Spinners Incorporated, a Delaware corporation
By:
------------------------------------------
Title:
---------------------------------------
"PARENT"
IXL Holdings, Inc., a Delaware corporation
By: /s/ James V. Sandry
-------------------------------------------
Title: Executive Vice President
"SUB"
iXL-Boston, Inc., a Delaware corporation
By: /s/ James V. Sandry
-------------------------------------------
Title: Executive Vice President
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
-34-
<PAGE>
"SPINNERS SHAREHOLDERS"
/s/ Niraj S. Shah
-------------------------------------------------------
Niraj S. Shah
Address: 1163 Beacon St #6
-------------------------------------------
Brookline, MA 02146
-------------------------------------------
___________________________________________
/s/ Steven K. Conine
-------------------------------------------------------
Steven K. Conine
Address: 128 Chestnut St. #32
-------------------------------------------
Boston, MA 02108
-------------------------------------------
___________________________________________
-35-
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate...................................... Exhibit A-1
Sub's Closing Certificate......................................... Exhibit A-2
Agreement to be Bound to Registration Rights Agreement............ Exhibit B
Option Agreement.................................................. Exhibit C
Opinion of Counsel to Parent and Sub.............................. Exhibit D
Spinner's Closing Certificate..................................... Exhibit E
Agreement to be Bound to Stockholders' Agreement.................. Exhibit F
Opinion of Counsel to Spinners.................................... Exhibit G
Certificate of Merger............................................. Exhibit H
<PAGE>
SCHEDULE 3.1(B)
---------------
MERGER CONSIDERATION
(See Schedule 3.1(B) attached hereto)
SCHEDULE 4.3(A)
---------------
CAPITALIZATION OF SPINNERS
SCHEDULE 4.3(B)
---------------
LIENS ON STOCK
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF SPINNERS
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF SPINNERS
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF SPINNERS
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF SPINNERS
<PAGE>
SCHEDULE 3.1(b)
---------------
PRO FORMA CALCULATION OF MERGER CONSIDERATION
---------------------------------------------
PS = (900,000 + X) - (D + $1 million)
--- ----------------
$10 $10
--------------------------------
S + O
Assuming: O=690,500 Spinners options, each at $.25 exercise price
X=1/2 of (690,500 x $.25)=$86,321.50
D=$680,000
S=7 million shares
PS = (900,000 + 8,631.25) - (168,000)
--------------------------------
7,690,500
PS = .0963 IXL shares per Spinners share
Total IXL shares = 674,132 (based on foregoing assumptions)
<PAGE>
SCHEDULE 4.10
-------------
EQUIPMENT OF SPINNERS
SCHEDULE 4.11(A)
----------------
INTELLECTUAL PROPERTY OF SPINNERS
SCHEDULE 4.11(B)
----------------
MATERIAL COMPUTER SOFTWARE
SCHEDULE 4.12
-------------
REAL PROPERTY OF SPINNERS
SCHEDULE 4.13
-------------
LEASES OF SPINNERS
SCHEDULE 4.14
-------------
CONTRACTS OF SPINNERS
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF SPINNERS
<PAGE>
SCHEDULE 4.16
-------------
PAYROLL INFORMATION OF SPINNERS
SCHEDULE 4.17
-------------
LITIGATION
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF SPINNERS
SCHEDULE 4.19
-------------
ERISA ISSUES OF SPINNERS
SCHEDULE 4.21
-------------
SPINNERS PERMITS
SCHEDULE 4.23
-------------
SPINNERS BROKERS
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS, COMPETITORS
<PAGE>
SCHEDULE 4.28
-------------
INSURANCE OF SPINNERS
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
OUTSTANDING OBLIGATIONS TO ISSUE OPTIONS, WARRANTS
OR OTHER PARENT STOCK RIGHTS
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
<PAGE>
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES
SCHEDULE 6.6(B)
---------------
PARENT OPTIONS TO HOLDERS OF SPINNERS STOCK RIGHTS
SCHEDULE 6.6(C)
---------------
PARENT OPTIONS TO THOSE PERSONS DESIGNATED BY SPINNERS
SCHEDULE 7.1(C)
----------------
PARENT CONSENTS
SCHEDULE 7.2(C)
---------------
SPINNERS AND SPINNERS SHAREHOLDERS CONSENTS
SCHEDULE 10.11
--------------
PERMITTED LIENS OF SPINNERS
<PAGE>
EXHIBIT 2.25
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
IXL HOLDINGS, INC.,
IXL-RICHMOND, INC.,
TEKNA, INC.
AND
THE TEKNA SHAREHOLDERS
DATED AS OF SEPTEMBER 4, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 4th day of
September, 1998, by and between TEKNA, INC., a Virginia corporation ("Tekna"),
IXL HOLDINGS, INC., a Delaware corporation ("Parent"), IXL-RICHMOND, INC., a
Delaware corporation, or its successors or assigns ("Sub"), and the shareholders
of Tekna as listed on the signature page hereto (the "Tekna Shareholders").
R E C I T A L S:
- - - - - - - -
A. Tekna is engaged in the business of developing internet sites and
furnishing internet services, including website design and maintenance (the
"Tekna Business").
B. Tekna and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The Tekna Shareholders collectively own 100% of the issued and
outstanding capital stock of Tekna (the "Tekna Stock").
D. The respective Boards of Directors of Parent, Sub and Tekna, and the
respective shareholders of Sub and Tekna, have approved the Merger, upon the
terms and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal
income tax purposes, as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, at
the Effective Time (as defined in Section 1.3 hereof), (a) Tekna shall be merged
with and into Sub, (b) the separate existence of Tekna shall cease, and (c) Sub
shall continue as the surviving corporation in the Merger under the laws of the
State of Delaware under the name iXL-Richmond, Inc. For purposes of this
Agreement, Sub shall be referred to, for the period commencing on the Effective
Time, as the "Surviving Corporation."
<PAGE>
1.2 CLOSING AND CLOSING DATE. Unless this Merger Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 9.1 hereof, and subject to the satisfaction or
waiver of the conditions set forth in Article VII hereof, the closing of the
Merger (the "Closing") will take place as promptly as practicable (and in any
event within five business days after satisfaction of the conditions set forth
in Sections 7.1 and 7.2 hereof) (the "Closing Date") at the offices of Minkin &
Snyder, A Professional Corporation, One Buckhead Plaza, 3060 Peachtree Rd., Ste.
1100, Atlanta, GA 30305, unless another date or place is agreed to by the
parties.
1.3 EFFECTIVE TIME OF THE MERGER. At the Closing, the parties hereto shall
cause (a) a certificate of merger (the "Delaware Certificate of Merger") to be
filed with the office of the Secretary of State of Delaware in accordance with
the provisions of the Delaware General Corporation Law, as amended (the "DGCL");
and (b) Articles of Merger (the "Virginia Articles of Merger"; collectively with
the Delaware Certificate of Merger, the "Certificate of Merger") to be filed
with the office of the State Corporation Commission of Virginia in accordance
with the provisions of the Virginia Stock Corporation Act (the "VSCA"). When
used herein, the term "Effective Time" shall mean the time when the Certificate
of Merger has been accepted for filing by the Secretary of State of Delaware and
the State Corporation Commission of Virginia, respectively, or such time as
otherwise specified therein.
1.4 EFFECT OF THE MERGER. The Merger shall, from and after the Effective
Time, have all the effects provided by the DGCL and the VSCA. If at any time
after the Effective Time, any further action is deemed necessary or desirable to
carry out the purposes of this Agreement, the parties hereto agree that the
Surviving Corporation and its proper officers and directors shall be authorized
to take, and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Sub, a copy of which is attached to a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-2" hereto ("Sub's Closing
-------------
Certificate"), shall be the Certificate of Incorporation of the Surviving
Corporation after the Effective Time, until thereafter changed or amended as
provided therein or by applicable law.
2.2 BYLAWS. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is attached to Sub's Closing Certificate.
2.3 BOARD OF DIRECTORS; OFFICERS. The Board of Directors and officers of
Sub immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified.
-2-
<PAGE>
ARTICLE III
CONVERSION OF SHARES
3.1 MERGER CONSIDERATION. As of the Effective Time:
(a) All shares of Tekna Stock owned by Tekna shall, by virtue of the
Merger and without any action on the part of any shareholder, officer or
director of Tekna or Sub, be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding share of Tekna Stock (other than any
Dissenting Shares, as defined in Section 3.2 hereof) shall, upon surrender to
Sub, at the Closing, of the underlying share certificates, be converted into,
and become exchangeable for, (i) a number of shares of validly issued, fully
paid and nonassessable Class B Common Stock of Parent, $.01 par value (the
"Parent Stock") based on the following equation:
PS= 850,000 - (D-ARC)
------
$10
--------------------
S + O
where:
PS = the number of shares of Parent Stock (valued, as of the
Closing, at $10 per share) for which each share of Tekna
Stock shall be exchanged pursuant to the Merger
D = the outstanding indebtedness of Tekna (the "Tekna Debt"),
including debt for borrowed money and accrued interest
thereon, capital leases, any unpaid legal, accounting or
other fees of Tekna, and accounts payable and accrued
expenses, all to be determined as of August 7, 1998 and all
as determined in accordance with generally accepted
accounting principles ("GAAP")
ARC = the accounts receivable of Tekna less than 90 days old (from
the due date), to be determined as of August 7, 1998 in
accordance with GAAP
S = the number of issued and outstanding shares of Tekna Stock
on the Closing Date
-3-
<PAGE>
O = the total number of options to purchase Tekna Stock
outstanding on the Closing Date, to be exchanged for options
to acquire Parent Stock pursuant to Section 6.6(b) hereof;
provided, however, that for the purpose of the above formula, regardless of
whether D exceeds ARC, the maximum, aggregate Parent Stock issuable pursuant to
this Section is 850,000 shares; and
(ii) the Escrowed Stock (as hereinafter defined), if any, to be determined
pursuant to Section 6.8 hereof.
(c) Each issued and outstanding share of common stock of Sub shall,
by virtue of the Merger and without any action on the part of any shareholder,
officer or director of Tekna or Sub, be converted into and become one fully paid
and nonassessable share of common stock of the Surviving Corporation.
3.2 DISSENTING SHARES. Notwithstanding any provision hereof to the
contrary, any shares of Tekna Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be converted as described in Section 3.1(b)
hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Shareholder pursuant to the DGCL or VSCA, as
applicable, provided, however, that if a Dissenting Shareholder shall fail to
perfect her demand, withdraw her demand or otherwise lose her right for
appraisal under the terms of the DGCL or VSCA, as applicable, then the Tekna
Stock held by such Dissenting Shareholder (the "Dissenting Shares") shall be
deemed to be converted as of the Effective Time in accordance with the
provisions of Section 3.1 hereof. Tekna shall not voluntarily make any payment
with respect to, settle, or offer to settle or otherwise negotiate, any such
demands. All amounts paid to Dissenting Shareholders shall be paid without
interest thereon (to the extent permitted by applicable law) by the Surviving
Corporation. For purposes hereof, the term "Dissenting Shareholder" shall mean
a Tekna Shareholder who (a) objects to the Merger; and (b) complies with the
applicable provisions of the DGCL or VSCA concerning dissenter's rights.
3.3 NO FURTHER RIGHTS. From and after the Effective Time, holders of
certificates theretofore evidencing Tekna Stock shall cease to have any rights
as stockholders of Tekna, except as provided herein or by applicable law.
3.4 CLOSING OF TEKNA'S TRANSFER BOOKS. At the Effective Time, the stock
transfer books of Tekna shall be closed and no transfer of Tekna Stock shall be
made thereafter. If after the Effective Time, certificates for Tekna Stock are
presented to Parent or the Surviving Corporation, they shall be canceled and
exchanged for a consideration as set forth in Section 3.1 hereof, subject to
applicable law in the case of Dissenting Shareholders.
-4-
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TEKNA
Tekna, and the Tekna Shareholders, jointly and severally, represent and
warrant to Parent and Sub as follows, which representations and warranties shall
survive the Closing in accordance with Section 10.1 hereof.
4.1 ORGANIZATION AND QUALIFICATION. Tekna is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia. Tekna has the requisite corporate power and authority
to carry on the Tekna Business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Articles of Incorporation and Bylaws of Tekna as in effect
on the date hereof are attached to a closing certificate and incumbency
certificate, substantially in the form of Exhibit "E" hereto ("Tekna's Closing
-----------
Certificate"). The minute book of Tekna, a true and complete copy of which has
been delivered to Parent, (a) accurately reflects all action taken by the
directors and shareholders of Tekna at meetings of Tekna's Board of Directors or
shareholders, as the case may be; and (b) contains true and complete copies, or
originals, of the respective minutes of all meetings or consent actions of the
directors or shareholders.
4.2 AUTHORITY. Tekna has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery hereof and the consummation of
the transactions contemplated hereby by Tekna have been duly and validly
authorized and approved by Tekna's Board of Directors and the Tekna
Shareholders, and no other corporate or shareholder proceedings on the part of
Tekna, its Board of Directors or the Tekna Shareholders is necessary to
authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Tekna and each Tekna Shareholder, and assuming the due authorization, execution
and delivery by Parent and Sub, constitutes the valid and binding obligation of
Tekna and each Tekna Shareholder, enforceable against Tekna and each Tekna
Shareholder in accordance with its terms subject, in each case, to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights and to general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing.
4.3 CAPITALIZATION.
(a) The authorized capital stock of Tekna consists of (i) 1,000,000
shares of common stock, $1.00 par value, of which 850,000 shares are validly
issued and outstanding, fully paid and nonassessable. All outstanding capital
stock of Tekna was issued in accordance with applicable federal and state
securities laws. Except as set forth on Schedule 4.3(a) hereto, there are no
---------------
options, warrants, calls, convertible notes, agreements, commitments or other
rights presently outstanding that would obligate Tekna or any of the Tekna
Shareholders to issue, deliver or sell shares of its capital stock, or to grant,
extend or enter into any such option, warrant, call, convertible
-5-
<PAGE>
note, agreement, commitment or other right. In addition to the foregoing, as of
the date hereof, Tekna has no bonds, debentures, notes or other indebtedness
issued or outstanding that have voting rights in Tekna. Schedule 4.3(a) sets
---------------
forth a list of (i) all holders of record of (A) Tekna Stock, and (B) options,
warrants, convertible notes or other rights to purchase capital stock of Tekna
(collectively, "Tekna Stock Rights"); (ii) the number of shares held by each
Tekna Shareholder and the number of shares of capital stock of Tekna represented
by the Tekna Stock Rights; and (iii) the exercise price for each Tekna Stock
Right.
(b) All of the issued and outstanding shares of capital stock of Tekna
are validly issued, fully paid and nonassessable. Except as set forth on
Schedule 4.3(b) hereto, each Tekna Shareholder represents and warrants that the
- ---------------
Tekna Stock held by such Tekna Shareholder is free and clear of any lien,
charge, security interest, pledge, option, right of first refusal, voting proxy
or other voting agreement, or encumbrance of any kind or nature other than
restrictions on transfer imposed by federal and state securities laws (any of
the foregoing, a "Lien").
4.4 SUBSIDIARIES. Tekna has no subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
- ------------
Tekna or the Tekna Shareholders, (ii) the consummation by Tekna and the Tekna
Shareholders of the transactions contemplated hereby or (iii) compliance by
Tekna with any of the provisions hereof will:
(a) conflict with or violate the Articles of Incorporation or Bylaws
of Tekna;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Tekna or any of the Tekna Shareholders,
or by which Tekna or any of its properties or assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which Tekna is a party or by which Tekna or
any of its properties or assets may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Tekna; or
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), (i) any government or subdivision thereof, whether
domestic or foreign, or any administrative, governmental, or regulatory
authority, agency, commission, court, tribunal or body, whether
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domestic, foreign or multinational (any of the foregoing, a "Governmental
Entity"), except for the filing of the Certificate of Merger pursuant to the
DGCL and the VSCA; or (ii) any other individual or Entity (collectively, a
"Person").
4.6 FINANCIAL STATEMENTS. Tekna has heretofore furnished Parent with a
true and complete copy of (i) the unaudited financial statements of Tekna for
the period ended December 31, 1997, and for the six month period ended June 30,
1998 and (ii) the balance sheet of Tekna dated as of August 7, 1998 (all of the
foregoing collectively herein referred to as the "Tekna Financial Statements").
Except as disclosed therein, the Tekna Financial Statements have been prepared
in accordance with GAAP (except for the absence of footnotes and normal year end
adjustments) consistently followed throughout the period indicated, and present
fairly, in all material respects, the financial position and operating results
of Tekna as of the dates, and during the periods, indicated therein.
4.7 ABSENCE OF CHANGES. Except as provided in Schedule 4.7 hereto and
------------
except as contemplated hereby, since December 31, 1997 (a) Tekna has not entered
into any transaction that was not in the ordinary course of business; (b) except
for sales of services and licenses of software in the ordinary course of
business, there has been no sale, assignment, transfer, mortgage, pledge,
encumbrance or lease of any material asset or property of Tekna; (c) there has
been (i) no declaration or payment of a dividend, or any other declaration,
payment or distribution of any type or nature to any shareholder of Tekna in
respect of its stock, whether in cash or property, and (ii) no purchase or
redemption of any share of the capital stock of Tekna; (d) there has been no
declaration, payment, or commitment for the payment, by Tekna, of a bonus or
other additional salary, compensation, or benefit to any employee of Tekna that
was not in the ordinary course of business, except for normal year-end bonuses
paid in the ordinary course of business; (e) there has been no release,
compromise, waiver or cancellation of any debt to or claim by Tekna, or waiver
of any right of Tekna; (f) there have been no capital expenditures in excess of
$10,000 for any single item, or $27,000 in the aggregate; (g) there has been no
change in accounting methods or practices or revaluation of any asset of Tekna
(other than Tekna Accounts Receivable as defined in Section 4.26 hereof written
down in the ordinary course of business in excess of $10,000 for any single
Tekna Accounts Receivable, or $25,000 in the aggregate); (h) there has been no
material damage, or destruction to, or loss of, physical property (whether or
not covered by insurance) adversely affecting the Tekna Business or the
operations of Tekna; (i) there has been no loan by Tekna, or guaranty by Tekna
of any loan, to any employee of Tekna; (j) Tekna has not ceased to transact
business with any customer that, as of the date of such cessation, represented
more than 5% of the annual gross revenues of Tekna; (k) there has been no
termination or resignation of any key employee or officer of Tekna, and to the
knowledge of Tekna, no such termination or resignation is threatened; (l) there
has been no amendment or termination of any material oral or written contract,
agreement or license related to the Tekna Business, to which Tekna is a party or
by which it is bound, except in the ordinary course of business, or except as
expressly contemplated hereby; (m) Tekna has not failed to satisfy any of its
debts, obligations or liabilities related to the Tekna Business or the assets of
Tekna as the same become due and owing (except for Tekna Accounts Payable (as
defined in Section 4.27 hereof) payable in accordance with past practices and in
the ordinary course of business); (n) there has been no agreement or commitment
by Tekna to do any
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of the foregoing; and (o) there has been no other event or condition of any
character pertaining to and materially and adversely affecting the assets,
business or financial condition of Tekna.
4.8 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.8 hereto,
------------
Tekna has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including any liability or obligation on account of taxes
or any governmental charge or penalty, interest or fine, except (a) liabilities
incurred in the ordinary course of business after December 31, 1997, that would
not, whether individually or in the aggregate, have a material adverse impact on
the business or financial condition of Tekna; (b) liabilities reflected on the
Tekna Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
4.9 TITLE TO PROPERTIES. Except as set forth on Schedule 4.9 hereto,
------------
Tekna has good and marketable title to all tangible property and assets used in
the Tekna Business, and good and valid title to its leasehold interests, in each
case, free and clear of any and all Liens other than Permitted Liens (as defined
in Section 10.11 hereof).
4.10 EQUIPMENT. Tekna has heretofore furnished Parent with a true and
correct list of all items of tangible personal property (including computer
hardware) necessary for or used in the operation of the Tekna Business in the
manner in which it has been and is now operated by Tekna ("the Tekna
Equipment"), except for personal property having a net book value of less than
$1,000. Except as set forth on Schedule 4.10 hereto, each material item of
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Tekna Equipment is in good condition and repair, ordinary wear and tear
excepted.
4.11 INTELLECTUAL PROPERTY.
(a) Tekna has heretofore furnished Parent with a true and complete
list of all material proprietary technology, patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights, and copyrights (and all pending applications for any of the foregoing)
used by Tekna in the conduct of the Tekna Business (together with trade secrets
and know how used in the conduct of the Tekna Business, the "Tekna Intellectual
Property Rights"). Tekna owns, or is validly licensed or otherwise has the
right to use or exploit, as currently used or exploited, all of the Tekna
Intellectual Property Rights, free of any obligation to make any payment
(whether of a royalty, license fee, compensation or otherwise). No claims are
pending or, to the knowledge of Tekna, threatened, that Tekna is infringing or
otherwise adversely affecting the rights of any Person with regard to any Tekna
Intellectual Property Right. No Person is infringing the rights of Tekna with
respect to any Tekna Intellectual Property Right. Neither Tekna nor any
employee, agent or independent contractor of Tekna, in connection with the
performance of such Person's services with Tekna, has used, appropriated or
disclosed, directly or indirectly, any trade secret or other proprietary or
confidential information of any other Person, or otherwise violated any
confidential relationship with any other Person.
(b) Tekna has heretofore furnished Parent with a true and complete
list of all material computer software used by Tekna in the conduct of the Tekna
Business (the "Tekna Software"). Tekna currently licenses, or otherwise has the
legal right to use, all of the Tekna
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Software (including any upgrade, alteration or enhancement with respect
thereto), and all of the Tekna Software is being used in compliance with any
applicable license or other agreement.
4.12 REAL PROPERTY. Except as set forth on Schedule 4.12 hereto:
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(a) Tekna has a good and valid leasehold interest in all real property
(including all buildings, improvements and fixtures thereon) used in the
operation of the Tekna Business (the "Tekna Real Property"). Tekna owns no real
property. Except for Permitted Liens, and for the items set forth on Schedule
--------
4.12, there are no Liens on Tekna's interest in any of the Tekna Real Property.
- ----
Schedule 4.12 lists each county and state where any Tekna Real Property is
- -------------
located, or where Tekna has ever leased or owned any real property.
(b) There are no parties in possession of any portion of the Tekna
Real Property other than Tekna, whether as sublessees, subtenants at will or
trespassers.
(c) To the knowledge of Tekna, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, under the provisions of any of the
Tekna Leases (as hereinafter defined), any material expenditure by Tekna to
modify or improve any of the Tekna Real Property to bring it into compliance
therewith.
4.13 LEASES. Schedule 4.13 hereto sets forth a list of all leases pursuant
-------------
to which Tekna leases, as lessor or lessee, real or personal property used in
operating the Tekna Business or otherwise (the "Tekna Leases"). Copies of the
Tekna Leases, all of which have previously been provided to Parent, are true and
complete copies thereof. All of the Tekna Leases are valid, binding and
enforceable against Tekna and, to the knowledge of Tekna, against the other
parties thereto, in accordance with their respective terms, and there is not
under any such Tekna Lease any existing default by Tekna, or, to the knowledge
of Tekna, by any other party thereto, or any condition or event that, with
notice or lapse of time or both, would constitute a default. Tekna has not
received notice that the lessor of any of the Tekna Leases intends to cancel,
suspend or terminate such Tekna Lease or to exercise or not exercise any option
thereunder.
4.14 CONTRACTS. Schedule 4.14 hereto sets forth a true and complete list
-------------
of all contracts, agreements and commitments (whether written or oral) to which
Tekna is, directly or indirectly, a party (in its own name or as a successor in
interest), or by which it or any of its properties or assets is otherwise bound,
including any service agreements, customer agreements, supplier agreements,
agreements to lend or borrow money, shareholder agreements, employment
agreements, agreements relating to Tekna Intellectual Property Rights and the
like (collectively, the "Tekna Contracts"); excepting only those Tekna Contracts
which involve less than $10,000 and are cancelable, without penalty, on no more
than 90 days' notice. The aggregate value of all payment obligations and rights
to receive payments, under agreements, contracts and commitments (whether oral
or in writing) to which Tekna is a party or by which it or any of its properties
or assets is otherwise bound, and that are not listed on Schedule 4.14, is less
-------------
than $50,000 (calculating such value by adding together the value of rights and
obligations, and not by determining the net amount thereof).
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True and complete copies of all Tekna Contracts (or a true and complete
narrative description of any oral Tekna Contract) have previously been provided
to Parent. Neither Tekna nor, to the knowledge of Tekna, any other party to any
of the Tekna Contracts (x) is in default under (nor does there exist any
condition that, with notice or lapse of time or both, would cause such a default
under) any of the Tekna Contracts, or (y) has waived any right it may have under
any of the Tekna Contracts, the waiver of which would have a material adverse
effect on the business, assets or financial condition or prospects of Tekna.
All of the Tekna Contracts constitute the valid and binding obligations of
Tekna, enforceable in accordance with their respective terms, and, to the
knowledge of Tekna, of the other parties thereto.
4.15 DIRECTORS AND OFFICERS. Schedule 4.15 hereto sets forth a list, as of
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the Closing Date, of the name of each director and officer of Tekna and the
position(s) held by each.
4.16 PAYROLL INFORMATION. Tekna has previously provided Parent with a true
and complete copy of the payroll report of Tekna dated [August 1], 1998, showing
all current employees of Tekna and their current levels of compensation, other
than bonuses and other extraordinary compensation, all of which bonuses and
other extraordinary compensation are set forth in Schedule 4.16 hereto. Tekna
-------------
has paid all compensation required to be paid to employees of Tekna on or prior
to the date hereof other than compensation (and bonuses pursuant to arrangements
described in Schedule 4.16) accrued in the current pay period.
-------------
4.17 LITIGATION. Except as set forth on Schedule 4.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Tekna, threatened against or affecting Tekna or the Tekna Business, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Tekna.
4.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 4.18 hereto, there are no employee
-------------
benefit plans, agreements or arrangements maintained by Tekna, including (i)
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); (ii) current or
deferred compensation, pension, profit sharing, vacation or severance plans or
programs; or (iii) medical, hospital, accident, disability or death benefit
plans (collectively, "Tekna Benefit Plans"). All Tekna Benefit Plans are
administered in accordance with, and are in material compliance with, all
applicable laws and regulations. No default exists with respect to the
obligations of Tekna under any Tekna Benefit Plan.
(b) Tekna is not a party to any collective bargaining agreement; no
collective bargaining agent has been certified as a representative of any of the
employees of Tekna; no representation campaign or election is now in progress
with respect to any employee of Tekna; and there are no labor disputes,
grievances, controversies, strikes or requests for union representation pending,
or, to the knowledge of Tekna, threatened, relating to or affecting the Tekna
Business. To the knowledge of Tekna, no event has occurred that could give rise
to any such dispute, controversy, strike or request for representation.
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4.19 ERISA.
(a) All Tekna Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the Tekna Benefit Plans that is
intended to meet the requirements of Section 401(a) of the Code has been
determined by the Internal Revenue Service to meet such requirements within the
meaning of such provision. No Tekna Benefit Plan is subject to Title IV of
ERISA or Section 412 of the Code. Tekna has not engaged in any nonexempt
"prohibited transactions," as such term is defined in Section 4975 of the Code
or Section 406 of ERISA, involving Tekna Benefit Plans that would subject Tekna
to the penalty or tax imposed under Section 502(i) of ERISA or Section 4975 of
the Code. Tekna has not engaged in any transaction described in Section 4069 of
ERISA within the last five years. Except as disclosed in Schedule 4.19 hereto
-------------
or pursuant to the terms of the Tekna Benefit Plans, neither the execution and
delivery hereof nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including severance, unemployment compensation
or golden parachute) becoming due to any director or other employee of Tekna,
(ii) increase any benefit otherwise payable under any Tekna Benefit Plan or
(iii) result in the acceleration of the time of payment or vesting of any such
benefit to any extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA, for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Tekna Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code, or by any
entity that is considered one employer with Tekna under Section 4001 of ERISA or
Section 414 of the Code, within the 12-month period ending on the Closing Date.
Tekna has not incurred any liability to the Pension Benefit Guaranty Corporation
in respect of any Tekna Benefit Plan that remains unpaid.
4.20 TAXES.
(a) Tekna has duly and timely filed all federal, state and local
income, franchise, excise, real and personal property and other tax returns and
reports, including extensions, required to have been filed by Tekna on or prior
to the Closing Date. Tekna has duly and timely paid all taxes and other
governmental charges, and all interest and penalties with respect thereto,
required to be paid by Tekna (whether by way of withholding or otherwise) to any
federal, state, local or other taxing authority (except to the extent the same
are being contested in good faith, and adequate reserves therefor have been
provided in the Tekna Financial Statements). As of the Closing Date, all
deficiencies proposed as a result of any audit have been paid or settled.
(b) Tekna is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) Tekna has not consented to have the provisions of Section
341(f)(2) of the Code (or comparable state law provisions) apply to it, and
Tekna has not agreed or been requested to make any adjustment under Section
481(c) of the Code by reason of a change in accounting method or otherwise.
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4.21 COMPLIANCE WITH APPLICABLE LAWS. Tekna holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
Tekna, as appropriate, and to carry on the Tekna Business as now conducted (the
"Tekna Permits"). To the knowledge of Tekna, Tekna is in material compliance
with all applicable laws, ordinances and regulations and the terms of the Tekna
Permits. Except as set forth on Schedule 4.21 hereto, all of the Tekna Permits
-------------
are fully assignable by Tekna in connection with the Merger. Schedule 4.21 sets
-------------
forth a true and complete list of all Tekna Permits, true and complete copies of
which have previously been provided to Parent.
4.22 BOARD OF DIRECTORS/SHAREHOLDER CONSENT. Both the Board of Directors
of Tekna and the Tekna Shareholders have adopted and approved this Agreement and
the transactions contemplated hereby (including the Merger).
4.23 BROKERS. Except as set forth on Schedule 4.23 hereto, no broker or
-------------
finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of Tekna.
4.24 ENVIRONMENTAL MATTERS.
(a) To the knowledge of Tekna, no real property currently or formerly
owned or operated by Tekna is contaminated with any Hazardous Substance (as
hereinafter defined).
(b) Tekna is not a party to any litigation or administrative
proceeding nor, to the knowledge of Tekna, is any litigation or administrative
proceeding threatened against it, that, in either case, asserts or alleges that
Tekna (i) violated any Environmental Law (as hereinafter defined); (ii) is
required to clean up, remove or take remedial or other responsive action due to
the disposal, deposit, discharge, leak or other release of any Hazardous
Substance; or (iii) is required to pay all or a portion of the cost of any past,
present or future cleanup, removal or remedial or other action that arises out
of or is related to the disposal, deposit, discharge, leak or other release of
any Hazardous Substance.
(c) To the knowledge of Tekna, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by Tekna containing materials that, if known to
be present in soil or ground water, would require cleanup, removal or other
remedial action under Environmental Law.
(d) To the knowledge of Tekna, Tekna is not subject to any judgment,
order or citation related to or arising out of any Environmental Law and has not
been named or listed as a potentially responsible party by any Governmental
Entity in a matter related to or arising out of any Environmental Law.
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water
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pollutants, noise, odors or process waste water, or otherwise relating to the
environment or hazardous or toxic substances; and (ii) the term "Hazardous
Substance" means any toxic or hazardous substance that is regulated by or under
authority of any Environmental Law, including any petroleum products, asbestos
or polychlorinated biphenyls.
4.25 INTEREST IN CUSTOMERS, SUPPLIERS AND COMPETITORS. Except as provided
in Schedule 4.25 hereto, no officer, director, shareholder or, to the knowledge
-------------
of Tekna, any employee of Tekna and no family member (including a spouse,
parent, sibling or lineal descendent of any of the foregoing), has any direct or
indirect material interest in any material customer, supplier or competitor of
Tekna, or in any Person from whom or to whom Tekna leases any real or personal
property, or in any other Person with whom Tekna is doing business whether
directly or indirectly (including as a debtor or creditor), whether in existence
as of the Closing Date or proposed, other than the ownership of stock of
publicly traded corporations.
4.26 ACCOUNTS RECEIVABLE. All accounts, notes, contracts and other
receivables of Tekna (collectively, "Tekna Accounts Receivable") were acquired
by Tekna in the ordinary course of business arising from bona fide transactions.
There are no set-offs, counterclaims or disputes asserted with respect to any
Tekna Accounts Receivable that would result in claims in excess of $10,000 and,
to the knowledge of Tekna and subject to such Dollar limit, all Tekna Accounts
Receivable are collectible in full. Tekna has previously provided Parent with a
true and complete aging report prepared as of August 7, 1998 which shows the
time elapsed since invoice date for all Tekna Accounts Receivable as of such
date.
4.27 ACCOUNTS PAYABLE. All material accounts, notes, contracts and other
amounts payable of Tekna (collectively, "Tekna Accounts Payable") are currently
within their respective terms, and are neither in default nor otherwise past due
by more than 90 days. Tekna has previously provided Parent with a true and
complete aging report prepared as of August 7, 1998 which shows the time elapsed
since invoice date for all Tekna Accounts Payable as of such date.
4.28 INSURANCE. Tekna currently maintains, in full force and effect, all
insurance policies that are required to be maintained for the conduct of the
Tekna Business or the ownership of Tekna's property (both real and personal)
(collectively, the "Tekna Insurance Policies"). The Tekna Insurance Policies
are listed on Schedule 4.28 hereto, and true and complete copies of all Tekna
-------------
Insurance Policies have previously been provided to Parent. Tekna (a) is not in
default regarding the provisions of any Tekna Insurance Policy; (b) has paid all
premiums due thereunder; and (c) has not failed to present any notice or
material claim thereunder in a due and timely fashion.
4.29 BANKRUPTCY. Tekna has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 TEKNA DEBT. As of the date hereof, the Tekna Debt is not in excess of
$656,272.
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4.31 ACCREDITED INVESTORS; INVESTMENT PURPOSE. Each Tekna Shareholder
represents that she (a) is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"); (b) is
acquiring the Parent Stock solely for her own account for investment and not
with a view to, or for sale in connection with, any distribution thereof; and
(c) will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate
or otherwise dispose of any Parent Stock (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of any such shares) except in compliance
with the Securities Act and the rules and regulations thereunder, other
applicable laws, rules and regulations, and the Second Amended and Restated
Stockholders' Agreement of Parent, dated December 17, 1997 (the "Stockholders'
Agreement).
4.32 RESTRICTIONS ON TRANSFER. Each Tekna Shareholder acknowledges that
(a) the Parent Stock received by her hereunder has not been registered under the
Securities Act; (b) the Parent Stock may be required to be held indefinitely,
and she must continue to bear the economic risk of the investment in such shares
unless such shares are subsequently registered under the Securities Act or an
exemption from such registration is available; (c) there may not be any public
market for the Parent Stock in the foreseeable future; (d) Rule 144 promulgated
under the Securities Act is not presently available with respect to sales of any
securities of Parent, and such Rule is not anticipated to be available in the
foreseeable future; (e) when and if Parent Stock may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
limited amounts and in accordance with the terms and conditions of such Rule;
(f) if the exemption afforded by Rule 144 is not available, public sale without
registration will require the availability of an exemption under the Securities
Act; (g) the Parent Stock is subject to the terms and conditions of the
Stockholders' Agreement; (h) restrictive legends shall be placed on the
certificates representing Parent Stock; and (i) a notation shall be made in the
appropriate records of Parent indicating that Parent Stock is subject to
restrictions on transfer and, if Parent should in the future engage the services
of a stock transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to Parent Stock.
4.33 ABILITY TO BEAR RISK; ACCESS TO INFORMATION; SOPHISTICATION. Each
Tekna Shareholder represents and warrants that (a) her financial situation is
such that she can afford to bear the economic risk of holding Parent Stock
acquired by her hereunder for an indefinite period; (b) she can afford to suffer
the complete loss of such Parent Stock; (c) she has been granted the opportunity
to ask questions of, and receive answers from, representatives of Parent
concerning the terms and conditions of the Parent Stock and to obtain any
additional information that she deems necessary; (d) her knowledge and
experience in financial business matters is such that she is capable of
evaluating the merits and risk of ownership of the Parent Stock; (e) she has
carefully reviewed the terms of the Stockholders' Agreement and has evaluated
the restrictions and obligations contained therein; and (f) she (i) has reviewed
the Private Placement Memorandum of Parent dated July 14, 1998, as amended (the
"Memorandum"), (ii) has carefully examined the Memorandum and has had an
opportunity to ask questions of, and receive answers from, representatives of
Parent, and to obtain additional information concerning Parent and its
Subsidiaries (as hereinafter defined), and (iii) does not require additional
information regarding Parent or its Subsidiaries in connection with the Merger.
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4.34 DISCLOSURE. No statement of fact by Tekna or any Tekna Shareholder
contained herein and no written statement of fact furnished by Tekna or any
Tekna Shareholder to Parent or Sub in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein contained not misleading.
4.35 PROJECTION OF TEKNA 1998 GROSS REVENUE. The projected gross revenue
of Tekna for calendar year 1998 is $3,500,000 (the "Projection").
4.36 NATURE OF LIABILITIES. Any unpaid legal, accounting or other fees of
Tekna are solely and directly related to the Merger.
4.37 PHILIP MORRIS AGREEMENT. The Professional Services Agreement between
Tekna and Universal Leaf Tobacco Company ("Universal Leaf"), dated May 18, 1998,
and the fact that Universal Leaf is a client of Tekna does not violate any
agreement (whether written or oral) or other business relationship or
understanding between Tekna and Philip Morris U.S.A. or require the consent of
Philip Morris U.S.A.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to
Tekna and the Tekna Shareholders, which representations and warranties shall
survive the Closing in accordance with Section 10.1 hereof, as follows:
5.1 ORGANIZATION AND QUALIFICATION. Each of Parent and its Subsidiaries
(as defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached, respectively, to a closing
certificate and incumbency certificate, substantially in the form of Exhibit "A-
----------
1" hereto ("Parent's Closing Certificate"), and to Sub's Closing Certificate.
- --
5.2 AUTHORITY. Each of Parent and Sub has the necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and
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assuming the due authorization, execution and delivery by Tekna and the Tekna
Shareholders, constitutes the valid and binding obligation of each of Parent and
Sub, enforceable against each of Parent and Sub in accordance with its terms,
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
5.3 NO CONFLICTS, REQUIRED FILINGS AND CONSENTS. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Parent or Sub, or the organizational documents of any other
Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for (x)
compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL and the
VSCA); or (ii) any other Person.
5.4 LITIGATION. Except as set forth on Schedule 5.4 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 BROKERS. Except as disclosed on Schedule 5.5 hereto, no broker or
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finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Parent or Sub.
5.6 PARENT STOCK.
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(a) As of the date hereof the authorized capital stock of Parent
consists of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 12,537,764 shares are
validly issued and outstanding (without taking into account any shares of Parent
Stock to be issued pursuant hereto or to the potential acquisition of LAVA
GmbH), fully paid and nonassessable; (ii) 750,000 shares of blank check
preferred stock, (A) 250,000 of which have been designated as Class A
Convertible Preferred Stock, of which 176,291 shares are validly issued and
outstanding, fully paid and nonassessable, (B) 200,000 of which have been
designated as Class B Convertible Preferred Stock, of which 98,767 shares are
validly issued and outstanding, fully paid and nonassessable, (C) 15,000 of
which have been designated as Class C Convertible Preferred Stock, of which
9,232 shares are validly issued and outstanding, fully paid and nonassessable,
and (D) 50,000 of which have been designated as Class D Nonvoting Preferred
Stock, of which 35,700 shares are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 5.6 hereto, there are no
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options, warrants, calls, agreements, commitments or other rights presently
outstanding that would obligate Parent to issue, deliver or sell shares of its
capital stock, or to grant, extend or enter into any such option, warrant, call,
agreement, commitment or other right. In addition to the foregoing, as of the
Closing Date, Parent has no bonds, debentures, notes or other indebtedness
issued or outstanding that have voting rights in Parent.
(b) When delivered to the Tekna Shareholders in accordance with the
terms hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
5.7 SUBSIDIARIES. Except as set forth on Schedule 5.7 hereto, Parent has
------------
no subsidiaries and does not otherwise own or control, directly or indirectly,
any equity interest in, or any security convertible into an equity interest in,
any Entity. Schedule 5.7 lists the name of each of the Subsidiaries of Parent,
------------
and indicates their respective jurisdictions of incorporation.
5.8 FINANCIAL STATEMENTS. Parent has heretofore furnished Tekna with a
true and complete copy of (a) the audited financial statements of iXL
Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31,
1993, 1994 and 1995, and for the four month period ended April 30, 1996; (b) the
audited combined financial statements for Creative Video, Inc. (n/k/a iXL,
Inc.), Creative Video Library, Inc. and Entrepreneur Television, Inc. for the
years ended December 31, 1993, 1994 and 1995, and for the four month period
ended April 30, 1996; (c) the audited consolidated financial statements for
Parent and its Subsidiaries for the eight months ended December 31, 1996 and for
the year ended December 31, 1997; and (d) the unaudited consolidated financial
statements for Parent and its Subsidiaries for the three month period ended
March 31, 1998 (all of the foregoing, collectively, "Parent Financial
Statements"). The Parent Financial Statements present fairly in all material
respects the consolidated financial position, results of operations,
shareholders' equity and cash flow of Parent at the respective dates or for the
respective periods to which they apply. Except as disclosed therein, such
statements and related notes have been prepared in accordance with GAAP
consistently applied throughout
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the periods involved (except, in the case of the unaudited financial statements,
for the exclusion of footnotes and normal year end adjustments).
5.9 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997 that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Parent and its Subsidiaries, taken as a whole; (b) liabilities reflected on
the Parent Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
5.10 COMPLIANCE WITH APPLICABLE LAWS. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
5.11 BOARD OF DIRECTORS/SHAREHOLDER CONSENT. The board of directors of
Parent, and both the board of directors and shareholder of Sub, have, by
unanimous written consent or other action, adopted and approved this Agreement
and the transactions contemplated hereby (including the Merger).
5.12 BANKRUPTCY. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 ABSENCE OF CHANGES. Except as provided in Schedule 5.13 hereto, since
-------------
December 31, 1997, there has not been (a) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
material change in Parent's accounting principles, practices or
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methods; (f) any split, combination or reclassification of any of Parent's
capital stock, or the issuance or authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for, shares of Parent's
capital stock; or (g) any agreement (whether or not in writing), arrangement or
understanding to do any of the foregoing.
5.14 TAXES. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent
and its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the Closing Date,
all deficiencies proposed as a result of any audits have been paid or settled.
5.15 DISCLOSURE. No statement of fact by Parent or Sub contained herein
and no written statement of fact furnished or to be furnished by Parent or Sub
to Tekna in connection herewith contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make the statements herein or therein contained not misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 CONDUCT OF BUSINESS BY TEKNA PENDING THE MERGER. From and after the
date hereof, prior to the Effective Time, except as contemplated hereby, unless
Parent shall otherwise agree in writing, Tekna shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, use reasonable efforts to preserve intact its present
business organization, keep available the services of its employees and preserve
its relationships with customers, suppliers, licensors, licensees, distributors
and others having business dealings with Tekna to the end that its goodwill and
on-going businesses shall not be impaired in any material respect at the
Effective Time. Without limiting the generality of the foregoing, and except as
contemplated hereby, unless Parent shall otherwise agree in writing, prior to
the Effective Time, Tekna shall not, directly or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire, any share of
capital stock of Tekna or any other equity security thereof or any right,
warrant, or option to acquire any such share or other security;
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(b) issue, deliver, sell, pledge or otherwise encumber any share of
its capital stock, any other voting security issued by Tekna or any security
convertible into, or any right, warrant or option to acquire any such share or
voting security;
(c) amend its Articles of Incorporation, Bylaws or other comparable
organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to Tekna;
(e) subject to a Lien or sell, lease or otherwise dispose of any of
its properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of Tekna,
guarantee any debt security of another Person or enter into any "keep well" or
other agreement to maintain the financial condition of another Person, make any
loan, advance or capital contribution to, or investment in, any other Person, or
settle or compromise any material claim or litigation; or
(g) authorize any of, or commit or agree to take any of, the foregoing
actions.
6.2 ACCESS TO INFORMATION. From the date hereof through the Effective
Time, Tekna and Parent shall afford to the other of them and the other's
accountants, counsel and other representatives reasonable access during normal
business hours (and at such other times as the parties may mutually agree) upon
reasonable prior notice and approval, which shall not be unreasonably withheld,
to its properties, books, contracts, commitments, records and personnel and,
during such period, shall furnish promptly to the other of them all information
concerning its business, properties and personnel as the other may reasonably
request. Parent and Tekna, and their respective accountants, counsel and other
representatives, shall, in the exercise of the rights described in this Section
6.2, not unduly interfere with the operation of the business of the other of
them.
6.3 FILINGS; TAX ELECTIONS. Tekna shall promptly provide Parent with
copies of all filings made by Tekna with any Governmental Entity in connection
herewith and the transactions contemplated hereby. Tekna shall, before settling
or compromising any material income tax liability of Tekna, consult with Parent
and its advisors as to the positions and elections that will be taken or made
with respect to such matter.
6.4 PUBLIC ANNOUNCEMENTS. The parties agree that, except as may otherwise
be required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger. Any such disclosure shall be coordinated by Parent,
and none of the Tekna Shareholders shall make any such disclosure without the
prior written consent of Parent.
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6.5 TRANSFER AND GAINS TAXES AND CERTAIN OTHER TAXES AND EXPENSES. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 OPTIONS.
(a) Tekna hereby covenants and agrees that at the Effective Time, all
of the Tekna Stock Rights (all of which are set forth on Schedule 4.3(a) hereto)
---------------
shall have been properly canceled and, except for the right to receive options
to acquire Parent Stock described in Section 6.6(b) below, all rights and
obligations thereunder shall have been terminated.
(b) Parent hereby covenants and agrees that, at the Effective Time,
each of the holders of Tekna Stock Rights shall receive options to purchase the
number of shares of validly issued, fully paid and nonassessable Parent Stock,
at the exercise price per share, as set forth on Schedule 6.6(b) hereto, all of
---------------
which options shall have been issued pursuant to the IXL Holdings, Inc. 1996
Stock Option Plan, as amended (the "Parent Stock Option Plan").
(c) Parent further covenants that (i) at the Effective Time, it will
issue options to purchase up to 125,000 shares of validly issued, fully paid and
nonassessable Parent Stock, at an exercise price of $10 per share and vesting
20% per year over each of five years, to those employees of Tekna (excluding the
Tekna Shareholders) listed on Schedule 6.6(c) hereto, all of which options shall
---------------
be issued pursuant to the Parent Stock Option Plan; and (ii) to the extent that
as of the Closing Date fewer than 125,000 such options are granted, the balance
of such options may be granted within three months thereafter, to employees of
the Surviving Corporation (excluding the Tekna Shareholders) designated by the
Tekna Shareholders and approved by Parent.
6.7 FURTHER ASSURANCES. From time to time after the Effective Time, upon
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof.
6.8 ESCROWED STOCK. Parent covenants that, at Closing and until March 1,
1999, it will escrow 50,000 shares of Parent Stock, at $10.00 per share (the
"Escrowed Stock"), pursuant to the terms of an Escrow Agreement substantially in
the form attached hereto as Exhibit "H" among the Tekna Shareholders, SunTrust
----------
Bank, Atlanta ("Escrow Agent"), and Parent ("Escrow Agreement"). Tekna's
Shareholders may be entitled to all or a portion of the Escrowed Stock on March
1, 1999, depending upon the gross revenue for Tekna for the period from January
1, 1998 through the Closing prepared in accordance with GAAP combined on a pro-
forma basis with Tekna revenue as reflected on Parent's books for the period
from Closing through December 31, 1998, ("Actual Revenue") relative to the
Projection, as follows:
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(a) If Actual Revenue is between 75% and 100% of the Projection, then
Tekna's Shareholders will be entitled to a pro rata portion of the Escrowed
Stock; and
(b) If Actual Revenue is less than $2,625,000, then Tekna's Shareholders
will be entitled to none of the Escrowed Stock.
Parent and Tekna's Shareholders shall notify the Escrow Agent accordingly and,
pursuant to the Escrow Agreement, (i) the portion of the Escrowed Stock to which
the Tekna Shareholders are entitled, as determined by Parent in the foregoing
manner, will be delivered to them, pro rata in accordance with their respective
Tekna shareholdings immediately prior to the Effective Time; and (ii) any
remaining Escrowed Stock shall be returned to Parent.
6.9 EMPLOYMENT AGREEMENTS. Each of the Tekna Shareholders shall enter
into an employment agreement with Sub, substantially in the form of Exhibit "I"
-----------
hereto ("Employment Agreement").
-
6.10 TEKNA OPTIONHOLDERS. Each of the existing Tekna optionholders, as
identified on Schedule 6.6(b) hereto ("Tekna Optionholders"), shall make the
---------------
representations to Parent and Sub in the form of Exhibit "J" hereto.
-----------
Furthermore, any Tekna Optionholder who is not an "accredited investor" as
defined in the Securities Act shall acknowledge his or her Purchaser
representative, who shall complete a questionnaire to Parent's satisfaction,
such questionnaire and acknowledgment to be in the form of Exhibit "K" hereto.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATION OF TEKNA AND THE TEKNA SHAREHOLDERS TO EFFECT
THE MERGER. The obligations of Tekna and the Tekna Shareholders to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) Parent and Sub shall have performed in all material respects their
respective agreements contained herein required to be performed at or prior to
the Effective Time, and the representations and warranties of Parent and Sub
contained herein shall be true when made and (except for representations and
warranties made as of a specified date, which need only be true as of such date)
at and as of the Effective Time as if made at and as of such time, except as
contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to Tekna at the Closing, Parent's Closing Certificate, and (ii) the
appropriate officers of Sub shall have executed and delivered to Tekna at the
Closing, Sub's Closing Certificate;
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
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(d) Tekna shall have received corporate certificates of good standing
for Parent and Sub, and a copy of the Certificate of Incorporation for Parent
and Sub, respectively, both as certified by the Secretary of State of Delaware;
(e) there shall have been delivered to each of the Tekna Shareholders
at the Closing, duly executed by Parent, an Agreement to be Bound to the
Registration Rights Agreement of Parent, dated as of Closing Date (the
"Agreement to be Bound to the Registration Rights Agreement"), in the form of
Exhibit "B" hereto;
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(f) Parent shall have executed and delivered at the Closing (i) a
Nonqualified Stock Option Agreement for each of the Persons listed on Schedule
--------
6.6(b) hereto as receiving options to purchase Parent Stock, in the form of
- ------
Exhibit "C-1" hereto; and (ii) an Incentive Stock Option Agreement for each of
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the Persons listed on Schedule 6.6(c) hereto as receiving options to purchase
Parent Stock, in the form of Exhibit "C-2" hereto (collectively, "Options");
-------------
(g) Tekna shall have received, at the Closing, a duly executed opinion
of counsel to Parent and Sub, substantially in the form of Exhibit "D" hereto;
-----------
(h) Tekna shall have received from Parent and Sub such other documents
as Tekna's counsel shall have reasonably requested, in form and substance
reasonably satisfactory to Tekna's counsel; and
(i) The Escrow Agreement shall have been executed and delivered at the
Closing by Parent and the Escrow Agent.
7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE MERGER. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) Tekna and the Tekna Shareholders shall have performed in all
material respects their respective agreements contained herein required to be
performed at or prior to the Effective Time, and the representations and
warranties of Tekna and the Tekna Shareholders contained herein shall be true
when made and (except for representations and warranties made as of a specified
date, which need only be true as of such date) at and as of the Effective Time
as if made at and as of such time, except as contemplated hereby;
(b) the appropriate officers of Tekna shall have executed and
delivered to Parent at the Closing, Tekna's Closing Certificate.
(c) Tekna and the Tekna Shareholders shall have obtained or caused to
be obtained all of the Consents, if any, listed on Schedule 7.2(c) hereto;
---------------
(d) there shall have been delivered to Parent at the Closing, duly
executed by each of the Tekna Shareholders, (i) an Agreement to be Bound to the
Stockholders' Agreement, in
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the form of Exhibit "F" hereto; (ii) an Agreement to be Bound to the
-----------
Registration Rights Agreement; and (iii) an Employment Agreement.
(e) Parent shall have received a corporate certificate of good
standing for Tekna, and a copy of the Articles of Incorporation of Tekna, both
as certified by the State Corporation Commission of Virginia;
(f) as of the date three business days prior to the Closing Date the
Tekna Debt shall be no greater than $656,272;
(g) Tekna shall have complied with its obligations under Section
6.6(a) hereof; Parent shall have received, at the Closing, Options executed and
delivered by each of the recipients thereof; and the Tekna Optionholders shall
have complied with all of their obligations under Section 6.10 hereof;
(h) Parent shall have received, at the Closing, a duly executed
opinion of counsel to Tekna and the Tekna Shareholders, substantially in the
form of Exhibit "G" hereto;
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(i) Parent shall have received from Tekna or the Tekna Shareholders,
as the case may be, such other documents as Parent's counsel shall have
reasonably requested, in form and substance reasonably satisfactory to Parent's
counsel;
(j) Parent shall have received evidence satisfactory to it that at the
Closing the assets and properties used in the Tekna Business are free and clear
of all Liens other than Permitted Liens (as hereinafter defined); and
(k) Parent shall have received, at the Closing, the Escrow Agreement
executed and delivered by the Tekna Shareholders and the Escrow Agent,
respectively.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY PARENT.
(a) Parent shall indemnify and hold the Tekna Shareholders and Tekna's
directors, officers and employees (collectively, the "Tekna Indemnified
Parties") harmless from and against, and agree promptly to defend each of the
Tekna Indemnified Parties from and reimburse each of the Tekna Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorney fees and other
legal costs and expenses) (collectively, a "Tekna Loss") that any of the Tekna
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with:
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(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Parent or Sub at the Closing in accordance
with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform, satisfy
and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations hereunder or under any of the documents and materials
delivered by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or
in any way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary,
Parent shall not have any liability under Section 8.1(a)(i) above (i) unless the
aggregate of all Tekna Losses for which Parent would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $100,000, and then
only to the extent of such excess, (ii) for amounts in excess of $7,000,000 in
the aggregate, and (iii) unless the Tekna Shareholders have asserted a claim
with respect to the matters set forth in Section 8.1(a)(i), or 8.1(a)(iii) to
the extent applicable to Section 8.1(a)(i), within two years of the Effective
Time. Notwithstanding any implication to the contrary contained herein, the
parties acknowledge and agree that a decrease in the value of Parent Stock would
not, by itself, constitute a Tekna Loss, unless and to the extent a decrease in
the value of Parent Stock has been demonstrated to be as a result of any event
described in Sections 8.1(a)(i), (ii) or (iii) above.
8.2 INDEMNIFICATION BY THE TEKNA SHAREHOLDERS.
(a) The Tekna Shareholders, jointly and severally, shall indemnify
and hold Parent, Sub, Surviving Corporation and their respective shareholders,
directors, officers and employees (collectively, the "Parent Indemnified
Parties") harmless from and against, and agree to defend promptly each of the
Parent Indemnified Parties from and reimburse each of the Parent Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorneys' fees and
other legal costs and expenses) (collectively, a "Parent Loss") that any of the
Parent Indemnified Parties may at any time suffer or incur, or become subject
to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Tekna or the Tekna Shareholders in or pursuant hereto, or in
any instrument certificate or affidavit delivered by any of the same at the
Closing in accordance with the provisions hereof;
(ii) any failure by Tekna or any of the Tekna Shareholders to
carry out, perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations hereunder or under any of
the documents and materials delivered by Tekna pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or
in any way related to, any of the matters referred to in this Section 8.2.
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(b) Notwithstanding the above, none of the Tekna Shareholders shall
have any liability under Section 8.2(a)(i) above (i) unless the aggregate of all
Parent Losses for which the Tekna Shareholders would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $100,000, and then
only to the extent of such excess, (ii) for amounts in excess of $7,000,000 in
the aggregate, and (iii) unless Parent has asserted a claim with respect to the
matters set forth in Sections 8.2(a)(i), or 8.2(a)(iii) to the extent applicable
to Section 8.2(a)(i) within two years of the Effective Time, except with respect
to the matters arising under Sections 4.18, 4.19, 4.20 or 4.24 hereof, in which
event Parent must have asserted a claim within the applicable statute of
limitations. Notwithstanding any implication to the contrary contained herein,
the parties acknowledge and agree that a decrease in the value of Parent Stock
would not, by itself, constitute a Parent Loss, unless and to the extent a
decrease in the value of Parent Stock has been demonstrated to be as a result of
any event described in Sections 8.2(a)(i), (ii) or (iii) above.
8.3 NOTIFICATION OF CLAIMS; ELECTION TO DEFEND
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder. Subject to the
Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section 8.1 or 8.2 hereof, as the case may
be, the Indemnifying Party shall have the right, at its sole cost and expense,
to employ counsel of its own choosing to defend any such Claim asserted against
the Indemnified Party. Notwithstanding anything to the contrary in the
preceding sentence, if the Indemnified Party (i) reasonably believes that its
interests with respect to a Claim (or any material portion thereof) are in
conflict with the interests of the Indemnifying Party with respect to such Claim
(or portion thereof), and (ii) promptly notifies the Indemnifying Party, in
writing, of the nature of such conflict, then the Indemnified Party shall be
entitled to choose, at the sole cost and expense of the Indemnifying Party,
independent counsel to defend such Claim (or the conflicting portion thereof).
The Indemnified Party shall have the right to participate in the defense of any
Claim at its own expense (except to the extent provided in the preceding
sentence), but the Indemnifying Party shall retain control over such litigation
(except as provided in the preceding sentence). The Indemnifying Party shall
notify the Indemnified Party in writing, as promptly as possible (but in any
case before the due date for the answer or response to a Claim) after receipt of
the notice of Claim given by the Indemnified Party to the Indemnifying Party
under Section 8.3(a) hereof, of its election to defend in
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<PAGE>
good faith any such third party Claim. For so long as the Indemnifying Party is
defending in good faith any such Claim asserted by a third party against the
Indemnified Party, the Indemnified Party shall not settle or compromise such
Claim without the prior written consent of the Indemnifying Party. The
Indemnified Party shall cooperate with the Indemnifying Party in connection with
any such defense and shall make available to the Indemnifying Party or its
agents all records and other materials in the Indemnified Party's possession
reasonably required by it for its use in contesting any third party Claim;
provided, however, that the Indemnifying Party shall have agreed, in writing, to
keep such records and other materials confidential except (i) to the extent
required for defense of the relevant Claim, or (ii) as required by law or court
order. Whether or not the Indemnifying Party elects to defend any such Claim,
the Indemnified Party shall have no obligations to do so. Within 30 days after a
final determination (including a settlement) has been reached with respect to
any Claim contested pursuant to this Section 8.3(b), the Indemnifying Party
shall satisfy its obligations hereunder with respect thereto. Any amount paid
thereafter shall include interest thereon for the period commencing at the end
of such 30-day period and ending on the actual date of payment, at a rate of 15%
per annum, or, if lower, at the highest rate of interest permitted by applicable
law at the time of such payment.
8.4 PAYMENT. Any Indemnifying Party may, at such Indemnifying Party's
option, pay all or part of any amount due under this Article VIII by delivery of
shares of Parent Stock having a value equal to the amount due (to the extent
that such Party owns sufficient shares of Parent Stock). For the purpose of this
provision, the value of Parent Stock shall be deemed to be $10 per share.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Merger Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of Parent and Tekna;
(b) by Tekna, upon a material breach hereof on the part of Parent or
Sub which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by August 31, 1998;
(c) by Parent, upon a material breach hereof on the part of Tekna or
any of the Tekna Shareholders which has not been cured and which would cause any
condition set forth in Section 7.2 hereof to be incapable of being satisfied by
August 31, 1998;
(d) by Parent or Tekna if any court of competent jurisdiction shall
have issued, enacted, entered, promulgated or enforced any order, judgment,
decree, injunction or ruling which restrains, enjoins or otherwise prohibits the
Merger and such order, judgment, decree, injunction or ruling shall have become
final and nonappealable; or
-27-
<PAGE>
(e) by either Parent or Tekna if the Merger shall not have been
consummated on or before August 31, 1998 (provided the terminating party is not
otherwise in material breach of its representations, warranties or obligations
hereunder).
9.2 FEES AND EXPENSES.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the Surviving Corporation; provided, however, that (i) the Tekna Shareholders
shall pay all fees and expenses (including agents, counsel and other advisors)
of Tekna and themselves that are not solely and directly related to the Merger;
and (ii) Parent and the Tekna Shareholders shall split evenly the Escrow Agent's
fee.
(b) If the Merger is not consummated for a reason other than the
willful and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
(c) If the Merger is not consummated because of a willful and material
breach hereof by any party, the nonbreaching party or parties shall be entitled
to pursue all legal and equitable remedies against the breaching party for such
breach including specific performance and all fees and expenses incurred by the
nonbreaching party or parties in connection with enforcing its or their rights
hereunder with respect to such breach shall be paid by the breaching party.
9.3 AMENDMENT. This Merger Agreement may be amended by Parent, Sub and
the Tekna Shareholders at any time before or after approval hereof by the Tekna
Shareholders, but, after such approval, no amendment shall be made which (i)
changes the form or decreases the amount of the consideration to be received in
the Merger, (ii) in any way materially adversely affects the rights of the Tekna
Shareholders, or (iii) under applicable law would require approval of the Tekna
Shareholders, in any such case referred to in clauses (i), (ii) and (iii),
without the further approval of the Tekna Shareholders. This Agreement may not
be amended except by an instrument in writing signed on behalf of the parties
hereto, provided that after the Effective Time, any such amendment must be
signed by the former holders of a majority of the Tekna Stock.
9.4 WAIVER. At any time prior to the Effective Time, the parties hereto
may, to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
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<PAGE>
10.1 SURVIVAL; RECOURSE. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 10.9 and 10.10 hereof, shall survive the
Merger indefinitely (except to the extent a shorter period of time is explicitly
specified therein) and (ii) the representations and warranties made in Articles
IV and V hereof shall survive the Merger, and shall survive any independent
investigation by the parties, and any dissolution, merger or consolidation of
Tekna or Parent, and shall bind the legal representatives, assigns and
successors of Tekna, the Tekna Shareholders and Parent, for a period of two
years after the Effective Date (other than the representations and warranties
contained in Sections 4.18, 4.19, 4.20 and 4.24 hereof, which shall survive for
the applicable statute of limitations).
10.2 NOTICES. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in Person, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Tekna: Tekna, Inc.
4600 Cox Road
Glen Allen, VA 23060
Attention: Karen Booth Adams, President and CEO
Telephone: (804) 217-8888
Telecopy: (804) 217-8890
With a copy to: Marc S. Robinson, Esq.
4198 Cox Road, Suite 104
Innsbrook Corporate Center
Glen Allen, VA 23060
Telephone: (804) 965-9643
Telecopy: (804) 965-0030
If to the Tekna To the address listed under the signature
Shareholders: line of the applicable Tekna Shareholder
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<PAGE>
If to Parent or Sub: IXL Holdings, Inc.
1888 Emery St., 2nd Floor
Atlanta, GA 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Rd., Ste. 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Ave., 24th Floor
New York, NY 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 ENTIRE AGREEMENT. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, except for the non-disclosure letter agreement between Parent and
Tekna dated as of June 25, 1998. There are no other representations or
warranties, whether written or oral, between the parties in connection the
subject matter hereof, except as expressly set forth herein.
10.4 ASSIGNMENTS; PARTIES IN INTEREST. Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests, and
obligations of Sub hereunder may be assigned to any direct wholly owned Delaware
subsidiary of Parent without such prior consent. Subject to the preceding
sentence, this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing herein, express or implied, is intended to or
shall confer upon any Person not a party hereto any right, benefit or remedy of
any nature whatsoever under or by reason hereof, except as otherwise provided
herein.
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<PAGE>
10.5 GOVERNING LAW. This Agreement, except to the extent that the VSCA
or the DGCL is mandatorily applicable to the Merger, or to the rights of the
Tekna Shareholders or the other parties hereto with respect to the Merger, shall
be governed in all respects by the laws of the State of Georgia (without giving
effect to the provisions thereof relating to conflicts of law).
10.6 HEADINGS. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation hereof.
10.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 SEVERABILITY. If any term or other provision hereof is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions hereof shall nevertheless remain in full force
and effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.9 POST-CLOSING ACCESS. For a period of three years after the Closing
Date, the Tekna Shareholders and their agents and representatives shall have
reasonable access to the books and records of the Tekna Business.
10.10 POST-CLOSING NOTICE. To the extent the Surviving Corporation
receives written notice of any event or circumstance that materially affects any
of the Tekna Shareholders, the Surviving Corporation shall promptly notify the
affected Tekna Shareholder of such matter, information, or event and shall
provide them with copies of all relevant documentation or correspondence in
connection thereto.
10.11 CERTAIN DEFINITIONS. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the Tekna
Real Property or interfering with the ordinary conduct of any of the Tekna
Business; and (e) those Liens listed on Schedule 10.11 hereto;
--------------
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<PAGE>
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of Tekna" shall refer to the knowledge,
subject to clause (i) above, of any of the Tekna Shareholders; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of which are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including Sub); provided, however, that
with respect to the Parent, the terms "Subsidiary" and "Subsidiaries" shall not
include Tekna or University Netcasting, Inc.
- SIGNATURES ON THE FOLLOWING PAGE -
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<PAGE>
IN WITNESS WHEREOF, Parent, Sub and Tekna have caused this Agreement to be
signed and delivered by their respective duly authorized officers, and each
Tekna Shareholder had signed and delivered this Agreement, all as of the date
first written above.
"TEKNA"
Tekna, Inc., a Virginia corporation
By: /s/ Karen Booth Adams
-------------------------
Karen Booth Adams
Title: President
----------------------
"PARENT"
IXL Holdings, Inc., a Delaware corporation
By: /s/ James V. Sandry
--------------------------
James V. Sandry
Title: Exec VP
-----------------------
"SUB"
IXL - RICHMOND, INC., a Delaware corporation
By: /s/ James V. Sandry
--------------------------
James V. Sandry
Title: Exec VP
-----------------------
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
<PAGE>
"TEKNA SHAREHOLDERS"
/s/ Karen Booth Adams
------------------------------
Karen Booth Adams
Address: 12608 Amber Terrace
Richmond, VA 22233
/s/ Mary M. Fowlkes
------------------------------
Mary M. Fowlkes
Address: 1501 West Ave.
Richmond, VA 23220
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate.................................. Exhibit A-1
Sub's Closing Certificate..................................... Exhibit A-2
Agreement to Be Bound to the Registration Rights Agreement.... Exhibit B
Form of Nonqualified Stock Option Award Agreement............. Exhibit C-1
Form of Incentive Stock Option Award Agreement................ Exhibit C-2
Parent's Opinion of Counsel................................... Exhibit D
Tekna Closing Certificate..................................... Exhibit E
Agreement to be Bound to the Stockholders' Agreement.......... Exhibit F
Tekna's Opinion of Counsel.................................... Exhibit G
Escrow Agreement.............................................. Exhibit H
Employment Agreement.......................................... Exhibit I
Representations of Tekna Optionholders........................ Exhibit J
Purchaser Representative Questionnaire and Purchaser
Acknowledgement............................................... Exhibit K
<PAGE>
SCHEDULE 4.3(A)
---------------
HOLDERS OF TEKNA STOCK AND TEKNA STOCK RIGHTS
SCHEDULE 4.3(B)
---------------
LIENS ON TEKNA STOCK
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF TEKNA
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF TEKNA
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF TEKNA
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF TEKNA
<PAGE>
SCHEDULE 4.10
-------------
BAD EQUIPMENT OF TEKNA
SCHEDULE 4.12
-------------
LIENS ON AND LOCATION OF REAL PROPERTY OF TEKNA
SCHEDULE 4.13
-------------
LEASES FOR REAL AND PERSONAL PROPERTY OF TEKNA
SCHEDULE 4.14
-------------
CONTRACTS, AGREEMENTS & COMMITMENTS OF TEKNA
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF TEKNA
SCHEDULE 4.16
-------------
PAYROLL INFORMATION (BONUSES & OTHER EXTRAORDINARY COMPENSATION) OF TEKNA
SCHEDULE 4.17
-------------
LITIGATION OF TEKNA
2
<PAGE>
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS OF TEKNA
SCHEDULE 4.19
-------------
ERISA ISSUES OF TEKNA
SCHEDULE 4.21
-------------
PERMITS OF TEKNA (INCLUDING EXCEPTIONS TO THEIR ASSIGNABILITY)
SCHEDULE 4.23
-------------
BROKERS OF TEKNA
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS & COMPETITORS OF TEKNA
SCHEDULE 4.28
-------------
INSURANCE OF TEKNA
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
3
<PAGE>
SCHEDULE 5.4
------------
PARENT OR SUB LITIGATION
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
STOCK OPTIONS AND WARRANTS OF PARENT
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT AND SUB UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES OF PARENT AND SUB
SCHEDULE 6.6(B)
---------------
PARENT STOCK OPTIONS ISSUED TO HOLDERS OF TEKNA STOCK RIGHTS
4
<PAGE>
SCHEDULE 6.6(C)
---------------
PARENT STOCK OPTIONS ISSUED TO TEKNA EMPLOYEES
SCHEDULE 7.1(C)
---------------
PARENT CONSENTS
SCHEDULE 7.2(C)
---------------
CONSENTS OF TEKNA
SCHEDULE 10.11
--------------
LIENS OF TEKNA
5
<PAGE>
EXHIBIT 2.27
AGREEMENT AND PLAN OF MERGER
by and between
IXL HOLDINGS, INC.,
iXL-BOSTON, INC.,
LARRY MILLER PRODUCTIONS, INC.
AND
THE LMP PRINCIPALS
Dated as of September 9th, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 9th day of
September, 1998, by and between Larry Miller Productions, Inc., a Massachusetts
corporation ("LMP"), IXL Holdings, Inc., a Delaware corporation ("Parent"), iXL-
Boston, Inc., a Delaware corporation, or its successors or assigns ("Sub"), and
the principals of LMP as listed on the signature page hereto (the "LMP
Principals").
R E C I T A L S:
- - - - - - - -
A. LMP is engaged in the business of developing internet sites and furnishing
internet services, including website design and maintenance (the "LMP
Business").
B. LMP and Sub each desire to merge their respective companies and business
operations, all on the terms and subject to the conditions set forth herein (the
"Merger").
C. The LMP Principals comprise (i) Jeff Janer and Dave Greeley, as the
holders, in aggregate, of a majority of the LMP Stock as defined below (the "LMP
Principal Shareholders"), (ii) the other shareholders of LMP, as identified as
such on Schedule 4.3(a) hereto (collectively, the "LMP Other Shareholders";
collectively with the LMP Principal Shareholders, the "LMP Shareholders"), (iii)
Jeff Janer, Mike Sabourin and Dave Greeley, as the holders, in aggregate, of a
majority of LMP's outstanding non-qualified stock options ("LMP $25 Options") at
$25 per share (collectively, together with the LMP Principal Shareholders in
their capacity as such, the "LMP Majority Principals") and (iv) the other
holders of LMP $25 Options, as identified as such on Schedule 4.3(a) hereto
---------------
(collectively, together with the LMP Other Shareholders, the "LMP Other
Principals").
D. The LMP Shareholders collectively own 100% of the issued and outstanding
capital stock of LMP (the "LMP Stock").
E. The respective Boards of Directors of Parent, Sub and LMP, and the
respective shareholders of Sub and LMP, have approved the Merger, upon the terms
and subject to the conditions set forth herein.
F. The parties hereto intend for the Merger to qualify, for federal income
tax purposes, as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits, conditions
and agreements set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is hereby
agreed as follows:
<PAGE>
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, at the
Effective Time (as defined in Section 1.3 hereof), (a) LMP shall be merged with
and into Sub, (b) the separate existence of LMP shall cease, and (c) Sub shall
continue as the surviving corporation in the Merger under the laws of the State
of Delaware under the name iXL-Boston, Inc. For purposes of this Agreement, Sub
shall be referred to, for the period commencing on the Effective Time, as the
"Surviving Corporation."
1.2 Closing and Closing Date. Unless this Merger Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9.1 hereof, and subject to the satisfaction or waiver of the
conditions set forth in Article VII hereof, the closing of the Merger (the
"Closing") will take place as promptly as practicable (and in any event within
five business days after satisfaction of the conditions set forth in Sections
7.1 and 7.2 hereof) (the "Closing Date") at the offices of Minkin & Snyder, A
Professional Corporation, One Buckhead Plaza, 3060 Peachtree Rd., Ste. 1100,
Atlanta, GA 30305, unless another date or place is agreed to by the parties.
1.3 Effective Time of the Merger. At the Closing, the parties hereto shall
cause (a) a certificate of merger (the "Delaware Certificate of Merger") to be
filed with the office of the Secretary of State of Delaware in accordance with
the provisions of the Delaware General Corporation Law, as amended (the "DGCL");
and (b) Articles of Merger (the "Massachusetts Articles of Merger"; collectively
with the Delaware Certificate of Merger, the "Certificate of Merger") to be
filed with the office of the Secretary of the Commonwealth of Massachusetts in
accordance with the provisions of the Massachusetts Business Corporation Law
(the "BCL"). When used herein, the term "Effective Time" shall mean the time
when the Certificate of Merger has been accepted for filing by the Secretary of
State of Delaware and by the Secretary of the Commonwealth of Massachusetts,
respectively, or such time as otherwise specified therein.
1.4 Effect of the Merger. The Merger shall, from and after the Effective
Time, have all the effects provided by the DGCL and the BCL. If at any time
after the Effective Time, any further action is deemed necessary or desirable to
carry out the purposes of this Agreement, the parties hereto agree that the
Surviving Corporation and its proper officers and directors shall be authorized
to take, and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of Sub, a
form of which is attached to a closing certificate and incumbency certificate,
substantially in the form of Exhibit "A-2" hereto ("Sub's Closing Certificate"),
-------------
shall be the Certificate of Incorporation of
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<PAGE>
the Surviving Corporation after the Effective Time, until thereafter changed or
amended as provided therein or by applicable law.
2.2 Bylaws. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is attached to the Sub's Closing Certificate.
2.3 Board of Directors; Officers. The Board of Directors and officers of Sub
immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
3.1 Merger Consideration. As of the Effective Time:
(a) All shares of LMP Stock owned by LMP shall, by virtue of the Merger
and without any action on the part of any shareholder, officer or director of
LMP or Sub, be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding share of LMP Stock owned by the LMP
Other Shareholders shall, upon surrender to Sub, at the Closing, of the
underlying share certificates, become exchangeable for an amount of cash based
on the following equation:
C = ($5,300,000 - D) - (PS x S\\2\\ x $10)
-------------------------------------
S\\1\\ + O + W
where:
C = the amount of cash for which each share of LMP Stock owned by the
LMP Other Shareholders shall be exchanged pursuant to the Merger
S\\1\\ = the aggregate number of issued and outstanding shares of LMP Stock
owned by the LMP Other Shareholders on the Closing Date
S\\2\\ = the aggregate number of issued and outstanding shares of LMP Stock
owned by the LMP Principal Shareholders on the Closing Date
and the other terms are as defined in Section 3.1(c) below.
-3-
<PAGE>
(c) Each issued and outstanding share of LMP Stock (other than (i) any
Dissenting Shares, as defined in Section 3.2 hereof and (ii) shares of LMP Stock
owned by the LMP Other Shareholders) shall, upon surrender to Sub, at the
Closing, of the underlying share certificates, be converted into, and become
exchangeable for, a number of shares of validly issued, fully paid and
nonassessable Class B Common Stock of Parent, $.01 par value (the "Parent
Stock") based on the following equation:
PS= 530,000 - D
---
$10
------------------
S + O + W
where:
PS = the number of shares of Parent Stock (valued, as of the
Closing, at $10 per share) for which each share of LMP Stock
owned by those LMP Principal Shareholders) shall be
exchanged pursuant to the Merger
D = the outstanding indebtedness of LMP (the "LMP Debt"),
including debt for borrowed money and accrued interest
thereon, capital leases, and that portion of accounts
payable and accrued expenses, including any unpaid legal,
accounting, broker or other fees of LMP, that exceeds the
five month average ended May 1998, all to be determined as
of three business days prior to the Closing Date and all as
determined in accordance with generally accepted accounting
principles ("GAAP")
S = the aggregate number of issued and outstanding shares of LMP
Stock owned by the LMP Shareholders on the Closing Date
O = the total number of options to purchase LMP Stock
outstanding on the Closing Date, to be exchanged for cash,
or for options to acquire Parent Stock, pursuant to Section
6.6(b) hereof
W = the total number of warrants to purchase LMP Stock
outstanding on the Closing Date, to be exchanged for
warrants to acquire Parent Stock pursuant to Section 6.6(b)
hereof
(d) Each issued and outstanding share of common stock of Sub shall, by
virtue of the Merger and without any action on the part of any shareholder,
officer or director of LMP or Sub, be converted into and become one fully paid
and nonassessable share of common stock of the Surviving Corporation.
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<PAGE>
3.2 Dissenting Shares. Notwithstanding any provision hereof to the
contrary, any shares of LMP Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be converted as described in Sections 3.1(b) or
(c) hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Shareholder pursuant to the DGCL or BCL, as
applicable; provided, however, that if a Dissenting Shareholder shall fail to
perfect his demand, withdraw his demand or otherwise lose his right for
appraisal under the terms of the DGCL or BCL, as applicable, then the LMP Stock
held by such Dissenting Shareholder (the "Dissenting Shares") shall be deemed to
be converted as of the Effective Time in accordance with the provisions of
Section 3.1 hereof. LMP shall not voluntarily make any payment with respect to,
settle, or offer to settle or otherwise negotiate, any such demand. All amounts
paid to Dissenting Shareholders shall be paid without interest thereon (to the
extent permitted by applicable law) by the Surviving Corporation. For purposes
hereof, the term "Dissenting Shareholder" shall mean an LMP Shareholder who (a)
objects to the Merger; and (b) complies with the applicable provisions of the
DGCL or BCL concerning dissenter's rights.
3.3 No Further Rights. From and after the Effective Time, holders of
certificates theretofore evidencing LMP Stock shall cease to have any rights as
stockholders of LMP, except as provided herein or by applicable law.
3.4 Closing of LMP's Transfer Books. At the Effective Time, the stock
transfer books of LMP shall be closed and no transfer of LMP Stock shall be made
thereafter. If after the Effective Time, certificates for LMP Stock are
presented to Parent or the Surviving Corporation, then they shall be canceled
and exchanged for a consideration as set forth in Section 3.1 hereof, subject to
applicable law in the case of Dissenting Shareholders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LMP
LMP, and the LMP Majority Principals, jointly and severally, and in addition
the LMP Other Principals, severally but not jointly, represent and warrant to
Parent and Sub as follows, which representations and warranties shall survive
the Closing in accordance with Section 10.1 hereof.
4.1 Organization and Qualification. LMP is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts. LMP has the requisite corporate power and authority to carry on
the LMP Business as it is now being conducted and is duly qualified or licensed
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure so to
qualify could not have a material adverse effect on the LMP Business or on LMP's
properties or assets. Complete and correct copies of the Articles of
Organization and Bylaws of LMP as in effect on the date hereof are attached to a
closing certificate and incumbency certificate, substantially in the form
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<PAGE>
of Exhibit "E" hereto ("LMP's Closing Certificate"). The minute book of LMP, a
-----------
true and complete copy of which has been delivered to Parent, (a) accurately
reflects all action taken by the directors and shareholders of LMP at meetings
of LMP's Board of Directors or shareholders, as the case may be; and (b)
contains true and complete copies, or originals, of the respective minutes of
all meetings or consent actions of the directors or shareholders.
4.2 Authority. LMP has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery hereof and the consummation of
the transactions contemplated hereby by LMP have been duly and validly
authorized and approved by LMP's Board of Directors and the LMP Shareholders,
and no other corporate or shareholder proceedings on the part of LMP, its Board
of Directors, the LMP Shareholders or the LMP Principals is necessary to
authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by LMP
and each LMP Principal, and assuming the due authorization, execution and
delivery by Parent and Sub, constitutes the valid and binding obligation of LMP
and each LMP Principal, enforceable against LMP and each LMP Principal in
accordance with its terms subject, in each case, to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors' rights and to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing.
4.3 Capitalization.
(a) The authorized capital stock of LMP consists of (i) 1,000 shares of
Class A Common Stock, $.01 par value, of which 450 shares are validly issued and
outstanding, fully paid and nonassessable; and (ii) 2,000 shares of Class B
Common Stock, $.01 par value, of which 250 shares are validly issued and
outstanding, fully paid and nonassessable. All outstanding capital stock of LMP
was issued in accordance with applicable federal and state securities laws.
Except as set forth on Schedule 4.3(a) hereto, there are no options, warrants,
---------------
calls, convertible notes, agreements, commitments or other rights presently
outstanding that would obligate LMP or any of the LMP Shareholders to issue,
deliver or sell shares of its capital stock, or to grant, extend or enter into
any such option, warrant, call, convertible note, agreement, commitment or other
right. In addition to the foregoing, as of the date hereof, LMP has no bonds,
debentures, notes or other indebtedness issued or outstanding that have voting
rights in LMP. Schedule 4.3(a) sets forth a list of (i) all holders of record of
---------------
(A) LMP Stock, and (B) options, warrants, convertible notes or other rights to
purchase capital stock of LMP (collectively, "LMP Stock Rights"); (ii) the
number of shares held by each LMP Shareholder and the number of shares of
capital stock of LMP represented by the LMP Stock Rights; and (iii) the exercise
price, date of grant, duration and vesting schedule for each LMP Stock Right.
All agreements with or among present or former LMP shareholders to which LMP or
any of the LMP Principals is a party are hereby terminated, including all
rights, obligations and restrictions thereunder; no such agreement is
enforceable by any party thereto; and neither any LMP Principal nor any other
Person, including any party thereto other than the LMP Principals, has
-6-
<PAGE>
rights to receive LMP Stock, LMP Stock Rights or other consideration under any
such agreement.
(b) All of the issued and outstanding shares of capital stock of LMP are
validly issued, fully paid and nonassessable. Except as set forth on Schedule
--------
4.3(b) hereto, each LMP Shareholder represents and warrants that the LMP Stock
- ------
held by such LMP Shareholder is free and clear of any lien, charge, security
interest, pledge, option, right of first refusal, voting proxy or other voting
agreement, or encumbrance of any kind or nature other than restrictions on
transfer imposed by federal and state securities laws (any of the foregoing, a
"Lien").
4.4 Subsidiaries. LMP has no subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
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LMP or the LMP Principals, (ii) the consummation by LMP and the LMP Principals
of the transactions contemplated hereby or (iii) compliance by LMP with any of
the provisions hereof will:
(a) conflict with or violate the Articles of Organization or Bylaws of
LMP;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to LMP or any of the LMP Principals, or by
which LMP or any of its properties or assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which LMP is a party or by which LMP or any
of its properties or assets may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of LMP; or
(e) require any consent, waiver, license, approval, authorization, order,
permit, registration or filing with, or notification to (any of the foregoing
being a "Consent"), (i) any government or subdivision thereof, whether domestic
or foreign, or any administrative, governmental, or regulatory authority,
agency, commission, court, tribunal or body, whether domestic, foreign or
multinational (any of the foregoing, a "Governmental Entity"), except for the
filing of the Certificate of Merger pursuant to the DGCL and the BCL; or (ii)
any other individual or Entity (collectively, a "Person").
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<PAGE>
4.6 Financial Statements. LMP has heretofore furnished Parent with a true
and complete copy of (a) the reviewed financial statements of LMP for the years
ended December 31, 1994, 1995, 1996 and 1997; and (b) the unaudited financial
statements of LMP for the five month period ended May 31, 1998 (all of the
foregoing collectively herein referred to as the "LMP Financial Statements").
Except as disclosed therein or on Schedule 4.6 hereto, the LMP Financial
-------------------
Statements have been prepared in accordance with GAAP (except for the absence of
footnotes and normal year end adjustments in the case of the LMP Financial
Statements for the period ended May 31, 1998) consistently followed throughout
the periods indicated, and present fairly, in all material respects, the
financial position and operating results of LMP as of the dates, and during the
periods, indicated therein.
4.7 Absence of Changes. Except as provided in Schedule 4.7 hereto and except
------------
as contemplated hereby, since December 31, 1997 (a) LMP has not entered into any
transaction that was not in the ordinary course of business; (b) except for
sales of services and licenses of software in the ordinary course of business,
there has been no sale, assignment, transfer, mortgage, pledge, encumbrance or
lease of any material asset or property of LMP; (c) there has been (i) no
declaration or payment of a dividend, or any other declaration, payment or
distribution of any type or nature to any shareholder of LMP in respect of its
stock, whether in cash or property, and (ii) no purchase or redemption of any
share of the capital stock of LMP; (d) there has been no declaration, payment,
or commitment for the payment, by LMP, of a bonus or other additional salary,
compensation, or benefit to any employee of LMP that was not in the ordinary
course of business, except for normal year-end bonuses paid in the ordinary
course of business; (e) there has been no release, compromise, waiver or
cancellation of any debt to or claim by LMP, or waiver of any right of LMP; (f)
there have been no capital expenditures in excess of $10,000 for any single
item, or $25,000 in the aggregate; (g) there has been no change in accounting
methods or practices or revaluation of any asset of LMP (other than LMP Accounts
Receivable as defined in Section 4.26 hereof written down in the ordinary course
of business in excess of $10,000 for any single LMP Accounts Receivable, or
$25,000 in the aggregate); (h) there has been no material damage, or destruction
to, or loss of, physical property (whether or not covered by insurance)
adversely affecting the LMP Business or the operations of LMP; (i) there has
been no loan by LMP, or guaranty by LMP of any loan, to any employee of LMP; (j)
LMP has not ceased to transact business with any customer that, as of the date
of such cessation, represented more than 5% of the 1997 annual gross revenues of
LMP; (k) there has been no termination or resignation of any key employee or
officer of LMP, and to the knowledge of LMP, no such termination or resignation
is threatened; (l) there has been no amendment or termination of any material
oral or written contract, agreement or license related to the LMP Business, to
which LMP is a party or by which it is bound, except in the ordinary course of
business, or except as expressly contemplated hereby; (m) LMP has not failed to
satisfy any of its debts, obligations or liabilities related to the LMP Business
or the assets of LMP as the same become due and owing (except for LMP Accounts
Payable (as defined in Section 4.27 hereof) payable in accordance with past
practices and in the ordinary course of business); (n) there has been no
agreement or commitment by LMP to do any of the foregoing; and (o) there has
been no other event or condition of any character specifically pertaining to and
materially and adversely affecting the assets, business or financial condition
of LMP.
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<PAGE>
4.8 Undisclosed Liabilities. Except as set forth on Schedule 4.8 hereto, LMP
------------
has no debt, liability or obligation of any kind, whether accrued, absolute or
otherwise, including any liability or obligation on account of taxes or any
governmental charge or penalty, interest or fine, except (a) liabilities
incurred in the ordinary course of business after December 31, 1997, that would
not, whether individually or in the aggregate, have a material adverse impact on
the business or financial condition of LMP; (b) liabilities reflected on the LMP
Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
4.9 Title to Properties. Except as set forth on Schedule 4.9 hereto, LMP has
------------
good and marketable title to, or good and valid title to its leasehold interests
in, all tangible property and assets used in the LMP Business, free and clear of
any and all Liens other than Permitted Liens (as defined in Section 10.11
hereof).
4.10 Equipment. LMP has heretofore furnished Parent with a true and correct
list of all items of tangible personal property (including computer hardware)
necessary for or used in the operation of the LMP Business in the manner in
which it has been and is now operated by LMP ("the LMP Equipment"), except for
personal property having a net book value of less than $1,000. Except as set
forth on Schedule 4.10 hereto, each material item of LMP Equipment is in good
-------------
working order, ordinary wear and tear excepted.
4.11 Intellectual Property.
(a) LMP has heretofore furnished Parent with a true and complete list of
all material patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, service marks, service mark rights, and copyrights (and all
pending applications for any of the foregoing) used by LMP in the conduct of the
LMP Business (together with trade secrets and know how used in the conduct of
the LMP Business, the "LMP Intellectual Property Rights"). LMP owns, or is
validly licensed or otherwise has the right to use or exploit, as currently used
or exploited, all of the LMP Intellectual Property Rights, free of any
obligation to make any payment (whether of a royalty, license fee, compensation
or otherwise). No claims are pending or, to the knowledge of LMP, threatened,
that LMP is infringing or otherwise adversely affecting the rights of any Person
with regard to any LMP Intellectual Property Right. To the knowledge of LMP, no
Person is infringing the rights of LMP with respect to any LMP Intellectual
Property Right. Neither LMP nor, to the knowledge of LMP, any employee, agent or
independent contractor of LMP, in connection with the performance of such
Person's services with LMP, has used, appropriated or disclosed, directly or
indirectly, any trade secret or other proprietary or confidential information of
any other Person, or otherwise violated any confidential relationship with any
other Person.
(b) LMP has heretofore furnished Parent with a true and complete list of
all material computer software used by LMP in the conduct of the LMP Business
(the "LMP Software"). LMP currently licenses, or otherwise has the legal right
to use, all of the LMP Software (including any upgrade, alteration or
enhancement with respect thereto), and all of the
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<PAGE>
LMP Software is being used in material compliance with any applicable license or
other agreement.
4.12 Real Property. Except as set forth on Schedule 4.12 hereto:
-------------
(a) LMP has a good and valid leasehold interest in all real property
(including all buildings, improvements and fixtures thereon) used in the
operation of the LMP Business (the "LMP Real Property"). LMP owns no real
property. Except for Permitted Liens, and for the items set forth on Schedule
--------
4.12, there are no Liens on LMP's interest in any of the LMP Real Property.
- ----
Schedule 4.12 lists each county and state where any LMP Real Property is
- -------------
located, or where LMP has ever leased or owned any real property.
(b) There are no parties in possession of any portion of the LMP Real
Property other than LMP, whether as sublessees, subtenants at will or
trespassers.
(c) To the knowledge of LMP, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, under the provisions of any of the LMP
Leases (as hereinafter defined), any material expenditure by LMP to modify or
improve any of the LMP Real Property to bring it into material compliance
therewith.
4.13 Leases. Schedule 4.13 hereto sets forth a list of all leases pursuant
-------------
to which LMP leases, as lessor or lessee, real or personal property used in
operating the LMP Business or otherwise (the "LMP Leases"). Copies of the LMP
Leases, all of which have previously been provided to Parent, are true and
complete copies thereof. All of the LMP Leases are valid, binding and
enforceable against LMP and, to the knowledge of LMP, against the other parties
thereto, in accordance with their respective terms, and there is not under any
such LMP Lease any existing default by LMP, or, to the knowledge of LMP, by any
other party thereto, or any condition or event that, with notice or lapse of
time or both, would constitute a default. LMP has not received notice that the
lessor of any of the LMP Leases intends to cancel, suspend or terminate such LMP
Lease or to exercise or not exercise any option thereunder.
4.14 Contracts. Schedule 4.14 hereto sets forth a true and complete list of
-------------
all contracts, agreements and commitments (whether written or oral) to which LMP
is, directly or indirectly, a party (in its own name or as a successor in
interest), or by which it or any of its properties or assets is otherwise bound,
including any service agreements, customer agreements, supplier agreements,
agreements to lend or borrow money, shareholder agreements, employment
agreements, agreements relating to LMP Intellectual Property Rights and the like
(collectively, the "LMP Contracts"); excepting only those LMP Contracts which
involve less than $10,000, or which involve less than $25,000 and are
cancelable, without penalty, on no more than 90 days' notice. The aggregate
value of all payment obligations and rights to receive payments, under
agreements, contracts and commitments (whether oral or in writing) to which LMP
is a party or by which it or any of its properties or assets is otherwise bound,
and that are not listed on
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<PAGE>
Schedule 4.14, is less than $50,000 (calculating such value by adding together
- -------------
the value of rights and obligations, and not by determining the net amount
thereof).
True and complete copies of all such LMP Contracts or of proposals evidencing
LMP Contracts, as the case may be (or a true and complete narrative description
of any oral LMP Contract) have previously been provided to Parent. Neither LMP
nor, to the knowledge of LMP, any other party to any of the LMP Contracts (x) is
in default under (nor does there exist any condition that, with notice or lapse
of time or both, would cause such a default under) any of the LMP Contracts, or
(y) has waived any right it may have under any of the LMP Contracts, the waiver
of which is reasonably likely to have a material adverse effect on the
business, assets or financial condition or prospects of LMP. All of the LMP
Contracts constitute the valid and binding obligations of LMP, enforceable in
accordance with their respective terms, and, to the knowledge of LMP, of the
other parties thereto.
4.15 Directors and Officers. Schedule 4.15 hereto sets forth a list, as of
-------------
the Closing Date, of the name of each director and officer of LMP and the
position(s) held by each.
4.16 Payroll Information. LMP has previously provided Parent with a true and
complete copy of the payroll report of LMP dated August 27, 1998, showing all
employees of LMP as of such date and their levels of compensation as of such
date, other than bonuses and other extraordinary compensation, all of which
bonuses and other extraordinary compensation are set forth in Schedule 4.16
-------------
hereto. LMP has paid all compensation required to be paid to employees of LMP
on or prior to the date hereof other than compensation (and bonuses pursuant to
arrangements described in Schedule 4.16 hereto) accrued in the current pay
-------------
period.
4.17 Litigation. Except as set forth on Schedule 4.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
LMP, threatened against or affecting LMP or the LMP Business, nor is there any
judgment, decree, injunction or order of any applicable Governmental Entity or
arbitrator outstanding against LMP.
4.18 Employee Benefit Plans/Labor Relations.
(a) Except as disclosed in Schedule 4.18 hereto, there are no employee
-------------
benefit plans, agreements or arrangements maintained by LMP, including (i)
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); (ii) current or
deferred compensation, pension, profit sharing, vacation or severance plans or
programs; or (iii) medical, hospital, accident, disability or death benefit
plans (collectively, "LMP Benefit Plans"). All LMP Benefit Plans are
administered in accordance with, and are in material compliance with, all
applicable laws and regulations. No default exists with respect to the
obligations of LMP under any LMP Benefit Plan.
(b) LMP is not a party to any collective bargaining agreement; no
collective bargaining agent has been certified as a representative of any of the
employees of LMP; no representation campaign or election is now in progress with
respect to any employee of LMP;
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<PAGE>
and there are no labor disputes, grievances, controversies, strikes or requests
for union representation pending, or, to the knowledge of LMP, threatened,
relating to or affecting the LMP Business. To the knowledge of LMP, no event has
occurred that could give rise to any such dispute, controversy, strike or
request for representation.
4.19 ERISA.
(a) Except as set forth on Schedule 4.19 hereto, all LMP Benefit Plans
-------------
that are subject to ERISA have been administered in accordance with, and are in
material compliance with, the applicable provisions of ERISA. Each of the LMP
Benefit Plans that is intended to meet the requirements of Section 401(a) of the
Code has been determined by the Internal Revenue Service to meet such
requirements within the meaning of such provision. No LMP Benefit Plan is
subject to Title IV of ERISA or Section 412 of the Code. LMP has not engaged in
any nonexempt "prohibited transactions," as such term is defined in Section 4975
of the Code or Section 406 of ERISA, involving LMP Benefit Plans that would
subject LMP to the penalty or tax imposed under Section 502(i) of ERISA or
Section 4975 of the Code. LMP has not engaged in any transaction described in
Section 4069 of ERISA within the last five years. Except as disclosed in
Schedule 4.19 hereto or pursuant to the terms of the LMP Benefit Plans, neither
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the execution and delivery hereof nor the consummation of the transactions
contemplated hereby will (i) result in any payment (including severance,
unemployment compensation or golden parachute) becoming due to any director or
other employee of LMP, (ii) increase any benefit otherwise payable under any LMP
Benefit Plan or (iii) result in the acceleration of the time of payment or
vesting of any such benefit to any extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA, for which the 30-day reporting requirement has not been waived,
has been required to be filed for any LMP Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code, or by any
entity that is considered one employer with LMP under Section 4001 of ERISA or
Section 414 of the Code, within the 12-month period ending on the Closing Date.
LMP has not incurred any liability to the Pension Benefit Guaranty Corporation
in respect of any LMP Benefit Plan that remains unpaid.
4.20 Taxes.
(a) LMP has duly and timely filed all federal, state and local income,
franchise, excise, real and personal property and other tax returns and reports,
including extensions, required to have been filed by LMP on or prior to the
Closing Date. LMP has duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by LMP (whether by way of withholding or otherwise) to any federal, state,
local or other taxing authority (except to the extent the same are being
contested in good faith, and adequate reserves therefor have been provided in
the LMP Financial Statements). As of the Closing Date, all deficiencies proposed
as a result of any audit have been paid or settled.
-12-
<PAGE>
(b) LMP is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) LMP has not consented to have the provisions of Section 341(f)(2)
of the Code (or comparable state law provisions) apply to it, and LMP has not
agreed or been requested to make any adjustment under Section 481(c) of the Code
by reason of a change in accounting method or otherwise.
4.21 Compliance with Applicable Laws. LMP holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
LMP, as appropriate, and to carry on the LMP Business as now conducted (the "LMP
Permits"). To the knowledge of LMP, LMP is in material compliance with all
applicable laws, ordinances and regulations and the terms of the LMP Permits.
Except as set forth on Schedule 4.21 hereto, all of the LMP Permits are fully
-------------
assignable by LMP in connection with the Merger. Schedule 4.21 sets forth a
-------------
true and complete list of all LMP Permits, true and complete copies of which
have previously been provided to Parent.
4.22 Board of Directors/Shareholder Consent. Both the Board of Directors of
LMP and the LMP Shareholders have adopted and approved this Agreement and the
transactions contemplated hereby (including the Merger).
4.23 Brokers. Except as set forth on Schedule 4.23 hereto, no broker or
-------------
finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of LMP.
4.24 Environmental Matters.
(a) To the knowledge of LMP, no real property currently or formerly
owned or operated by LMP is contaminated with any Hazardous Substance (as
hereinafter defined);
(b) LMP is not a party to any litigation or administrative proceeding
nor, to the knowledge of LMP, is any litigation or administrative proceeding
threatened against it, that, in either case, asserts or alleges that LMP (i)
violated any Environmental Law (as hereinafter defined); (ii) is required to
clean up, remove or take remedial or other responsive action due to the
disposal, deposit, discharge, leak or other release of any Hazardous Substance;
or (iii) is required to pay all or a portion of the cost of any past, present or
future cleanup, removal or remedial or other action that arises out of or is
related to the disposal, deposit, discharge, leak or other release of any
Hazardous Substance;
(c) To the knowledge of LMP, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by LMP containing materials that, if known to be
present in soil or ground water, would require cleanup, removal or other
remedial action under Environmental Law;
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<PAGE>
(d) To the knowledge of LMP, LMP is not subject to any judgment, order
or citation related to or arising out of any Environmental Law and has not been
named or listed as a potentially responsible party by any Governmental Entity in
a matter related to or arising out of any Environmental Law; and
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including any petroleum products, asbestos or polychlorinated biphenyls.
4.25 Interest in Customers, Suppliers and Competitors. Except as provided
in Schedule 4.25 hereto, no officer, director, shareholder or, to the knowledge
-------------
of LMP, employee of LMP and no family member (including a spouse, parent,
sibling or lineal descendent of any of the foregoing), has any direct or
indirect material interest in any material customer, supplier or competitor of
LMP, or in any Person from whom or to whom LMP leases any real or personal
property, or in any other Person with whom LMP is doing business whether
directly or indirectly (including as a debtor or creditor), whether in existence
as of the Closing Date or proposed, other than the ownership of stock of
publicly traded corporations.
4.26 Accounts Receivable. All accounts, notes, contracts and other
receivables of LMP (collectively, "LMP Accounts Receivable") were acquired by
LMP in the ordinary course of business arising from bona fide transactions. To
the knowledge of LMP, there are no set-offs, counterclaims or disputes asserted
with respect to any LMP Accounts Receivable that would result in claims in
excess of the reserve for bad debts set forth on the LMP Financial Statements or
on Schedule 4.26 hereto and, to the knowledge of LMP and subject to such
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reserve, all LMP Accounts Receivable are collectible in full. LMP has previously
provided Parent with a true and complete aging report prepared as of August 27,
1998 which shows the time elapsed since invoice date for all LMP Accounts
Receivable as of such date.
4.27 Accounts Payable. Except as set forth on Schedule 4.27 hereto, all
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material accounts, notes, contracts and other amounts payable of LMP
(collectively, "LMP Accounts Payable") are not past due by more than 90 days.
LMP has previously provided Parent with a true and complete aging report
prepared as of August 27, 1998 which shows the time elapsed since invoice date
for all LMP Accounts Payable as of such date.
4.28 Insurance. LMP currently maintains, in full force and effect, all
insurance policies that are required to be maintained for the conduct of the LMP
Business or the ownership of LMP's property (both real and personal)
(collectively, the "LMP Insurance Policies"). The LMP Insurance Policies are
listed on Schedule 4.28 hereto, and true and complete copies of all LMP
-------------
Insurance Policies have previously been provided to Parent. LMP (a) is not in
material
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default regarding the provisions of any LMP Insurance Policy; (b) has paid all
premiums due thereunder; and (c) has not failed to present any notice or
material claim thereunder in a due and timely fashion.
4.29 Bankruptcy. LMP has not filed a petition or request for reorganization
or protection or relief under the bankruptcy laws of the United States or any
state or territory thereof, made any general assignment for the benefit of
creditors, or consented to the appointment of a receiver or trustee, including a
custodian under the United States bankruptcy laws, whether such receiver or
trustee is appointed in a voluntary or involuntary proceeding.
4.30 LMP Debt. As of the date hereof, the LMP Debt is not in excess of
$656,000.
4.31 Investment Purpose; Accredited Investors or Purchaser representative.
(a) Each LMP Principal Shareholder, with respect to the Parent Stock, and each
holder of LMP $25 Options listed on Schedule 4.31 hereto ("4.31 Optionholder"),
-------------
with respect to the options on Parent Stock the he will receive pursuant to
Section 6.6(b) hereof as well as to any Parent Stock that he may be issued upon
exercise of such Parent options (such options and Stock, collectively, "Parent
Securities"), represents that he (i) is acquiring the Parent Stock (in the case
of each 4.31 Optionholder, the Parent Securities) solely for his own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof; and (ii) will not, directly or indirectly, offer,
transfer, sell, pledge, hypothecate or otherwise dispose of any Parent Stock (or
solicit any offers to buy, purchase or otherwise acquire or take a pledge of any
such shares) except in compliance with the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations thereunder, other
applicable laws, rules and regulations, and the Second Amended and Restated
Stockholders' Agreement of Parent, dated December 17, 1997 (the "Stockholders'
Agreement); (b) Each LMP Principal Shareholder, and each 4.31 Optionholder
identified on Schedule 4.31 as an accredited investor, further represents that
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he is an "accredited investor" as such term is defined in Rule 501 of Regulation
D promulgated by the Securities and Exchange Commission under the Securities
Act; and (c) Mike Sabourin, the only 4.31 Optionholder identified on Schedule
--------
4.31 as not an accredited investor, further represents that (i) Corporate
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Finance Advisors, Inc. is his Purchaser representative (the "Purchaser
representative") as such term is defined in Rule 501 of Regulation D under the
Securities Act; and (ii) the Purchaser representative (A) is not an affiliate,
director, officer or other employee of Parent, or beneficial owner of 10% or
more of any class of the equity securities of, or 10% or more of the equity
interest in, Parent; (B) has such knowledge and experience in financial and
business matters that he is capable of evaluating, alone, or together with Mike
Sabourin, the merits and risks of the prospective investment in Parent
Securities; (C) has been acknowledged by Mike Sabourin in writing, during the
course of the Merger, to be his purchaser representative in connection with
evaluating the merits and risks of the prospective investment in Parent
Securities; and (D) has disclosed to Mike Sabourin in writing a reasonable time
prior to the Closing any material relationship between the Purchaser
representative or his affiliates and Parent or its affiliates that exists, is
mutually understood to be contemplated, or has existed at any time during the
previous two years, and any compensation received or to be received as a result
of such relationship.
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4.32 Restrictions on Transfer. Each LMP Principal Shareholder, and each 4.31
Optionholder, acknowledges that (a) any Parent Stock received by him directly or
indirectly in connection with the Merger has not been registered under the
Securities Act; (b) such Parent Stock may be required to be held indefinitely,
and he must continue to bear the economic risk of the investment in such shares
unless such shares are subsequently registered under the Securities Act or an
exemption from such registration is available; (c) there may not be any public
market for the Parent Stock in the foreseeable future; (d) Rule 144 promulgated
under the Securities Act is not presently available with respect to sales of any
securities of Parent, and such Rule is not anticipated to be available in the
foreseeable future; (e) when and if Parent Stock may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
limited amounts and in accordance with the terms and conditions of such Rule;
(f) if the exemption afforded by Rule 144 is not available, public sale without
registration will require the availability of an exemption under the Securities
Act; (g) the Parent Stock is subject to the terms and conditions of the
Stockholders' Agreement; (h) restrictive legends shall be placed on the
certificates representing Parent Stock; and (i) a notation shall be made in the
appropriate records of Parent indicating that Parent Stock is subject to
restrictions on transfer and, if Parent should in the future engage the services
of a stock transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to Parent Stock.
4.33 Ability to Bear Risk; Access to Information; Sophistication. (a) Each
LMP Principal Shareholder, and each 4.31 Optionholder, represents and warrants
that (i) his financial situation is such that he can afford to bear the economic
risk of holding Parent Stock acquired by him directly or indirectly in
connection with the Merger for an indefinite period; and (ii) he can afford to
suffer the complete loss of such Parent Stock; (b) Each LMP Principal
Shareholder, and each 4.31 Optionholder identified on Schedule 4.31 hereto as an
--------------------------
accredited investor, further represents that (i) he has been granted the
- --------------------
opportunity to ask questions of, and receive answers from, representatives of
Parent concerning the terms and conditions of the Parent Stock (in the case of
each such 4.31 Optionholder, the Parent Securities) and to obtain any additional
information that he deems necessary; (ii) his knowledge and experience in
financial business matters is such that he is capable of evaluating the merits
and risk of ownership of the Parent Stock or Parent Securities, as the case may
be; (iii) he has carefully reviewed the terms of the Stockholders' Agreement and
has evaluated the restrictions and obligations contained therein; and (iv) he
(A) has reviewed the Private Placement Memorandum of Parent dated as of
September 4, 1998 (the "Memorandum"); (B) has carefully examined the Memorandum
and has had an opportunity to ask questions of, and receive answers from,
representatives of Parent, and to obtain additional information concerning
Parent and its Subsidiaries (as hereinafter defined); and (C) does not require
additional information regarding Parent or its Subsidiaries in connection with
the Merger; and (c) Mike Sabourin further represents that, either alone or with
the Purchaser representative, (i) he has been granted the opportunity to ask
questions of, and receive answers from, representatives of Parent concerning the
terms and conditions of the Parent Securities and to obtain any additional
information that he deems necessary; (ii) his knowledge and experience in
financial business matters is such that he is capable of evaluating the merits
and risk of ownership of the Parent Securities; (iii) he has carefully reviewed
the terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; and (iv) he (A) has reviewed the Memorandum; (B)
has carefully examined the Memorandum and has had an opportunity to ask
questions of, and receive answers from,
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representatives of Parent, and to obtain additional information concerning
Parent and its Subsidiaries; and (C) does not require additional information
regarding Parent or its Subsidiaries in connection with the Merger.
4.34 Disclosure. No statement of fact by LMP or any LMP Shareholder
contained herein and no written statement of fact furnished by LMP or any LMP
Shareholder to Parent or Sub in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein contained not misleading.
4.35 Nature of Liabilities. Any unpaid legal, accounting or other fees of
LMP are solely and directly related to the Merger or to the performance of
services for LMP and not for or on behalf of any shareholder, director or
employee of LMP.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to LMP
and the LMP Principals, which representations and warranties shall survive the
Closing in accordance with Section 10.1 hereof, as follows:
5.1 Organization and Qualification. Each of Parent and its Subsidiaries (as
defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached, respectively, to a closing
certificate and incumbency certificate, substantially in the form of Exhibit "A-
----------
1" hereto ("Parent's Closing Certificate"), and to Sub's Closing Certificate.
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5.2 Authority. Each of Parent and Sub has the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by LMP and the LMP Shareholders,
constitutes the valid and binding
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obligation of each of Parent and Sub, enforceable against each of Parent and Sub
in accordance with its terms, subject, in each case, to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors' rights and to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing.
5.3 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or Bylaws
of Parent or Sub, or the organizational documents of any other Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for (x)
compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL and the
BCL); or (ii) any other Person.
5.4 Litigation. Except as set forth on Schedule 5.4 hereto, there is no
------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 Brokers. Except as disclosed on Schedule 5.5 hereto, no broker or finder
------------
is entitled to any broker's or finder's fee in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Parent or
Sub.
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5.6 Parent Stock.
(a) As of the date hereof the authorized capital stock of Parent
consists of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 13,621,814, shares are
validly issued and outstanding (without taking into account any shares of Parent
Stock to be issued pursuant hereto), fully paid and nonassessable; (ii) 750,000
shares of blank check preferred stock, (A) 250,000 of which have been designated
as Class A Convertible Preferred Stock, of which 176,291 shares are validly
issued and outstanding, fully paid and nonassessable, (B) 200,000 of which have
been designated as Class B Convertible Preferred Stock, of which 98,767 shares
are validly issued and outstanding, fully paid and nonassessable, (C) 15,000 of
which have been designated as Class C Convertible Preferred Stock, of which
9,232 shares are validly issued and outstanding, fully paid and nonassessable,
and (D) 50,000 of which have been designated as Class D Nonvoting Preferred
Stock, of which 35,700 shares are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 5.6 hereto, there are no options,
------------
warrants, calls, agreements, commitments or other rights presently outstanding
that would obligate Parent to issue, deliver or sell shares of its capital
stock, or to grant, extend or enter into any such option, warrant, call,
agreement, commitment or other right. In addition to the foregoing, as of the
Closing Date, Parent has no bonds, debentures, notes or other indebtedness
issued or outstanding that have voting rights in Parent.
(b) When delivered to the LMP Principal Shareholders in accordance with
the terms hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
5.7 Subsidiaries. Except as set forth on Schedule 5.7 hereto, Parent has no
------------
subsidiaries and does not otherwise own or control, directly or indirectly, any
equity interest in, or any security convertible into an equity interest in, any
Entity. Schedule 5.7 lists the name of each of the Subsidiaries of Parent, and
------------
indicates their respective jurisdictions of incorporation.
5.8 Financial Statements. Parent has heretofore furnished LMP with a true
and complete copy of (a) the audited financial statements of iXL Interactive
Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31, 1993, 1994
and 1995, and for the four month period ended April 30, 1996; (b) the audited
combined financial statements for Creative Video, Inc. (n/k/a iXL, Inc.),
Creative Video Library, Inc. and Entrepreneur Television, Inc. for the years
ended December 31, 1993, 1994 and 1995, and for the four month period ended
April 30, 1996; (c) the audited consolidated financial statements for Parent and
its Subsidiaries for the eight months ended December 31, 1996 and for the year
ended December 31, 1997; and (d) the unaudited consolidated financial statements
for Parent and its Subsidiaries for the three month period ended June 30, 1998
(all of the foregoing, collectively, "Parent Financial Statements"). The Parent
Financial Statements present fairly in all material respects the consolidated
financial position, results of operations, shareholders' equity and cash flow of
Parent at the respective dates
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or for the respective periods to which they apply. Except as disclosed therein,
such statements and related notes have been prepared in accordance with GAAP
consistently applied throughout the periods involved (except, in the case of the
unaudited financial statements, for the exclusion of footnotes and normal year-
end adjustments).
5.9 Undisclosed Liabilities. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997 that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Parent and its Subsidiaries, taken as a whole; (b) liabilities reflected on
the Parent Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
5.10 Compliance with Applicable Laws. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
5.11 Board of Directors/Shareholder Consent. The board of directors of
Parent, and both the board of directors and shareholder of Sub, have, by
unanimous written consent or other action, adopted and approved this Agreement
and the transactions contemplated hereby (including the Merger).
5.12 Bankruptcy. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 Absence of Changes. Except as provided in Schedule 5.13 hereto, since
-------------
December 31, 1997, there has not been (a) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in
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the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
material change in Parent's accounting principles, practices or methods; (f) any
split, combination or reclassification of any of Parent's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Parent's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
5.14 Taxes. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent
and its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the Closing Date,
all deficiencies proposed as a result of any audits have been paid or settled.
5.15 Disclosure. No statement of fact by Parent or Sub contained herein and
no written statement of fact furnished or to be furnished by Parent or Sub to
LMP in connection herewith contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements herein or therein contained not misleading.
5.16 Section 6.6(b) Options. With respect to the options to acquire Parent
Stock to be granted to 4.31 Optionholders pursuant to Section 6.6(b) hereof
("Section 6.6(b) Options"), if at any time prior to the expiration of the
Section 6.6(b) Options Parent files under the Securities Act a registration
statement on Form S-8 as to Parent Stock, then Parent shall, subject to any
underwriter's restrictions and applicable securities laws, and to such
registration statement becoming effective, include in such registration the
Parent Stock underlying the Section 6.6(b) Options, and shall promptly give
notice of such registration to each 4.31 Optionholder.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Conduct of Business by LMP Pending the Merger. From and after the date
hereof, prior to the Effective Time, except as contemplated hereby, unless
Parent shall otherwise agree in writing, LMP shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, use reasonable efforts to preserve intact its present
business organization, keep available the services of its employees and preserve
its relationships with customers, suppliers, licensors, licensees, distributors
and others having
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business dealings with LMP to the end that its goodwill and on-going businesses
shall not be impaired in any material respect at the Effective Time. Without
limiting the generality of the foregoing, and except as contemplated hereby,
unless Parent shall otherwise agree in writing, prior to the Effective Time, LMP
shall not, directly or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire, any share of
capital stock of LMP or any other equity security thereof or any right, warrant,
or option to acquire any such share or other security;
(b) issue, deliver, sell, pledge or otherwise encumber any share of its
capital stock, any other voting security issued by LMP or any security
convertible into, or any right, warrant or option to acquire any such share or
voting security;
(c) amend its Articles of Organization, Bylaws or other comparable
organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to LMP;
(e) subject to a Lien or sell, lease or otherwise dispose of any of its
properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of LMP,
guarantee any debt security of another Person or enter into any "keep well" or
other agreement to maintain the financial condition of another Person, make any
loan, advance or capital contribution to, or investment in, any other Person, or
settle or compromise any material claim or litigation; or
(g) authorize any of, or commit or agree to take any of, the foregoing
actions.
6.2 Access to Information. From the date hereof through the Effective Time,
LMP shall afford to Parent and Parent's accountants, counsel and other
representatives reasonable access during normal business hours (and at such
other times as the parties may mutually agree) upon reasonable prior notice and
approval of LMP, which shall not be unreasonably withheld, to its properties,
books, contracts, commitments, records and personnel and, during such period,
shall furnish promptly to Parent all information concerning its business,
properties and personnel as Parent may reasonably request. Parent and its
accountants, counsel and other representatives shall, in the exercise of the
rights described in this Section 6.2, not unduly interfere with the operation of
the business of LMP.
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6.3 Filings; Tax Elections. LMP shall promptly provide Parent with copies of
all filings made by LMP with any Governmental Entity in connection herewith and
the transactions contemplated hereby. LMP shall, before settling or
compromising any material income tax liability of LMP, consult with Parent and
its advisors as to the positions and elections that will be taken or made with
respect to such matter.
6.4 Public Announcements. The parties agree that, except as may otherwise be
required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, (a) public disclosure
of the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger, and any such disclosure shall be coordinated by
Parent, and none of the LMP Principals shall make any such disclosure without
the prior written consent of Parent; and (b) the timing and text of any
disclosure, to the employees of LMP or Sub, of the transactions contemplated
hereby will be mutually agreed by LMP, Parent and the LMP Principals.
6.5 Transfer and Gains Taxes and Certain Other Taxes and Expenses. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 Options.
(a) LMP hereby covenants and agrees that at the Effective Time, all of
the LMP Stock Rights (all of which are set forth on Schedule 4.3(a) hereto)
---------------
shall have been properly canceled and, except for the right to receive cash, or
options or warrants to acquire Parent Stock, described in Section 6.6(b) below,
all rights and obligations thereunder shall have been terminated.
(b) Parent hereby covenants and agrees that, at the Effective Time, each
of the holders of LMP Stock Rights shall receive cash, or fully vested options
or warrants to purchase the number of shares of validly issued, fully paid and
nonassessable Parent Stock, at the exercise price per share, as set forth on
Schedule 6.6(b) hereto, all of which options shall have been issued pursuant
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to the IXL Holdings, Inc. 1996 Stock Option Plan, as amended (the "Parent Stock
Option Plan"), and shall be in the form of Exhibit "C-1" hereto, and all of
--------------------
which warrants shall be in the form of Exhibit "H" hereto ("Warrants"). Each
-----------
holder of LMP $25 Options other than the 4.31 Optionholders will be entitled to
the amount of cash set forth opposite such Person's name on Schedule 6.6(b).
---------------
6.7 Further Assurances. From time to time after the Effective Time, upon
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as
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the requesting party may reasonably request in order to effectuate fully the
purposes, terms and conditions hereof.
6.8 Confidentiality and Non-Competition Agreements. Each of the LMP
Majority Principals shall enter into an employee confidentiality and non-
competition agreement with Parent, substantially in the form of Exhibit "I"
-----------
hereto ("Non-compete Agreement").
6.9 Purchaser Representative. With respect to Mike Sabourin, (a) the
Purchaser representative shall furnish to Parent, to Parent's satisfaction, a
completed Purchaser representative Questionnaire, in the form of Exhibit "J"
-----------
hereto; and (b) Mike Sabourin shall furnish to Parent a signed Purchaser
Acknowledgement in connection therewith.
6.10 Amendment of Employment Agreements. Any LMP employment agreement,
written or oral, under which any LMP employee is entitled to a commission or
bonus based on LMP's overall revenues shall be amended to delete such
entitlement.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligation of LMP and the LMP Principals to Effect the
Merger. The obligations of LMP and the LMP Principals to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) Parent and Sub shall have performed in all material respects their
respective agreements contained herein required to be performed at or prior to
the Effective Time, and the representations and warranties of Parent and Sub
contained herein shall be true when made and (except for representations and
warranties made as of a specified date, which need only be true as of such date)
at and as of the Effective Time as if made at and as of such time, except as
contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to LMP at the Closing, Parent's Closing Certificate, and (ii) the
appropriate officers of Sub shall have executed and delivered to LMP at the
Closing, Sub's Closing Certificate;
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
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(d) LMP shall have received corporate certificates of good standing for
Parent and Sub, and a copy of the Certificate of Incorporation for Parent and
Sub, respectively, both as certified by the Secretary of State of Delaware;
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<PAGE>
(e) there shall have been delivered to the LMP Principal Shareholders at
the Closing, duly executed by Parent, an Agreement to be Bound to the
Registration Rights Agreement of Parent, dated as of the Closing Date (the
"Agreement to be Bound to the Registration Rights Agreement"), in the form of
Exhibit "B" hereto;
- -----------
(f) Parent shall have executed and delivered at the Closing an Option
Agreement for each of the 4.31 Optionholders, and a Warrant for each of the
Persons listed on Schedule 6.6(b) hereto as receiving warrants to purchase
---------------
Parent Stock;
(g) LMP shall have received, at the Closing, a duly executed opinion of
counsel to Parent and Sub, substantially in the form of Exhibit "D" hereto;
-----------
(h) LMP shall have received from Parent and Sub such other documents as
LMP's counsel shall have reasonably requested, in form and substance reasonably
satisfactory to LMP's counsel; and
(i) Sub shall have executed and delivered at the Closing a Non-compete
Agreement for each of the LMP Majority Principals.
7.2 Conditions to Obligations of Parent and Sub to Effect the Merger. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) LMP and the LMP Principals shall have performed in all material
respects their respective agreements contained herein required to be performed
at or prior to the Effective Time, and the representations and warranties of LMP
and the LMP Principals contained herein shall be true when made and (except for
representations and warranties made as of a specified date, which need only be
true as of such date) at and as of the Effective Time as if made at and as of
such time, except as contemplated hereby;
(b) the appropriate officers of LMP shall have executed and delivered to
Parent at the Closing, LMP's Closing Certificate;
(c) LMP and the LMP Principals shall have obtained or caused to be
obtained all of the Consents, if any, listed on Schedule 7.2(c) hereto;
---------------
(d) there shall have been delivered to Parent at the Closing, duly
executed by each of the LMP Principal Shareholders, (i) an Agreement to be Bound
to the Stockholders' Agreement, in the form of Exhibit "F" hereto; and (ii) an
-----------
Agreement to be Bound to the Registration Rights Agreement;
(e) Parent shall have received a corporate certificate of good standing
for LMP, and a copy of the Articles of Organization of LMP, both as certified by
the Secretary of the Commonwealth of Massachusetts;
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<PAGE>
(f) as of the date three business days prior to the Closing Date the LMP
Debt shall be no greater than $656,000;
(g) LMP shall have furnished evidence to Parent's satisfaction of
performance under Sections 6.6(a), 6.9 and 6.10 hereof;
(h) Parent shall have received, at the Closing, a duly executed opinion
of counsel to LMP and the LMP Principals, substantially in the form of Exhibit
-------
"G" hereto;
- ---
(i) Parent shall have received from LMP or the LMP Principals, as the
case may be, such other documents as Parent's counsel shall have reasonably
requested, in form and substance reasonably satisfactory to Parent's counsel;
(j) Parent shall have received, at the Closing, (i) an Option Agreement
executed by each recipient pursuant to Sections 6.6(b) hereof, and (ii) a Non-
compete Agreement executed by each LMP Majority Principal; and
(k) Parent shall have received evidence satisfactory to it that at the
Closing the assets and properties used in the LMP Business are free and clear of
all Liens other than Permitted Liens (as hereinafter defined), and that the LMP
Principal Shareholders, and all 4.31 Optionholders except for Mike Sabourin, are
accredited investors in accordance with Section 4.31(a) hereof.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Parent.
(a) Parent shall indemnify and hold the LMP Principals and LMP's
directors, officers and employees (collectively, the "LMP Indemnified Parties")
harmless from and against, and agree promptly to defend each of the LMP
Indemnified Parties from and reimburse each of the LMP Indemnified Parties for,
any and all losses, damages, costs, expenses, liabilities, obligations and
claims of any kind (including reasonable attorney fees and other legal costs and
expenses) (collectively, a "LMP Loss") that any of the LMP Indemnified Parties
may at any time suffer or incur, or become subject to, as a result of or in
connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Parent or Sub at the Closing in accordance
with the provisions hereof;
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<PAGE>
(ii) any failure by Parent or Sub to carry out, perform, satisfy
and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations hereunder or under any of the documents and materials
delivered by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary, Parent
shall not have any liability under Section 8.1(a)(i) above (i) unless the
aggregate of all LMP Losses for which Parent would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $100,000, and then
only to the extent of such excess, (ii) for amounts in excess of $5,500,000 in
the aggregate, and (iii) unless the LMP Principals have asserted a claim with
respect to the matters set forth in Section 8.1(a)(i), or 8.1(a)(iii) to the
extent applicable to Section 8.1(a)(i), within 18 months of the Effective Time.
Notwithstanding any implication to the contrary contained herein, the parties
acknowledge and agree that a decrease in the value of Parent Stock would not, by
itself, constitute a LMP Loss, unless and to the extent a decrease in the value
of Parent Stock has been demonstrated to be as a result of any event described
in Sections 8.1(a)(i), (ii) or (iii) above.
8.2 Indemnification by the LMP Shareholders.
(a) The LMP Majority Principals, jointly and severally, and in addition
the LMP Other Principals, severally but not jointly, shall indemnify and hold
Parent, Sub, Surviving Corporation and their respective shareholders, directors,
officers and employees (collectively, the "Parent Indemnified Parties") harmless
from and against, and agree to defend promptly each of the Parent Indemnified
Parties from and reimburse each of the Parent Indemnified Parties for, any and
all losses, damages, costs, expenses, liabilities, obligations and claims of any
kind (including reasonable attorneys' fees and other legal costs and expenses)
(collectively, a "Parent Loss") that any of the Parent Indemnified Parties may
at any time suffer or incur, or become subject to, as a result of or in
connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by LMP or the LMP Principals in or pursuant hereto, or in any
instrument certificate or affidavit delivered by any of the same at the Closing
in accordance with the provisions hereof;
(ii) any failure by LMP or any of the LMP Principals to carry out,
perform, satisfy and discharge any of their respective covenants, agreements,
undertakings, liabilities or obligations hereunder or under any of the documents
and materials delivered by LMP pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.2.
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<PAGE>
(b) Notwithstanding the above, none of the LMP Shareholders shall have
any liability under Section 8.2(a)(i) above (i) unless the aggregate of all
Parent Losses for which the LMP Shareholders would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $100,000, and then
only to the extent of such excess, (ii) for amounts in excess of $5,500,000 in
the aggregate, and (iii) unless Parent has asserted a claim with respect to the
matters set forth in Sections 8.2(a)(i), or 8.2(a)(iii) to the extent applicable
to Section 8.2(a)(i) within 18 months of the Effective Time, except with respect
to the matters arising under (A) Sections 4.18, 4.19 or 4.20 hereof, in which
event Parent must have asserted a claim within the applicable statute of
limitations; or (B) Section 4.24 hereof, in which event Parent must have
asserted a claim within six years of the Effective Time. Notwithstanding any
implication to the contrary contained herein, the parties acknowledge and agree
that a decrease in the value of Parent Stock would not, by itself, constitute a
Parent Loss, unless and to the extent a decrease in the value of Parent Stock
has been demonstrated to be as a result of any event described in Sections
8.2(a)(i), (ii) or (iii) above.
(c) Notwithstanding the above, except for claims for indemnification
based on (i) fraud, (ii) intentional misrepresentation or (iii) any breach of
any representation made in Section 4.3 hereof or otherwise with respect to title
to any LMP Stock or any LMP Stock Rights, the liability of the LMP Principals
under Section 8.2(a) hereof will not exceed their respective portions of the
merger consideration receivable hereunder, as determined, in the case of the LMP
Principal Shareholders or the 4.31 Optionholders, by multiplying by $10 the sum
of (A) the number of shares of Parent Stock issued to them pursuant to Section
3.1(c) hereof, plus (B) the number of Parent options granted to them pursuant to
Section 6.6(b) hereof in exchange for their LMP $25 Options; and, in the case of
the LMP Other Principals exluding Francis Maslowski and Laura Wallace, by the
amount of cash receivable by them pursuant to Sections 3.1(b) or 6.6(b) hereof.
8.3 Notification of Claims; Election to Defend
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder. Subject to the
Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 12% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of any
Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a Claim
asserted by a third party against the Indemnified Party that the Indemnifying
Party acknowledges (subject to a reasonable reservation of rights) is a Claim
for which it must indemnify or hold harmless the Indemnified
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<PAGE>
Party under Section 8.1 or 8.2 hereof, as the case may be, the Indemnifying
Party shall have the right, at its sole cost and expense, to employ counsel of
its own choosing to defend any such Claim asserted against the Indemnified
Party. Notwithstanding anything to the contrary in the preceding sentence, if
the Indemnified Party (i) reasonably believes that its interests with respect to
a Claim (or any material portion thereof) are in conflict with the interests of
the Indemnifying Party with respect to such Claim (or portion thereof), and (ii)
promptly notifies the Indemnifying Party, in writing, of the nature of such
conflict, then the Indemnified Party shall be entitled to choose, at the sole
cost and expense of the Indemnifying Party, independent counsel to defend such
Claim (or the conflicting portion thereof). The Indemnified Party shall have the
right to participate in the defense of any Claim at its own expense (except to
the extent provided in the preceding sentence), but the Indemnifying Party shall
retain control over such litigation (except as provided in the preceding
sentence). The Indemnifying Party shall notify the Indemnified Party in writing,
as promptly as possible (but in any case before the due date for the answer or
response to a Claim) after receipt of the notice of Claim given by the
Indemnified Party to the Indemnifying Party under Section 8.3(a) hereof, of its
election to defend in good faith any such third party Claim. For so long as the
Indemnifying Party is defending in good faith any such Claim asserted by a third
party against the Indemnified Party, the Indemnified Party shall not settle or
compromise such Claim without the prior written consent of the Indemnifying
Party. The Indemnified Party shall cooperate with the Indemnifying Party in
connection with any such defense and shall make available to the Indemnifying
Party or its agents all records and other materials in the Indemnified Party's
possession reasonably required by it for its use in contesting any third party
Claim; provided, however, that the Indemnifying Party shall have agreed, in
writing, to keep such records and other materials confidential except (i) to the
extent required for defense of the relevant Claim, or (ii) as required by law or
court order. Whether or not the Indemnifying Party elects to defend any such
Claim, the Indemnified Party shall have no obligations to do so. Within 30 days
after a final determination (including a settlement) has been reached with
respect to any Claim contested pursuant to this Section 8.3(b), the Indemnifying
Party shall satisfy its obligations hereunder with respect thereto. Any amount
paid thereafter shall include interest thereon for the period commencing at the
end of such 30-day period and ending on the actual date of payment, at a rate of
15% per annum, or, if lower, at the highest rate of interest permitted by
applicable law at the time of such payment.
8.4 Payment. Any Indemnifying Party may, at such Indemnifying Party's
option, pay all or part of any amount due under this Article VIII by delivery of
shares of Parent Stock having a value equal to the amount due (to the extent
that such Indemnifying Party owns sufficient shares of Parent Stock). For the
purpose of this provision, the value of Parent Stock shall be deemed to be $10
per share.
8.5 Further Agreements Regarding Indemnification. Notwithstanding anything
to the contrary in this Article VIII, (a) the entitlement of any Indemnified
Party will be determined on an after-tax basis after giving effect to insurance
recoveries, if any; and (b) if the Merger is not consummated, then (i) only LMP,
in lieu of the LMP Principals, shall be liable hereunder, and (ii) the
indemnification provisions of Sections 8.1 through 8.4 hereof will not apply,
and any
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<PAGE>
liability hereunder shall arise, instead, from the representations and
warranties made pursuant hereto, or in any instrument, certificate or affidavit
delivered in accordance herewith.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Merger Agreement may be terminated at any time prior
to the Effective Time:
(a) by mutual written consent of Parent and LMP;
(b) by LMP, upon a material breach hereof on the part of Parent or Sub
which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by September 15, 1998;
(c) by Parent, upon a material breach hereof on the part of LMP or any
of the LMP Principals which has not been cured and which would cause any
condition set forth in Section 7.2 hereof to be incapable of being satisfied by
September 15, 1998;
(d) by Parent or LMP if any court of competent jurisdiction shall have
issued, enacted, entered, promulgated or enforced any order, judgment, decree,
injunction or ruling which restrains, enjoins or otherwise prohibits the Merger
and such order, judgment, decree, injunction or ruling shall have become final
and nonappealable; or
(e) by either Parent or LMP if the Merger shall not have been
consummated on or before September 15, 1998 (provided the terminating party is
not otherwise in material breach of its representations, warranties or
obligations hereunder).
9.2 Fees and Expenses.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the Surviving Corporation; provided, however, that the LMP Principals shall pay
all fees and expenses (including agents, counsel and other advisors) of LMP and
themselves that are not solely and directly related to the Merger or to the
provision of services to LMP and not to or on behalf of any shareholder,
director or employee of LMP.
(b) If the Merger is not consummated for a reason other than the
willful and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
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(c) If the Merger is not consummated because of a willful and material
breach hereof by any party, the nonbreaching party or parties shall be entitled
to pursue all legal and equitable remedies against the breaching party for such
breach including specific performance and all fees and expenses incurred by the
nonbreaching party or parties in connection with enforcing its or their rights
hereunder with respect to such breach shall be paid by the breaching party.
9.3 Amendment. This Merger Agreement may be amended by Parent, Sub, LMP and,
on behalf of all of the LMP Principals, the LMP Principal Shareholders, at any
time before or after approval hereof by the LMP Shareholders, but, after such
approval, no amendment shall be made which (i) changes the form or decreases the
amount of the consideration to be received in the Merger, (ii) in any way
materially adversely affects the rights of the LMP Shareholders, or (iii) under
applicable law would require approval of the LMP Shareholders, in any such case
referred to in clauses (i), (ii) and (iii), without the further approval of the
LMP Shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of the parties hereto, provided that after the
Effective Time, any such amendment must be signed by the former holders of a
majority of the LMP Stock.
9.4 Waiver. At any time prior to the Effective Time, the parties hereto
may, to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival; Recourse. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 10.9 and 10.10 hereof, shall survive the
Merger indefinitely (except to the extent a shorter period of time is explicitly
specified therein) and (ii) the representations and warranties made in Articles
IV and V hereof shall survive the Merger, and shall survive any independent
investigation by the parties, and any dissolution, merger or consolidation of
LMP or Parent, and shall bind the legal representatives, assigns and successors
of LMP, the LMP Principals and Parent, for a period of 18 months after the
Closing Date (other than the representations and warranties contained in (A)
Sections 4.18, 4.19 and 4.20 hereof, which shall survive for the applicable
statute of limitations, or (B) Section 4.24 hereof, which shall survive for six
years after the Effective Time).
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<PAGE>
10.2 Notices. All notices or other communications under this Agreement shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in Person, by telecopy (with confirmation of receipt),
or by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to LMP: Larry Miller Productions, Inc.
One Thompson Square
Charlestown, MA 02129
Attention: Mr. Jeff Janer, President and CEO
Telephone: (617) 242-4242
Telecopy: (617) 242-9259
With a copy to: Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, MA 02111
Attention: Philip J. Flink, Esq.
Telephone: (617) 856-8555
Telecopy: (617) 856-8201
If to the LMP To the address listed under the signature
Shareholders: line of the applicable LMP Shareholder
If to Parent or Sub: IXL Holdings, Inc.
1888 Emery St., 2nd Floor
Atlanta, GA 30318
Attention: Mr. James V. Sandry, Exec. V.P.
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Rd., Ste. 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Ave., 24th Floor
New York, NY 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
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<PAGE>
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 Entire Agreement. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, except for the non-disclosure letter agreement between Parent and
LMP dated as of April 14, 1998. There are no other representations or
warranties, whether written or oral, between the parties in connection the
subject matter hereof, except as expressly set forth herein.
10.4 Assignments; Parties in Interest. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the rights, interests, and obligations
of Sub hereunder may be assigned to any direct wholly owned Delaware subsidiary
of Parent without such prior consent. Subject to the preceding sentence, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing herein, express or implied, is intended to or shall confer
upon any Person not a party hereto any right, benefit or remedy of any nature
whatsoever under or by reason hereof, except as otherwise provided herein.
10.5 Governing Law. This Agreement, except to the extent that the BCL or the
DGCL is mandatorily applicable to the Merger, or to the rights of the LMP
Principals or the other parties hereto with respect to the Merger, shall be
governed in all respects by the laws of the State of Georgia (without giving
effect to the provisions thereof relating to conflicts of law).
10.6 Headings. The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation hereof.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 Severability. If any term or other provision hereof is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions hereof shall nevertheless remain in full force and
effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
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<PAGE>
10.9 Post-Closing Access. For a period of six years after the Closing Date,
the LMP Principals and their agents and representatives shall have reasonable
access to the books and records of the LMP Business, which shall be retained, as
reasonable, by Parent during such period. Thereafter, the LMP Principals may
have such access to the extent (a) reasonably required to defend a claim for
indemnification under Sections 4.18, 4.19 or 4.20 hereof; and (b) that Parent
has retained such records.
10.10 Post-Closing Notice. To the extent the Surviving Corporation receives
written notice of any event or circumstance that materially affects any of the
LMP Principals, the Surviving Corporation shall promptly notify the affected LMP
Principal of such matter, information, or event and shall provide them with
copies of all relevant documentation or correspondence in connection thereto.
10.11 Certain Definitions. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the LMP Real
Property or interfering with the ordinary conduct of any of the LMP Business;
and (e) those Liens listed on Schedule 10.11 hereto;
--------------
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of LMP" shall refer to the knowledge,
subject to clause (i) above, of any of the LMP Principals; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of which are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including Sub); provided, however, that
with respect to the Parent, the terms "Subsidiary" and "Subsidiaries" shall not
include LMP or University Netcasting, Inc.
- SIGNATURES ON THE FOLLOWING PAGE -
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<PAGE>
IN WITNESS WHEREOF, Parent, Sub and LMP have caused this Agreement to be
signed and delivered by their respective duly authorized officers, and each LMP
Principal has signed and delivered this Agreement, all as of the date first
written above.
"LMP"
Larry Miller Productions, Inc., a Massachusetts
corporation
By: /s/ Jeff Janer
----------------------------------------
Title: Chief Executive Officer
By:
----------------------------------------
Title:
-------------------------------------
"Parent"
IXL Holdings, Inc., a Delaware corporation
By: /s/ James V. Sandry
----------------------------------------
Title:
-------------------------------------
"Sub"
iXL-Boston, Inc., a Delaware corporation
By: /s/ James V. Sandry
----------------------------------------
Title:
-------------------------------------
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
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<PAGE>
"LMP Majority Principals"
/s/ Jeff Janer
-------------------------------------------
Jeff Janer
Address: 98 Clark Road
Cape Neddick, ME 03902
/s/ Dave Greeley
-------------------------------------------
Dave Greeley
Address: 592 Old Bedford Road
Concord, MA 01742
/s/ Mike Sabourin
-------------------------------------------
Mike Sabourin
Address: 1657 Main Street
West Concord, MA 01742
"LMP Other Principals"
/s/ Francis Maslowski
-------------------------------------------
Francis Maslowski
Address: 1657 Main Street
West Concord, MA 01742
/s/ Robert Wilson
-------------------------------------------
Robert Wilson
Address: 372 Nahant Road
Nahant, MA 01908
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
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<PAGE>
/s/ Angela Richards
-------------------------------------------
Angela Richards
Address: 26 Thatcher Street
Medford, MA 02155
/s/ David Jacobs
-------------------------------------------
David Jacobs
Address: 107 Parmenter Road
Framingham, MA 01701
/s/ Jonathan Reduker
-------------------------------------------
Jonathan Reduker
Address: 17 Parsons Street
Newburyport, MA 01950
/s/ Damian Roskill
-------------------------------------------
Damian Roskill
Address: 7 Waterhouse Street
Somerville, MA 02148
/s/ Mike Ryan
-------------------------------------------
Mike Ryan
Address: 10 Stratford Road
West Hartford, CT 06117
/s/ Laura Wallace
-------------------------------------------
Laura Wallace
Address: 339 Summer Street
Lynfield, MA 01940
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<PAGE>
EXHIBITS
--------
Parent's Closing Certificate...................................... Exhibit A-1
Sub's Closing Certificate......................................... Exhibit A-2
Agreement to be Bound to Registration Rights Agreement............ Exhibit B
Option Agreement.................................................. Exhibit C-1
Opinion of Counsel to Parent and Sub.............................. Exhibit D
LMP's Closing Certificate......................................... Exhibit E
Agreement to be Bound to Stockholders' Agreement.................. Exhibit F
Opinion of Counsel to LMP......................................... Exhibit G
Warrants.......................................................... Exhibit H
Non-Compete Agreement............................................. Exhibit I
Purchaser Representative Questionnaire and Acknowledgement........ Exhibit J
<PAGE>
SCHEDULE 4.3(a)
---------------
CAPITALIZATION OF LMP
SCHEDULE 4.3(B)
---------------
LIENS ON LMP STOCK
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF LMP
SCHEDULE 4.6
------------
EXCEPTIONS TO FINANCIAL STATEMENTS BEING PREPARED
ACCORDING TO GAAP
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF LMP
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF LMP
SCHEDULE 4.9
------------
EXCEPTION TO TITLE TO PROPERTIES OF LMP
<PAGE>
SCHEDULE 4.10
-------------
BAD EQUIPMENT OF LMP
SCHEDULE 4.12
-------------
REAL PROPERTY OF LMP
SCHEDULE 4.13
-------------
LEASES OF LMP
SCHEDULE 4.14
-------------
CONTRACTS OF LMP
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF LMP
SCHEDULE 4.16
-------------
PAYROLL INFORMATION OF LMP
SCHEDULE 4.17
-------------
LITIGATION
<PAGE>
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF LMP
SCHEDULE 4.19
-------------
ERISA ISSUES OF LMP
SCHEDULE 4.21
-------------
LMP PERMITS
SCHEDULE 4.23
-------------
LMP BROKERS
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS, COMPETITORS
SCHEDULE 4.26
-------------
EXCEPTIONS TO LMP ACCOUNTS RECEIVABLE BEING FULLY COLLECTIBLE
SCHEDULE 4.27
-------------
LIST OF LMP ACCOUNTS PAYABLE BEING PAST DUE BY MORE THAN 90 DAYS
<PAGE>
SCHEDULE 4.28
-------------
INSURANCE OF LMP
SCHEDULE 4.31
-------------
ACCREDITED INVESTORS
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILING AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
OUTSTANDING OBLIGATIONS TO ISSUE OPTIONS, WARRANTS
OR OTHER PARENT STOCK RIGHTS
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
<PAGE>
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES OF PARENT
SCHEDULE 6.6(B)
---------------
PARENT OPTIONS TO HOLDERS OF LMP STOCK RIGHTS
SCHEDULE 7.1(C)
---------------
PARENT CONSENTS
SCHEDULE 7.2(C)
---------------
LMP AND LMP SHAREHOLDERS CONSENTS
SCHEDULE 10.11
--------------
PERMITTED LIENS OF LMP
<PAGE>
EXHIBIT 2.28
AGREEMENT AND PLAN OF MERGER
by and among
IXL HOLDINGS, INC.,
iXL, INC.,
EXCHANGE PLACE SOLUTIONS, INC.
AND
THE EXCHANGE PLACE SHAREHOLDER
Dated as of SEPTEMBER 10, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 10th day of
September, 1998, by and between Exchange Place Solutions, Inc., a Georgia
corporation ("Exchange Place"), IXL Holdings, Inc., a Delaware corporation
("Parent"), iXL, Inc., a Delaware corporation, or its successors or assigns
("Sub"), and the sole shareholder of Exchange Place as listed on the signature
page hereto (the "Exchange Place Shareholder").
R E C I T A L S:
- - - - - - - -
A. Exchange Place is engaged in the business of consulting, particularly in
the financial services industry or for clients furnishing internet services (the
"Exchange Place Business").
B. Exchange Place and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The Exchange Place Shareholder owns 100% of the issued and outstanding
capital stock of Exchange Place (the "Exchange Place Stock").
D. The respective Boards of Directors of Parent, Sub and Exchange Place, and
the respective shareholders of Sub and Exchange Place, have approved the Merger,
upon the terms and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal income
tax purposes, as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits, conditions
and agreements set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is hereby
agreed as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, at the
Effective Time (as defined in Section 1.3 hereof), (a) Exchange Place shall be
merged with and into Sub, (b) the separate existence of Exchange Place shall
cease, and (c) Sub shall continue as the surviving corporation in the Merger
under the laws of the State of Delaware under the name iXL, Inc. For purposes
of this Agreement, Sub shall be referred to, for the period commencing on the
Effective Time, as the "Surviving Corporation."
<PAGE>
1.2 Closing and Closing Date. Unless this Merger Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9.1 hereof, and subject to the satisfaction or waiver of the
conditions set forth in Article VII hereof, the closing of the Merger (the
"Closing") will take place as promptly as practicable (and in any event within
five business days after satisfaction of the conditions set forth in Sections
7.1 and 7.2 hereof) (the "Closing Date") at the offices of Minkin & Snyder, A
Professional Corporation, One Buckhead Plaza, 3060 Peachtree Rd., Ste. 1100,
Atlanta, GA 30305, unless another date or place is agreed to by the parties.
1.3 Effective Time of the Merger. At the Closing, the parties hereto shall
cause (a) a certificate of merger (the "Delaware Certificate of Merger") to be
filed with the office of the Secretary of State of Delaware in accordance with
the provisions of the Delaware General Corporation Law, as amended (the "DGCL");
and (b) a certificate of merger (the "Georgia Certificate of Merger";
collectively with the Delaware Certificate of Merger, the "Certificate of
Merger") to be filed with the office of the Secretary of State of Georgia in
accordance with the provisions of the Georgia Business Corporation Code (the
"GBCC"). When used herein, the term "Effective Time" shall mean the time when
the Delaware Certificate of Merger has been accepted for filing by the Secretary
of State of Delaware, or such time as otherwise specified therein.
1.4 Effect of the Merger. The Merger shall, from and after the Effective Time,
have all the effects provided by the DGCL and the GBCC. If at any time after the
Effective Time, any further action is deemed necessary or desirable to carry out
the purposes of this Agreement, the parties hereto agree that the Surviving
Corporation and its proper officers and directors shall be authorized to take,
and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of Sub, a
form of which is attached to a closing certificate and incumbency certificate,
substantially in the form of Exhibit "A" hereto ("Sub's Closing Certificate"),
-----------
shall be the Certificate of Incorporation of the Surviving Corporation after the
Effective Time, until thereafter changed or amended as provided therein or by
applicable law.
2.2 Bylaws. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is attached to the Sub's Closing Certificate.
2.3 Board of Directors; Officers. The Board of Directors and officers of Sub
immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified.
-2-
<PAGE>
ARTICLE III
CONVERSION OF SHARES
3.1 Merger Consideration. As of the Effective Time:
(a) All shares of Exchange Place Stock owned by Exchange Place shall, by
virtue of the Merger and without any action on the part of any shareholder,
officer or director of Exchange Place or Sub, be canceled and retired and shall
cease to exist, and no consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding share of Exchange Place Stock (other
than any Dissenting Shares, as defined in Section 3.2 hereof) shall, upon
surrender to Sub, at the Closing, of the underlying share certificates, be
converted into, and become exchangeable for, a number of shares of validly
issued, fully paid and nonassessable Class B Common Stock of Parent, $.01 par
value (the "Parent Stock") based on the following equation:
PS= 275,000 - D
---
$10
------------
S
where:
PS = the number of shares of Parent Stock (valued, as of the
Closing, at $10 per share) for which each share of Exchange
Place Stock shall be exchanged pursuant to the Merger
D = any outstanding indebtedness of Exchange Place (the
"Exchange Place Debt"), including debt for borrowed money
and accrued interest thereon, capital leases, accounts
payable, accrued expenses, and any unpaid legal, accounting
or other fees, all to be determined as of three business
days prior to the Closing Date and all as determined in
accordance with generally accepted accounting principles
("GAAP")
S = the number of issued and outstanding shares of Exchange
Place Stock on the Closing Date
(c) Each issued and outstanding share of common stock of Sub shall, by
virtue of the Merger and without any action on the part of any shareholder,
officer or director of Exchange Place or Sub, be converted into and become one
fully paid and nonassessable share of common stock of the Surviving Corporation.
-3-
<PAGE>
3.2 Dissenting Shares. Notwithstanding any provision hereof to the
contrary, any shares of Exchange Place Stock held by a Dissenting Shareholder
(as hereinafter defined) shall not be converted as described in Section 3.1(b)
hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Shareholder pursuant to the DGCL or GBCC, as
applicable, provided, however, that if a Dissenting Shareholder shall fail to
perfect his demand, withdraw his demand or otherwise lose his right for
appraisal under the terms of the DGCL or GBCC, as applicable, then the Exchange
Place Stock held by such Dissenting Shareholder (the "Dissenting Shares") shall
be deemed to be converted as of the Effective Time in accordance with the
provisions of Section 3.1 hereof. Exchange Place shall not voluntarily make any
payment with respect to, settle, or offer to settle or otherwise negotiate, any
such demands. All amounts paid to Dissenting Shareholders shall be paid without
interest thereon (to the extent permitted by applicable law) by the Surviving
Corporation. For purposes hereof, the term "Dissenting Shareholder" shall mean
an Exchange Place Shareholder who (a) objects to the Merger; and (b) complies
with the applicable provisions of the DGCL or GBCC concerning dissenter's
rights.
3.3 No Further Rights. From and after the Effective Time, holders of
certificates theretofore evidencing Exchange Place Stock shall cease to have any
rights as stockholders of Exchange Place, except as provided herein or by
applicable law.
3.4 Closing of Exchange Place's Transfer Books. At the Effective Time, the
stock transfer books of Exchange Place shall be closed and no transfer of
Exchange Place Stock shall be made thereafter. If after the Effective Time,
certificates for Exchange Place Stock are presented to Parent or the Surviving
Corporation, they shall be canceled and exchanged for a consideration as set
forth in Section 3.1 hereof, subject to applicable law in the case of Dissenting
Shareholders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EXCHANGE PLACE
Exchange Place, and the Exchange Place Shareholder, jointly and severally,
represent and warrant to Parent and Sub as follows, which representations and
warranties shall survive the Closing in accordance with Section 10.1 hereof.
4.1 Organization and Qualification. Exchange Place is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia. Exchange Place has the requisite corporate power and authority to
carry on the Exchange Place Business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Articles of Incorporation and Bylaws, if any, of Exchange
Place as in effect on the date hereof are attached to a closing certificate and
incumbency certificate, substantially in the form of Exhibit "B" hereto
-----------
("Exchange Place's Closing Certificate"). The minute book of Exchange Place, a
true and complete copy of which has been delivered to Parent, (a) accurately
reflects all action taken by the directors and shareholders of Exchange Place at
meetings of Exchange Place's Board of Directors
-4-
<PAGE>
or shareholders, as the case may be; and (b) contains true and complete copies,
or originals, of the respective minutes, if any, of all meetings or consent
actions of the directors or shareholders.
4.2 Authority. Exchange Place has the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by Exchange Place have been
duly and validly authorized and approved by Exchange Place's Board of Directors
and the Exchange Place Shareholder, and no other corporate or shareholder
proceedings on the part of Exchange Place, its Board of Directors or the
Exchange Place Shareholder is necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Exchange Place and the Exchange Place
Shareholder, and assuming the due authorization, execution and delivery by
Parent and Sub, constitutes the valid and binding obligation of Exchange Place
and the Exchange Place Shareholder, enforceable against Exchange Place and the
Exchange Place Shareholder in accordance with its terms subject, in each case,
to bankruptcy, insolvency, reorganization, moratorium and similar laws of
general application relating to or affecting creditors' rights and to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing.
4.3 Capitalization.
(a) The authorized capital stock of Exchange Place consists of 1,000,000
shares of common stock. All issued shares are validly issued and outstanding,
fully paid and nonassessable, and issued to the Exchange Place Shareholder. All
outstanding capital stock of Exchange Place was issued in accordance with
applicable federal and state securities laws. Except as set forth on Schedule
--------
4.3(a) hereto, there are no options, warrants, calls, convertible notes,
- -----
agreements, commitments or other rights presently outstanding that would
obligate Exchange Place or the Exchange Place Shareholder to issue, deliver or
sell shares of its capital stock, or to grant, extend or enter into any such
option, warrant, call, convertible note, agreement, commitment or other right.
In addition to the foregoing, as of the date hereof, Exchange Place has no
bonds, debentures, notes or other indebtedness issued or outstanding that have
voting rights in Exchange Place. Other than the shares issued to and held by the
Exchange Place Shareholder, Schedule 4.3(a) sets forth a list of (i) all holders
of record of (A) Exchange Place Stock, and (B) options, warrants, convertible
notes or other rights to purchase capital stock of Exchange Place (collectively,
"Exchange Place Stock Rights"); (ii) the number of shares held by each Exchange
Place Shareholder and the number of shares of capital stock of Exchange Place
represented by the Exchange Place Stock Rights; and (iii) the exercise price for
each Exchange Place Stock Right.
(b) All of the issued and outstanding shares of capital stock of Exchange
Place are validly issued, fully paid and nonassessable. Except as set forth on
Schedule 4.3(b) hereto, the Exchange Place Shareholder represents and warrants
- ---------------
that the Exchange Place Stock held by the Exchange Place Shareholder is free and
clear of any lien, charge, security interest, pledge, option, right of first
refusal, voting proxy or other voting agreement, or encumbrance of any kind or
nature other than restrictions on transfer imposed by federal and state
securities laws (any of the foregoing, a "Lien").
-5-
<PAGE>
4.4 Subsidiaries. Exchange Place has no subsidiaries and does not otherwise
own or control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
- ------------
Exchange Place or the Exchange Place Shareholder, (ii) the consummation by
Exchange Place and the Exchange Place Shareholder of the transactions
contemplated hereby or (iii) compliance by Exchange Place with any of the
provisions hereof will:
(a) conflict with or violate the Articles of Incorporation or Bylaws of
Exchange Place;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Exchange Place or the Exchange Place
Shareholder, or by which Exchange Place or any of its properties or assets may
be bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which Exchange Place is a party or by which
Exchange Place or any of its properties or assets may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of Exchange Place; or
(e) require any consent, waiver, license, approval, authorization, order,
permit, registration or filing with, or notification to (any of the foregoing
being a "Consent"), (i) any government or subdivision thereof, whether domestic
or foreign, or any administrative, governmental, or regulatory authority,
agency, commission, court, tribunal or body, whether domestic, foreign or
multinational (any of the foregoing, a "Governmental Entity"), except for the
filing of the Certificate of Merger pursuant to the DGCL and the GBCC; or (ii)
any other individual or Entity (collectively, a "Person").
4.6 Financial Statements. Exchange Place has heretofore furnished Parent
with a true and complete copy of the unaudited financial statements of Exchange
Place for the year ended December 31, 1997, and for the six month period ended
June 30, 1998 (all of the foregoing collectively herein referred to as the
"Exchange Place Financial Statements"). Except as disclosed therein, the
Exchange Place Financial Statements have been prepared in accordance with GAAP
(except for the absence of footnotes and normal year end adjustments
consistently followed throughout the period indicated, and present fairly, in
all material respects, the financial position and operating results of Exchange
Place as of the dates, and during the periods, indicated therein.
-6-
<PAGE>
4.7 Absence of Changes. Except as provided in Schedule 4.7 hereto and except
------------
as contemplated hereby, since June 30, 1998 (a) Exchange Place has not entered
into any transaction that was not in the ordinary course of business; (b) except
for sales of services and licenses of software in the ordinary course of
business, there has been no sale, assignment, transfer, mortgage, pledge,
encumbrance or lease of any material asset or property of Exchange Place; (c)
there has been (i) no declaration or payment of a dividend, or any other
declaration, payment or distribution of any type or nature to any shareholder of
Exchange Place in respect of its stock, whether in cash or property, and (ii) no
purchase or redemption of any share of the capital stock of Exchange Place; (d)
there has been no declaration, payment, or commitment for the payment, by
Exchange Place, of a bonus or other additional salary, compensation, or benefit
to any employee of Exchange Place that was not in the ordinary course of
business, except for normal year-end bonuses paid in the ordinary course of
business; (e) there has been no release, compromise, waiver or cancellation of
any debt to or claim by Exchange Place, or waiver of any right of Exchange
Place; (f) there have been no capital expenditures in excess of $10,000 for any
single item, or $25,000 in the aggregate; (g) there has been no change in
accounting methods or practices or revaluation of any asset of Exchange Place
(other than Exchange Place Accounts Receivable as defined in Section 4.26 hereof
written down in the ordinary course of business in excess of $10,000 for any
single Exchange Place Accounts Receivable, or $25,000 in the aggregate); (h)
there has been no material damage, or destruction to, or loss of, physical
property (whether or not covered by insurance) adversely affecting the Exchange
Place Business or the operations of Exchange Place; (i) there has been no loan
by Exchange Place, or guaranty by Exchange Place of any loan, to any employee of
Exchange Place; (j) Exchange Place has not ceased to transact business with any
customer that, as of the date of such cessation, represented more than 5% of the
annual gross revenues of Exchange Place; (k) there has been no termination or
resignation of any key employee or officer of Exchange Place, and to the
knowledge of Exchange Place, no such termination or resignation is threatened;
(l) there has been no amendment or termination of any material oral or written
contract, agreement or license related to the Exchange Place Business, to which
Exchange Place is a party or by which it is bound, except in the ordinary course
of business, or except as expressly contemplated hereby; (m) Exchange Place has
not failed to satisfy any of its debts, obligations or liabilities related to
the Exchange Place Business or the assets of Exchange Place as the same become
due and owing (except for Exchange Place Accounts Payable (as defined in Section
4.27 hereof) payable in accordance with past practices and in the ordinary
course of business); (n) there has been no agreement or commitment by Exchange
Place to do any of the foregoing; and (o) there has been no other event or
condition of any character pertaining to and materially and adversely affecting
the assets, business or financial condition of Exchange Place.
4.8 Undisclosed Liabilities. Except as set forth on Schedule 4.8 hereto,
------------
Exchange Place has no debt, liability or obligation of any kind, whether
accrued, absolute or otherwise, including any liability or obligation on account
of taxes or any governmental charge or penalty, interest or fine, except (a)
liabilities incurred in the ordinary course of business after June 30, 1998,
that would not, whether individually or in the aggregate, have a material
adverse impact on the business or financial condition of Exchange Place; (b)
liabilities reflected on the Exchange Place Financial Statements; and (c)
liabilities incurred as a result of the transactions contemplated hereby.
-7-
<PAGE>
4.9 Title to Properties. Except as set forth on Schedule 4.9 hereto,
------------
Exchange Place has good and marketable title to all tangible property and assets
used in the Exchange Place Business, and good and valid title to its leasehold
interests, in each case, free and clear of any and all Liens other than
Permitted Liens (as defined in Section 10.11 hereof).
4.10 Equipment. Exchange Place has heretofore furnished Parent with a true
and correct list of all items of tangible personal property (including computer
hardware) necessary for or used in the operation of the Exchange Place Business
in the manner in which it has been and is now operated by Exchange Place ("the
Exchange Place Equipment"), except for personal property having a net book value
of less than $1,000. Except as set forth on Schedule 4.10 hereto, each material
-------------
item of Exchange Place Equipment is in good condition and repair, ordinary wear
and tear excepted.
4.11 Intellectual Property.
(a) Exchange Place has heretofore furnished Parent with a true and
complete list of all material proprietary technology, patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights, and copyrights (and all pending applications for any of the
foregoing) used by Exchange Place in the conduct of the Exchange Place Business
(together with trade secrets and know how used in the conduct of the Exchange
Place Business, the "Exchange Place Intellectual Property Rights"). Exchange
Place owns, or is validly licensed or otherwise has the right to use or exploit,
as currently used or exploited, all of the Exchange Place Intellectual Property
Rights, free of any obligation to make any payment (whether of a royalty,
license fee, compensation or otherwise). No claims are pending or, to the
knowledge of Exchange Place, threatened, that Exchange Place is infringing or
otherwise adversely affecting the rights of any Person with regard to any
Exchange Place Intellectual Property Right. No Person is infringing the rights
of Exchange Place with respect to any Exchange Place Intellectual Property
Right. Neither Exchange Place nor any employee, agent or independent contractor
of Exchange Place, in connection with the performance of such Person's services
with Exchange Place, has used, appropriated or disclosed, directly or
indirectly, any trade secret or other proprietary or confidential information of
any other Person, or otherwise violated any confidential relationship with any
other Person.
(b) Exchange Place has heretofore furnished Parent with a true and
complete list of all material computer software used by Exchange Place in the
conduct of the Exchange Place Business (the "Exchange Place Software"). Exchange
Place currently licenses, or otherwise has the legal right to use, all of the
Exchange Place Software (including any upgrade, alteration or enhancement with
respect thereto), and all of the Exchange Place Software is being used in
compliance with any applicable license or other agreement.
-8-
<PAGE>
4.12 Real Property. Except as set forth on Schedule 4.12 hereto:
-------------
(a) Exchange Place has a good and valid leasehold interest in all real
property (including all buildings, improvements and fixtures thereon) used in
the operation of the Exchange Place Business (the "Exchange Place Real
Property"). Exchange Place owns no real property. Except for Permitted Liens,
and for the items set forth on Schedule 4.12, there are no Liens on Exchange
Place's interest in any of the Exchange Place Real Property. Schedule 4.12 lists
-------------
each county and state where any Exchange Place Real Property is located, or
where Exchange Place has ever leased or owned any real property.
(b) There are no parties in possession of any portion of the Exchange
Place Real Property other than Exchange Place, whether as sublessees, subtenants
at will or trespassers.
(c) To the knowledge of Exchange Place, there is no law, ordinance,
order, regulation or requirement now in existence or under active consideration
by any Governmental Entity, that would require, under the provisions of any of
the Exchange Place Leases (as hereinafter defined), any material expenditure by
Exchange Place to modify or improve any of the Exchange Place Real Property to
bring it into compliance therewith.
4.13 Leases. Except as set forth on Schedule 4.13 hereto, Exchange Place has
-------------
furnished Parent with true and complete copies of all leases pursuant to which
Exchange Place leases, as lessor or lessee, real or personal property used in
operating the Exchange Place Business or otherwise (the "Exchange Place
Leases"). All of the Exchange Place Leases are valid, binding and enforceable
against Exchange Place and, to the knowledge of Exchange Place, against the
other parties thereto, in accordance with their respective terms, and there is
not under any such Exchange Place Lease any existing default by Exchange Place,
or, to the knowledge of Exchange Place, by any other party thereto, or any
condition or event that, with notice or lapse of time or both, would constitute
a default. Exchange Place has not received notice that the lessor of any of the
Exchange Place Leases intends to cancel, suspend or terminate such Exchange
Place Lease or to exercise or not exercise any option thereunder.
4.14 Contracts. Except as set forth on Schedule 4.14 hereto, Exchange Place
-------------
has furnished Parent with true and complete copies of all contracts, agreements
and commitments (whether written or oral) to which Exchange Place is, directly
or indirectly, a party (in its own name or as a successor in interest), or by
which it or any of its properties or assets is otherwise bound, including any
service agreements, customer agreements, supplier agreements, agreements to lend
or borrow money, shareholder agreements, employment agreements, agreements
relating to Exchange Place Intellectual Property Rights and the like
(collectively, the "Exchange Place Contracts"); excepting only those Exchange
Place Contracts which involve less than $10,000 and are cancelable, without
penalty, on no more than 90 days' notice. The aggregate value of all payment
obligations and rights to receive payments, under agreements, contracts and
commitments (whether oral or in writing) to which Exchange Place is a party or
by which it or any of its properties or assets is otherwise bound, and that are
not listed on Schedule 4.14, is less than $50,000 (calculating such value by
-------------
adding together the value of rights and obligations, and not by determining the
net amount thereof).
-9-
<PAGE>
Neither Exchange Place nor, to the knowledge of Exchange Place, any other
party to any of the Exchange Place Contracts (x) is in default under (nor does
there exist any condition that, with notice or lapse of time or both, would
cause such a default under) any of the Exchange Place Contracts, or (y) has
waived any right it may have under any of the Exchange Place Contracts, the
waiver of which would have a material adverse effect on the business, assets or
financial condition or prospects of Exchange Place. All of the Exchange Place
Contracts constitute the valid and binding obligations of Exchange Place,
enforceable in accordance with their respective terms, and, to the knowledge of
Exchange Place, of the other parties thereto.
4.15 Directors and Officers. Schedule 4.15 hereto sets forth a list, as of
-------------
the Closing Date, of the name of each director and officer of Exchange Place and
the position(s) held by each.
4.16 Payroll Information. Exchange Place has paid all compensation,
including bonuses and other extraordinary compensation, required to be paid to
employees of Exchange Place on or prior to the date hereof other than
compensation accrued in the current pay period.
4.17 Litigation. Except as set forth on Schedule 4.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Exchange Place, threatened against or affecting Exchange Place or the Exchange
Place Business, nor is there any judgment, decree, injunction or order of any
applicable Governmental Entity or arbitrator outstanding against Exchange Place.
4.18 Employee Benefit Plans/Labor Relations.
(a) Except as disclosed in Schedule 4.18 hereto, there are no employee
-------------
benefit plans, agreements or arrangements maintained by Exchange Place,
including (i) "employee benefit plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (ii)
current or deferred compensation, pension, profit sharing, vacation or severance
plans or programs; or (iii) medical, hospital, accident, disability or death
benefit plans (collectively, "Exchange Place Benefit Plans"). All Exchange Place
Benefit Plans are administered in accordance with, and are in material
compliance with, all applicable laws and regulations. No default exists with
respect to the obligations of Exchange Place under any Exchange Place Benefit
Plan.
(b) Exchange Place is not a party to any collective bargaining agreement;
no collective bargaining agent has been certified as a representative of any of
the employees of Exchange Place; no representation campaign or election is now
in progress with respect to any employee of Exchange Place; and there are no
labor disputes, grievances, controversies, strikes or requests for union
representation pending, or, to the knowledge of Exchange Place, threatened,
relating to or affecting the Exchange Place Business. To the knowledge of
Exchange Place, no event has occurred that could give rise to any such dispute,
controversy, strike or request for representation.
-10-
<PAGE>
4.19 ERISA.
(a) All Exchange Place Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the Exchange Place Benefit Plans that is
intended to meet the requirements of Section 401(a) of the Code has been
determined by the Internal Revenue Service to meet such requirements within the
meaning of such provision. No Exchange Place Benefit Plan is subject to Title IV
of ERISA or Section 412 of the Code. Exchange Place has not engaged in any
nonexempt "prohibited transactions," as such term is defined in Section 4975 of
the Code or Section 406 of ERISA, involving Exchange Place Benefit Plans that
would subject Exchange Place to the penalty or tax imposed under Section 502(i)
of ERISA or Section 4975 of the Code. Exchange Place has not engaged in any
transaction described in Section 4069 of ERISA within the last five years.
Except as disclosed in Schedule 4.19 hereto or pursuant to the terms of the
Exchange Place Benefit Plans, neither the execution and delivery hereof nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation or golden parachute)
becoming due to any director or other employee of Exchange Place, (ii) increase
any benefit otherwise payable under any Exchange Place Benefit Plan or (iii)
result in the acceleration of the time of payment or vesting of any such benefit
to any extent.
(b) No notice of a "reportable event," within the meaning of Section 4043
of ERISA, for which the 30-day reporting requirement has not been waived, has
been required to be filed for any Exchange Place Benefit Plan that is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA and
that is intended to meet the requirements of Section 401(a) of the Code, or by
any entity that is considered one employer with Exchange Place under Section
4001 of ERISA or Section 414 of the Code, within the 12-month period ending on
the Closing Date. Exchange Place has not incurred any liability to the Pension
Benefit Guaranty Corporation in respect of any Exchange Place Benefit Plan that
remains unpaid.
4.20 Taxes.
(a) Exchange Place has duly and timely filed all federal, state and local
income, franchise, excise, real and personal property and other tax returns and
reports, including extensions, required to have been filed by Exchange Place on
or prior to the Closing Date. Exchange Place has duly and timely paid all taxes
and other governmental charges, and all interest and penalties with respect
thereto, required to be paid by Exchange Place (whether by way of withholding or
otherwise) to any federal, state, local or other taxing authority (except to the
extent the same are being contested in good faith, and adequate reserves
therefor have been provided in the Exchange Place Financial Statements). As of
the Closing Date, all deficiencies proposed as a result of any audit have been
paid or settled.
(b) Exchange Place is not a party to, or bound by, or otherwise in any
way obligated under, any tax sharing or similar agreement.
(c) Exchange Place has not consented to have the provisions of Section
341(f)(2) of the Code (or comparable state law provisions) apply to it, and
Exchange Place has not
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agreed or been requested to make any adjustment under Section 481(c) of the Code
by reason of a change in accounting method or otherwise.
4.21 Compliance with Applicable Laws. Exchange Place holds all material
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Exchange Place, as appropriate, and to carry on the Exchange Place
Business as now conducted (the "Exchange Place Permits"). To the knowledge of
Exchange Place, Exchange Place is in material compliance with all applicable
laws, ordinances and regulations and the terms of the Exchange Place Permits.
Except as set forth on Schedule 4.21 hereto, all of the Exchange Place Permits
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are fully assignable by Exchange Place in connection with the Merger.
4.22 Board of Directors/Shareholder Consent. Both the Board of Directors of
Exchange Place and the Exchange Place Shareholder have adopted and approved this
Agreement and the transactions contemplated hereby (including the Merger).
4.23 Brokers. Except as set forth on Schedule 4.23 hereto, no broker or
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finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of Exchange Place.
4.24 Environmental Matters.
(a) To the knowledge of Exchange Place, no real property currently or
formerly owned or operated by Exchange Place is contaminated with any Hazardous
Substance (as hereinafter defined).
(b) Exchange Place is not a party to any litigation or administrative
proceeding nor, to the knowledge of Exchange Place, is any litigation or
administrative proceeding threatened against it, that, in either case, asserts
or alleges that Exchange Place (i) violated any Environmental Law (as
hereinafter defined); (ii) is required to clean up, remove or take remedial or
other responsive action due to the disposal, deposit, discharge, leak or other
release of any Hazardous Substance; or (iii) is required to pay all or a portion
of the cost of any past, present or future cleanup, removal or remedial or other
action that arises out of or is related to the disposal, deposit, discharge,
leak or other release of any Hazardous Substance.
(c) To the knowledge of Exchange Place, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by Exchange Place containing materials that, if
known to be present in soil or ground water, would require cleanup, removal or
other remedial action under Environmental Law.
(d) To the knowledge of Exchange Place, Exchange Place is not subject to
any judgment, order or citation related to or arising out of any Environmental
Law and has not been named or listed as a potentially responsible party by any
Governmental Entity in a matter related to or arising out of any Environmental
Law.
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(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including any petroleum products, asbestos or polychlorinated biphenyls.
4.25 Interest in Customers, Suppliers and Competitors. Except as provided
in Schedule 4.25 hereto, no officer, director, shareholder or employee of
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Exchange Place and no family member (including a spouse, parent, sibling or
lineal descendent of any of the foregoing), has any direct or indirect material
interest in any material customer, supplier or competitor of Exchange Place, or
in any Person from whom or to whom Exchange Place leases any real or personal
property, or in any other Person with whom Exchange Place is doing business
whether directly or indirectly (including as a debtor or creditor), whether in
existence as of the Closing Date or proposed, other than the ownership of stock
of publicly traded corporations.
4.26 Accounts Receivable. All accounts, notes, contracts and other
receivables of Exchange Place (collectively, "Exchange Place Accounts
Receivable") were acquired by Exchange Place in the ordinary course of business
arising from bona fide transactions. There are no set-offs, counterclaims or
disputes asserted with respect to any Exchange Place Accounts Receivable that
would result in claims in excess of the reserve for bad debts set forth on the
Exchange Place Financial Statements and, to the knowledge of Exchange Place and
subject to such reserve, all Exchange Place Accounts Receivable are collectible
in full.
4.27 Accounts Payable. All material accounts, notes, contracts and other
amounts payable of Exchange Place (collectively, "Exchange Place Accounts
Payable") are currently within their respective terms, and are neither in
default nor otherwise past due by more than 90 days.
4.28 Insurance. Exchange Place currently maintains, in full force and
effect, all insurance policies that are required to be maintained for the
conduct of the Exchange Place Business or the ownership of Exchange Place's
property (both real and personal) (collectively, the "Exchange Place Insurance
Policies"). Exchange Place (a) is not in default regarding the provisions of
any Exchange Place Insurance Policy; (b) has paid all premiums due thereunder;
and (c) has not failed to present any notice or material claim thereunder in a
due and timely fashion.
4.29 Bankruptcy. Exchange Place has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 Exchange Place Debt. As of the date hereof, the Exchange Place Debt is
$0.
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4.31 Accredited Investor; Investment Purpose. The Exchange Place Shareholder
represents that he (a) is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"); (b) is
acquiring the Parent Stock solely for his own account for investment and not
with a view to, or for sale in connection with, any distribution thereof; and
(c) will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate
or otherwise dispose of any Parent Stock (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of any such shares) except in compliance
with the Securities Act and the rules and regulations thereunder, other
applicable laws, rules and regulations, and the Second Amended and Restated
Stockholders' Agreement of Parent, dated December 17, 1997 (the "Stockholders'
Agreement).
4.32 Restrictions on Transfer. The Exchange Place Shareholder acknowledges
that (a) the Parent Stock received by him hereunder has not been registered
under the Securities Act; (b) the Parent Stock may be required to be held
indefinitely, and he must continue to bear the economic risk of the investment
in such shares unless such shares are subsequently registered under the
Securities Act or an exemption from such registration is available; (c) there
may not be any public market for the Parent Stock in the foreseeable future; (d)
Rule 144 promulgated under the Securities Act is not presently available with
respect to sales of any securities of Parent, and such Rule is not anticipated
to be available in the foreseeable future; (e) when and if Parent Stock may be
disposed of without registration in reliance upon Rule 144, such disposition can
be made only in limited amounts and in accordance with the terms and conditions
of such Rule; (f) if the exemption afforded by Rule 144 is not available, public
sale without registration will require the availability of an exemption under
the Securities Act; (g) the Parent Stock is subject to the terms and conditions
of the Stockholders' Agreement; (h) restrictive legends shall be placed on the
certificates representing Parent Stock; and (i) a notation shall be made in the
appropriate records of Parent indicating that Parent Stock is subject to
restrictions on transfer and, if Parent should in the future engage the services
of a stock transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to Parent Stock.
4.33 Ability to Bear Risk; Access to Information; Sophistication. The
Exchange Place Shareholder represents and warrants that (a) his financial
situation is such that he can afford to bear the economic risk of holding Parent
Stock acquired by him hereunder for an indefinite period; (b) he can afford to
suffer the complete loss of such Parent Stock; (c) he has been granted the
opportunity to ask questions of, and receive answers from, representatives of
Parent concerning the terms and conditions of the Parent Stock and to obtain any
additional information that he deems necessary; (d) his knowledge and experience
in financial business matters is such that he is capable of evaluating the
merits and risk of ownership of the Parent Stock; (e) he has carefully reviewed
the terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; and (f) he (i) has reviewed the Private Placement
Memorandum of Parent dated September 8, 1998 (the "Memorandum"), (ii) has
-----------
carefully examined the Memorandum and has had an opportunity to ask questions
of, and receive answers from, representatives of Parent, and to obtain
additional information concerning Parent and its Subsidiaries (as hereinafter
defined), and (iii) does not require additional information regarding Parent or
its Subsidiaries in connection with the Merger.
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4.34 Disclosure. No statement of fact by Exchange Place or the Exchange
Place Shareholder contained herein and no written statement of fact furnished by
Exchange Place or the Exchange Place Shareholder to Parent or Sub in connection
herewith contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein
contained not misleading.
4.35 Nature of Liabilities. Any unpaid legal, accounting or other fees of
Exchange Place are solely and directly related to the Merger.
4.36 Exchange Place Business. None of the services previously, currently or
to be performed by the Exchange Place Business, and none of its customer
relationships, conflicts with or breaches any agreement or understanding, oral
or written, between any Person and the Exchange Place Shareholder, including the
use of customer lists or customer contacts, solicitation of employees or
customers, trade secrets, or any confidential information to which the Exchange
Place Shareholder may have had access during his previous employment.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to
Exchange Place and the Exchange Place Shareholder, which representations and
warranties shall survive the Closing in accordance with Section 10.1 hereof, as
follows:
5.1 Organization and Qualification. Each of Parent and its Subsidiaries (as
defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached, respectively, to a closing
certificate and incumbency certificate, substantially in the form of Exhibit "C"
-----------
hereto ("Parent's Closing Certificate"), and to Sub's Closing Certificate.
5.2 Authority. Each of Parent and Sub has the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by Exchange Place and the Exchange Place
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Shareholder, constitutes the valid and binding obligation of each of Parent and
Sub, enforceable against each of Parent and Sub in accordance with its terms,
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
5.3 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or Bylaws
of Parent or Sub, or the organizational documents of any other Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for (x)
compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL and the
GBCC); or (ii) any other Person.
5.4 Litigation. Except as set forth on Schedule 5.4 hereto, there is no
------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 Brokers. Except as disclosed on Schedule 5.5 hereto, no broker or finder
------------
is entitled to any broker's or finder's fee in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Parent or
Sub.
5.6 Parent Stock.
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(a) As of the date hereof the authorized capital stock of Parent consists
of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value, of which
no shares are validly issued and outstanding, and (B) 100,000,000 shares of
Class B Common Stock, $.01 par value, of which 13,778,489 shares are validly
issued and outstanding (without taking into account any shares of Parent Stock
to be issued pursuant hereto), fully paid and nonassessable; (ii) 750,000 shares
of blank check preferred stock, (A) 250,000 of which have been designated as
Class A Convertible Preferred Stock, of which 176,291 shares are validly issued
and outstanding, fully paid and nonassessable, (B) 200,000 of which have been
designated as Class B Convertible Preferred Stock, of which 98,767 shares are
validly issued and outstanding, fully paid and nonassessable, (C) 15,000 of
which have been designated as Class C Convertible Preferred Stock, of which
9,232 shares are validly issued and outstanding, fully paid and nonassessable
and (D) 50,000 of which have been designated as Class D Nonvoting Preferred
Stock, of which 35,700 shares are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 5.6 hereto, there are no options,
warrants, calls, agreements, commitments or other rights presently outstanding
that would obligate Parent to issue, deliver or sell shares of its capital
stock, or to grant, extend or enter into any such option, warrant, call,
agreement, commitment or other right. In addition to the foregoing, as of the
Closing Date, Parent has no bonds, debentures, notes or other indebtedness
issued or outstanding that have voting rights in Parent.
(b) When delivered to the Exchange Place Shareholder in accordance with
the terms hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
5.7 Subsidiaries. Except as set forth on Schedule 5.7 hereto, Parent has no
------------
subsidiaries and does not otherwise own or control, directly or indirectly, any
equity interest in, or any security convertible into an equity interest in, any
Entity. Schedule 5.7 lists the name of each of the Subsidiaries of Parent, and
------------
indicates their respective jurisdictions of incorporation.
5.8 Financial Statements. Parent has heretofore furnished Exchange Place
with a true and complete copy of (a) the audited financial statements of iXL
Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31,
1993, 1994 and 1995, and for the four month period ended April 30, 1996; (b) the
audited combined financial statements for Creative Video, Inc. (n/k/a iXL,
Inc.), Creative Video Library, Inc. and Entrepreneur Television, Inc. for the
years ended December 31, 1993, 1994 and 1995, and for the four month period
ended April 30, 1996; (c) the audited consolidated financial statements for
Parent and its Subsidiaries for the eight months ended December 31, 1996 and for
the year ended December 31, 1997; and (d) the unaudited consolidated financial
statements for Parent and its Subsidiaries for the six month period ended June
30, 1998 (all of the foregoing, collectively, "Parent Financial Statements").
The Parent Financial Statements present fairly in all material respects the
consolidated financial position, results of operations, shareholders' equity and
cash flow of Parent at the respective dates or for the respective periods to
which they apply. Except as disclosed therein, such statements and related
notes have been prepared in accordance with GAAP consistently applied throughout
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the periods involved (except, in the case of the unaudited financial statements,
for the exclusion of footnotes and normal year-end adjustments).
5.9 Undisclosed Liabilities. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalties,
interest or fines, except (a) liabilities incurred in the ordinary course of
business after June 30, 1998 that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Parent and its Subsidiaries, taken as a whole; (b) liabilities reflected on
the Parent Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
5.10 Compliance with Applicable Laws. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
5.11 Board of Directors/Shareholder Consent. The board of directors of
Parent, and both the board of directors and shareholder of Sub, have, by
unanimous written consent or other action, adopted and approved this Agreement
and the transactions contemplated hereby (including the Merger).
5.12 Bankruptcy. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 Absence of Changes. Except as provided in Schedule 5.13 hereto, since
-------------
June 30, 1998, there has not been (a) any transaction, commitment, dispute or
other event or condition (financial or otherwise) of any character (whether or
not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
material change in Parent's accounting principles, practices or methods; (f) any
split,
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combination or reclassification of any of Parent's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Parent's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
5.14 Taxes. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent
and its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the Closing Date,
all deficiencies proposed as a result of any audits have been paid or settled.
5.15 Disclosure. No statement of fact by Parent or Sub contained herein and
no written statement of fact furnished or to be furnished by Parent or Sub to
Exchange Place in connection herewith contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements herein or therein contained not
misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Conduct of Business by Exchange Place Pending the Merger. From and after
the date hereof, prior to the Effective Time, except as contemplated hereby,
unless Parent shall otherwise agree in writing, Exchange Place shall carry on
its business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, use reasonable efforts to preserve intact its
present business organization, keep available the services of its employees and
preserve its relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with Exchange Place to the end
that its goodwill and on-going businesses shall not be impaired in any material
respect at the Effective Time. Without limiting the generality of the
foregoing, and except as contemplated hereby, unless Parent shall otherwise
agree in writing, prior to the Effective Time, Exchange Place shall not,
directly or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire, any share of
capital stock of Exchange Place or any other equity security thereof or any
right, warrant, or option to acquire any such share or other security;
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(b) issue, deliver, sell, pledge or otherwise encumber any share of its
capital stock, any other voting security issued by Exchange Place or any
security convertible into, or any right, warrant or option to acquire any such
share or voting security;
(c) amend its Articles of Incorporation, Bylaws or other comparable
organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to Exchange Place;
(e) subject to a Lien or sell, lease or otherwise dispose of any of its
properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of Exchange
Place, guarantee any debt security of another Person or enter into any "keep
well" or other agreement to maintain the financial condition of another Person,
make any loan, advance or capital contribution to, or investment in, any other
Person, or settle or compromise any material claim or litigation; or
(g) authorize any of, or commit or agree to take any of, the foregoing
actions.
6.2 Access to Information. From the date hereof through the Effective Time,
Exchange Place shall afford to Parent and Parent's accountants, counsel and
other representatives reasonable access during normal business hours (and at
such other times as the parties may mutually agree) upon reasonable prior notice
and approval of Exchange Place, which shall not be unreasonably withheld, to its
properties, books, contracts, commitments, records and personnel and, during
such period, shall furnish promptly to Parent all information concerning its
business, properties and personnel as Parent may reasonably request. Parent and
its accountants, counsel and other representatives shall, in the exercise of the
rights described in this Section 6.2, not unduly interfere with the operation of
the business of Exchange Place.
6.3 Filings; Tax Elections. Exchange Place shall promptly provide Parent
with copies of all filings made by Exchange Place with any Governmental Entity
in connection herewith and the transactions contemplated hereby. Exchange Place
shall, before settling or compromising any material income tax liability of
Exchange Place, consult with Parent and its advisors as to the positions and
elections that will be taken or made with respect to such matter.
6.4 Public Announcements. The parties agree that, except as may otherwise be
required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger. Any such disclosure shall be coordinated by Parent,
and the Exchange Place Shareholder shall not make any such disclosure without
the prior written consent of Parent.
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6.5 Transfer and Gains Taxes and Certain Other Taxes and Expenses. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 Further Assurances. From time to time after the Effective Time, upon the
reasonable request of any party hereto, the other party or parties hereto shall
execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligation of Exchange Place and the Exchange Place
Shareholder to Effect the Merger. The obligations of Exchange Place and the
Exchange Place Shareholder to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions:
(a) Parent and Sub shall have performed in all material respects their
respective agreements contained herein required to be performed at or prior to
the Effective Time, and the representations and warranties of Parent and Sub
contained herein shall be true when made and (except for representations and
warranties made as of a specified date, which need only be true as of such date)
at and as of the Effective Time as if made at and as of such time, except as
contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to Exchange Place at the Closing, Parent's Closing Certificate, and
(ii) the appropriate officers of Sub shall have executed and delivered to
Exchange Place at the Closing, Sub's Closing Certificate;
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
- ---------------
(d) Exchange Place shall have received corporate certificates of good
standing for Parent and Sub, and a copy of the Certificate of Incorporation for
Parent and Sub, respectively, both as certified by the Secretary of State of
Delaware; and
(e) there shall have been delivered to the Exchange Place Shareholder at
the Closing, duly executed by Parent, an Agreement to be Bound to the
Registration Rights Agreement of Parent, dated as of Closing Date (the
"Agreement to be Bound to the Registration Rights Agreement"), in the form of
Exhibit "D" hereto.
- -----------
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<PAGE>
7.2 Conditions to Obligations of Parent and Sub to Effect the Merger. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) Exchange Place and the Exchange Place Shareholder shall have
performed in all material respects their respective agreements contained herein
required to be performed at or prior to the Effective Time, and the
representations and warranties of Exchange Place and the Exchange Place
Shareholder contained herein shall be true when made and (except for
representations and warranties made as of a specified date, which need only be
true as of such date) at and as of the Effective Time as if made at and as of
such time, except as contemplated hereby;
(b) the appropriate officers of Exchange Place shall have executed and
delivered to Parent at the Closing, Exchange Place's Closing Certificate;
(c) Exchange Place and the Exchange Place Shareholder shall have obtained
or caused to be obtained all of the Consents, if any, listed on Schedule 7.2(c)
--------------
hereto;
(d) there shall have been delivered to Parent at the Closing, duly
executed by the Exchange Place Shareholder, (i) an Agreement to be Bound to the
Stockholders' Agreement, in the form of Exhibit "E" hereto, substantially in the
-----------
form attached thereto; and (ii) an Agreement to be Bound to the Registration
Rights Agreement;
(e) Parent shall have received a corporate certificate of existence for
Exchange Place, as certified by the Secretary of State of Georgia, and a copy of
the Articles of Incorporation of Exchange Place;
(f) as of the date three business days prior to the Closing Date the
Exchange Place Debt shall be no greater than $0;
(g) Parent shall have received from Exchange Place or the Exchange Place
Shareholder, as the case may be, such other documents as Parent's counsel shall
have reasonably requested, in form and substance reasonably satisfactory to
Parent's counsel; and
(h) Parent shall have received evidence satisfactory to it that at the
Closing the assets and properties used in the Exchange Place Business are free
and clear of all Liens other than Permitted Liens (as hereinafter defined), and
that the Exchange Place Shareholder is an accredited investor in accordance with
Section 4.31 hereof.
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<PAGE>
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Parent.
(a) Parent shall indemnify and hold the Exchange Place Shareholder and
Exchange Place's directors, officers and employees (collectively, the "Exchange
Place Indemnified Parties") harmless from and against, and agree promptly to
defend each of the Exchange Place Indemnified Parties from and reimburse each of
the Exchange Place Indemnified Parties for, any and all losses, damages, costs,
expenses, liabilities, obligations and claims of any kind (including reasonable
attorney fees and other legal costs and expenses) (collectively, a "Exchange
Place Loss") that any of the Exchange Place Indemnified Parties may at any time
suffer or incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Parent or Sub at the Closing in accordance
with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform, satisfy and
discharge any of its respective covenants, agreements, undertakings, liabilities
or obligations hereunder or under any of the documents and materials delivered
by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary, Parent
shall not have any liability under Section 8.1(a)(i) above (i) unless the
aggregate of all Exchange Place Losses for which Parent would be liable but for
this sentence exceeds, on a cumulative basis, an amount equal to $50,000, and
then only to the extent of such excess, (ii) for amounts in excess of $2,750,000
in the aggregate, and (iii) unless the Exchange Place Shareholder has asserted a
claim with respect to the matters set forth in Section 8.1(a)(i), or 8.1(a)(iii)
to the extent applicable to Section 8.1(a)(i), within two years of the Effective
Time. Notwithstanding any implication to the contrary contained herein, the
parties acknowledge and agree that a decrease in the value of Parent Stock would
not, by itself, constitute a Exchange Place Loss, unless and to the extent a
decrease in the value of Parent Stock has been demonstrated to be as a result of
any event described in Sections 8.1(a)(i), (ii) or (iii) above.
8.2 Indemnification by the Exchange Place Shareholder.
(a) The Exchange Place Shareholder shall indemnify and hold Parent, Sub,
Surviving Corporation and their respective shareholders, directors, officers and
employees (collectively, the "Parent Indemnified Parties") harmless from and
against, and agree to defend promptly each of the Parent Indemnified Parties
from and reimburse each of the Parent Indemnified
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<PAGE>
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorneys' fees and
other legal costs and expenses) (collectively, a "Parent Loss") that any of the
Parent Indemnified Parties may at any time suffer or incur, or become subject
to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Exchange Place or the Exchange Place Shareholder in or
pursuant hereto, or in any instrument certificate or affidavit delivered by any
of the same at the Closing in accordance with the provisions hereof;
(ii) any failure by Exchange Place or the Exchange Place Shareholder
to carry out, perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations hereunder or under any of
the documents and materials delivered by Exchange Place pursuant hereto; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above, the Exchange Place Shareholder shall
not have any liability under Section 8.2(a)(i) above (i) unless the aggregate of
all Parent Losses for which the Exchange Place Shareholder would be liable but
for this sentence exceeds, on a cumulative basis, an amount equal to $50,000,
and then only to the extent of such excess, (ii) for amounts in excess of
$2,750,000 in the aggregate, and (iii) unless Parent has asserted a claim with
respect to the matters set forth in Sections 8.2(a)(i), or 8.2(a)(iii) to the
extent applicable to Section 8.2(a)(i) within two years of the Effective Time,
except with respect to the matters arising under Sections 4.18, 4.19, 4.20 or
4.24 hereof, in which event Parent must have asserted a claim within the
applicable statute of limitations. Notwithstanding any implication to the
contrary contained herein, the parties acknowledge and agree that a decrease in
the value of Parent Stock would not, by itself, constitute a Parent Loss, unless
and to the extent a decrease in the value of Parent Stock has been demonstrated
to be as a result of any event described in Sections 8.2(a)(i), (ii) or (iii)
above.
8.3 Notification of Claims; Election to Defend
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder. Subject to the
Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
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<PAGE>
(b) If the Indemnified Party shall notify the Indemnifying Party of any
Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a Claim
asserted by a third party against the Indemnified Party that the Indemnifying
Party acknowledges is a Claim for which it must indemnify or hold harmless the
Indemnified Party under Section 8.1 or 8.2 hereof, as the case may be, the
Indemnifying Party shall have the right, at its sole cost and expense, to employ
counsel of its own choosing to defend any such Claim asserted against the
Indemnified Party. Notwithstanding anything to the contrary in the preceding
sentence, if the Indemnified Party (i) reasonably believes that its interests
with respect to a Claim (or any material portion thereof) are in conflict with
the interests of the Indemnifying Party with respect to such Claim (or portion
thereof), and (ii) promptly notifies the Indemnifying Party, in writing, of the
nature of such conflict, then the Indemnified Party shall be entitled to choose,
at the sole cost and expense of the Indemnifying Party, independent counsel to
defend such Claim (or the conflicting portion thereof). The Indemnified Party
shall have the right to participate in the defense of any Claim at its own
expense (except to the extent provided in the preceding sentence), but the
Indemnifying Party shall retain control over such litigation (except as provided
in the preceding sentence). The Indemnifying Party shall notify the Indemnified
Party in writing, as promptly as possible (but in any case before the due date
for the answer or response to a Claim) after receipt of the notice of Claim
given by the Indemnified Party to the Indemnifying Party under Section 8.3(a)
hereof, of its election to defend in good faith any such third party Claim. For
so long as the Indemnifying Party is defending in good faith any such Claim
asserted by a third party against the Indemnified Party, the Indemnified Party
shall not settle or compromise such Claim without the prior written consent of
the Indemnifying Party. The Indemnified Party shall cooperate with the
Indemnifying Party in connection with any such defense and shall make available
to the Indemnifying Party or its agents all records and other materials in the
Indemnified Party's possession reasonably required by it for its use in
contesting any third party Claim; provided, however, that the Indemnifying Party
shall have agreed, in writing, to keep such records and other materials
confidential except (i) to the extent required for defense of the relevant
Claim, or (ii) as required by law or court order. Whether or not the
Indemnifying Party elects to defend any such Claim, the Indemnified Party shall
have no obligations to do so. Within 30 days after a final determination
(including a settlement) has been reached with respect to any Claim contested
pursuant to this Section 8.3(b), the Indemnifying Party shall satisfy its
obligations hereunder with respect thereto. Any amount paid thereafter shall
include interest thereon for the period commencing at the end of such 30-day
period and ending on the actual date of payment, at a rate of 15% per annum, or,
if lower, at the highest rate of interest permitted by applicable law at the
time of such payment.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Merger Agreement may be terminated at any time prior
to the Effective Time:
(a) by mutual written consent of Parent and Exchange Place;
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<PAGE>
(b) by Exchange Place, upon a material breach hereof on the part of
Parent or Sub which has not been cured and which would cause any condition set
forth in Section 7.1 hereof to be incapable of being satisfied by September 15,
1998;
(c) by Parent, upon a material breach hereof on the part of Exchange
Place or the Exchange Place Shareholder which has not been cured and which would
cause any condition set forth in Section 7.2 hereof to be incapable of being
satisfied by September 15, 1998;
(d) by Parent or Exchange Place if any court of competent jurisdiction
shall have issued, enacted, entered, promulgated or enforced any order,
judgment, decree, injunction or ruling which restrains, enjoins or otherwise
prohibits the Merger and such order, judgment, decree, injunction or ruling
shall have become final and nonappealable; or
(e) by either Parent or Exchange Place if the Merger shall not have been
consummated on or before September 15, 1998 (provided the terminating party is
not otherwise in material breach of its representations, warranties or
obligations hereunder).
9.2 Fees and Expenses.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the Surviving Corporation; provided, however, that the Exchange Place
Shareholder shall pay all fees and expenses (including agents, counsel and other
advisors) of Exchange Place and himself.
(b) If the Merger is not consummated for a reason other than the willful
and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
(c) If the Merger is not consummated because of a willful and material
breach hereof by any party, the nonbreaching party or parties shall be entitled
to pursue all legal and equitable remedies against the breaching party for such
breach including specific performance and all fees and expenses incurred by the
nonbreaching party or parties in connection with enforcing its or their rights
hereunder with respect to such breach shall be paid by the breaching party.
9.3 Amendment. This Merger Agreement may be amended by Parent, Sub, Exchange
Place and the Exchange Place Shareholder at any time before or after approval
hereof by the Exchange Place Shareholder, but, after such approval, no amendment
shall be made which (i) changes the form or decreases the amount of the
consideration to be received in the Merger, (ii) in any way materially adversely
affects the rights of the Exchange Place Shareholder, or (iii) under applicable
law would require approval of the Exchange Place Shareholder, in any such case
referred to in clauses (i), (ii) and (iii), without the further approval of the
Exchange Place Shareholder. This Agreement may not be amended except by an
instrument in writing signed on behalf of the parties hereto, provided that
after the Effective Time, any such amendment must be signed by the Exchange
Place Shareholder.
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<PAGE>
9.4 Waiver. At any time prior to the Effective Time, the parties hereto may,
to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival; Recourse. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 10.9 and 10.10 hereof, shall survive the
Merger indefinitely (except to the extent a shorter period of time is explicitly
specified therein) and (ii) the representations and warranties made in Articles
IV and V hereof shall survive the Merger, and shall survive any independent
investigation by the parties, and any dissolution, merger or consolidation of
Exchange Place or Parent, and shall bind the legal representatives, assigns and
successors of Exchange Place, the Exchange Place Shareholder and Parent, for a
period of two years after the Effective Time (other than the representations and
warranties contained in Sections 4.18, 4.19, 4.20 and 4.24 hereof, which shall
survive for the applicable statute of limitations).
10.2 Notices. All notices or other communications under this Agreement shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in Person, by telecopy (with confirmation of receipt),
or by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Exchange Place : Exchange Place Solutions, Inc.
2690 Dellwood Drive
Atlanta, GA 30305
Attention: Ashish Bahl, President
Telephone: 404/351-7736
If to the Exchange Place To the address listed under the signature
Shareholder: line of the Exchange Place Shareholder
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<PAGE>
If to Parent or Sub: IXL Holdings, Inc.
1888 Emery St., 2nd Floor
Atlanta, GA 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Rd., Ste. 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Ave., 24th Floor
New York, NY 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 Entire Agreement. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, except for the non-disclosure letter agreement between Parent and
Exchange Place dated as of June 10, 1998. There are no other representations or
warranties, whether written or oral, between the parties in connection the
subject matter hereof, except as expressly set forth herein.
10.4 Assignments; Parties in Interest. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the rights, interests, and obligations
of Sub hereunder may be assigned to any direct wholly owned Delaware subsidiary
of Parent without such prior consent. Subject to the preceding sentence, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing herein, express or implied, is intended to or shall confer
upon any Person not a party hereto any right, benefit or remedy of any nature
whatsoever under or by reason hereof, except as otherwise provided herein.
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<PAGE>
10.5 Governing Law. This Agreement, except to the extent that the DGCL is
mandatorily applicable to the Merger, or to the rights of the Exchange Place
Shareholder or the other parties hereto with respect to the Merger, shall be
governed in all respects by the laws of the State of Georgia (without giving
effect to the provisions thereof relating to conflicts of law).
10.6 Headings. The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation hereof.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 Severability. If any term or other provision hereof is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions hereof shall nevertheless remain in full force and
effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.9 Post-Closing Access. For a period of three years after the Closing
Date, the Exchange Place Shareholder and his agents and representatives shall
have reasonable access to the books and records of the Exchange Place Business.
10.10 Post-Closing Notice. To the extent the Surviving Corporation receives
written notice of any event or circumstance that materially affects the Exchange
Place Shareholder, the Surviving Corporation shall promptly notify the Exchange
Place Shareholder of such matter, information, or event and shall provide them
with copies of all relevant documentation or correspondence in connection
thereto.
10.11 Certain Definitions. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the Exchange
Place Real Property or interfering with the ordinary conduct of any of the
Exchange Place Business; and (e) those Liens listed on Schedule 10.11 hereto;
--------------
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<PAGE>
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of Exchange Place" shall refer to the
knowledge, subject to clause (i) above, of the Exchange Place Shareholder; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of which are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including Sub); provided, however, that
with respect to the Parent, the terms "Subsidiary" and "Subsidiaries" shall not
include Exchange Place or University Netcasting, Inc.
- SIGNATURES ON THE FOLLOWING PAGE -
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<PAGE>
IN WITNESS WHEREOF, Parent, Sub and Exchange Place have caused this
Agreement to be signed and delivered by their respective duly authorized
officers, and the Exchange Place Shareholder has signed and delivered this
Agreement, all as of the date first written above.
"Exchange Place"
Exchange Place Solutions, Inc., a Georgia corporation
By: /s/ Ashish Bahl
---------------------------------------
Title: President
"Parent"
IXL Holdings, Inc., a Delaware corporation
By: /s/ James V. Sandry
---------------------------------------
Title: Executive Vice President
"Sub"
iXL, Inc., a Delaware corporation
By: /s/ James V. Sandry
---------------------------------------
Title: Executive Vice President
"Exchange Place Shareholder"
/s/ Ashish Bahl
------------------------------------------
Ashish Bahl
Address: 2690 Dellwood Drive
Atlanta, Georgia 30305
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<PAGE>
EXHIBITS
--------
Sub's Closing Certificate........................................... Exhibit A
Exchange Place's Closing Certificate................................ Exhibit B
Parent's Closing Certificate........................................ Exhibit C
Agreement to be Bound to the Registration Rights Agreement.......... Exhibit D
Agreement to be Bound to the Stockholders' Agreement................ Exhibit E
<PAGE>
SCHEDULE 4.3(a)
---------------
Holders of Exchange Place Stock and Exchange Place Stock Rights
SCHEDULE 4.3(b)
---------------
Liens on Stock
SCHEDULE 4.5
------------
Consents; Required Filings
SCHEDULE 4.7
------------
Exceptions to Absence of Changes of Exchange Place
SCHEDULE 4.8
------------
Undisclosed Liabilities of Exchange Place
SCHEDULE 4.9
------------
Exceptions to Title to Properties of Exchange Place
SCHEDULE 4.10
-------------
Exceptions to the Good Condition of the Equipment of Exchange Place
<PAGE>
SCHEDULE 4.12
-------------
Liens on and Location of Real Property of Exchange Place
SCHEDULE 4.13
-------------
Exceptions to Leases of Exchange Place
SCHEDULE 4.14
-------------
Exceptions to Contracts of Exchange Place
SCHEDULE 4.15
-------------
Directors and Officers of Exchange Place
SCHEDULE 4.17
-------------
Litigation
SCHEDULE 4.18
-------------
Employee Benefit Plans/Labor Relations of Exchange Place
SCHEDULE 4.19
-------------
ERISA Issues of Exchange Place
<PAGE>
SCHEDULE 4.21
-------------
Exceptions to the Assignability of Exchange Place Permits
SCHEDULE 4.23
-------------
Exchange Place Brokers
SCHEDULE 4.25
-------------
Interest in Customers, Suppliers, Competitors
SCHEDULE 5.3
------------
Conflicts, Required Filings and Consents of Parent and Sub
SCHEDULE 5.4
------------
Parent or Sub Litigation
SCHEDULE 5.5
------------
Parent and Sub Brokers
SCHEDULE 5.6
------------
Outstanding Obligations of Parent to issue options, warrants or other rights in
parent stock.
<PAGE>
SCHEDULE 5.7
------------
Subsidiaries of Parent
SCHEDULE 5.9
------------
Parent Undisclosed Liabilities
SCHEDULE 5.13
-------------
Exceptions to Absence of Changes of Parent and Sub
SCHEDULE 7.1(c)
---------------
Parent Consents
SCHEDULE 7.2(c)
---------------
Exchange Place Consents
SCHEDULE 10.11
--------------
Permitted Liens of Exchange Place
<PAGE>
Exhibit 2.29
AGREEMENT AND PLAN OF MERGER
by and among
IXL HOLDINGS, INC.,
iXL-SAN FRANCISCO, INC.,
PANTHEON INTERACTIVE, INC.
AND
THE PANTHEON SHAREHOLDERS
DATED AS OF SEPTEMBER 18, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 18th day of
September, 1998, by and between Pantheon Interactive, Inc., a California
corporation ("Pantheon"), IXL Holdings, Inc., a Delaware corporation ("Parent"),
iXL-San Francisco, Inc., a Delaware corporation, or its successors or assigns
("Sub"), and the shareholders of Pantheon as listed on the signature page hereto
(the "Pantheon Shareholders").
R E C I T A L S:
- - - - - - - -
A. Pantheon is engaged in the business of developing internet sites and
furnishing internet services, including website design and maintenance (the
"Pantheon Business").
B. Pantheon and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The Pantheon Shareholders collectively own 100% of the issued and
outstanding capital stock of Pantheon (the "Pantheon Stock").
D. The respective Boards of Directors of Parent, Sub and Pantheon, and the
respective shareholders of Sub and Pantheon, have approved the Merger, upon the
terms and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal income
tax purposes, as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, at
the Effective Time (as defined in Section 1.3 hereof), (a) Pantheon shall be
merged with and into Sub, (b) the separate existence of Pantheon shall cease,
and (c) Sub shall continue as the surviving corporation in the Merger under the
laws of the State of Delaware under the name iXL-San Francisco, Inc. For
purposes of this Agreement, Sub shall be referred to, for the period commencing
on the Effective Time, as the "Surviving Corporation."
<PAGE>
1.2 Closing and Closing Date. Unless this Merger Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 9.1 hereof, and subject to the satisfaction or
waiver of the conditions set forth in Article VII hereof, the closing of the
Merger (the "Closing") will take place as promptly as practicable (and in any
event within five business days after satisfaction of the conditions set forth
in Sections 7.1 and 7.2 hereof) (the "Closing Date") at the offices of Minkin &
Snyder, A Professional Corporation, One Buckhead Plaza, 3060 Peachtree Rd., Ste.
1100, Atlanta, GA 30305, unless another date or place is agreed to by the
parties.
1.3 Effective Time of the Merger. At the Closing, the parties hereto
shall cause (a) a certificate of merger (the "Delaware Certificate of Merger")
to be filed with the office of the Secretary of State of Delaware in accordance
with the provisions of the Delaware General Corporation Law, as amended (the
"DGCL"); and (b) a copy of the Delaware Certificate of Merger (the "California
Certificate of Merger"; collectively with the Delaware Certificate of Merger,
the "Certificate of Merger") to be filed with the office of the Secretary of
State of California in accordance with the provisions of the California General
Corporation Law (the "GCL"). When used herein, the term "Effective Time" shall
mean the time when the Delaware Certificate of Merger has been accepted for
filing by the Secretary of State of Delaware, or such time as otherwise
specified therein.
1.4 Effect of the Merger. The Merger shall, from and after the Effective
Time, have all the effects provided by the DGCL and the GCL. If at any time
after the Effective Time, any further action is deemed necessary or desirable to
carry out the purposes of this Agreement, the parties hereto agree that the
Surviving Corporation and its proper officers and directors shall be authorized
to take, and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of
Sub, a form of which is attached to a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A" hereto ("Sub's Closing
-----------
Certificate"), shall be the Certificate of Incorporation of the Surviving
Corporation after the Effective Time, until thereafter changed or amended as
provided therein or by applicable law.
2.2 Bylaws. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is attached to the Sub's Closing Certificate.
2.3 Board of Directors; Officers. The Board of Directors and officers of
Sub immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively,
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of the Surviving Corporation, until the earlier of their respective resignations
or the time that their respective successors are duly elected or appointed and
qualified.
ARTICLE III
CONVERSION OF SHARES
3.1 Merger Consideration. As of the Effective Time:
(a) All shares of Pantheon Stock owned by Pantheon shall, by virtue
of the Merger and without any action on the part of any shareholder, officer or
director of Pantheon or Sub, be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding share of Pantheon Stock (other than
any Dissenting Shares, as defined in Section 3.2 hereof) shall, upon surrender
to Sub, at the Closing, of the underlying share certificates, be converted into,
and become exchangeable for, a number of shares of validly issued, fully paid
and nonassessable Class B Common Stock of Parent, $.01 par value (the "Parent
Stock") based on the following equation:
PS= 315,000 - D
---
$10
-----------------
S + O
where:
PS = the number of shares of Parent Stock (valued, as of the
Closing, at $10 per share) for which each share of Pantheon
Stock shall be exchanged pursuant to the Merger
D = the amount by which any outstanding indebtedness of Pantheon
(the "Pantheon Debt"), including debt for borrowed money and
accrued interest thereon, capital leases, accounts payable,
accrued expenses, and any unpaid legal, accounting or other
fees, exceeds Pantheon's cash, all to be determined as of three
business days prior to the Closing Date and all as determined
in accordance with generally accepted accounting principles
("GAAP"); provided, however, that 315,000 is the maximum number
of shares of Parent Stock issuable hereunder
S = the number of issued and outstanding shares of Pantheon Stock
on the Closing Date
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<PAGE>
O = the total number of options to purchase Pantheon Stock
outstanding on the Closing Date, to be exchanged for options to
acquire Parent Stock pursuant to Section 6.7(b) hereof
(c) Each issued and outstanding share of common stock of Sub shall,
by virtue of the Merger and without any action on the part of any shareholder,
officer or director of Pantheon or Sub, be converted into and become one fully
paid and nonassessable share of common stock of the Surviving Corporation.
3.2 Dissenting Shares. Notwithstanding any provision hereof to the
contrary, any shares of Pantheon Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be converted as described in Section 3.1(b)
hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Shareholder pursuant to the DGCL or GCL, as
applicable, provided, however, that if a Dissenting Shareholder shall fail to
perfect his demand, withdraw his demand or otherwise lose his right for
appraisal under the terms of the DGCL or GCL, as applicable, then the Pantheon
Stock held by such Dissenting Shareholder (the "Dissenting Shares") shall be
deemed to be converted as of the Effective Time in accordance with the
provisions of Section 3.1 hereof. Pantheon shall not voluntarily make any
payment with respect to, settle, or offer to settle or otherwise negotiate, any
such demands. All amounts paid to Dissenting Shareholders shall be paid without
interest thereon (to the extent permitted by applicable law) by the Surviving
Corporation. For purposes hereof, the term "Dissenting Shareholder" shall mean a
Pantheon Shareholder who (a) objects to the Merger; and (b) complies with the
applicable provisions of the DGCL or GCL concerning dissenter's rights.
3.3 No Further Rights. From and after the Effective Time, holders of
certificates theretofore evidencing Pantheon Stock shall cease to have any
rights as stockholders of Pantheon, except as provided herein or by applicable
law.
3.4 Closing of Pantheon's Transfer Books. At the Effective Time, the
stock transfer books of Pantheon shall be closed and no transfer of Pantheon
Stock shall be made thereafter. If after the Effective Time, certificates for
Pantheon Stock are presented to Parent or the Surviving Corporation, they shall
be canceled and exchanged for a consideration as set forth in Section 3.1
hereof, subject to applicable law in the case of Dissenting Shareholders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PANTHEON
Pantheon, and the Pantheon Shareholders, jointly and severally, represent
and warrant to Parent and Sub as follows, which representations and warranties
shall survive the Closing in accordance with Section 10.1 hereof.
4.1 Organization and Qualification. Pantheon is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Pantheon has the
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requisite corporate power and authority to carry on the Pantheon Business as it
is now being conducted and is duly qualified or licensed to do business, and is
in good standing, in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary. Complete and correct copies of the Articles of
Incorporation and Bylaws of Pantheon as in effect on the date hereof are
attached to a closing certificate and incumbency certificate, substantially in
the form of Exhibit "B" hereto ("Pantheon's Closing Certificate"). The minute
-----------
book of Pantheon, a true and complete copy of which has been delivered to
Parent, (a) accurately reflects all action taken by the directors and
shareholders of Pantheon at meetings of Pantheon's Board of Directors or
shareholders, as the case may be; and (b) contains true and complete copies, or
originals, of the respective minutes of all meetings or consent actions of the
directors or shareholders.
4.2 Authority. Pantheon has the necessary corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery hereof and the consummation of
the transactions contemplated hereby by Pantheon have been duly and validly
authorized and approved by Pantheon's Board of Directors and the Pantheon
Shareholders, and no other corporate or shareholder proceedings on the part of
Pantheon, its Board of Directors or the Pantheon Shareholders is necessary to
authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Pantheon and each Pantheon Shareholder, and assuming the due authorization,
execution and delivery by Parent and Sub, constitutes the valid and binding
obligation of Pantheon and each Pantheon Shareholder, enforceable against
Pantheon and each Pantheon Shareholder in accordance with its terms subject, in
each case, to bankruptcy, insolvency, reorganization, moratorium and similar
laws of general application relating to or affecting creditors' rights and to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing.
4.3 Capitalization.
(a) The authorized capital stock of Pantheon consists of 5,000,000
shares of common stock, no par value, of which 3,000,000 shares are validly
issued and outstanding, fully paid and nonassessable. All outstanding capital
stock of Pantheon was issued in accordance with applicable federal and state
securities laws. Except as set forth on Schedule 4.3(a) hereto, there are no
---------------
options, warrants, calls, convertible notes, agreements, commitments or other
rights presently outstanding that would obligate Pantheon or any of the Pantheon
Shareholders to issue, deliver or sell shares of its capital stock, or to grant,
extend or enter into any such option, warrant, call, convertible note,
agreement, commitment or other right. In addition to the foregoing, as of the
date hereof, Pantheon has no bonds, debentures, notes or other indebtedness
issued or outstanding that have voting rights in Pantheon. Schedule 4.3(a) sets
---------------
forth a list of (i) all holders of record of (A) Pantheon Stock, and (B)
options, warrants, convertible notes or other rights to purchase capital stock
of Pantheon (collectively, "Pantheon Stock Rights"); (ii) the number of shares
held by each Pantheon Shareholder and the number of shares of capital stock of
Pantheon represented by the Pantheon Stock Rights; and (iii) the exercise price,
date of grant, duration and vesting schedule for each Pantheon Stock Right.
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<PAGE>
(b) All of the issued and outstanding shares of capital stock of
Pantheon are validly issued, fully paid and nonassessable. Except as set forth
on Schedule 4.3(b) hereto, each Pantheon Shareholder represents and warrants
---------------
that the Pantheon Stock held by such Pantheon Shareholder is free and clear of
any lien, charge, security interest, pledge, option, right of first refusal,
voting proxy or other voting agreement, or encumbrance of any kind or nature
other than restrictions on transfer imposed by federal and state securities laws
(any of the foregoing, a "Lien").
4.4 Subsidiaries. Pantheon has no subsidiaries and does not otherwise own
or control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
- ------------
Pantheon or the Pantheon Shareholders, (ii) the consummation by Pantheon and the
Pantheon Shareholders of the transactions contemplated hereby or (iii)
compliance by Pantheon with any of the provisions hereof will:
(a) conflict with or violate the Articles of Incorporation or Bylaws
of Pantheon;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to Pantheon or any of the
Pantheon Shareholders, or by which Pantheon or any of its properties or assets
may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which Pantheon is a party or by which
Pantheon or any of its properties or assets may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Pantheon; or
(e) require any consent, waiver, license, approval, authorization,
order, permit, registration or filing with, or notification to (any of the
foregoing being a "Consent"), (i) any government or subdivision thereof, whether
domestic or foreign, or any administrative, governmental, or regulatory
authority, agency, commission, court, tribunal or body, whether domestic,
foreign or multinational (any of the foregoing, a "Governmental Entity"), except
for the filing of the Certificate of Merger pursuant to the DGCL and the GCL; or
(ii) any other individual or Entity (collectively, a "Person").
4.6 Financial Statements. Pantheon has heretofore furnished Parent with a
true and complete copy of the unaudited financial statements of Pantheon for the
partial year from incorporation through December 31, 1996, for the year ended
December 31, 1997, and for the six
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<PAGE>
month period ended June 30, 1998 (all of the foregoing collectively herein
referred to as the "Pantheon Financial Statements"). The Pantheon Financial
Statements are internal statements that have not been prepared in accordance
with GAAP. The Pantheon Financial Statements present fairly, in all material
respects, the financial position and operating results of Pantheon as of the
dates, and during the periods, indicated therein. Pantheon used the cash basis
method of accounting consistently until March, 1998, when it changed to the
accrual basis.
4.7 Absence of Changes. Except as provided in Schedule 4.7 hereto and
------------
except as contemplated hereby, since June 30, 1998 (a) Pantheon has not entered
into any transaction that was not in the ordinary course of business; (b) except
for sales of services and licenses of software in the ordinary course of
business, there has been no sale, assignment, transfer, mortgage, pledge,
encumbrance or lease of any material asset or property of Pantheon; (c) there
has been (i) no declaration or payment of a dividend, or any other declaration,
payment or distribution of any type or nature to any shareholder of Pantheon in
respect of its stock, whether in cash or property, and (ii) no purchase or
redemption of any share of the capital stock of Pantheon; (d) there has been no
declaration, payment, or commitment for the payment, by Pantheon, of a bonus or
other additional salary, compensation, or benefit to any employee of Pantheon
that was not in the ordinary course of business, except for normal year-end
bonuses paid in the ordinary course of business; (e) there has been no release,
compromise, waiver or cancellation of any debt to or claim by Pantheon, or
waiver of any right of Pantheon; (f) there have been no capital expenditures in
excess of $10,000 for any single item, or $25,000 in the aggregate; (g) there
has been no change in accounting methods or practices or revaluation of any
asset of Pantheon (other than Pantheon Accounts Receivable as defined in Section
4.26 hereof written down in the ordinary course of business in excess of $10,000
for any single Pantheon Accounts Receivable, or $25,000 in the aggregate); (h)
there has been no material damage, or destruction to, or loss of, physical
property (whether or not covered by insurance) adversely affecting the Pantheon
Business or the operations of Pantheon; (i) there has been no loan by Pantheon,
or guaranty by Pantheon of any loan, to any employee of Pantheon; (j) Pantheon
has not ceased to transact business with any customer that, as of the date of
such cessation, represented more than 5% of the annual gross revenues of
Pantheon; (k) there has been no termination or resignation of any key employee
or officer of Pantheon, and to the knowledge of Pantheon, no such termination or
resignation is threatened; (l) there has been no amendment or termination of any
material oral or written contract, agreement or license related to the Pantheon
Business, to which Pantheon is a party or by which it is bound, except in the
ordinary course of business, or except as expressly contemplated hereby; (m)
Pantheon has not failed to satisfy any of its debts, obligations or liabilities
related to the Pantheon Business or the assets of Pantheon as the same become
due and owing (except for Pantheon Accounts Payable (as defined in Section 4.27
hereof) payable in accordance with past practices and in the ordinary course of
business); (n) there has been no agreement or commitment by Pantheon to do any
of the foregoing; and (o) there has been no other event or condition of any
character pertaining to and materially and adversely affecting the assets,
business or financial condition of Pantheon.
4.8 Undisclosed Liabilities. Except as set forth on Schedule 4.8 hereto,
------------
Pantheon has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including any liability or obligation on account of taxes
or any governmental charge or penalty, interest or fine, except (a) liabilities
incurred in the ordinary course of business after June 30, 1998, that would not,
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<PAGE>
whether individually or in the aggregate, have a material adverse impact on the
business or financial condition of Pantheon; (b) liabilities reflected on the
Pantheon Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
4.9 Title to Properties. Except as set forth on Schedule 4.9 hereto,
------------
Pantheon has good and marketable title to all tangible property and assets used
in the Pantheon Business, and good and valid title to its leasehold interests,
in each case, free and clear of any and all Liens other than Permitted Liens (as
defined in Section 10.11 hereof).
4.10 Equipment. Pantheon has heretofore furnished Parent with a true and
correct list of all items of tangible personal property (including computer
hardware) necessary for or used in the operation of the Pantheon Business in the
manner in which it has been and is now operated by Pantheon ("the Pantheon
Equipment"), except for personal property having a net book value of less than
$1,000. Except as set forth on Schedule 4.10 hereto, each material item of
-------------
Pantheon Equipment is in good condition and repair, ordinary wear and tear
excepted.
4.11 Intellectual Property.
(a) Schedule 4.11 hereto contains a true and complete list of all
-------------
material proprietary technology, patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, service marks, service mark rights, and
copyrights (and all pending applications for any of the foregoing) used by
Pantheon in the conduct of the Pantheon Business (together with trade secrets
and know how used in the conduct of the Pantheon Business, the "Pantheon
Intellectual Property Rights"). To the knowledge of Pantheon and without
investigation, Pantheon owns, or is validly licensed or otherwise has the right
to use or exploit, as currently used or exploited, all of the Pantheon
Intellectual Property Rights, free of any obligation to make any payment
(whether of a royalty, license fee, compensation or otherwise). No claims are
pending or, to the knowledge of Pantheon, threatened, that Pantheon is
infringing or otherwise adversely affecting the rights of any Person with regard
to any Pantheon Intellectual Property Right. To the knowledge of Pantheon and
without investigation, no Person is infringing the rights of Pantheon with
respect to any Pantheon Intellectual Property Right. Neither Pantheon nor, to
the knowledge of Pantheon and without investigation, any employee, agent or
independent contractor of Pantheon, in connection with the performance of such
Person's services with Pantheon, has used, appropriated or disclosed, directly
or indirectly, any trade secret or other proprietary or confidential information
of any other Person, or otherwise violated any confidential relationship with
any other Person.
(b) Schedule 4.11 also contains a true and complete list of all
-------------
material computer software used by Pantheon in the conduct of the Pantheon
Business (the "Pantheon Software"). Pantheon currently licenses, or otherwise
has the legal right to use, all of the Pantheon Software (including any upgrade,
alteration or enhancement with respect thereto), and all of the Pantheon
Software is being used in compliance with any applicable license or other
agreement.
4.12 Real Property. Except as set forth on Schedule 4.12 hereto:
-------------
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<PAGE>
(a) Pantheon has a good and valid leasehold interest in all real
property (including all buildings, improvements and fixtures thereon) used in
the operation of the Pantheon Business (the "Pantheon Real Property"). Pantheon
owns no real property. Except for Permitted Liens, and for the items set forth
on Schedule 4.12, there are no Liens on Pantheon's interest in any of the
-------------
Pantheon Real Property. Schedule 4.12 lists each county and state where any
-------------
Pantheon Real Property is located, or where Pantheon has ever leased or owned
any real property.
(b) There are no parties in possession of any portion of the Pantheon
Real Property other than Pantheon, whether as sublessees, subtenants at will or
trespassers.
(c) To the knowledge of Pantheon and without investigation, there is
no law, ordinance, order, regulation or requirement now in existence or under
active consideration by any Governmental Entity, that would require, under the
provisions of any of the Pantheon Leases (as hereinafter defined), any material
expenditure by Pantheon to modify or improve any of the Pantheon Real Property
to bring it into compliance therewith.
4.13 Leases. Schedule 4.13 hereto sets forth a list of all leases
-------------
pursuant to which Pantheon leases, as lessor or lessee, real or personal
property used in operating the Pantheon Business or otherwise (the "Pantheon
Leases"). Copies of the Pantheon Leases, all of which have previously been
provided to Parent, are true and complete copies thereof. All of the Pantheon
Leases are valid, binding and enforceable against Pantheon and, to the knowledge
of Pantheon, against the other parties thereto, in accordance with their
respective terms, and there is not under any such Pantheon Lease any existing
default by Pantheon, or, to the knowledge of Pantheon, by any other party
thereto, or any condition or event that, with notice or lapse of time or both,
would constitute a default. Pantheon has not received notice that the lessor of
any of the Pantheon Leases intends to cancel, suspend or terminate such Pantheon
Lease or to exercise or not exercise any option thereunder.
4.14 Contracts. Schedule 4.14 hereto sets forth a true and complete list
-------------
of all contracts, agreements and commitments (whether written or oral) to which
Pantheon is a party (in its own name or as a successor in interest), or by which
it or any of its properties or assets is otherwise bound, including any service
agreements, customer agreements, supplier agreements, agreements to lend or
borrow money, shareholder agreements, employment agreements, agreements relating
to Pantheon Intellectual Property Rights and the like (collectively, the
"Pantheon Contracts"); excepting only those Pantheon Contracts which involve
less than $10,000 and are cancelable, without penalty, on no more than 90 days'
notice. Pantheon has not, through any agent, entered into any such contract,
agreement or commitment which, if Pantheon were a party thereto, would be
considered a Pantheon Contract. The aggregate value of all payment obligations
and rights to receive payments, under agreements, contracts and commitments
(whether oral or in writing) to which Pantheon is a party or by which it or any
of its properties or assets is otherwise bound, and that are not listed on
Schedule 4.14, is less than $50,000 (calculating such value by adding together
- -------------
the value of rights and obligations, and not by determining the net amount
thereof).
True and complete copies of all Pantheon Contracts (or a true and complete
narrative description of any oral Pantheon Contract) have previously been
provided to Parent. Neither
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Pantheon nor, to the knowledge of Pantheon, any other party to any of the
Pantheon Contracts (x) is in default under (nor does there exist any condition
that, with notice or lapse of time or both, would cause such a default under)
any of the Pantheon Contracts, or (y) has waived any right it may have under any
of the Pantheon Contracts, the waiver of which would have a material adverse
effect on the business, assets or financial condition or prospects of Pantheon.
All of the Pantheon Contracts constitute the valid and binding obligations of
Pantheon, enforceable in accordance with their respective terms, and, to the
knowledge of Pantheon, of the other parties thereto.
4.15 Directors and Officers. Schedule 4.15 hereto sets forth a list, as
-------------
of the Closing Date, of the name of each director and officer of Pantheon and
the position(s) held by each.
4.16 Payroll Information. Pantheon has previously provided Parent with a
true and complete copy of the payroll report of Pantheon dated September 14,
1998, showing all current employees of Pantheon and their current levels of
compensation, other than bonuses and other extraordinary compensation, all of
which bonuses and other extraordinary compensation are set forth in Schedule
--------
4.16 hereto. Pantheon has paid all compensation required to be paid to employees
- ----
of Pantheon on or prior to the date hereof other than compensation (and bonuses
pursuant to arrangements described in Schedule 4.16 hereto) accrued in the
-------------
current pay period.
4.17 Litigation. Except as set forth on Schedule 4.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Pantheon, threatened against or affecting Pantheon or the Pantheon Business, nor
is there any judgment, decree, injunction or order of any applicable
Governmental Entity or arbitrator outstanding against Pantheon.
4.18 Employee Benefit Plans/Labor Relations.
(a) Except as disclosed in Schedule 4.18 hereto, there are no
-------------
employee benefit plans, agreements or arrangements maintained by Pantheon,
including (i) "employee benefit plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (ii)
current or deferred compensation, pension, profit sharing, vacation or severance
plans or programs; or (iii) medical, hospital, accident, disability or death
benefit plans (collectively, "Pantheon Benefit Plans"). To the knowledge of
Pantheon and without investigation, all Pantheon Benefit Plans are administered
in accordance with, and are in material compliance with, all applicable laws and
regulations, and no default exists with respect to the obligations of Pantheon
under any Pantheon Benefit Plan.
(b) Pantheon is not a party to any collective bargaining agreement;
no collective bargaining agent has been certified as a representative of any of
the employees of Pantheon; no representation campaign or election is now in
progress with respect to any employee of Pantheon; and there are no labor
disputes, grievances, controversies, strikes or requests for union
representation pending, or, to the knowledge of Pantheon, threatened, relating
to or affecting the Pantheon Business. To the knowledge of Pantheon, no event
has occurred that could give rise to any such dispute, controversy, strike or
request for representation.
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4.19 ERISA.
(a) To the knowledge of Pantheon and without investigation, all
Pantheon Benefit Plans that are subject to ERISA have been administered in
accordance with, and are in material compliance with, the applicable provisions
of ERISA. Each of the Pantheon Benefit Plans that is intended to meet the
requirements of Section 401(a) of the Code has been determined by the Internal
Revenue Service to meet such requirements within the meaning of such provision.
No Pantheon Benefit Plan is subject to Title IV of ERISA or Section 412 of the
Code. Pantheon has not engaged in any nonexempt "prohibited transactions," as
such term is defined in Section 4975 of the Code or Section 406 of ERISA,
involving Pantheon Benefit Plans that would subject Pantheon to the penalty or
tax imposed under Section 502(i) of ERISA or Section 4975 of the Code. Pantheon
has not engaged in any transaction described in Section 4069 of ERISA within the
last five years. Except as disclosed in Schedule 4.19 hereto or pursuant to the
-------------
terms of the Pantheon Benefit Plans, neither the execution and delivery hereof
nor the consummation of the transactions contemplated hereby will (i) result in
any payment (including severance, unemployment compensation or golden parachute)
becoming due to any director or other employee of Pantheon, (ii) increase any
benefit otherwise payable under any Pantheon Benefit Plan or (iii) result in the
acceleration of the time of payment or vesting of any such benefit to any
extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA, for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Pantheon Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code, or by any
entity that is considered one employer with Pantheon under Section 4001 of ERISA
or Section 414 of the Code, within the 12-month period ending on the Closing
Date. Pantheon has not incurred any liability to the Pension Benefit Guaranty
Corporation in respect of any Pantheon Benefit Plan that remains unpaid.
4.20 Taxes.
(a) Except as set forth on Schedule 4.20 hereto, Pantheon has duly
-------------
and timely filed all federal, state and local income, franchise, excise, real
and personal property and other tax returns and reports, including extensions,
required to have been filed by Pantheon on or prior to the Closing Date.
Pantheon has duly and timely paid all taxes and other governmental charges, and
all interest and penalties with respect thereto, required to be paid by Pantheon
(whether by way of withholding or otherwise) to any federal, state, local or
other taxing authority (except to the extent the same are being contested in
good faith, and adequate reserves therefor have been provided in the Pantheon
Financial Statements). As of the Closing Date, all deficiencies proposed as a
result of any audit have been paid or settled.
(b) Pantheon is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) Pantheon has not consented to have the provisions of Section
341(f)(2) of the Code (or comparable state law provisions) apply to it, and
Pantheon has not agreed or been
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requested to make any adjustment under Section 481(c) of the Code by reason of a
change in accounting method or otherwise.
4.21 Compliance with Applicable Laws. Pantheon holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
Pantheon, as appropriate, and to carry on the Pantheon Business as now conducted
(the "Pantheon Permits"). To the knowledge of Pantheon, Pantheon is in material
compliance with all applicable laws, ordinances and regulations and the terms of
the Pantheon Permits. Except as set forth on Schedule 4.21 hereto, all of the
-------------
Pantheon Permits are fully assignable by Pantheon in connection with the Merger.
Schedule 4.21 sets forth a true and complete list of all Pantheon Permits, true
- -------------
and complete copies of which have previously been provided to Parent.
4.22 Board of Directors/Shareholder Consent. Both the Board of Directors of
Pantheon and the Pantheon Shareholders have adopted and approved this Agreement
and the transactions contemplated hereby (including the Merger).
4.23 Brokers. Except as set forth on Schedule 4.23 hereto, no broker or
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finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of Pantheon.
4.24 Environmental Matters.
(a) To the knowledge of Pantheon and without investigation, no real
property currently or formerly owned or operated by Pantheon is contaminated
with any Hazardous Substance (as hereinafter defined).
(b) Pantheon is not a party to any litigation or administrative
proceeding nor, to the knowledge of Pantheon and without investigation, is any
litigation or administrative proceeding threatened against it, that, in either
case, asserts or alleges that Pantheon (i) violated any Environmental Law (as
hereinafter defined); (ii) is required to clean up, remove or take remedial or
other responsive action due to the disposal, deposit, discharge, leak or other
release of any Hazardous Substance; or (iii) is required to pay all or a portion
of the cost of any past, present or future cleanup, removal or remedial or other
action that arises out of or is related to the disposal, deposit, discharge,
leak or other release of any Hazardous Substance.
(c) To the knowledge of Pantheon and without investigation, there are
not now nor have there previously been tanks or other facilities on, under, or
at any real property owned, leased, used or occupied by Pantheon containing
materials that, if known to be present in soil or ground water, would require
cleanup, removal or other remedial action under Environmental Law.
(d) To the knowledge of Pantheon and without investigation, Pantheon
is not subject to any judgment, order or citation related to or arising out of
any Environmental Law and has not been named or listed as a potentially
responsible party by any Governmental Entity in a matter related to or arising
out of any Environmental Law.
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(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including any petroleum products, asbestos or polychlorinated biphenyls.
4.25 Interest in Customers, Suppliers and Competitors. Except as provided
in Schedule 4.25 hereto, no officer, director, shareholder or employee of
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Pantheon and no family member (including a spouse, parent, sibling or lineal
descendent of any of the foregoing), has any direct or indirect material
interest in any material customer, supplier or competitor of Pantheon, or in any
Person from whom or to whom Pantheon leases any real or personal property, or in
any other Person with whom Pantheon is doing business whether directly or
indirectly (including as a debtor or creditor), whether in existence as of the
Closing Date or proposed, other than the ownership of stock of publicly traded
corporations.
4.26 Accounts Receivable. All accounts, notes, contracts and other
receivables of Pantheon (collectively, "Pantheon Accounts Receivable") were
acquired by Pantheon in the ordinary course of business arising from bona fide
transactions. There are no set-offs, counterclaims or disputes asserted with
respect to any Pantheon Accounts Receivable that would result in claims in
excess of the reserve for bad debts set forth on the Pantheon Financial
Statements and, to the knowledge of Pantheon and subject to such reserve, all
Pantheon Accounts Receivable are collectible in full. Pantheon has previously
provided Parent with a true and complete aging report prepared as of August 31,
1998 which shows the time elapsed since invoice date for all Pantheon Accounts
Receivable as of such date.
4.27 Accounts Payable. All material accounts, notes, contracts and other
amounts payable of Pantheon (collectively, "Pantheon Accounts Payable") are
currently within their respective terms, and are neither in default nor
otherwise past due by more than 90 days. Pantheon has previously provided Parent
with a true and complete aging report prepared as of August 31, 1998 which shows
the time elapsed since invoice date for all Pantheon Accounts Payable as of such
date.
4.28 Insurance. Pantheon currently maintains, in full force and effect,
all insurance policies that are required to be maintained for the conduct of the
Pantheon Business or the ownership of Pantheon's property (both real and
personal) (collectively, the "Pantheon Insurance Policies"). The Pantheon
Insurance Policies are listed on Schedule 4.28 hereto, and true and complete
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copies of all Pantheon Insurance Policies have previously been provided to
Parent. Pantheon (a) to its knowledge and without investigation, is not in
default regarding the provisions of any Pantheon Insurance Policy; (b) has paid
all premiums due thereunder; and (c) has not failed to present any notice or
material claim thereunder in a due and timely fashion.
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4.29 Bankruptcy. Pantheon has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 Pantheon Debt. As of the date hereof, the Pantheon Debt is $-0-.
4.31 Investment Purpose; Accredited Investors or Purchaser representative.
(a) Each Pantheon Shareholder receiving Parent Stock in the Merger represents
that he (i) is acquiring the Parent Stock solely for his own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof; and (ii) will not, directly or indirectly, offer,
transfer, sell, pledge, hypothecate or otherwise dispose of any Parent Stock (or
solicit any offers to buy, purchase or otherwise acquire or take a pledge of any
such shares) except in compliance with the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations thereunder, other
applicable laws, rules and regulations, and the Second Amended and Restated
Stockholders' Agreement of Parent, dated December 17, 1997 (the "Stockholders'
Agreement"); (b) Each of the Pantheon Shareholders further represents that he is
an "accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act;
and (c) Colin Morris further represents that (i) Robert Ratonyi is his Purchaser
representative (the "Purchaser representative") as such term is defined in Rule
501 of Regulation D under the Securities Act; and (ii) the Purchaser
representative (A) is not an affiliate, director, officer or other employee of
Parent, or beneficial owner of 10% or more of any class of the equity securities
of, or 10% or more of the equity interest in, Parent; (B) has such knowledge and
experience in financial and business matters that he is capable of evaluating,
alone, or together with such Pantheon Shareholder, the merits and risks of the
prospective investment in Parent Stock; (C) has been acknowledged by such
Pantheon Shareholder in writing, during the course of the Merger, to be his
purchaser representative in connection with evaluating the merits and risks of
the prospective investment in Parent Stock; and (D) has disclosed to such
Pantheon Shareholder in writing a reasonable time prior to the Closing any
material relationship between the Purchaser representative or his affiliates and
Parent or its affiliates that exists, is mutually understood to be contemplated,
or has existed at any time during the previous two years, and any compensation
received or to be received as a result of such relationship.
4.32 Restrictions on Transfer. Each Pantheon Shareholder receiving Parent
Stock in the Merger acknowledges that (a) the Parent Stock received by him
hereunder has not been registered under the Securities Act; (b) the Parent Stock
may be required to be held indefinitely, and he must continue to bear the
economic risk of the investment in such shares unless such shares are
subsequently registered under the Securities Act or an exemption from such
registration is available; (c) there may not be any public market for the Parent
Stock in the foreseeable future; (d) Rule 144 promulgated under the Securities
Act is not presently available with respect to sales of any securities of
Parent, and such Rule is not anticipated to be available in the foreseeable
future; (e) when and if Parent Stock may be disposed of without registration in
reliance upon Rule 144, such disposition can be made only in limited amounts and
in accordance with the terms and conditions of such Rule; (f) if the exemption
afforded by Rule 144 is not available, public sale
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without registration will require the availability of an exemption under the
Securities Act; (g) the Parent Stock is subject to the terms and conditions of
the Stockholders' Agreement; (h) restrictive legends shall be placed on the
certificates representing Parent Stock; and (i) a notation shall be made in the
appropriate records of Parent indicating that Parent Stock is subject to
restrictions on transfer and, if Parent should in the future engage the services
of a stock transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to Parent Stock.
4.33 Ability to Bear Risk; Access to Information; Sophistication. (a)
Each Pantheon Shareholder receiving Parent Stock in the Merger represents and
warrants that (i) his financial situation is such that he can afford to bear the
economic risk of holding Parent Stock acquired by him hereunder for an
indefinite period; and (ii) he can afford to suffer the complete loss of such
Parent Stock; (b) Each of the Pantheon Shareholders further represents that (i)
he has been granted the opportunity to ask questions of, and receive answers
from, representatives of Parent concerning the terms and conditions of the
Parent Stock and to obtain any additional information that he deems necessary;
(ii) his knowledge and experience in financial business matters is such that he
is capable of evaluating the merits and risk of ownership of the Parent Stock;
(iii) he has carefully reviewed the terms of the Stockholders' Agreement and has
evaluated the restrictions and obligations contained therein; and (iv) he (A)
has reviewed the Private Placement Memorandum of Parent dated as of September 8,
1998, as amended (the "Memorandum"); (B) has carefully examined the Memorandum
and has had an opportunity to ask questions of, and receive answers from,
representatives of Parent, and to obtain additional information concerning
Parent and its Subsidiaries (as hereinafter defined); and (C) does not require
additional information regarding Parent or its Subsidiaries in connection with
the Merger; and (c) Colin Morris further represents that, either alone or with
the Purchaser representative, (i) he has been granted the opportunity to ask
questions of, and receive answers from, representatives of Parent concerning the
terms and conditions of the Parent Stock and to obtain any additional
information that he deems necessary; (ii) his knowledge and experience in
financial business matters is such that he is capable of evaluating the merits
and risk of ownership of the Parent Stock; (iii) he has carefully reviewed the
terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; and (iv) he (A) has reviewed the Memorandum; (B)
has carefully examined the Memorandum and has had an opportunity to ask
questions of, and receive answers from, representatives of Parent, and to obtain
additional information concerning Parent and its Subsidiaries; and (C) does not
require additional information regarding Parent or its Subsidiaries in
connection with the Merger.
4.34 Disclosure. No representation or warranty of Pantheon or any
Pantheon Shareholder herein (including the schedules hereto), and no certificate
or affidavit furnished or to be furnished by or on behalf of Pantheon or any
Pantheon Shareholder to Parent, Sub or their agents in connection herewith,
contains or will, at the time it is made, contain any untrue statement of a
material fact or omits or will, at the time it is made, omit to state a material
fact necessary in order to make the statements herein or therein contained not
misleading.
4.35 Nature of Liabilities. Any unpaid legal, accounting or other fees of
Pantheon are solely and directly related to the Merger.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to
Pantheon and the Pantheon Shareholders, which representations and warranties
shall survive the Closing in accordance with Section 10.1 hereof, as follows:
5.1 Organization and Qualification. Each of Parent and its Subsidiaries
(as defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached, respectively, to a closing
certificate and incumbency certificate, substantially in the form of Exhibit "C"
----------
hereto ("Parent's Closing Certificate"), and to Sub's Closing Certificate.
5.2 Authority. Each of Parent and Sub has the necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by Pantheon and the Pantheon Shareholders,
constitutes the valid and binding obligation of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms,
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
5.3 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Parent or Sub, or the organizational documents of any other
Subsidiaries;
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(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to Parent or its Subsidiaries,
or by which Parent, any of its Subsidiaries, or their respective properties or
assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or
an event that, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for
(x) compliance with any applicable requirements of any applicable securities
laws, and (y) the filing of the Certificate of Merger pursuant to the DGCL and
the GCL); or (ii) any other Person.
5.4 Litigation. Except as set forth on Schedule 5.4 hereto, there is no
------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 Brokers. Except as disclosed on Schedule 5.5 hereto, no broker or
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finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Parent or Sub.
5.6 Parent Stock.
(a) As of the date hereof the authorized capital stock of Parent
consists of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 14,053,489 shares are
validly issued and outstanding (without taking into account any shares of Parent
Stock to be issued pursuant hereto, and excluding the potential acquisitions of
Two-Way Communications, L.L.C., Pequot Systems, Inc., Ionix Development
Corporation and NetResponse L.L.C.), fully paid and nonassessable; (ii) 750,000
shares of blank check preferred stock, (A) 250,000 of which have been designated
as Class A Convertible Preferred Stock, of which 176,291 shares are validly
issued and outstanding, fully paid and nonassessable, (B) 200,000 of which have
been designated as Class B Convertible Preferred Stock, of which 98,767 shares
are validly issued and outstanding, fully paid and nonassessable, (C) 15,000 of
which have been designated as Class C Convertible Preferred Stock, of which
9,232 shares are validly issued and outstanding, fully paid and nonassessable
and (D) 50,000 of which have been designated as Class D Nonvoting Preferred
Stock, of which 35,700 shares are validly issued and outstanding, fully paid and
nonassessable..
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Except as set forth on Schedule 5.6 hereto, there are no options, warrants,
------------
calls, agreements, commitments or other rights presently outstanding that would
obligate Parent to issue, deliver or sell shares of its capital stock, or to
grant, extend or enter into any such option, warrant, call, agreement,
commitment or other right (excluding the same potential acquisitions as referred
to above). In addition to the foregoing, as of the Closing Date, Parent has no
bonds, debentures, notes or other indebtedness issued or outstanding that have
voting rights in Parent.
(b) When delivered to the Pantheon Shareholders in accordance with
the terms hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
5.7 Subsidiaries. Except as set forth on Schedule 5.7 hereto, Parent has
------------
no subsidiaries and does not otherwise own or control, directly or indirectly,
any equity interest in, or any security convertible into an equity interest in,
any Entity. Schedule 5.7 lists the name of each of the Subsidiaries of Parent,
------------
and indicates their respective jurisdictions of incorporation.
5.8 Financial Statements. Parent has heretofore furnished Pantheon with a
true and complete copy of (a) the audited financial statements of iXL
Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31,
1993, 1994 and 1995, and for the four month period ended April 30, 1996; (b) the
audited combined financial statements for Creative Video, Inc. (n/k/a iXL,
Inc.), Creative Video Library, Inc. and Entrepreneur Television, Inc. for the
years ended December 31, 1993, 1994 and 1995, and for the four month period
ended April 30, 1996; (c) the audited consolidated financial statements for
Parent and its Subsidiaries for the eight months ended December 31, 1996 and for
the year ended December 31, 1997; and (d) the unaudited consolidated financial
statements for Parent and its Subsidiaries for the six month period ended June
30, 1998 (all of the foregoing, collectively, "Parent Financial Statements").
The Parent Financial Statements present fairly in all material respects the
consolidated financial position, results of operations, shareholders' equity and
cash flow of Parent at the respective dates or for the respective periods to
which they apply. Except as disclosed therein, such statements and related notes
have been prepared in accordance with GAAP consistently applied throughout the
periods involved (except, in the case of the unaudited financial statements, for
the exclusion of footnotes and normal year-end adjustments).
5.9 Undisclosed Liabilities. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalties,
interest or fines, except (a) liabilities incurred in the ordinary course of
business after June 30, 1998 that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Parent and its Subsidiaries, taken as a whole; (b) liabilities reflected on
the Parent Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
5.10 Compliance with Applicable Laws. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities
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necessary to own, lease or operate all of the assets and properties of Parent
and its Subsidiaries, as appropriate, and to carry on Parent's business as now
conducted (the "Parent Permits"). To the knowledge of Parent, Parent and its
Subsidiaries are in material compliance with all applicable laws, ordinances and
regulations and the terms of the Parent Permits.
5.11 Board of Directors/Shareholder Consent. The board of directors of
Parent, and both the board of directors and shareholder of Sub, have, by
unanimous written consent or other action, adopted and approved this Agreement
and the transactions contemplated hereby (including the Merger).
5.12 Bankruptcy. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 Absence of Changes. Except as provided in Schedule 5.13 hereto,
-------------
since June 30, 1998, there has not been (a) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
material change in Parent's accounting principles, practices or methods; (f) any
split, combination or reclassification of any of Parent's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Parent's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
5.14 Taxes. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent
and its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement).
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As of the Closing Date, all deficiencies proposed as a result of any audits have
been paid or settled.
5.15 Disclosure. No statement of fact by Parent or Sub contained herein
and no written statement of fact furnished or to be furnished by Parent or Sub
to Pantheon in connection herewith contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements herein or therein contained not misleading.
5.16 Section 368 of the Code.
(a) At all times prior to the Merger, Parent has owned all of the
outstanding equity interests in Sub (including rights to acquire an equity
interest in Sub, if any). Accordingly, both prior to and immediately after the
Merger, Parent will be in control of Sub within the meaning of Section 368(c) of
the Code. "Control" for these purposes means the ownership of stock possessing
at least eighty percent (80%) of the total combined voting power of all classes
of stock entitled to vote and at least eighty percent (80%) of the total number
of shares of each class of nonvoting stock. Following the Merger, Parent has no
plan or intention to cause Sub to issue additional equity interests that would
result in Parent losing "Control," as defined above, of Sub.
(b) After the Merger, Parent will own 100% of the outstanding equity
interest in Sub (including the right to acquire such an equity interest). Parent
has no plan or intention to liquidate Sub, to merge Sub with or into another
operation (including Parent), to sell, transfer ownership, or otherwise dispose
of or transfer any portion of its stock or assets (including those assets
acquired from Pantheon) to any person or entity (including Parent), except for
dispositions made in the ordinary course of business or transfers of assets to a
corporation controlled by Sub (including payments to dissenters ("Permissible
Transfers").
(c) Parent intends that, following the Merger, it will cause Sub
either to continue Pantheon's historic business or to continue to use a
significant portion of Pantheon's historic business assets in a business;
provided, however, to the extent that the business or assets of Pantheon are
subject to a Permissible Transfer, Parent intends that the transferee will
continue the historic business of Pantheon or use a significant portion of
Pantheon's assets in a business.
(d) Neither Parent nor Sub is an "investment company" as defined in
Section 368(a)(2)(F)(ii) and (iv) of the Code.
(e) Neither Parent nor Sub is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368 (a)(3)(A) of the
Code.
(f) Parent has no knowledge of any reason, fact or circumstance
which would cause the Merger to fail to qualify as a tax-free reorganization
under Section 368 of the Code; provided, however, that Parent has not considered
for this purpose any information regarding Pantheon furnished by or on behalf of
Pantheon to Parent or its advisors.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Conduct of Business by Pantheon Pending the Merger. From and after
the date hereof, prior to the Effective Time, except as contemplated hereby,
unless Parent shall otherwise agree in writing, Pantheon shall carry on its
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, use reasonable efforts to preserve intact its
present business organization, keep available the services of its employees and
preserve its relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with Pantheon to the end that
its goodwill and on-going businesses shall not be impaired in any material
respect at the Effective Time. Without limiting the generality of the foregoing,
and except as contemplated hereby, unless Parent shall otherwise agree in
writing, prior to the Effective Time, Pantheon shall not, directly or
indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire, any share of
capital stock of Pantheon or any other equity security thereof or any right,
warrant, or option to acquire any such share or other security;
(b) issue, deliver, sell, pledge or otherwise encumber any share of
its capital stock, any other voting security issued by Pantheon or any security
convertible into, or any right, warrant or option to acquire any such share or
voting security;
(c) amend its Articles of Incorporation, Bylaws or other comparable
organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to Pantheon;
(e) subject to a Lien or sell, lease or otherwise dispose of any of
its properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of Pantheon,
guarantee any debt security of another Person or enter into any "keep well" or
other agreement to maintain the financial condition of another Person, make any
loan, advance or capital contribution to, or investment in, any other Person, or
settle or compromise any material claim or litigation; or
(g) authorize any of, or commit or agree to take any of, the
foregoing actions.
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6.2 Access to Information. From the date hereof through the Effective
Time, Pantheon shall afford to Parent and Parent's accountants, counsel and
other representatives reasonable access during normal business hours (and at
such other times as the parties may mutually agree) upon reasonable prior notice
and approval of Pantheon, which shall not be unreasonably withheld, to its
properties, books, contracts, commitments, records and personnel and, during
such period, shall furnish promptly to Parent all information concerning its
business, properties and personnel as Parent may reasonably request. Parent and
its accountants, counsel and other representatives shall, in the exercise of the
rights described in this Section 6.2, not unduly interfere with the operation of
the business of Pantheon.
6.3 Filings; Tax Elections. Pantheon shall promptly provide Parent with
copies of all filings made by Pantheon with any Governmental Entity in
connection herewith and the transactions contemplated hereby. Pantheon shall,
before settling or compromising any material income tax liability of Pantheon,
consult with Parent and its advisors as to the positions and elections that will
be taken or made with respect to such matter.
6.4 Public Announcements. The parties agree that, except as may otherwise
be required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger. Any such disclosure shall be coordinated by Parent,
and none of the Pantheon Shareholders shall make any such disclosure without the
prior written consent of Parent.
6.5 Transfer and Gains Taxes and Certain Other Taxes and Expenses. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 State Tax Assumption. Pantheon shall, prior to the Effective Time,
have obtained a tax clearance certificate (the "Tax Clearance Certificate") from
the California Franchise Tax Board ("FTB") and, in that connection, shall
execute, and deliver to the FTB, a corporate assumption of tax liability ("State
Tax Assumption"). Sub agrees to enter into an Assumption Agreement with Kyle
Parent, substantially in the form of Exhibit "D" hereto, whereby Sub will assume
----------
the State Tax Assumption ("Assumption Agreement").
6.7 Options.
(a) Pantheon hereby covenants and agrees that at the Effective Time,
all of the Pantheon Stock Rights (all of which are set forth on Schedule 4.3(a)
---------------
hereto) shall have been properly canceled and, except for the right to receive
options or warrants to acquire Parent Stock described in Section 6.7(b) below,
all rights and obligations thereunder shall have been terminated.
(b) Parent hereby covenants and agrees that, at the Effective Time,
each of the holders of Pantheon Stock Rights shall receive options to purchase
the number of shares of validly
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issued, fully paid and nonassessable Parent Stock, at the exercise price per
share, as set forth on Schedule 6.7(b) hereto, all of which options ("Options")
---------------
shall have been issued pursuant to the IXL Holdings, Inc. 1996 Stock Option
Plan, as amended (the "Parent Stock Option Plan"). With respect to a Pantheon
option that was intended to qualify as an incentive stock option under Section
422 of the Code, the corresponding Option under the Parent Stock Option Plan
shall also be intended to qualify as an incentive stock option under Section 422
of the Code, and the option price, the number of shares purchasable pursuant to
such Option and the terms and conditions of exercise of such Option will be
determined in accordance with Section 424(a) of the Code. To the extent that the
underlying Pantheon options were vested, so will be the Parent Options. If any
Option recipient leaves Sub's (or Parent's ) employ prior to full vesting of his
or her Options in accordance with the terms of the award thereof, and therefore
the unvested portion of the Options is cancelled, then options on the number of
shares of Parent Stock subject to such cancellation, and corresponding as to
exercise price and vesting, will be issued to the Pantheon Shareholders, pro
rata in proportion to their respective ownership of Pantheon Stock, without the
payment of any additional consideration therefor.
6.8 Further Assurances. From time to time after the Effective Time, upon
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof.
6.9 Purchaser Representative. With respect to Colin Morris, (a) the
Purchaser representative shall furnish to Parent, to Parent's satisfaction, a
completed Purchaser Representative Questionnaire, substantially in the form of
Exhibit "F" hereto; and (b) Colin Morris shall furnish to Parent a signed
- -----------
Purchaser Acknowledgment in connection therewith.
6.10 Section 368 Reporting. Each of Parent, Surviving Corporation and the
Pantheon Shareholders will use their commercially reasonable best efforts to
cause the Merger to be treated as a tax free reorganization within the meaning
of Section 368(a) of the Code. Accordingly, to the extent permitted under
applicable tax laws, including statutory, regulatory and judicial authority,
each party will report the Merger as a reorganization within the meaning of
Section 368(a) of the Code in all federal, state and local tax returns after the
Effective Date.
6.11 Employment Terms. Each of the Pantheon Shareholders shall receive an
offer of employment, either in oral or written form, reasonably satisfactory to
such Pantheon Shareholder.
6.12 COBRA Continuation Coverage. Parent and Sub shall use commercially
reasonable best efforts to make available for purchase continuation health
coverage for those Pantheon employees who terminate employment and lose health
care coverage between September 2, 1998 and the date of the Merger. Payment for
any coverage made available under this Section shall be the sole responsibility
of the terminated Pantheon employee(s).
ARTICLE VII
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CONDITIONS PRECEDENT
7.1 Conditions to Obligation of Pantheon and the Pantheon Shareholders to
Effect the Merger. The obligations of Pantheon and the Pantheon Shareholders to
effect the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions:
(a) Parent and Sub shall have performed in all material respects
their respective agreements contained herein required to be performed at or
prior to the Effective Time, and the representations and warranties of Parent
and Sub contained herein shall be true when made and (except for representations
and warranties made as of a specified date, which need only be true as of such
date) at and as of the Effective Time as if made at and as of such time, except
as contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to Pantheon at the Closing, Parent's Closing Certificate, and (ii) the
appropriate officers of Sub shall have executed and delivered to Pantheon at the
Closing, Sub's Closing Certificate;
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
- ---------------
(d) Pantheon shall have received corporate certificates of good
standing for Parent and Sub, and a copy of the Certificate of Incorporation for
Parent and Sub, respectively, both as certified by the Secretary of State of
Delaware;
(e) there shall have been delivered to each of the Pantheon
Shareholders at the Closing, duly executed by Parent, an Agreement to be Bound
to the Registration Rights Agreement of Parent, dated as of Closing Date (the
"Agreement to be Bound to the Registration Rights Agreement"), in the form of
Exhibit "G" hereto;
- -----------
(f) Parent shall have executed and delivered at the Closing an Option
Agreement in the form of Exhibit "H" hereto for each of the Persons listed on
-----------
Schedule 6.7(b) hereto as receiving options to purchase Parent Stock at that
- ---------------
time;
(g) Pantheon shall have received, at the Closing, a duly executed
opinion of counsel to Parent and Sub, substantially in the form of Exhibit "I"
-----------
hereto;
(h) Pantheon shall have received the Tax Clearance Certificate from
the FTB, and Sub shall have executed and delivered at the Closing the Assumption
Agreement;
(i) Pantheon shall have received from Parent and Sub such other
documents as Pantheon's counsel shall have reasonably requested, in form and
substance reasonably satisfactory to Pantheon's counsel; and
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<PAGE>
(j) Since the date hereof and until the Closing Date, there shall not
have occurred any event or condition of any character that has adversely
affected in any material respect or could reasonably be expected to affect
adversely in any material respect (i) the business or business prospects or the
financial condition of Parent and its Subsidiaries, taken as a whole, or (ii)
Sub's ability to operate the business of Pantheon.
7.2 Conditions to Obligations of Parent and Sub to Effect the Merger. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) Pantheon and the Pantheon Shareholders shall have performed in
all material respects their respective agreements contained herein required to
be performed at or prior to the Effective Time, and the representations and
warranties of Pantheon and the Pantheon Shareholders contained herein shall be
true when made and (except for representations and warranties made as of a
specified date, which need only be true as of such date) at and as of the
Effective Time as if made at and as of such time, except as contemplated hereby;
(b) the appropriate officers of Pantheon shall have executed and
delivered to Parent at the Closing, Pantheon's Closing Certificate.
(c) Pantheon and the Pantheon Shareholders shall have obtained or
caused to be obtained all of the Consents, if any, listed on Schedule 7.2(c)
---------------
hereto;
(d) there shall have been delivered to Parent at the Closing, duly
executed by each of the Pantheon Shareholders, (i) an Agreement to be Bound to
the Stockholders' Agreement, in the form of Exhibit "J" hereto, including for
-----------
each of the Pantheon Shareholders who is married an executed Spousal Waiver,
substantially in the form attached thereto; and (ii) an Agreement to be Bound to
the Registration Rights Agreement;
(e) Parent shall have received a corporate certificate of good
standing for Pantheon, and a copy of the Articles of Incorporation of Pantheon,
both as certified by the Secretary of State of California;
(f) as of the date three business days prior to the Closing Date the
Pantheon shall be $-0-;
(g) Parent shall have received, at the Closing, an Option Agreement
executed by each Option recipient;
(h) Parent shall have received, at the Closing, a duly executed
opinion of counsel to Pantheon and the Pantheon Shareholders, substantially in
the form of Exhibit "K" hereto;
-----------
(i) Parent shall have received from Pantheon the Tax Clearance
Certificate, indicating that no taxes are owed by Pantheon to state taxing
authorities in the State of California;
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<PAGE>
(j) Pantheon shall have furnished evidence to Parent's satisfaction
of performance under Sections 6.7(a), 6.9 and 6.11 hereof, and Parent shall have
received from Pantheon or the Pantheon Shareholders, as the case may be, such
other documents as Parent's counsel shall have reasonably requested, in form and
substance reasonably satisfactory to Parent's counsel; and
(k) Parent shall have received evidence satisfactory to it that at
the Closing the assets and properties used in the Pantheon Business are free and
clear of all Liens other than Permitted Liens (as hereinafter defined), and that
all Pantheon Shareholders are accredited investors in accordance with Section
4.31(a) hereof.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Parent.
(a) Parent shall indemnify and hold the Pantheon Shareholders and
Pantheon's directors, officers and employees (collectively, the "Pantheon
Indemnified Parties") harmless from and against, and agree promptly to defend
each of the Pantheon Indemnified Parties from and reimburse each of the Pantheon
Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including reasonable attorney
fees and other legal costs and expenses) (collectively, a "Pantheon Loss") that
any of the Pantheon Indemnified Parties may at any time suffer or incur, or
become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Parent or Sub at the Closing in accordance
with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform, satisfy
and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations hereunder or under any of the documents and materials
delivered by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary,
Parent shall not have any liability under Section 8.1(a)(i) above (i) unless the
aggregate of all Pantheon Losses for which Parent would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $100,000, and then
only to the extent of such excess, (ii) for amounts in excess of $3,150,000 in
the aggregate, and (iii) unless the Pantheon Shareholders have asserted a claim
with respect to the matters set forth in Section 8.1(a)(i), or 8.1(a)(iii) to
the extent applicable to Section 8.1(a)(i),
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within two years of the Effective Time. Notwithstanding any implication to the
contrary contained herein, the parties acknowledge and agree that a decrease in
the value of Parent Stock would not, by itself, constitute a Pantheon Loss,
unless and to the extent a decrease in the value of Parent Stock has been
demonstrated to be as a result of any event described in Sections 8.1(a)(i),
(ii) or (iii) above.
8.2 Indemnification by the Pantheon Shareholders.
(a) The Pantheon Shareholders, jointly and severally, shall indemnify
and hold Parent, Sub, Surviving Corporation and their respective shareholders,
directors, officers and employees (collectively, the "Parent Indemnified
Parties") harmless from and against, and agree to defend promptly each of the
Parent Indemnified Parties from and reimburse each of the Parent Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorneys' fees and
other legal costs and expenses) (collectively, a "Parent Loss") that any of the
Parent Indemnified Parties may at any time suffer or incur, or become subject
to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Pantheon or the Pantheon Shareholders in or pursuant hereto,
or in any instrument certificate or affidavit delivered by any of the same at
the Closing in accordance with the provisions hereof;
(ii) any failure by Pantheon or any of the Pantheon Shareholders
to carry out, perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations hereunder or under any of
the documents and materials delivered by Pantheon pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in
any way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above, none of the Pantheon Shareholders
shall have any liability under Section 8.2(a)(i) above (i) unless the aggregate
of all Parent Losses for which the Pantheon Shareholders would be liable but for
this sentence exceeds, on a cumulative basis, an amount equal to $100,000, and
then only to the extent of such excess, (ii) for amounts in excess of $3,150,000
in the aggregate, and (iii) unless Parent has asserted a claim with respect to
the matters set forth in Sections 8.2(a)(i), or 8.2(a)(iii) to the extent
applicable to Section 8.2(a)(i) within two years of the Effective Time, except
with respect to the matters arising under Sections 4.18, 4.19, 4.20 or 4.24
hereof, in which event Parent must have asserted a claim within the applicable
statute of limitations. Notwithstanding any implication to the contrary
contained herein, the parties acknowledge and agree that a decrease in the value
of Parent Stock would not, by itself, constitute a Parent Loss, unless and to
the extent a decrease in the value of Parent Stock has been demonstrated to be
as a result of any event described in Sections 8.2(a)(i), (ii) or (iii) above.
(c) Notwithstanding the above, except for claims for indemnification
based on (i) fraud, (ii) intentional misrepresentation or (iii) any breach of
any representation made in Section
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<PAGE>
4.3 hereof or otherwise with respect to title to any Pantheon Stock or any
Pantheon Stock Rights, the liability of any Pantheon Shareholder under Section
8.2(a) hereof will not exceed such Pantheon Shareholder's respective portion of
the merger consideration receivable hereunder, as determined by multiplying by
$10 the number of shares of Parent Stock issued to them pursuant to Section
3.1(b) hereof.
8.3 Notification of Claims; Election to Defend
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder. Subject to the
Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section 8.1 or 8.2 hereof, as the case may
be, the Indemnifying Party shall have the right, at its sole cost and expense,
to employ counsel of its own choosing to defend any such Claim asserted against
the Indemnified Party. Notwithstanding anything to the contrary in the preceding
sentence, if the Indemnified Party (i) reasonably believes that its interests
with respect to a Claim (or any material portion thereof) are in conflict with
the interests of the Indemnifying Party with respect to such Claim (or portion
thereof), and (ii) promptly notifies the Indemnifying Party, in writing, of the
nature of such conflict, then the Indemnified Party shall be entitled to choose,
at the sole cost and expense of the Indemnifying Party, independent counsel to
defend such Claim (or the conflicting portion thereof). The Indemnified Party
shall have the right to participate in the defense of any Claim at its own
expense (except to the extent provided in the preceding sentence), but the
Indemnifying Party shall retain control over such litigation (except as provided
in the preceding sentence). The Indemnifying Party shall notify the Indemnified
Party in writing, as promptly as possible (but in any case before the due date
for the answer or response to a Claim) after receipt of the notice of Claim
given by the Indemnified Party to the Indemnifying Party under Section 8.3(a)
hereof, of its election to defend in good faith any such third party Claim. For
so long as the Indemnifying Party is defending in good faith any such Claim
asserted by a third party against the Indemnified Party, the Indemnified Party
shall not settle or compromise such Claim without the prior written consent of
the Indemnifying Party. The Indemnified Party shall cooperate with the
Indemnifying Party in connection with any such defense and shall make available
to the Indemnifying Party or its agents all records and other materials in the
Indemnified Party's possession reasonably required by it for its use in
contesting any third party Claim; provided, however, that the Indemnifying Party
shall have agreed, in writing, to keep such records and other materials
confidential except (i) to the extent required for defense of
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the relevant Claim, or (ii) as required by law or court order. Whether or not
the Indemnifying Party elects to defend any such Claim, the Indemnified Party
shall have no obligations to do so. Within 30 days after a final determination
(including a settlement) has been reached with respect to any Claim contested
pursuant to this Section 8.3(b), the Indemnifying Party shall satisfy its
obligations hereunder with respect thereto. Any amount paid thereafter shall
include interest thereon for the period commencing at the end of such 30-day
period and ending on the actual date of payment, at a rate of 15% per annum, or,
if lower, at the highest rate of interest permitted by applicable law at the
time of such payment.
8.4 Payment. Any Pantheon Indemnifying Party may, at such Indemnifying
Party's option, pay all or part of any amount due under this Article VIII by
delivery of shares of Parent Stock having a value equal to the amount due (to
the extent that such Indemnifying Party owns sufficient shares of Parent Stock).
For the purpose of this provision, the value of Parent Stock shall be deemed to
be $10 per share.
8.5 Further Agreement Regarding Indemnification. After the Effective Time
the sole and exclusive remedy of any Indemnified Party for any breach of any
representation, warranty, covenant or agreement herein (including any schedule
hereto) shall be the indemnification provisions contained in this Article VIII.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Merger Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of Parent and Pantheon;
(b) by Pantheon, upon a material breach hereof on the part of Parent
or Sub which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by September 15, 1998;
(c) by Parent, upon a material breach hereof on the part of Pantheon
or any of the Pantheon Shareholders which has not been cured and which would
cause any condition set forth in Section 7.2 hereof to be incapable of being
satisfied by September 15, 1998;
(d) by Parent or Pantheon if any court of competent jurisdiction
shall have issued, enacted, entered, promulgated or enforced any order,
judgment, decree, injunction or ruling which restrains, enjoins or otherwise
prohibits the Merger and such order, judgment, decree, injunction or ruling
shall have become final and nonappealable; or
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(e) by either Parent or Pantheon if the Merger shall not have been
consummated on or before September 15, 1998 (provided the terminating party is
not otherwise in material breach of its representations, warranties or
obligations hereunder).
9.2 Fees and Expenses.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the Surviving Corporation; provided, however, that the Pantheon Shareholders
shall pay all fees and expenses (including agents, counsel and other advisors)
of Pantheon and themselves that are not solely and directly related to the
Merger (any other such fees, to the extent unpaid by Pantheon, shall be deducted
as Debt from the merger consideration in accordance with the formula in Section
3.1).
(b) If the Merger is not consummated for a reason other than the
willful and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
(c) If the Merger is not consummated because of a willful and
material breach hereof by any party, the nonbreaching party or parties shall be
entitled to pursue all legal and equitable remedies against the breaching party
for such breach including specific performance and all fees and expenses
incurred by the nonbreaching party or parties in connection with enforcing its
or their rights hereunder with respect to such breach shall be paid by the
breaching party.
9.3 Amendment. This Merger Agreement may be amended by Parent, Sub,
Pantheon and the Pantheon Shareholders at any time before or after approval
hereof by the Pantheon Shareholders, but, after such approval, no amendment
shall be made which (i) changes the form or decreases the amount of the
consideration to be received in the Merger, (ii) in any way materially adversely
affects the rights of the Pantheon Shareholders, or (iii) under applicable law
would require approval of the Pantheon Shareholders, in any such case referred
to in clauses (i), (ii) and (iii), without the further approval of the Pantheon
Shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of the parties hereto, provided that after the date
hereof, any such amendment must be signed by the former holders of a majority of
the Pantheon Stock.
9.4 Waiver. At any time prior to the Effective Time, the parties hereto
may, to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
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ARTICLE X
GENERAL PROVISIONS
10.1 Survival; Recourse. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 10.9 and 10.10 hereof, shall survive the
Merger indefinitely (except to the extent a shorter period of time is explicitly
specified therein) and (ii) the representations and warranties made in Articles
IV and V hereof shall survive the Merger, and shall survive any independent
investigation by the parties, and any dissolution, merger or consolidation of
Pantheon or Parent, and shall bind the legal representatives, assigns and
successors of Pantheon, the Pantheon Shareholders and Parent, for a period of
two years after the Effective Time (other than the representations and
warranties contained in Sections 4.18, 4.19, 4.20 and 4.24 hereof, which shall
survive for the applicable statute of limitations).
10.2 Notices. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in Person, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
If to Pantheon: Pantheon Interactive, Inc.
2350 Mission College Blvd.
Suite 290
Santa Clara, CA 95054
Attention: Mr. Kip Parent, President
Telephone: (408) 982-3888
Telecopy: (408) 982-3883
With a copy to: General Counsel Associates LLP
1891 Landings Drive
Mountain View, CA 94043
Attention: Anne L. Neeter, Esq.
Telephone: (650) 428-3900
Telecopy: (650) 428-3901
If to the Pantheon To the address listed under the signature
Shareholders: line of the applicable Pantheon Shareholder
If to Parent or Sub: IXL Holdings, Inc.
1888 Emery St., 2nd Floor
Atlanta, GA 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
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With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Rd., Ste. 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Ave., 24th Floor
New York, NY 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 Entire Agreement. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and instruments
referred to herein and to be delivered pursuant hereto constitute the entire
agreement between the parties pertaining to the subject matter hereof, and
supersede all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
except for the non-disclosure letter agreement between Parent and Pantheon dated
as of June 10, 1998. There are no other representations or warranties, whether
written or oral, between the parties in connection the subject matter hereof,
except as expressly set forth herein.
10.4 Assignments; Parties in Interest. Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests, and
obligations of Sub hereunder may be assigned to any direct wholly owned Delaware
subsidiary of Parent without such prior consent. Subject to the preceding
sentence, this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing herein, express or implied, is intended to or
shall confer upon any Person not a party hereto any right, benefit or remedy of
any nature whatsoever under or by reason hereof, except as otherwise provided
herein.
10.5 Governing Law. This Agreement, except to the extent that the GCL or
the DGCL is mandatorily applicable to the Merger, or to the rights of the
Pantheon Shareholders or the other parties hereto with respect to the Merger,
shall be governed in all respects by the laws of the State of Georgia (without
giving effect to the provisions thereof relating to conflicts of law).
10.6 Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation hereof.
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10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 Severability. If any term or other provision hereof is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions hereof shall nevertheless remain in full force
and effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.9 Post-Closing Access. For a period of four years after the Closing
Date, the Pantheon Shareholders and their agents and representatives shall have
reasonable access to the books and records of the Pantheon Business.
10.10 Post-Closing Notice. To the extent the Surviving Corporation
receives written notice of any event or circumstance that materially affects any
of the Pantheon Shareholders, the Surviving Corporation shall promptly notify
the affected Pantheon Shareholder of such matter, information, or event and
shall provide them with copies of all relevant documentation or correspondence
in connection thereto.
10.11 Certain Definitions. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the Pantheon
Real Property or interfering with the ordinary conduct of any of the Pantheon
Business; and (e) those Liens listed on Schedule 10.11 hereto;
--------------
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of Pantheon" shall refer to the knowledge,
subject to clause (i) above, of any of the Pantheon Shareholders, and, as
applicable to the Pantheon Shareholders, will be understood to be limited also
"to the knowledge of the Pantheon Shareholders"; and
-33-
<PAGE>
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of
which Parent (either alone or through or together with any other Subsidiary)
owns, directly or indirectly, stock or other equity interests the holders of
which are entitled to more than 50% of the vote for the election of the board of
directors or other governing body of such Entity (including Sub); provided,
however, that with respect to the Parent, the terms "Subsidiary" and
"Subsidiaries" shall not include Pantheon or University Netcasting, Inc.
- SIGNATURES ON THE FOLLOWING PAGE -
-34-
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and Pantheon have caused this Agreement to
be signed and delivered by their respective duly authorized officers, and each
Pantheon Shareholder has signed and delivered this Agreement, all as of the date
first written above.
"Pantheon"
Pantheon Interactive, Inc., a California corporation
By: /s/ Kyle Parent
-----------------------------------------------
Title: President
And By: /s/ Jacob McGowan
--------------------------------------------
Title: Secretary
"Parent"
IXL Holdings, Inc., a Delaware corporation
By: /s/ James V. Sandry
------------------------------------------------
Title: Executive Vice President
"Sub"
iXL-San Francisco, Inc., a Delaware corporation
By: /s/ James V. Sandry
------------------------------------------------
Title: Executive Vice President
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
-35-
<PAGE>
"Pantheon Shareholders"
/s/ Kyle Parent
---------------------------------------
Kyle Parent
Address: 924 Laurelwood Drive
San Mateo, CA 94403
/s/ Jacob McGowan
---------------------------------------
Jacob McGowan
Address: 1890 Kay Drive
San Jose, CA 95124
/s/ Colin Morris
---------------------------------------
Colin Morris
Address: 34258 Mimosa Terrace
Fremont, CA 94555
-36-
<PAGE>
EXHIBITS
--------
Sub's Closing Certificate..................................... Exhibit A
Pantheon's Closing Certificate................................ Exhibit B
Parent's Closing Certificate.................................. Exhibit C
Assumption Agreement.......................................... Exhibit D
Purchaser Representative Questionnaire and Acknowledgement.... Exhibit F
Agreement to be Bound to Registration Rights Agreement........ Exhibit G
Option Agreement.............................................. Exhibit H
Opinion of Counsel to Parent and Sub.......................... Exhibit I
Agreement to be Bound to Stockholders' Agreement.............. Exhibit J
Opinion of Counsel to Pantheon................................ Exhibit K
<PAGE>
SCHEDULE 4.3(A)
---------------
CAPITALIZATION OF PANTHEON
SCHEDULE 4.3(B)
---------------
LIENS ON PANTHEON STOCK
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PANTHEON
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF PANTHEON
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF PANTHEON
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF PANTHEON
SCHEDULE 4.10
-------------
BAD EQUIPMENT OF PANTHEON
<PAGE>
SCHEDULE 4.11
-------------
INTELLECTUAL PROPERTY AND MATERIAL COMPUTER SOFTWARE OF PANTHEON
SCHEDULE 4.12
-------------
LIENS ON AND LOCATION OF REAL PROPERTY OF PANTHEON
SCHEDULE 4.13
-------------
LEASES OF PANTHEON
SCHEDULE 4.14
-------------
CONTRACTS OF PANTHEON
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF PANTHEON
SCHEDULE 4.16
-------------
PAYROLL INFORMATION OF PANTHEON
SCHEDULE 4.17
-------------
LITIGATION
<PAGE>
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF PANTHEON
SCHEDULE 4.19
-------------
ERISA ISSUES OF PANTHEON
SCHEDULE 4.20
-------------
EXCEPTIONS TO TAXES OF PANTHEON BEING TIMELY FILED
SCHEDULE 4.21
-------------
PANTHEON PERMITS
SCHEDULE 4.23
-------------
PANTHEON BROKERS
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS, COMPETITORS
SCHEDULE 4.28
-------------
INSURANCE OF PANTHEON
<PAGE>
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
OUTSTANDING OBLIGATIONS TO ISSUE OPTIONS,
WARRANTS OR OTHER PARENT STOCK RIGHTS
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES
<PAGE>
SCHEDULE 6.7(B)
---------------
PARENT OPTIONS TO HOLDERS OF PANTHEON STOCK RIGHTS
SCHEDULE 7.1(C)
---------------
PARENT CONSENTS
SCHEDULE 7.2(C)
---------------
PANTHEON AND PANTHEON SHAREHOLDERS CONSENTS
SCHEDULE 10.11
--------------
PERMITTED LIENS OF PANTHEON
<PAGE>
EXHIBIT 2.30
AGREEMENT AND PLAN OF MERGER
by and among
IXL HOLDINGS, INC.,
iXL-CHICAGO, INC.,
TWO-WAY COMMUNICATIONS, L.L.C.
AND
THE TWC MEMBERS
Dated as of September 18, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
this 18th day of September, 1998, by and among Two-Way Communications, L.L.C.,
an Illinois limited liability company ("TWC"), IXL Holdings, Inc., a Delaware
corporation ("Parent"), iXL-Chicago, Inc., a Delaware corporation, or its
successors or assigns ("Sub"), and the members of TWC as listed on the signature
page hereto (the "TWC Members").
R E C I T A L S:
- - - - - - - -
A. TWC is engaged in the business of developing internet sites and furnishing
internet services, including website design and maintenance (the "TWC
Business").
B. TWC and Sub each desire to merge their respective companies and business
operations, all on the terms and subject to the conditions set forth herein (the
"Merger").
C. The TWC Members collectively own 100% of the issued and outstanding
membership interests of TWC (the "TWC Membership Interests").
D. The Board of Directors of Parent and Sub, the Manager and members of TWC
and the shareholder of Sub have approved the Merger, upon the terms and subject
to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal income
tax purposes, as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits, conditions
and agreements set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is hereby
agreed as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, at the
Effective Time (as defined in Section 1.3 hereof), (a) TWC shall be merged with
and into Sub, (b) the separate existence of TWC shall cease, and (c) Sub shall
continue as the surviving corporation in the Merger under the laws of the State
of Delaware under the name iXL-Chicago, Inc. For purposes of this Agreement,
Sub shall be referred to, for the period commencing on the Effective Time, as
the "Surviving Corporation."
1.2 Closing and Closing Date. Unless this Merger Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section
<PAGE>
9.1 hereof, and subject to the satisfaction or waiver of the conditions set
forth in Article VII hereof, the closing of the Merger (the "Closing") will take
place as promptly as practicable (and in any event within five business days
after satisfaction of the conditions set forth in Sections 7.1 and 7.2 hereof)
(the "Closing Date") at such date and place as is agreed to by the parties.
1.3 Effective Time of the Merger. At the Closing, the parties hereto shall
cause (a) a certificate of merger (the "Delaware Certificate of Merger") to be
filed with the office of the Secretary of State of Delaware in accordance with
the provisions of the Delaware General Corporation Law, as amended (the "DGCL");
and (b) Articles of Merger (the "Illinois Articles of Merger"; collectively with
the Delaware Certificate of Merger, the "Certificate of Merger") to be filed
with the office of the Secretary of State of Illinois in accordance with the
provisions of the Illinois Limited Liability Company Act (the "ILLCA"). When
used herein, the term "Effective Time" shall mean the time when the Certificate
of Merger has been accepted for filing by the Secretary of State of Delaware and
Illinois Secretary of State, respectively, or such time as otherwise specified
therein.
1.4 Effect of the Merger. The Merger shall, from and after the Effective Time,
have all the effects provided by the DGCL and the ILLCA. If at any time after
the Effective Time, any further action is deemed necessary or desirable to carry
out the purposes of this Agreement, the parties hereto agree that the Surviving
Corporation and its proper officers and directors shall be authorized to take,
and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of Sub, a
form of which is attached to a closing certificate and incumbency certificate,
substantially in the form of Exhibit "A-2" hereto ("Sub's Closing Certificate"),
-------------
shall be the Certificate of Incorporation of the Surviving Corporation after the
Effective Time, until thereafter changed or amended as provided therein or by
applicable law.
2.2 Bylaws. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is attached to the Sub's Closing Certificate.
2.3 Board of Directors; Officers. The Board of Directors and officers of Sub
immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified.
2
<PAGE>
ARTICLE III
CONVERSION OF MEMBERSHIP INTERESTS
3.1 Merger Consideration. As of the Effective Time:
(a) Each one percent (1.0%) of the TWC Membership Interests owned by the
TWC Members (other than any Dissenting Membership Interests, as defined in
Section 3.2 hereof) shall, upon delivery at Closing of an Acknowledgement of
Delivery of Membership Interest substantially in the form of Exhibit "I"
-----------
hereto, be converted into, and become exchangeable for a number of shares of
validly issued, fully paid and nonassessable Class B Common Stock of Parent,
$.01 par value (the "Parent Stock") and/or an amount of cash (as provided below)
based on the following equation:
TC%= 12 x 1.75 x R + $273,555 - D
--------------
7
--------------------------------
100
where:
TC%= the total consideration per percentage ownership, payable
(as provided below) in either shares of Parent Stock
(valued, as of the Closing, at $10 per share) and/or cash,
for which each one percent of TWC Membership Interests
shall be exchanged pursuant to the Merger
R= the aggregate gross revenues of TWC for the seven-month
period ended July 31, 1998, as determined in accordance
with generally accepted accounting principles ("GAAP") as
consistently applied by TWC prior to the date hereof
D= (a) any outstanding liabilities of TWC (the "TWC Debt"),
including debt for borrowed money and accrued interest
thereon, capital leases, accounts payable, and accrued
expenses, but excluding deferred-revenue liabilities to
the extent such deferred revenues are also included in
accounts receivable, minus (b) the sum of TWC's cash and
accounts receivable less than 90 days' old (from invoice
date), all to be determined as of three business days
prior to the Closing Date and all as determined in
accordance with GAAP.
(i) As to Corey Conn, the total consideration per percentage ownership,
multiplied by his percentage of TWC Membership Interests, shall be
payable in cash.
(ii) As to the other TWC Members, all of whom are listed on Schedule 3.1(a)
---------------
hereto, the
3
<PAGE>
total consideration per percentage ownership, multiplied
by their respective percentages of TWC Membership Interests, shall be
payable as follows:
(A) Cash portion = $4,200; and
(B) Stock portion = the balance of TC%.
(b) Each issued and outstanding share of common stock of Sub shall, by
virtue of the Merger and without any action on the part of any shareholder,
member, officer or director of TWC or Sub, be converted into and become one
fully paid and nonassessable share of common stock of the Surviving Corporation.
3.2 Dissenting Membership Interests. Notwithstanding any provision
hereof to the contrary, any TWC Membership Interests held by a Dissenting Member
(as hereinafter defined) shall not be converted as described in Section 3.1
hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Member pursuant to the DGCL or ILLCA, as
applicable; provided, however, that if a Dissenting Member shall fail to perfect
his demand, withdraw his demand or otherwise lose his right for appraisal under
the terms of the DGCL or ILLCA, as applicable, then the TWC Membership Interests
held by such Dissenting Member (the "Dissenting Membership Interests") shall be
deemed to be converted as of the Effective Time in accordance with the
provisions of Section 3.1 hereof. TWC shall not voluntarily make any payment
with respect to, settle, or offer to settle or otherwise negotiate, any such
demands. All amounts paid to Dissenting Members shall be paid without interest
thereon (to the extent permitted by applicable law) by the Surviving
Corporation. For purposes hereof, the term "Dissenting Member" shall mean a TWC
Member who (a) objects to the Merger; and (b) complies with the applicable
provisions, if any, of the DGCL or ILLCA concerning dissenter's rights.
3.3 No Further Rights. From and after the Effective Time, holders of the
TWC Membership Interests shall cease to have any rights as members of TWC,
except as provided herein or by applicable law.
3.4 Closing of TWC's Transfer Books. At the Effective Time, the membership
interest transfer books of TWC shall be closed and no transfer of TWC Membership
Interests shall be made thereafter. If, after the Effective Time, any
instruments evidencing ownership of TWC Membership Interests are presented to
Parent or the Surviving Corporation, they shall be canceled and exchanged for a
consideration as set forth in Section 3.1 hereof, subject to applicable law in
the case of Dissenting Members.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TWC
4
<PAGE>
TWC, Robert Gear, Paul Bryant, Geoff Melick and Corey Conn, jointly and
severally, and in addition the other TWC Members, severally but not jointly,
represent and warrant to Parent and Sub as follows, which representations and
warranties shall survive the Closing in accordance with Section 10.1 hereof.
4.1 Organization and Qualification. TWC is a limited liability company duly
organized and validly existing under the laws of the State of Illinois. TWC has
the requisite power and authority to carry on the TWC Business as it is now
being conducted and is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not have a material
adverse effect on TWC or the TWC Business. Complete and correct copies of the
Articles of Organization and Operating Agreement of TWC as in effect on the date
hereof are attached to a closing certificate and incumbency certificate,
substantially in the form of Exhibit "E" hereto ("TWC's Closing Certificate").
-----------
The minute book of TWC, a true and complete copy of which has been delivered to
Parent, (a) accurately reflects all action taken by the Manager and members of
TWC at meetings, as the case may be; and (b) contains true and complete copies,
or originals, of the respective minutes of all meetings or consent actions of
the members.
4.2 Authority. TWC has the necessary power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery hereof and the consummation of the transactions
contemplated hereby by TWC have been duly and validly authorized and approved by
TWC's Members, and no other member proceedings on the part of TWC, the Manager
or the TWC Members is necessary to authorize or approve this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by TWC and each TWC Member, and assuming the due
authorization, execution and delivery by Parent and Sub, constitutes the valid
and binding obligation of TWC and each TWC Member, enforceable against TWC and
each TWC Member in accordance with its terms subject, in each case, to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
application relating to or affecting creditors' rights and to general principles
of equity, including principles of commercial reasonableness, good faith and
fair dealing.
4.3 Capitalization.
(a) All of the authorized membership interests of TWC are validly issued
and outstanding, fully paid and nonassessable. All of the membership interests
of TWC were issued in accordance with applicable federal and state securities
laws. Except as set forth on Schedule 4.3(a) hereto, there are no options,
---------------
warrants, calls, convertible notes, agreements, commitments or other rights
presently outstanding that would obligate TWC or any of the TWC Members to
issue, deliver or sell additional membership interests, or to grant, extend or
enter into any such option, warrant, call, convertible note, agreement,
commitment or other right. In addition to the foregoing, as of the date hereof,
TWC has no bonds, debentures, notes or other indebtedness issued or outstanding
that have voting rights in TWC. Schedule 4.3(a) sets forth a list of (i) all
---------------
holders of record of (A) TWC Membership Interests, and (B) any options,
warrants, convertible notes or other rights to purchase
5
<PAGE>
membership interests of TWC (collectively, "TWC Membership Interests Rights");
and (ii) the membership interests held by each TWC Member.
(b) Except as set forth on Schedule 4.3(b) hereto, each TWC Member
---------------
represents and warrants that the TWC Membership Interests held by such TWC
Member are free and clear of any lien, charge, security interest, pledge,
option, right of first refusal, voting proxy or other voting agreement, or
encumbrance of any kind or nature other than restrictions on transfer imposed by
federal and state securities laws (any of the foregoing, a "Lien").
4.4 Subsidiaries. TWC has no subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
- ------------
TWC or the TWC Members, (ii) the consummation by TWC and the TWC Members of the
transactions contemplated hereby or (iii) compliance by TWC with any of the
provisions hereof will:
(a) conflict with or violate the Articles of Organization or Operating
Agreement of TWC;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to TWC or any of the TWC Members, or by
which TWC or any of its properties or assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which TWC is a party or by which TWC or any
of its properties or assets may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of TWC; or
(e) require any consent, waiver, license, approval, authorization, order,
permit, registration or filing with, or notification to (any of the foregoing
being a "Consent"), (i) any government or subdivision thereof, whether domestic
or foreign, or any administrative, governmental, or regulatory authority,
agency, commission, court, tribunal or body, whether domestic, foreign or
multinational (any of the foregoing, a "Governmental Entity"), except for the
filing of the Certificate of Merger pursuant to the DGCL and the ILLCA; or (ii)
any other individual or Entity (collectively, a "Person").
6
<PAGE>
4.6 Financial Statements. TWC has heretofore furnished Parent with a true
and complete copy of (a) the unaudited financial statements of TWC for the years
ended December 31, 1995, 1996 and 1997; and (b) the unaudited financial
statements of TWC for the six-month period ended June 30, 1998 (all of the
foregoing collectively herein referred to as the "TWC Financial Statements").
Except as disclosed therein, the TWC Financial Statements have been prepared in
accordance with GAAP (except for the absence of footnotes and normal year end
adjustments in the case of the TWC Financial Statements for the period ended
June 30, 1998) consistently followed throughout the period indicated, and
present fairly, in all material respects, the financial position and operating
results of TWC as of the dates, and during the periods, indicated therein.
4.7 Absence of Changes. Except as provided in Schedule 4.7 hereto and except
------------
as contemplated hereby, since June 30, 1998 (a) TWC has not entered into any
transaction that was not in the ordinary course of business; (b) except for
sales of services and licenses of software in the ordinary course of business,
there has been no sale, assignment, transfer, mortgage, pledge, encumbrance or
lease of any material asset or property of TWC; (c) there has been (i) no
declaration or payment of a dividend, or any other declaration, payment or
distribution of any type or nature to any member of TWC in respect of its
membership interests, whether in cash or property, and (ii) no purchase or
redemption of any membership interest of TWC; (d) there has been no declaration,
payment, or commitment for the payment, by TWC, of a bonus or other additional
salary, compensation, or benefit to any employee of TWC that was not in the
ordinary course of business, except for normal year-end bonuses paid in the
ordinary course of business; (e) there has been no release, compromise, waiver
or cancellation of any debt to or claim by TWC, or waiver of any right of TWC;
(f) there have been no capital expenditures in excess of $10,000 for any single
item, or $25,000 in the aggregate; (g) there has been no change in accounting
methods or practices or revaluation of any asset of TWC (other than TWC Accounts
Receivable as defined in Section 4.26 hereof written down in the ordinary course
of business and not in excess of $10,000 for any single TWC Accounts Receivable,
or $25,000 in the aggregate); (h) there has been no material damage, or
destruction to, or loss of, physical property (whether or not covered by
insurance) adversely affecting the TWC Business or the operations of TWC; (i)
there has been no loan by TWC, or guaranty by TWC of any loan, to any employee
of TWC; (j) TWC has not ceased to transact business with any customer that, as
of the date of such cessation, represented more than 5% of the annual gross
revenues of TWC; (k) there has been no termination or resignation of any key
employee or officer of TWC, and to the knowledge of TWC, no such termination or
resignation is threatened; (l) there has been no amendment or termination of any
material oral or written contract, agreement or license related to the TWC
Business, to which TWC is a party or by which it is bound, except in the
ordinary course of business, or except as expressly contemplated hereby; (m) TWC
has not failed to satisfy any of its debts, obligations or liabilities related
to the TWC Business or the assets of TWC as the same become due and owing
(except for TWC Accounts Payable (as defined in Section 4.27 hereof) payable in
accordance with past practices and in the ordinary course of business); (n)
there has been no agreement or commitment by TWC to do any of the foregoing; and
(o) there has been no other event or condition of any character pertaining to
and materially and adversely affecting the assets, business or financial
condition of TWC.
7
<PAGE>
4.8 Undisclosed Liabilities. Except as set forth on Schedule 4.8 hereto, TWC
------------
has no debt, liability or obligation of any kind, whether accrued, absolute or
otherwise, including any liability or obligation on account of taxes or any
governmental charge or penalty, interest or fine, except (a) liabilities
incurred in the ordinary course of business after June 30, 1998, that would not,
whether individually or in the aggregate, have a material adverse impact on the
business or financial condition of TWC; (b) liabilities reflected on the TWC
Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
4.9 Title to Properties. Except as set forth on Schedule 4.9 hereto, TWC has
------------
good and marketable title to all tangible property and assets used in the TWC
Business, and good and valid title to its leasehold interests, in each case,
free and clear of any and all Liens other than Permitted Liens (as defined in
Section 10.11 hereof).
4.10 Equipment. TWC has heretofore furnished Parent with a true and correct
list of all items of tangible personal property (including computer hardware)
necessary for or used in the operation of the TWC Business in the manner in
which it has been and is now operated by TWC ("the TWC Equipment"), except for
personal property having a net book value of less than $1,000. Except as set
forth on Schedule 4.10 hereto, each material item of TWC Equipment is in good
-------------
condition and repair, ordinary wear and tear excepted.
4.11 Intellectual Property.
(a) TWC has heretofore furnished Parent with a true and complete list of
all material proprietary technology, patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights, and copyrights (and all pending applications for any of the foregoing)
used by TWC in the conduct of the TWC Business (together with trade secrets and
know how used in the conduct of the TWC Business, the "TWC Intellectual Property
Rights"). TWC owns, or is validly licensed or otherwise has the right to use or
exploit, as currently used or exploited, all of the TWC Intellectual Property
Rights, free of any obligation to make any payment (whether of a royalty,
license fee, compensation or otherwise). No claims are pending or, to the
knowledge of TWC, threatened, that TWC is infringing or otherwise adversely
affecting the rights of any Person with regard to any TWC Intellectual Property
Right. To TWC's knowledge, no Person is infringing the rights of TWC with
respect to any TWC Intellectual Property Right. Neither TWC nor, to TWC's
knowledge, any employee, agent or independent contractor of TWC, in connection
with the performance of such Person's services with TWC, has used, appropriated
or disclosed, directly or indirectly, any trade secret or other proprietary or
confidential information of any other Person, or otherwise violated any
confidential relationship with any other Person.
(b) TWC has heretofore furnished Parent with a true and complete list of
all material computer software used by TWC in the conduct of the TWC Business
(the "TWC Software"). TWC currently licenses, or otherwise has the legal right
to use, all of the TWC Software (including any upgrade, alteration or
enhancement with respect thereto), and all of the TWC Software is being used in
compliance with any applicable license or other agreement.
8
<PAGE>
4.12 Real Property. Except as set forth on Schedule 4.12 hereto:
-------------
(a) TWC has a good and valid leasehold interest in all real property
(including all buildings, improvements and fixtures thereon) used in the
operation of the TWC Business (the "TWC Real Property"). TWC owns no real
property. Except for Permitted Liens, and for the items set forth on Schedule
--------
4.12, there are no Liens on TWC's interest in any of the TWC Real Property.
- ----
(b) There are no parties in possession of any portion of the TWC Real
Property other than TWC, whether as sublessees, subtenants at will or
trespassers.
(c) To the knowledge of TWC, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, under the provisions of any of the TWC
Leases (as hereinafter defined), any material expenditure by TWC to modify or
improve any of the TWC Real Property to bring it into compliance therewith.
4.13 Leases. Schedule 4.13 hereto sets forth a list of all leases pursuant
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to which TWC leases, as lessor or lessee, real or personal property used in
operating the TWC Business or otherwise (the "TWC Leases"). Copies of the TWC
Leases, all of which have previously been provided to Parent, are true and
complete copies thereof. All of the TWC Leases are valid, binding and
enforceable against TWC and, to the knowledge of TWC, against the other parties
thereto, in accordance with their respective terms, and there is not under any
such TWC Lease any existing default by TWC, or, to the knowledge of TWC, by any
other party thereto, or any condition or event that, with notice or lapse of
time or both, would constitute a default. TWC has not received notice that the
lessor of any of the TWC Leases intends to cancel, suspend or terminate such TWC
Lease or to exercise or not exercise any option thereunder.
4.14 Contracts. Schedule 4.14 hereto sets forth a true and complete list of
-------------
all contracts, agreements and commitments (whether written or oral) to which TWC
is, directly or indirectly, a party (in its own name or as a successor in
interest), or by which it or any of its properties or assets is otherwise bound,
including any service agreements, customer agreements, supplier agreements,
agreements to lend or borrow money, member agreements, employment agreements,
agreements relating to TWC Intellectual Property Rights and the like
(collectively, the "TWC Contracts"); excepting only those TWC Contracts which
involve less than $10,000 and are cancelable, without penalty, on no more than
90 days' notice.
True and complete copies of all TWC Contracts (or a true and complete
narrative description of any oral TWC Contract) have previously been provided to
Parent. Neither TWC nor, to the knowledge of TWC, any other party to any of the
TWC Contracts (x) is in default under (nor does there exist any condition that,
with notice or lapse of time or both, would cause such a default under) any of
the TWC Contracts, or (y) has waived any right it may have under any of the TWC
Contracts, the waiver of which would have a material adverse effect on the
business, assets or financial condition or prospects of TWC. All of the TWC
Contracts constitute the valid and
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binding obligations of TWC, enforceable in accordance with their respective
terms, and, to the knowledge of TWC, of the other parties thereto.
4.15 Manager and Officers. Schedule 4.15 hereto sets forth a list, as of the
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Closing Date, of the name of each Manager and officer of TWC and the position(s)
held by each.
4.16 Payroll Information. TWC has previously provided Parent with a true and
complete copy of the payroll report of TWC dated June 30, 1998, showing all
current employees of TWC and their current levels of compensation, other than
bonuses and other extraordinary compensation, all of which bonuses and other
extraordinary compensation are set forth in Schedule 4.16 hereto. TWC has paid
--------------
all compensation required to be paid to employees of TWC on or prior to the date
hereof other than compensation (and bonuses pursuant to arrangements described
in Schedule 4.16 hereto) accrued in the current pay period.
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4.17 Litigation. Except as set forth on Schedule 4.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
TWC, threatened against or affecting TWC or the TWC Business, nor is there any
judgment, decree, injunction or order of any applicable Governmental Entity or
arbitrator outstanding against TWC.
4.18 Employee Benefit Plans/Labor Relations.
(a) Except as disclosed in Schedule 4.18 hereto, there are no employee
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benefit plans, agreements or arrangements maintained by TWC, including (i)
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); (ii) current or
deferred compensation, pension, profit sharing, vacation or severance plans or
programs; or (iii) medical, hospital, accident, disability or death benefit
plans (collectively, "TWC Benefit Plans"). All TWC Benefit Plans are
administered in accordance with, and are in material compliance with, all
applicable laws and regulations. No default exists with respect to the
obligations of TWC under any TWC Benefit Plan.
(b) TWC is not a party to any collective bargaining agreement; no
collective bargaining agent has been certified as a representative of any of the
employees of TWC; no representation campaign or election is now in progress with
respect to any employee of TWC; and there are no labor disputes, grievances,
controversies, strikes or requests for union representation pending, or, to the
knowledge of TWC, threatened, relating to or affecting the TWC Business. To the
knowledge of TWC, no event has occurred that could give rise to any such
dispute, controversy, strike or request for representation.
4.19 ERISA.
(a) All TWC Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the TWC Benefit Plans that is intended
to meet the requirements of Section 401(a) of the Code has been determined by
the Internal Revenue Service to meet such requirements within the meaning of
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such provision. No TWC Benefit Plan is subject to Title IV of ERISA or Section
412 of the Code. TWC has not engaged in any nonexempt "prohibited transactions,"
as such term is defined in Section 4975 of the Code or Section 406 of ERISA,
involving TWC Benefit Plans that would subject TWC to the penalty or tax imposed
under Section 502(i) of ERISA or Section 4975 of the Code. TWC has not engaged
in any transaction described in Section 4069 of ERISA within the last five
years. Except as disclosed in Schedule 4.19 hereto or pursuant to the terms of
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the TWC Benefit Plans, neither the execution and delivery hereof nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation or golden parachute)
becoming due to any member or employee of TWC, (ii) increase any benefit
otherwise payable under any TWC Benefit Plan or (iii) result in the acceleration
of the time of payment or vesting of any such benefit to any extent.
(b) No notice of a "reportable event," within the meaning of Section 4043
of ERISA, for which the 30-day reporting requirement has not been waived, has
been required to be filed for any TWC Benefit Plan that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA and that is intended
to meet the requirements of Section 401(a) of the Code, or by any entity that is
considered one employer with TWC under Section 4001 of ERISA or Section 414 of
the Code, within the 12-month period ending on the Closing Date. TWC has not
incurred any liability to the Pension Benefit Guaranty Corporation in respect of
any TWC Benefit Plan that remains unpaid.
4.20 Taxes.
(a) TWC has duly and timely filed all federal, state and local income,
franchise, excise, real and personal property and other tax returns and reports,
including extensions, required to have been filed by TWC on or prior to the
Closing Date. TWC has duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by TWC (whether by way of withholding or otherwise) to any federal, state,
local or other taxing authority (except to the extent the same are being
contested in good faith, and adequate reserves therefor have been provided in
the TWC Financial Statements). As of the Closing Date, all deficiencies proposed
as a result of any audit have been paid or settled.
(b) TWC is not a party to, or bound by, or otherwise in any way obligated
under, any tax sharing or similar agreement.
(c) TWC has not consented to have the provisions of Section 341(f)(2) of
the Code (or comparable state law provisions) apply to it, and TWC has not
agreed or been requested to make any adjustment under Section 481(c) of the Code
by reason of a change in accounting method or otherwise.
4.21 Compliance with Applicable Laws. TWC holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
TWC, as appropriate, and to carry on the TWC Business as now conducted (the "TWC
Permits"). To the knowledge of TWC, TWC is in material
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compliance with all applicable laws, ordinances and regulations and the terms of
the TWC Permits. Except as set forth on Schedule 4.21 hereto, all of the TWC
-------------
Permits are fully assignable by TWC in connection with the Merger. Schedule 4.21
-------------
sets forth a true and complete list of all TWC Permits, true and complete copies
of which have previously been provided to Parent.
4.22 Manager/Member Consent. Both the Manager of TWC and the TWC Members
have adopted and approved this Agreement and the transactions contemplated
hereby (including the Merger).
4.23 Brokers. Except as set forth on Schedule 4.23 hereto, no broker or
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finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of TWC.
4.24 Environmental Matters.
(a) To the knowledge of TWC, no real property currently or formerly owned
or operated by TWC is contaminated with any Hazardous Substance (as hereinafter
defined);
(b) TWC is not a party to any litigation or administrative proceeding
nor, to the knowledge of TWC, is any litigation or administrative proceeding
threatened against it, that, in either case, asserts or alleges that TWC (i)
violated any Environmental Law (as hereinafter defined); (ii) is required to
clean up, remove or take remedial or other responsive action due to the
disposal, deposit, discharge, leak or other release of any Hazardous Substance;
or (iii) is required to pay all or a portion of the cost of any past, present or
future cleanup, removal or remedial or other action that arises out of or is
related to the disposal, deposit, discharge, leak or other release of any
Hazardous Substance.
(c) To the knowledge of TWC, there are not now nor have there previously
been tanks or other facilities on, under, or at any real property owned, leased,
used or occupied by TWC containing materials that, if known to be present in
soil or ground water, would require cleanup, removal or other remedial action
under Environmental Law.
(d) To the knowledge of TWC, TWC is not subject to any judgment, order or
citation related to or arising out of any Environmental Law and has not been
named or listed as a potentially responsible party by any Governmental Entity in
a matter related to or arising out of any Environmental Law.
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including any petroleum products, asbestos or polychlorinated biphenyls.
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4.25 Interest in Customers, Suppliers and Competitors. Except as provided
in Schedule 4.25 hereto, no officer, manager, member or, to TWC's knowledge,
-------------
employee of TWC and no family member (including a spouse, parent, sibling or
lineal descendent of any of the foregoing), has any direct or indirect material
interest in any material customer, supplier or competitor of TWC, or in any
Person from whom or to whom TWC leases any real or personal property, or in any
other Person with whom TWC is doing business whether directly or indirectly
(including as a debtor or creditor), whether in existence as of the Closing Date
or proposed, other than the ownership of stock of publicly traded corporations.
4.26 Accounts Receivable. All accounts, notes, contracts and other
receivables of TWC (collectively, "TWC Accounts Receivable") were acquired by
TWC in the ordinary course of business arising from bona fide transactions. To
the knowledge of TWC, there are no set-offs, counterclaims or disputes asserted
with respect to any TWC Accounts Receivable that would result in claims in
excess of the reserve for bad debts set forth on the TWC Financial Statements
and, to the knowledge of TWC and subject to such reserve, all TWC Accounts
Receivable are collectible in full. TWC has previously provided Parent with a
true and complete aging report prepared as of July 31, 1998 which shows the time
elapsed since invoice date for all TWC Accounts Receivable as of such date.
4.27 Accounts Payable. All material accounts, notes, contracts and other
amounts payable of TWC (collectively, "TWC Accounts Payable") are currently
within their respective terms, and are neither in default nor otherwise past due
by more than 90 days. TWC has previously provided Parent with a true and
complete aging report prepared as of July 31, 1998 which shows the time elapsed
since invoice date for all TWC Accounts Payable as of such date.
4.28 Insurance. TWC currently maintains, in full force and effect, all
insurance policies that are required to be maintained for the conduct of the TWC
Business or the ownership of TWC's property (both real and personal)
(collectively, the "TWC Insurance Policies"). The TWC Insurance Policies are
listed on Schedule 4.28 hereto, and true and complete copies of all TWC
-------------
Insurance Policies have previously been provided to Parent. TWC (a) is not in
default regarding the provisions of any TWC Insurance Policy; (b) has paid all
premiums due thereunder; and (c) has not failed to present any notice or
material claim thereunder in a due and timely fashion.
4.29 Bankruptcy. TWC has not filed a petition or request for reorganization
or protection or relief under the bankruptcy laws of the United States or any
state or territory thereof, made any general assignment for the benefit of
creditors, or consented to the appointment of a receiver or trustee, including a
custodian under the United States bankruptcy laws, whether such receiver or
trustee is appointed in a voluntary or involuntary proceeding.
4.30 TWC Debt. As of the date hereof, the TWC Debt is not in excess of
$298,833.
4.31 Investment Purpose; Accredited Investors or Purchaser representative.
(a) Each TWC Member receiving Parent Stock in the Merger represents that he (i)
is acquiring the
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Parent Stock solely for his own account for investment and not with a view to,
or for sale in connection with, any distribution thereof; and (ii) will not,
directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise
dispose of any Parent Stock (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of any such shares) except in compliance with the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations thereunder, other applicable laws, rules and regulations, and the
Second Amended and Restated Stockholders' Agreement of Parent, dated December
17, 1997 (the "Stockholders' Agreement"); (b) Except for Paul Bryant, each TWC
Member receiving Parent Stock in the Merger further represents that he is an
"accredited investor" as such terms is defined in Rule 501 of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act;
and (c) Paul Bryant represents that (i) Robert Ratonyi is his Purchaser
representative (the "Purchaser representative") as such term is defined in Rule
501 to Regulation D under the Securities Act; and (ii) the Purchaser
representative (A) is not an affiliate, director, officer or other employee of
Parent, or beneficial owner of 10% or more of any class of the equity securities
of, or 10% or more of the equity interest in, Parent; (B) has such knowledge and
experience in financial and business matters that he is capable of evaluating,
alone, or together with such TWC Member, the merits and risks of the prospective
investment in Parent Stock; (C) has been acknowledged by such TWC Member in
writing, during the course of the Merger, to be his Purchaser representative in
connection with evaluating the merits and risks of the prospective investment in
Parent Stock; and (D) has disclosed to such TWC Member in writing a reasonable
time prior to the Closing any material relationship between the Purchaser
representative or his affiliates and Parent or its affiliates that exists, is
mutually understood to be contemplated, or has existed at any time during the
previous two years, and any compensation received or to be received as a result
of such relationship.
4.32 Restrictions on Transfer. Each TWC Member receiving Parent Stock in the
Merger acknowledges that (a) the Parent Stock received by him hereunder has not
been registered under the Securities Act; (b) the Parent Stock may be required
to be held indefinitely, and he must continue to bear the economic risk of the
investment in such shares unless such shares are subsequently registered under
the Securities Act or an exemption from such registration is available; (c)
there may not be any public market for the Parent Stock in the foreseeable
future; (d) Rule 144 promulgated under the Securities Act is not presently
available with respect to sales of any securities of Parent, and such Rule is
not anticipated to be available in the foreseeable future; (e) when and if
Parent Stock may be disposed of without registration in reliance upon Rule 144,
such disposition can be made only in limited amounts and in accordance with the
terms and conditions of such Rule; (f) if the exemption afforded by Rule 144 is
not available, public sale without registration will require the availability of
an exemption under the Securities Act; (g) the Parent Stock is subject to the
terms and conditions of the Stockholders' Agreement; (h) restrictive legends
shall be placed on the certificates representing Parent Stock; and (i) a
notation shall be made in the appropriate records of Parent indicating that
Parent Stock is subject to restrictions on transfer and, if Parent should in the
future engage the services of a stock transfer agent, appropriate stop-transfer
instructions will be issued to such transfer agent with respect to Parent Stock.
4.33 Ability to Bear Risk; Access to Information; Sophistication. (a) Each
TWC Member receiving Parent Stock in the Merger represents and warrants that (i)
his financial situation
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is such that he can afford to bear the economic risk of holding Parent Stock
acquired by him hereunder for an indefinite period; and (ii) he can afford to
suffer the complete loss of such Parent Stock; (b) Except for Paul Bryant, each
such TWC Member receiving Parent Stock in the Merger further represents that (i)
he has been granted the opportunity to ask questions of, and receive answers
from, representatives of Parent concerning the terms and conditions of the
Parent Stock and to obtain any additional information that he deems necessary;
(ii) his knowledge and experience in financial business matters is such that he
is capable of evaluating the merits and risk of ownership of the Parent Stock;
(iii) he has carefully reviewed the terms of the Stockholders' Agreement and has
evaluated the restrictions and obligations contained therein; and (iv) he (A)
has reviewed the Private Placement Memorandum of Parent dated as of September
15, 1998, (the "Memorandum"); (B) has carefully examined the Memorandum and has
had an opportunity to ask questions of, and receive answers from,
representatives of Parent, and to obtain additional information concerning
Parent and its Subsidiaries (as hereinafter defined); and (C) does not require
additional information regarding Parent or its Subsidiaries in connection with
the Merger; and (c) Paul Bryant further represents that, either alone or with
the Purchaser representative, (i) he has been granted the opportunity to ask
questions of, and receive answers from, representatives of Parent concerning the
terms and conditions of the Parent Stock and to obtain any additional
information that he deems necessary; (ii) his knowledge and experience in
financial business matters is such that he is capable of evaluating the merits
and risk of ownership of the Parent Stock; (iii) he has carefully reviewed the
terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; and (iv) he (A) has reviewed the Memorandum; (B)
has carefully examined the Memorandum and has had the opportunity to ask
questions of, and receive answers from, representatives of Parent, and to obtain
additional information concerning Parent and its Subsidiaries; and (C) does not
require additional information regarding Parent or its Subsidiaries in
connection with the Merger.
4.34 Disclosure. No statement of fact by TWC or any TWC Member contained
herein and no written statement of fact furnished by TWC or any TWC Member to
Parent or Sub in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
herein or therein contained not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to TWC
and the TWC Members, which representations and warranties shall survive the
Closing in accordance with Section 10.1 hereof, as follows:
5.1 Organization and Qualification. Each of Parent and its Subsidiaries (as
defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character
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of its properties owned or held under lease or the nature of its activities
makes such qualification necessary. Complete and correct copies of the
Certificates of Incorporation and Bylaws of Parent and Sub as in effect on the
date hereof are attached, respectively, to a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-1" hereto ("Parent's
-------------
Closing Certificate"), and to Sub's Closing Certificate.
5.2 Authority. Each of Parent and Sub has the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by TWC and the TWC Members, constitutes
the valid and binding obligation of each of Parent and Sub, enforceable against
each of Parent and Sub in accordance with its terms, subject, in each case, to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
application relating to or affecting creditors' rights and to general principles
of equity, including principles of commercial reasonableness, good faith and
fair dealing.
5.3 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
- ------------
Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or Bylaws
of Parent or Sub, or the organizational documents of any other Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of Parent or any of its Subsidiaries; or
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(e) require any Consent of (i) any Governmental Entity (except for (x)
compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL and the
ILLCA); or (ii) any other Person.
5.4 Litigation. Except as set forth on Schedule 5.4 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 Brokers. Except as disclosed on Schedule 5.5 hereto, no broker or finder
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is entitled to any broker's or finder's fee in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Parent or
Sub.
5.6 Parent Stock.
(a) As of the date hereof the authorized capital stock of Parent consists
of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value, of which
no shares are validly issued and outstanding, and (B) 100,000,000 shares of
Class B Common Stock, $.01 par value, of which 14,053,489 shares are validly
issued and outstanding (without taking into account any shares of Parent Stock
to be issued pursuant hereto, and excluding the potential acquisitions of Pequot
Systems, Inc., Pantheon Interactive, Inc., Ionix Development Corporation and
NetResponse L.L.C.), fully paid and nonassessable; (ii) 750,000 shares of blank
check preferred stock, (A) 250,000 of which have been designated as Class A
Convertible Preferred Stock, of which 176,291 shares are validly issued and
outstanding, fully paid and nonassessable, (B) 200,000 of which have been
designated as Class B Convertible Preferred Stock, of which 98,767 shares are
validly issued and outstanding, fully paid and nonassessable, (C) 15,000 of
which have been designated as Class C Convertible Preferred Stock, of which
9,232 shares are validly issued and outstanding, fully paid and nonassessable,
and (D) 50,000 of which have been designated as Class D Nonvoting Preferred
Stock, of which 35,700 shares are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 5.6 hereto, there are no options,
------------
warrants, calls, agreements, commitments or other rights presently outstanding
that would obligate Parent to issue, deliver or sell shares of its capital
stock, or to grant, extend or enter into any such option, warrant, call,
agreement, commitment or other right (excluding the same potential acquisitions
as referred to above). In addition to the foregoing, as of the Closing Date,
Parent has no bonds, debentures, notes or other indebtedness issued or
outstanding that have voting rights in Parent.
(b) When delivered to the TWC Members in accordance with the terms
hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
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5.7 Subsidiaries. Except as set forth on Schedule 5.7 hereto, Parent has no
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subsidiaries and does not otherwise own or control, directly or indirectly, any
equity interest in, or any security convertible into an equity interest in, any
Entity. Schedule 5.7 lists the name of each of the Subsidiaries of Parent, and
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indicates their respective jurisdictions of incorporation.
5.8 Financial Statements. Parent has heretofore furnished TWC with a true
and complete copy of (a) the audited financial statements of iXL Interactive
Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31, 1993, 1994
and 1995, and for the four month period ended April 30, 1996; (b) the audited
combined financial statements for Creative Video, Inc. (n/k/a iXL, Inc.),
Creative Video Library, Inc. and Entrepreneur Television, Inc. for the years
ended December 31, 1993, 1994 and 1995, and for the four month period ended
April 30, 1996; (c) the audited consolidated financial statements for Parent and
its Subsidiaries for the eight months ended December 31, 1996 and for the year
ended December 31, 1997; and (d) the unaudited consolidated financial statements
for Parent and its Subsidiaries for the six month period ended June 30, 1998
(all of the foregoing, collectively, "Parent Financial Statements"). The Parent
Financial Statements present fairly in all material respects the consolidated
financial position, results of operations, shareholders' equity and cash flow of
Parent at the respective dates or for the respective periods to which they
apply. Except as disclosed therein, such statements and related notes have been
prepared in accordance with GAAP consistently applied throughout the periods
involved (except, in the case of the unaudited financial statements, for the
exclusion of footnotes and normal year-end adjustments).
5.9 Undisclosed Liabilities. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after June 30, 1998 that would not, whether individually or in the aggregate,
have a material adverse impact on the business or financial condition of Parent
and its Subsidiaries, taken as a whole; (b) liabilities reflected on the Parent
Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
5.10 Compliance with Applicable Laws. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
5.11 Board of Directors/Shareholder Consent. The board of directors of
Parent, and both the board of directors and shareholder of Sub, have, by
unanimous written consent or other action, adopted and approved this Agreement
and the transactions contemplated hereby (including the Merger).
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5.12 Bankruptcy. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 Absence of Changes. Except as provided in Schedule 5.13 hereto, since
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June 30, 1998, there has not been (a) any transaction, commitment, dispute or
other event or condition (financial or otherwise) of any character (whether or
not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
material change in Parent's accounting principles, practices or methods; (f) any
split, combination or reclassification of any of Parent's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Parent's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
5.14 Taxes. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent
and its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the Closing Date,
all deficiencies proposed as a result of any audits have been paid or settled.
5.15 Disclosure. No statement of fact by Parent or Sub contained herein and
no written statement of fact furnished or to be furnished by Parent or Sub to
TWC in connection herewith contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements herein or therein contained not misleading.
ARTICLE VI
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<PAGE>
ADDITIONAL AGREEMENTS
6.1 Conduct of Business by TWC Pending the Merger. From and after the date
hereof, prior to the Effective Time, except as contemplated hereby, unless
Parent shall otherwise agree in writing, TWC shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, use reasonable efforts to preserve intact its present
business organization, keep available the services of its employees and preserve
its relationships with customers, suppliers, licensors, licensees, distributors
and others having business dealings with TWC to the end that its goodwill and
on-going businesses shall not be impaired in any material respect at the
Effective Time. Without limiting the generality of the foregoing, and except as
contemplated hereby or in Schedule 6.1 hereto, unless Parent shall otherwise
agree in writing, prior to the Effective Time, TWC shall not, directly or
indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any membership interest, (ii) split, combine or
reclassify any membership interest, or issue or authorize the issuance of any
securities in respect of, in lieu of or in substitution for, any membership
interests, or (iii) purchase, redeem or otherwise acquire, any membership
interest of TWC or any other equity security thereof or any right, warrant, or
option to acquire any such share or other security;
(b) issue, deliver, sell, pledge or otherwise encumber any membership
interest, any other voting security issued by TWC or any security convertible
into, or any right, warrant or option to acquire any such membership interest or
voting security;
(c) amend its Articles of Organization, Operating Agreement or other
comparable organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to TWC;
(e) subject to a Lien or sell, lease or otherwise dispose of any of its
properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of TWC,
guarantee any debt security of another Person or enter into any "keep well" or
other agreement to maintain the financial condition of another Person, make any
loan, advance or capital contribution to, or investment in, any other Person, or
settle or compromise any material claim or litigation; or
(g) authorize any of, or commit or agree to take any of, the foregoing
actions.
6.2 Access to Information. From the date hereof through the Effective Time,
TWC shall afford to Parent and its accountants, counsel and other
representatives reasonable access during
20
<PAGE>
normal business hours (and at such other times as the parties may mutually
agree) upon reasonable prior notice and approval of TWC, which shall not be
unreasonably withheld, to its properties, books, contracts, commitments, records
and personnel and, during such period, shall furnish promptly to Parent all
information concerning its business, properties and personnel as the other may
reasonably request. Parent and its accountants, counsel and other
representatives shall, in the exercise of the rights described in this Section
6.2, not unduly interfere with the operation of the business of TWC. Parent will
furnish to TWC and its representatives all information reasonably requested by
them.
6.3 Filings; Tax Elections. TWC shall promptly provide Parent with copies of
all filings made by TWC with any Governmental Entity in connection herewith and
the transactions contemplated hereby. TWC shall, before settling or
compromising any material income tax liability of TWC, consult with Parent and
its advisors as to the positions and elections that will be taken or made with
respect to such matter.
6.4 Public Announcements. The parties agree that, except as may otherwise be
required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger. Any such disclosure shall be coordinated by Parent,
and none of the TWC Members shall make any such disclosure without the prior
written consent of Parent.
6.5 Transfer and Gains Taxes and Certain Other Taxes and Expenses. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 Options. Parent hereby covenants and agrees that at the Effective
Time it will issue options to purchase an aggregate of 70,000 shares of Parent
Stock to such employees of TWC (after Closing, of the Surviving Corporation),
and in such amounts per person, as set forth in Schedule 6.6 hereto, at an
------------
exercise price of $10 per share, all in the form of Exhibit "C" hereto
-----------
("Options") and subject to Parent's standard five-year vesting schedule and
Parent's 1996 Stock Option Plan, as amended.
6.7 Further Assurances. From time to time after the Effective Time, upon the
reasonable request of any party hereto, the other party or parties hereto shall
execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof.
6.8 Employment Agreement. Robert Gear, Geoff Melick, Corey Conn, Carmie
Stornello and Paul Bryant shall, at the Closing, each enter into an employment
agreement with Sub, substantially in the form of Exhibit "H" hereto.
-----------
21
<PAGE>
6.9 Purchaser Representative. With respect to Paul Bryant, (a) the Purchaser
representative shall furnish to Parent, to Parent's satisfaction, a completed
Purchaser Representative Questionnaire, substantially in the form of Exhibit "J"
-----------
hereto; and Paul Bryant shall furnish to Parent a signed Purchaser
Acknowledgement in connection therewith.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligation of TWC and the TWC Members to Effect the Merger.
The obligations of TWC and the TWC Members to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) Parent and Sub shall have performed in all material respects their
respective agreements contained herein required to be performed at or prior to
the Effective Time, and the representations and warranties of Parent and Sub
contained herein shall be true when made and (except for representations and
warranties made as of a specified date, which need only be true as of such date)
at and as of the Effective Time as if made at and as of such time, except as
contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to TWC at the Closing, Parent's Closing Certificate, and (ii) the
appropriate officers of Sub shall have executed and delivered to TWC at the
Closing, Sub's Closing Certificate;
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
- ---------------
(d) TWC shall have received corporate certificates of good standing for
Parent and Sub, and a copy of the Certificate of Incorporation for Parent and
Sub, respectively, both as certified by the Secretary of State of Delaware;
(e) there shall have been delivered to each of the TWC Members receiving
Parent Stock at the Closing, duly executed by Parent, an Agreement to be Bound
to the Registration Rights Agreement of Parent, dated as of Closing Date (the
"Agreement to be Bound to the Registration Rights Agreement"), in the form of
Exhibit "B" hereto;
- -----------
(f) Parent shall have executed and delivered at the Closing an Option
Agreement for each of the Persons listed on Schedule 6.6 hereto as receiving
------------
options to purchase Parent Stock at that time;
(g) TWC shall have received, at the Closing, a duly executed opinion of
counsel to Parent and Sub, substantially in the form of Exhibit "D" hereto;
-----------
22
<PAGE>
(h) Sub shall have executed and delivered at the Closing the employment
agreement for each of the persons referred to in Section 6.8 hereof; and
(i) TWC shall have received from Parent and Sub such other documents as
TWC's counsel shall have reasonably requested, in form and substance reasonably
satisfactory to TWC's counsel.
7.2 Conditions to Obligations of Parent and Sub to Effect the Merger. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) TWC and the TWC Members shall have performed in all material respects
their respective agreements contained herein required to be performed at or
prior to the Effective Time, and the representations and warranties of TWC and
the TWC Members contained herein shall be true when made and (except for
representations and warranties made as of a specified date, which need only be
true as of such date) at and as of the Effective Time as if made at and as of
such time, except as contemplated hereby;
(b) the appropriate officers of TWC shall have executed and delivered to
Parent at the Closing, TWC's Closing Certificate;
(c) TWC and the TWC Members shall have obtained or caused to be obtained
all of the Consents, if any, listed on Schedule 7.2(c) hereto;
---------------
(d) there shall have been delivered to Parent at the Closing, duly
executed by each of the TWC Members receiving Parent Stock in the Merger, (i) an
Agreement to be Bound to the Stockholders' Agreement, substantially in the form
of Exhibit "F" hereto; and (ii) an Agreement to be Bound to the Registration
-----------
Rights Agreement;
(e) Parent shall have received a certificate of existence for TWC, as
certified by the Secretary of State of Illinois;
(f) as of the date three business days prior to the Closing Date the TWC
Debt shall be no greater than $298,833;
(g) Each of the TWC Members referred to in Section 6.8 hereof shall have
executed and delivered his or her respective employment agreements, and each
person to receive Options at the Closing shall have executed and delivered an
Option Agreement;
(h) Parent shall have received, at the Closing, a duly executed opinion
of counsel to TWC and the TWC Members, substantially in the form of Exhibit "G"
-----------
hereto;
23
<PAGE>
(i) TWC shall have furnished evidence to Parent's satisfaction of
performance under Section 6.9 hereof, and Parent shall have received from TWC or
the TWC Members, as the case may be, such other documents as Parent's counsel
shall have reasonably requested, in form and substance reasonably satisfactory
to Parent's counsel; and
(j) Parent shall have received evidence satisfactory to it that at the
Closing the assets and properties used in the TWC Business are free and clear of
all Liens other than Permitted Liens (as hereinafter defined), and that, except
for Paul Bryant, all TWC Members receiving Parent Stock in the Merger are
accredited investors in accordance with Section 4.31(a) hereof.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Parent.
(a) Parent shall indemnify and hold the TWC Members and TWC's manager,
officers and employees (collectively, the "TWC Indemnified Parties") harmless
from and against, and agree promptly to defend each of the TWC Indemnified
Parties from and reimburse each of the TWC Indemnified Parties for, any and all
losses, damages, costs, expenses, liabilities, obligations and claims of any
kind (including reasonable attorney fees and other legal costs and expenses)
(collectively, a "TWC Loss") that any of the TWC Indemnified Parties may at any
time suffer or incur, or become subject to, as a result of or in connection
with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Parent or Sub at the Closing in accordance
with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform, satisfy and
discharge any of its respective covenants, agreements, undertakings, liabilities
or obligations hereunder or under any of the documents and materials delivered
by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary, Parent
shall not have any liability under Section 8.1(a)(i) above (i) unless the
aggregate of all TWC Losses for which Parent would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to 5% of the aggregate
Merger consideration payable, in any form (each share of Parent Stock valued at
$10), pursuant to Section 3.1 hereof ("Basket"), and then only to the extent of
such excess, (ii) for amounts in excess of the aggregate Merger consideration
payable, in any form (each share of Parent Stock valued at $10), pursuant to
Section 3.1 hereof ("Cap") in the aggregate, and (iii) unless the TWC Members
have asserted a claim pursuant to Section 8.3 hereof with respect to the matters
24
<PAGE>
set forth in Section 8.1(a)(i), or 8.1(a)(iii) to the extent applicable to
Section 8.1(a)(i), within 18 months of the Effective Time. Notwithstanding any
implication to the contrary contained herein, the parties acknowledge and agree
that a decrease in the value of Parent Stock owned by any of the TWC Members
would not, by itself, constitute a TWC Loss, unless and to the extent a decrease
in the value of such Parent Stock has been demonstrated to be as a result of any
event described in Sections 8.1(a)(i), (ii) or (iii) above.
8.2 Indemnification by the TWC Members.
(a) Robert Gear, Paul Bryant, Geoff Melick, and Corey Conn, jointly and
severally, and in addition the other TWC Members, severally but not jointly,
shall indemnify and hold Parent, Sub, Surviving Corporation and their respective
shareholders, directors, officers and employees (collectively, the "Parent
Indemnified Parties") harmless from and against, and agree to defend promptly
each of the Parent Indemnified Parties from and reimburse each of the Parent
Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including reasonable attorneys'
fees and other legal costs and expenses) (collectively, a "Parent Loss") that
any of the Parent Indemnified Parties may at any time suffer or incur, or become
subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by TWC or the TWC Members in or pursuant hereto, or in any
instrument certificate or affidavit delivered by any of the same at the Closing
in accordance with the provisions hereof;
(ii) any failure by TWC or any of the TWC Members to carry out,
perform, satisfy and discharge any of their respective covenants, agreements,
undertakings, liabilities or obligations hereunder or under any of the documents
and materials delivered by TWC pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above, none of the TWC Members shall have any
liability under Section 8.2(a)(i) above (i) unless the aggregate of all Parent
Losses for which the TWC Members would be liable but for this sentence exceeds,
on a cumulative basis, an amount equal to the Basket, and then only to the
extent of such excess, (ii) for amounts in excess of the Cap in the aggregate,
and (iii) unless Parent has asserted a claim pursuant to Section 8.3 hereof with
respect to the matters set forth in Sections 8.2(a)(i), or 8.2(a)(iii) to the
extent applicable to Section 8.2(a)(i), within 18 months of the Effective Time,
except with respect to the matters arising under (A) Sections 4.18, 4.19 or 4.20
hereof, in which event Parent must have asserted a claim within the applicable
statute of limitations; or (B) Section 4.24 hereof, in which event Parent must
have asserted a claim within five years of the Effective Time.
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<PAGE>
(c) Notwithstanding the above, except for claims for indemnification
based on (i) fraud, (ii) intentional misrepresentation or (iii) any breach of
any representation made in Section 4.3 hereof or otherwise with respect to title
to any TWC Membership Interests, the liability of the TWC Members under Section
8.2(a) hereof will not exceed their respective portions of the merger
consideration receivable hereunder, as determined by multiplying by $10 the
number of shares of Parent Stock, if any, issued to them pursuant to Section 3.1
hereof and by adding the amount of cash receivable by them pursuant to Section
3.1.
8.3 Notification of Claims; Election to Defend
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder. Subject to the
Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of any
Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a Claim
asserted by a third party against the Indemnified Party that the Indemnifying
Party acknowledges is a Claim for which it must indemnify or hold harmless the
Indemnified Party under Section 8.1 or 8.2 hereof, as the case may be, the
Indemnifying Party shall have the right, at its sole cost and expense, to employ
counsel of its own choosing to defend any such Claim asserted against the
Indemnified Party. Notwithstanding anything to the contrary in the preceding
sentence, if the Indemnified Party (i) reasonably believes that its interests
with respect to a Claim (or any material portion thereof) are in conflict with
the interests of the Indemnifying Party with respect to such Claim (or portion
thereof), and (ii) promptly notifies the Indemnifying Party, in writing, of the
nature of such conflict, then the Indemnified Party shall be entitled to choose,
at the sole cost and expense of the Indemnifying Party, independent counsel to
defend such Claim (or the conflicting portion thereof). The Indemnified Party
shall have the right to participate in the defense of any Claim at its own
expense (except to the extent provided in the preceding sentence), but the
Indemnifying Party shall retain control over such litigation (except as provided
in the preceding sentence). The Indemnifying Party shall notify the Indemnified
Party in writing, as promptly as possible (but in any case before the due date
for the answer or response to a Claim) after receipt of the notice of Claim
given by the Indemnified Party to the Indemnifying Party under Section 8.3(a)
hereof, of its election to defend in good faith any such third party Claim. For
so long as the Indemnifying Party is defending in good faith any such Claim
asserted by a third party against the Indemnified Party, the Indemnified Party
shall not settle or compromise such Claim without the prior written consent of
the Indemnifying Party, such consent not to be unreasonably withheld. The
Indemnified Party shall cooperate with the Indemnifying Party in connection with
any such defense and shall make available to the
26
<PAGE>
Indemnifying Party or its agents all records and other materials in the
Indemnified Party's possession reasonably required by it for its use in
contesting any third party Claim; provided, however, that the Indemnifying Party
shall have agreed, in writing, to keep such records and other materials
confidential except (i) to the extent required for defense of the relevant
Claim, or (ii) as required by law or court order. Whether or not the
Indemnifying Party elects to defend any such Claim, the Indemnified Party shall
have no obligations to do so. Within 30 days after a final determination
(including a settlement) has been reached with respect to any Claim contested
pursuant to this Section 8.3(b), the Indemnifying Party shall satisfy its
obligations hereunder with respect thereto. Any amount paid thereafter shall
include interest thereon for the period commencing at the end of such 30-day
period and ending on the actual date of payment, at a rate of 15% per annum, or,
if lower, at the highest rate of interest permitted by applicable law at the
time of such payment.
8.4 Payment. Any Indemnifying Party may, at such Indemnifying Party's
option, pay all or part of any amount due under this Article VIII by delivery of
shares of Parent Stock having a value equal to the amount due (to the extent
that such Indemnifying Party owns sufficient shares of Parent Stock). For the
purpose of this provision, the value of Parent Stock shall be deemed to be $10
per share.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Merger Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual written consent of Parent and TWC;
(b) by TWC, upon a material breach hereof on the part of Parent or Sub
which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by September 30, 1998;
(c) by Parent, upon a material breach hereof on the part of TWC or any of
the TWC Members which has not been cured and which would cause any condition set
forth in Section 7.2 hereof to be incapable of being satisfied by September 30,
1998;
(d) by Parent or TWC if any court of competent jurisdiction shall have
issued, enacted, entered, promulgated or enforced any order, judgment, decree,
injunction or ruling which restrains, enjoins or otherwise prohibits the Merger
and such order, judgment, decree, injunction or ruling shall have become final
and nonappealable; or
27
<PAGE>
(e) by either Parent or TWC if the Merger shall not have been consummated
on or before September 30, 1998 (provided the terminating party is not otherwise
in material breach of its representations, warranties or obligations hereunder).
9.2 Fees and Expenses.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses (including agents, counsel and other
advisors); provided, however, that the TWC Members shall pay all such fees and
expenses of TWC.
(b) If the Merger is not consummated for a reason other than the willful
and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
(c) If the Merger is not consummated because of a willful and material
breach hereof by any party, the nonbreaching party or parties shall be entitled
to pursue all legal and equitable remedies against the breaching party for such
breach including specific performance and all fees and expenses incurred by the
nonbreaching party or parties in connection with enforcing its or their rights
hereunder with respect to such breach shall be paid by the breaching party.
9.3 Amendment. This Merger Agreement may be amended by Parent, Sub, TWC and
the TWC Members at any time before or after approval hereof by the TWC Members,
but, after such approval, no amendment shall be made which (i) changes the form
or decreases the amount of the consideration to be received in the Merger, (ii)
in any way materially adversely affects the rights of the TWC Members, or (iii)
under applicable law would require approval of the TWC Members, in any such case
referred to in clauses (i), (ii) and (iii), without the further approval of the
TWC Members. This Agreement may not be amended except by an instrument in
writing signed on behalf of the parties hereto, provided that after the
Effective Time, any such amendment must be signed by the former holders of a
majority of the TWC Membership Interests.
9.4 Waiver. At any time prior to the Effective Time, the parties hereto may,
to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
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<PAGE>
10.1 Survival; Recourse. None of the agreements contained herein shall survive
the Merger, except that (i) the agreements contained in Article III hereof, the
covenants contained in Article VI hereof, the obligations to indemnify contained
in Article VIII hereof and the agreements of the Surviving Corporation referred
to in Sections 10.9 and 10.10 hereof, shall survive the Merger indefinitely
(except to the extent a shorter period of time is explicitly specified therein)
and (ii) the representations and warranties made in Articles IV and V hereof
shall survive the Merger, and shall survive any independent investigation by the
parties, and any dissolution, merger or consolidation of TWC or Parent, and
shall bind the legal representatives, assigns and successors of TWC, the TWC
Members and Parent, for a period of 18 months after the Effective Time (other
than the representations and warranties contained in (A) Sections 4.18, 4.19 or
4.20 hereof, which shall survive for the applicable statute of limitations; or
(B) Section 4.24 hereof, which shall survive for five years after the Effective
Time).
10.2 Notices. All notices or other communications under this Agreement shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in Person, by telecopy (with confirmation of receipt),
or by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
<TABLE>
<CAPTION>
<S> <C>
If to TWC : Two-Way Communications, L.L.C.
363 W. Erie St., Suite 6W
Chicago, IL 60610
Attention: Mr. Robert Jaeschke, Manager
Telephone: (312) 787-6730
Telecopy: (312) 787-3599
With a copy to: Gary Irwin Walt, Esq.
Patzik, Frank & Samotny Ltd.
150 South Wacker Drive
Chicago, IL 60606
Telephone: (312) 551-8300
Telecopy: (312) 551-1101
If to the TWC To the address listed under the signature
Members: line of the applicable TWC Member
If to Parent or Sub: IXL Holdings, Inc.
1888 Emery St., 2nd Floor
Atlanta, GA 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Rd., Ste. 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Ave., 24th Floor
New York, NY 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
</TABLE>
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 Entire Agreement. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, except for the non-disclosure letter agreement between Parent and
TWC dated as of August 26, 1998. There are no other representations or
warranties, whether written or oral, between the parties in connection the
subject matter hereof, except as expressly set forth herein.
10.4 Assignments; Parties in Interest. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon and inure solely to the benefit of each party hereto, and
nothing herein, express or implied, is intended to or shall confer upon any
Person not a party hereto any right, benefit or remedy of any nature whatsoever
under or by reason hereof, except as otherwise provided herein.
10.5 Governing Law. This Agreement, except to the extent that the ILLCA or
the DGCL is mandatorily applicable to the Merger, or to the rights of the TWC
Members or the other parties hereto with respect to the Merger, shall be
governed in all respects by the laws of the State of Georgia (without giving
effect to the provisions thereof relating to conflicts of law).
10.6 Headings. The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation hereof.
30
<PAGE>
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 Severability. If any term or other provision hereof is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions hereof shall nevertheless remain in full force and
effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.9 Post-Closing Access. For a period of five years after the Closing Date,
the TWC Members and their agents and representatives shall have reasonable
access to the books and records of the TWC Business.
10.10 Post-Closing Notice. To the extent the Surviving Corporation receives
written notice of any event or circumstance that materially affects any of the
TWC Members, the Surviving Corporation shall promptly notify the affected TWC
Member of such matter, information, or event
31
<PAGE>
and shall provide them with copies of all relevant documentation or
correspondence in connection thereto.
10.11 Certain Definitions. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the TWC Real
Property or interfering with the ordinary conduct of any of the TWC Business;
and (e) those Liens listed on Schedule 10.11 hereto;
--------------
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of TWC" shall refer to the knowledge,
subject to clause (i) above, of any of the TWC Members; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of which are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including Sub); provided, however, that
with respect to the Parent, the terms "Subsidiary" and "Subsidiaries" shall not
include TWC or University Netcasting, Inc.
[SIGNATURES ON FOLLOWING PAGES]
32
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and TWC have caused this Agreement to be
signed and delivered by their respective duly authorized officers, and each TWC
Member has signed and delivered this Agreement, all as of the date first written
above.
"TWC"
Two-Way Communications, L.L.C., an Illinois limited
liability company
By: /s/ Robert Jaeschke
----------------------------------
Robert Jaeschke, Manager
"Parent"
IXL Holdings, Inc., a Delaware corporation
By: /s/ James V. Sandry
----------------------------------
Title: Executive Vice President
------------------------------
"Sub"
iXL-Chicago, Inc., a Delaware corporation
By: /s/ James V. Sandry
----------------------------------
Title: Executive Vice President
------------------------------
[SIGNATURE CONTINUED ON FOLLOWING PAGE]
33
<PAGE>
"TWC Members"
/s/ Robert Jaeschke
---------------------------------------
Robert Jaeschke
Address: 2526 Greenwood Ave
Wilmette, IL 60091
/s/ Paul Bryant
---------------------------------------
Paul Bryant
Address: 133 North Humphrey
Oak Park, Illinois 60302
/s/ Corey Conn
---------------------------------------
Corey Conn
Address: 223 S. Catherine
LaGrange, IL 60525
/s/ Robert Gear
---------------------------------------
Robert Gear
Address: 1404 Lake Shore Drive North
Barrington, IL 60010
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
34
<PAGE>
/s/ Geoff Melick
-----------------------------------------
Geoff Melick
Address: 933 Rosemary
Deerfield, IL 60015
/s/ Daryl Travis by: /s/ Robert Jaeschke
----------------- --------------------
Daryl Travis Robert Jaeschke
Attorney in Fact
Address: 343 W. Erie
Chicago, IL 60610
Kraft Enterprises, Ltd., an Illinois general partnership
By: /s/ John C. Kraft
--------------------------------------
John C. Kraft, General Partner
Address: 363 W. Erie St.
Chicago, IL 60610
35
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate................................... Exhibit A-1
Sub's Closing Certificate...................................... Exhibit A-2
Agreement to be Bound to Registration Rights Agreement......... Exhibit B
Option Agreement............................................... Exhibit C
Opinion of Counsel to Parent and Sub........................... Exhibit D
TWC's Closing Certificate...................................... Exhibit E
Agreement to be Bound to Stockholders' Agreement............... Exhibit F
Opinion of Counsel to TWC...................................... Exhibit G
Employment Agreement........................................... Exhibit H
Acknowledgement of Deliver of Membership Interest.............. Exhibit I
Purchaser Representative Questionnaire and Acknowledgement..... Exhibit J
<PAGE>
SCHEDULE 3.1(A)
---------------
TWC MEMBERS RECEIVING CASH AND PARENT STOCK
SCHEDULE 4.3(A)
---------------
CAPITALIZATION OF TWC
SCHEDULE 4.3(B)
---------------
LIENS ON TWC MEMBERSHIP INTERESTS
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF TWC
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF TWC
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF TWC
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF TWC
<PAGE>
SCHEDULE 4.10
-------------
BAD EQUIPMENT OF TWC
SCHEDULE 4.12
-------------
LIENS ON REAL PROPERTY OF TWC
SCHEDULE 4.13
-------------
LEASES OF TWC
SCHEDULE 4.14
-------------
CONTRACTS OF TWC
SCHEDULE 4.15
-------------
MANAGERS AND OFFICERS OF TWC
SCHEDULE 4.16
-------------
PAYROLL INFORMATION OF TWC
SCHEDULE 4.17
-------------
LITIGATION
<PAGE>
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF TWC
SCHEDULE 4.19
-------------
ERISA ISSUES OF TWC
SCHEDULE 4.21
-------------
TWC PERMITS
SCHEDULE 4.23
-------------
TWC BROKERS
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS, COMPETITORS
SCHEDULE 4.28
-------------
INSURANCE OF TWC
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
<PAGE>
SCHEDULE 5.4
------------
PARENT LITIGATION
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
OUTSTANDING OBLIGATIONS TO ISSUES OPTIONS, WARRANTS
OR OTHER PARENT STOCK RIGHTS
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES
SCHEDULE 6.1
------------
CONDUCT OF BUSINESS BY TWC PENDING THE MERGER
<PAGE>
SCHEDULE 6.6
------------
PARENT STOCK OPTIONS TO EMPLOYEES OF TWC
SCHEDULE 7.1(C)
---------------
PARENT CONSENTS
SCHEDULE 7.2(C)
---------------
TWC CONSENTS
SCHEDULE 10.11
--------------
PERMITTED LIENS OF TWC
<PAGE>
EXHIBIT 2.31
AGREEMENT AND PLAN OF MERGER
by and between
IXL HOLDINGS, INC.,
iXL-DC, INC.,
NETRESPONSE, L.L.C.,
and
NEXT CENTURY COMMUNICATIONS CORP.,
Dated as of September 22, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 22nd day of
September, 1998, by and between NetResponse, L.L.C., a Delaware limited
liability company ("NetResponse"), Next Century Communications Corp., a Delaware
corporation and the sole member of NetResponse ("Next Century"), Jon Rubin ("Jon
Rubin"), IXL Holdings, Inc., a Delaware corporation ("Parent"), and iXL-DC,
Inc., a Delaware corporation, or its successors or assigns ("Sub").
R E C I T A L S:
- - - - - - - -
A. NetResponse is engaged in the business of developing internet sites and
furnishing internet services, including website design and maintenance (the
"NetResponse Business").
B. NetResponse and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. Next Century owns 100% of the outstanding limited liability company
interests of NetResponse (each a "Net Response Interest" and collectively the
"NetResponse LLC Interests").
D. The respective Boards of Directors of Parent, Sub and Next Century, the
board of managers of NetResponse, the respective shareholders of Sub and Next
Century, and Next Century have approved the Merger, upon the terms and subject
to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, benefits, conditions
and agreements set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is hereby
agreed as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, at the
Effective Time (as defined in Section 1.3 hereof), (a) NetResponse shall be
merged with and into Sub, (b) the separate existence of NetResponse shall cease,
and (c) Sub shall continue as the surviving corporation in the Merger under the
laws of the State of Delaware under the name iXL-DC, Inc. For purposes of this
Agreement, Sub shall be referred to, for the period commencing on the Effective
Time, as the "Surviving Corporation."
1.2 Closing and Closing Date. Unless this Merger Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9.1 hereof, and subject to the satisfaction or waiver of the
conditions set forth in Article VII hereof, the closing of the Merger (the
"Closing") will take place as promptly as practicable (and in any
<PAGE>
event within five business days after satisfaction of the conditions set forth
in Sections 7.1 and 7.2 hereof) (the "Closing Date") at the offices of Minkin &
Snyder, A Professional Corporation, One Buckhead Plaza, 3060 Peachtree Rd., Ste.
1100, Atlanta, GA 30305, unless another date or place is agreed to by the
parties.
1.3 Effective Time of the Merger. At the Closing, the parties hereto shall
cause a certificate of merger (the "Certificate of Merger") to be filed with the
office of the Secretary of State of Delaware in accordance with the provisions
of the Delaware General Corporation Law, as amended (the "DGCL"). When used
herein, the term "Effective Time" shall mean the time when the Certificate of
Merger has been accepted for filing by the Secretary of State of Delaware or
such time as otherwise specified therein.
1.4 Effect of the Merger. The Merger shall, from and after the Effective
Time, have all the effects provided by the DGCL. If at any time after the
Effective Time, any further action is deemed necessary or desirable to carry out
the purposes of this Agreement, the parties hereto agree that the Surviving
Corporation and its proper officers and directors shall be authorized to take,
and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of Sub, a
copy of which is attached to a closing certificate and incumbency certificate,
substantially in the form of Exhibit "A-2" hereto ("Sub's Closing Certificate"),
-------------
shall be the Certificate of Incorporation of the Surviving Corporation after the
Effective Time, until thereafter changed or amended as provided therein or by
applicable law.
2.2 Bylaws. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is attached to Sub's Closing Certificate.
2.3 Board of Directors; Officers. The Board of Directors and officers of Sub
immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified.
2
<PAGE>
ARTICLE III
CONVERSION OF SHARES
3.1 Merger Consideration. As of the Effective Time:
(a) The NetResponse LLC Interests shall, by virtue of the Merger and
without any action on the part of any shareholder, member, director, or officer
of NetResponse or Sub, as the case may be, be canceled and retired and shall
cease to exist, and no consideration shall be delivered in exchange therefor.
(b) The NetResponse Interests of Next Century shall upon surrender
thereof to Sub, at the Closing, including the underlying membership
certificates, if any, be converted into, and become exchangeable for 701,375
shares of validly issued, fully paid and nonassessable Class B Common Stock of
Parent, $.01 par value (the "Parent Stock") which is based on the following
equation:
PS= (100 - Op) x 775,000
--------
100
where:
PS = the number of shares of Parent Stock (valued, as of the
Closing, at $10 per share) for which Next Century's
NetResponse LLC Interests will be exchanged pursuant to the
Merger; and
Op = the aggregate NetResponse LLC Interests that are subject to
purchase by options outstanding on the Closing Date, to be
exchanged for options to acquire Parent Stock pursuant to
Section 6.6(b) hereof.
(c) Each issued and outstanding share of common stock of Sub shall, by
virtue of the Merger and without any action on the part of any shareholder,
member, director, or officer of NetResponse or Sub, be converted into and become
one fully paid and nonassessable share of common stock of the Surviving
Corporation.
3.2 No Further Rights. From and after the Effective Time, holders of any
NetResponse LLC Interest (or certificates representing such interests) shall
cease to have any rights as members of NetResponse, except as provided herein or
by applicable law.
3.3 Closing of NetResponse's Transfer Books. At the Effective Time, the
NetResponse LLC Interest transfer books shall be closed and no transfer of any
of the NetResponse LLC Interests shall be made thereafter. If after the
Effective Time, certificates for any of the NetResponse LLC Interests are
presented to Parent or the Surviving Corporation, they shall be canceled and
exchanged for a consideration as set forth in Section 3.1 hereof.
3
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NETRESPONSE
NetResponse and Next Century, jointly and severally, and Jon Rubin,
individually and solely to the best of his knowledge, represent and warrant to
Parent and Sub the representations and warranties set forth in this Article IV.
The representations and warranties contained in this Article IV shall survive
the Closing in accordance with Section 10.1 hereof
4.1 Organization and Qualification. NetResponse is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. NetResponse has the requisite power and authority to
carry on the NetResponse Business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificate of Formation and Operating Agreement of
NetResponse as in effect on the date hereof will at the Closing be attached to a
closing certificate and incumbency certificate, substantially in the form of
Exhibit "E-1" hereto ("NetResponse's Closing Certificate"). NetResponse does
- -------------
not maintain a minute book. A true and complete copy of (a) all action taken by
the members and board of managers of NetResponse at meetings of the members or
board of managers of NetResponse, and (b) the respective minutes of all meetings
or consent actions of the members or board of managers of NetResponse, has been
furnished to Parent. Attached as Schedule 4.1 hereto is a signed consent to all
actions of the members of NetResponse.
4.2 Authority. NetResponse has the necessary power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery hereof and the consummation of the
transactions contemplated hereby by NetResponse and Next Century, as the sole
member of NetResponse, have been duly and validly authorized and approved by the
board of managers of NetResponse and Next Century in accordance with the terms
of the NetResponse Operating Agreement and applicable law, and no other limited
liability company or member proceeding on the part of NetResponse, the board of
managers of NetResponse or the members of NetResponse, is necessary to authorize
or approve this Agreement or to consummate the transactions contemplated hereby.
Next Century, its shareholders and board of directors have taken all corporate
actions necessary or appropriate to authorize Next Century, acting as the sole
member of NetResponse, to approve this Agreement. At the Closing, Next Century
shall cause to be delivered a closing certificate, substantially in the form of
Exhibit "E-2" hereto (the "Next Century Closing Certificate"), pursuant to
- -------------
Section 7.2(b) hereof. The execution and delivery hereof by Next Century and
the consummation of the transactions contemplated hereby by NetResponse have
been duly authorized by all necessary or appropriate parties and proceedings and
will not violate the certificate of incorporation or bylaws of Next Century or
any material agreement, law or regulation to which it is subject. The
NetResponse Operating Agreement does not provide any contractual appraisal
rights as provided for in Section 18-210 of the DGCL and NetResponse is not
subject to any other form of "dissenter's rights" with respect to the Merger."
This Agreement has been duly executed and delivered by NetResponse, Next
Century, and Jon Rubin, and assuming the due authorization, execution and
delivery by Parent and
4
<PAGE>
Sub, constitutes the valid and binding obligation of NetResponse, Next Century,
and Jon Rubin enforceable against NetResponse, Next Century and Jon Rubin, in
accordance with its terms subject, in each case, to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors' rights and to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing.
4.3 Capitalization.
(a) Next Century is the holder of record of one hundred percent (100%) of
the NetResponse LLC Interest. Schedule 4.3(a) sets forth a list of (i) all
---------------
holders of record of options, warrants, convertible notes or other rights to
purchase any of the NetResponse LLC Interests (collectively, "NetResponse LLC
Interest Rights"); (ii) the ownership interests of NetResponse represented by
the NetResponse LLC Interest Rights; and (iii) the exercise price for each
NetResponse LLC Interest Right. No certificate has ever been issued for any
NetResponse LLC Interest.
(b) All of the NetResponse LLC Interests are validly issued, fully paid
and nonassessable. Except as set forth on Schedule 4.3(b) hereto, Next Century
---------------
represents and warrants that the NetResponse LLC Interest held by it is free and
clear of any lien, charge, security interest, pledge, option, right of first
refusal, voting proxy or other voting agreement, or encumbrance of any kind or
nature other than restrictions on transfer imposed by federal and state
securities laws (any of the foregoing, a "Lien") .
4.4 Subsidiaries. Except as set forth on Schedule 4.4 hereto, NetResponse
has no subsidiaries and does not otherwise own or control, directly or
indirectly, any equity interest, or any security convertible into an equity
interest, in any corporation, partnership, limited liability company, joint
venture, association or other business entity (any of the foregoing, an
"Entity").
4.5 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
- ------------
NetResponse or Next Century, (ii) the consummation by NetResponse and Next
Century of the transactions contemplated hereby or (iii) compliance by
NetResponse with any of the provisions hereof will:
(a) conflict with or violate the Certificate of Formation or Operating
Agreement of NetResponse;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to NetResponse or Next Century, or by which
NetResponse or any of its properties or assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which NetResponse is a party or by which
NetResponse or any of its properties or assets may be bound or affected;
5
<PAGE>
(d) result in the creation of any Lien on any of the property or assets
of NetResponse; or
(e) require any consent, waiver, license, approval, authorization, order,
permit, registration or filing with, or notification to (any of the foregoing
being a "Consent"), (i) any government or subdivision thereof, whether domestic
or foreign, or any administrative, governmental, or regulatory authority,
agency, commission, court, tribunal or body, whether domestic, foreign or
multinational (any of the foregoing, a "Governmental Entity"), except for the
filing of the Certificate of Merger pursuant to the DGCL; or (ii) any other
individual or Entity (collectively, a "Person").
4.6 Financial Statements. NetResponse, having been formed as a limited
liability company in May 1997, has heretofore furnished Parent with a true and
complete copy of the unaudited financial statements of NetResponse for the eight
month period ended December 31, 1997 and the six month period ended June 30,
1998 (all of the foregoing collectively herein referred to as the "NetResponse
Financial Statements"). Except as disclosed therein or on Schedule 4.6 hereto,
the NetResponse Financial Statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") (except for the absence of
footnotes and normal year end adjustments in the case of the NetResponse
Financial Statements for the period ended June 30, 1998) consistently followed
throughout the period indicated, and present fairly, in all material respects,
the financial position and operating results of NetResponse as of the dates, and
during the periods, indicated therein.
4.7 Absence of Changes. Except as provided in Schedule 4.7 hereto and except
------------
as contemplated hereby, since June 30, 1998 (a) NetResponse has not entered into
any transaction that was not in the ordinary course of business; (b) except for
sales of services and licenses of software in the ordinary course of business,
there has been no sale, assignment, transfer, mortgage, pledge, encumbrance or
lease of any material asset or property of NetResponse; (c) there has been (i)
no declaration or payment of a dividend, or any other declaration, payment or
distribution of any type or nature to any member of NetResponse in respect of
the NetResponse LLC Interests, whether in cash or property, and (ii) no purchase
or redemption of any of the NetResponse LLC Interests; (d) there has been no
declaration, payment, or commitment for the payment, by NetResponse, of a bonus
or other additional salary, compensation, or benefit to any employee of
NetResponse that was not in the ordinary course of business, except for normal
year-end bonuses paid in the ordinary course of business; (e) there has been no
release, compromise, waiver or cancellation of any debt to or claim by
NetResponse, or waiver of any right of NetResponse involving more than $10,000
in the aggregate; (f) there have been no capital expenditures in excess of
$10,000 for any single item, or $25,000 in the aggregate; (g) there has been no
change in accounting methods or practices or revaluation of any asset of
NetResponse (other than NetResponse Accounts Receivable as defined in Section
4.26 hereof written down in the ordinary course of business in excess of $10,000
for any single NetResponse Accounts Receivable, or $25,000 in the aggregate);
(h) there has been no material damage, or destruction to, or loss of, physical
property (whether or not covered by insurance) materially and adversely
affecting the NetResponse Business or the operations of NetResponse; (i) there
has been no loan by NetResponse, or guaranty by NetResponse of any loan, to any
employee of NetResponse; (j) NetResponse has not ceased to transact business
with any
6
<PAGE>
customer that, as of the date of such cessation, represented more than 10% of
the annual gross revenues of NetResponse; (k) there has been no termination or
resignation of any key employee or officer of NetResponse, and to the knowledge
of NetResponse, no such termination or resignation is threatened; (l) there has
been no amendment or termination of any material oral or written contract,
agreement or license related to the NetResponse Business, to which NetResponse
is a party or by which it is bound, except in the ordinary course of business,
or except as expressly contemplated hereby; (m) NetResponse has not failed to
satisfy any of its debts, obligations or liabilities related to the NetResponse
Business or the assets of NetResponse as the same become due and owing (except
for NetResponse Accounts Payable (as defined in Section 4.27 hereof) payable in
accordance with past practices and in the ordinary course of business); (n)
there has been no agreement or commitment by NetResponse to do any of the
foregoing; and (o) there has been no other event or condition of any character
pertaining to specifically, and materially and adversely affecting, the assets,
business or financial condition of NetResponse.
4.8 Undisclosed Liabilities. Except as set forth on Schedule 4.8 hereto,
------------
NetResponse has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including any liability or obligation on account of taxes
or any governmental charge or penalty, interest or fine, except (a) liabilities
incurred in the ordinary course of business after June 30, 1998, that would not,
whether individually or in the aggregate, have a material adverse impact on the
business or financial condition of NetResponse; (b) liabilities reflected on the
NetResponse Financial Statements; and (c) liabilities incurred as a result of
the transactions contemplated hereby.
4.9 Title to Properties. Except as set forth on Schedule 4.9 hereto,
------------
NetResponse has good and marketable title to, or a good and valid license to
use, all tangible property and assets used in the NetResponse Business, and good
and valid title to its leasehold interests, in each case, free and clear of any
and all Liens other than Permitted Liens (as defined in Section 10.11 hereof).
4.10 Equipment. NetResponse has heretofore furnished Parent with a true and
correct list of all items of tangible personal property (including computer
hardware) necessary for or used in the operation of the NetResponse Business
substantially in the same manner in which it has been and is now operated by
NetResponse ("the NetResponse Equipment"), except for personal property having a
net book value of less than $1,000. Except as set forth on Schedule 4.10
-------------
hereto, each material item of NetResponse Equipment is in good condition and
repair, ordinary wear and tear excepted.
4.11 Intellectual Property.
(a) NetResponse has heretofore furnished Parent with a true and complete
list of all material proprietary technology, patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights, and copyrights (and all pending applications for any of the foregoing)
used by NetResponse in the conduct of the NetResponse Business (together with
trade secrets and know how used in the conduct of the NetResponse Business, the
"NetResponse Intellectual Property Rights"). NetResponse owns, or is validly
licensed or otherwise has the right to use or exploit, as currently used or
exploited, all of the NetResponse Intellectual Property Rights, free of any
obligation to make any payment (whether of a royalty, license fee, compensation
or otherwise), except as set forth on Schedule 4.11 hereto. No
-------------
7
<PAGE>
claims are pending or, to the knowledge of NetResponse, threatened, that
NetResponse is infringing or otherwise adversely affecting the rights of any
Person with regard to any NetResponse Intellectual Property Right. To the
knowledge of NetResponse, no Person is infringing the rights of NetResponse with
respect to any NetResponse Intellectual Property Right. Neither NetResponse nor
to the knowledge of NetResponse, any employee, agent or independent contractor
of NetResponse, in connection with the performance of such Person's services
with NetResponse, has used, appropriated or disclosed, directly or indirectly,
any trade secret or other proprietary or confidential information of any other
Person, or otherwise violated any confidential relationship with any other
Person.
(b) NetResponse has heretofore furnished Parent with a true and
substantially complete list of all material computer software used by
NetResponse in the conduct of the NetResponse Business (the "NetResponse
Software"). NetResponse currently licenses, or otherwise has the legal right to
use, all of the NetResponse Software (including any upgrade, alteration or
enhancement with respect thereto), and all of the NetResponse Software is being
used in material compliance with any applicable license or other agreement.
4.12 Real Property. Except as set forth on Schedule 4.12 hereto:
-------------
(a) NetResponse has a good and valid leasehold or license interest in all
real property (including all buildings, improvements and fixtures thereon) used
in the operation of the NetResponse Business (the "NetResponse Real Property").
NetResponse owns no real property. Except for Permitted Liens, and for the items
set forth on Schedule 4.12, there are no Liens on NetResponse's interest in any
-------------
of the NetResponse Real Property. Schedule 4.12 lists each county and state
where any NetResponse Real Property is located, or where NetResponse has ever
owned or leased any real property.
(b) There are no parties in possession of any portion of the NetResponse
Real Property other than NetResponse, whether as sublessees, subtenants at will
or trespassers.
(c) To the knowledge of NetResponse, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by
any Governmental Entity, that would require, under the provisions of any of
the NetResponse Leases (as hereinafter defined), any material expenditure
by NetResponse to modify or improve any of the NetResponse Real Property to
bring it into compliance therewith.
4.13 Leases. Schedule 4.13 hereto sets forth a list of all material leases
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pursuant to which NetResponse leases, as lessor or lessee, real or personal
property (the "NetResponse Leases"). Copies of the NetResponse Leases, all of
which have previously been provided to Parent, are true and complete copies
thereof. All of the NetResponse Leases are valid, binding and enforceable
against NetResponse and, to the knowledge of NetResponse, against the other
parties thereto, in accordance with their respective terms, and, there is not
under any such NetResponse Lease any existing default by NetResponse, or, to the
knowledge of NetResponse by any other party thereto, or any condition or event
that, with notice or lapse of time or both, would constitute a default.
NetResponse has not received notice that the lessor of any of the NetResponse
Leases
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intends to cancel, suspend or terminate such NetResponse Lease or to exercise or
not exercise any option thereunder.
4.14 Contracts. Schedule 4.14 hereto sets forth a true and substantially
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complete and materially accurate list of all contracts, agreements and
commitments (whether written or oral) to which NetResponse is, directly or
indirectly, a party (in its own name or as a successor in interest), or by which
it or any of its properties or assets is otherwise bound, including any service
agreements, customer agreements, supplier agreements, agreements to lend or
borrow money, shareholder agreements, employment agreements, agreements relating
to NetResponse Intellectual Property Rights and the like (collectively, the
"NetResponse Contracts"); excepting only those NetResponse Contracts which
involve less than $15,000 and are cancelable, without penalty, on no more than
90 days' notice. The aggregate value of all payment obligations and rights to
receive payments, under agreements, contracts and commitments (whether oral or
in writing) to which NetResponse is a party or by which it or any of its
properties or assets is otherwise bound, and that are not listed on Schedule
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4.14, is less than $50,000 (calculating such value by adding together the value
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of rights and obligations, and not by determining the net amount thereof).
True and complete copies of all NetResponse Contracts (or a true and
materially complete narrative description of any oral NetResponse Contract) have
previously been provided to Parent. Neither NetResponse nor to the knowledge of
NetResponse any other party to any of the NetResponse Contracts (x) is in
material default under (nor does there exist any condition that, with notice or
lapse of time or both, would cause such a default under) any of the NetResponse
Contracts, or (y) has waived any material right it may have under any of the
NetResponse Contracts, the waiver of which would have a material adverse effect
on the business, assets or financial condition of NetResponse. All of the
NetResponse Contracts constitute the valid and binding obligations of
NetResponse, enforceable in accordance with their respective terms, and, to the
knowledge of NetResponse, of the other parties thereto.
4.15 Officers. Schedule 4.15 hereto sets forth a list, as of the Closing
-------------
Date, of the name of each officer of NetResponse and the position(s) held by
each.
4.16 Payroll Information. NetResponse has previously provided Parent with a
true and complete copy of the payroll schedule of NetResponse dated as of August
4, 1998, showing all then current employees of NetResponse and their then
current levels of compensation, other than bonuses and other extraordinary
compensation, all of which bonuses and other extraordinary compensation are set
forth in Schedule 4.16 hereto. NetResponse has paid all compensation required
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to be paid to employees of NetResponse on or prior to the date hereof other than
compensation (and bonuses pursuant to arrangements described in Schedule 4.16)
-------------
accrued in the current pay period.
4.17 Litigation. Except as set forth on Schedule 4.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
NetResponse, threatened against or affecting NetResponse or the NetResponse
Business, nor is there any judgment, decree, injunction or order of any
applicable Governmental Entity or arbitrator outstanding against NetResponse.
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4.18 Employee Benefit Plans/Labor Relations.
(a) Except as disclosed in Schedule 4.18 hereto, there are no employee
-------------
benefit plans, agreements or arrangements maintained by NetResponse, including
(i) "employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); (ii) current or
deferred compensation, pension, profit sharing, vacation or severance plans or
programs; or (iii) medical, hospital, accident, disability or death benefit
plans (collectively, "NetResponse Benefit Plans"). All NetResponse Benefit Plans
are administered in accordance with, and are in material compliance with, all
applicable laws and regulations. No default exists with respect to the
obligations of NetResponse under any NetResponse Benefit Plan.
(b) NetResponse is not a party to any collective bargaining agreement; no
collective bargaining agent has been certified as a representative of any of the
employees of NetResponse; no representation campaign or election is now in
progress with respect to any employee of NetResponse; and there are no labor
disputes, grievances, controversies, strikes or requests for union
representation pending, or, to the knowledge of NetResponse, threatened,
relating to or affecting the NetResponse Business. To the knowledge of
NetResponse, no event has occurred that could reasonably give rise to any such
dispute, controversy, strike or request for representation.
4.19 ERISA.
(a) All NetResponse Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the NetResponse Benefit Plans that is
intended to meet the requirements of Section 401(a) of the Code has been
determined by the Internal Revenue Service to meet such requirements within the
meaning of such provision. No NetResponse Benefit Plan is subject to Title IV of
ERISA or Section 412 of the Code. NetResponse has not engaged in any nonexempt
"prohibited transactions," as such term is defined in Section 4975 of the Code
or Section 406 of ERISA, involving NetResponse Benefit Plans that would subject
NetResponse to the penalty or tax imposed under Section 502(i) of ERISA or
Section 4975 of the Code. NetResponse has not engaged in any transaction
described in Section 4069 of ERISA within the last five years. Except as
disclosed in Schedule 4.19 hereto or pursuant to the terms of the NetResponse
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Benefit Plans, neither the execution and delivery hereof nor the consummation of
the transactions contemplated hereby will (i) result in any payment (including
severance, unemployment compensation or golden parachute) becoming due to any
employee of NetResponse, (ii) increase any benefit otherwise payable under any
NetResponse Benefit Plan or (iii) result in the acceleration of the time of
payment or vesting of any such benefit to any extent.
(b) No notice of a "reportable event," within the meaning of Section 4043
of ERISA, for which the 30-day reporting requirement has not been waived, has
been required to be filed for any NetResponse Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code, or by any
entity that is considered one employer with NetResponse under Section 4001 of
ERISA or Section 414 of the Code, within the 12-month period ending on the
Closing Date.
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NetResponse has not incurred any liability to the Pension Benefit Guaranty
Corporation in respect of any NetResponse Benefit Plan that remains unpaid.
4.20 Taxes.
(a) Except as set forth on Schedule 4.20 hereto, NetResponse has duly and
timely filed all federal, state and local income, franchise, excise, real and
personal property and other tax returns and reports, including extensions,
required to have been filed by NetResponse on or prior to the Closing Date.
NetResponse has duly and timely paid all taxes and other governmental charges,
and all interest and penalties with respect thereto, required to be paid by
NetResponse (whether by way of withholding or otherwise) to any federal, state,
local or other taxing authority (except to the extent the same are being
contested in good faith, and adequate reserves therefor have been provided in
the NetResponse Financial Statements). As of the Closing Date, all deficiencies
proposed as a result of any audit have been paid or settled.
(b) NetResponse is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) NetResponse has not consented to have the provisions of Section
341(f)(2) of the Code (or comparable state law provisions) apply to it, and
NetResponse has not agreed or been requested to make any adjustment under
Section 481(c) of the Code by reason of a change in accounting method or
otherwise.
4.21 Compliance with Applicable Laws. Except as set forth on Schedule 4.21
hereto, NetResponse holds all material permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary to own, lease or
operate all of the assets and properties of NetResponse, as appropriate, and to
carry on the NetResponse Business substantially as now conducted (the
"NetResponse Permits"). To the knowledge of NetResponse, NetResponse is in
material compliance with all applicable laws, ordinances and regulations and the
terms of the NetResponse Permits. Except as set forth on Schedule 4.21 hereto,
-------------
all of the NetResponse Permits are fully assignable by NetResponse in connection
with the Merger. Schedule 4.21 sets forth a true and complete list of all
-------------
NetResponse Permits, true and complete copies of which have previously been
provided to Parent.
4.22 Member/Board of Managers. Both the board of managers of NetResponse and
Next Century, as the sole member of NetResponse, have adopted and approved this
Agreement and the transactions contemplated hereby (including the Merger).
4.23 Brokers. Except as set forth on Schedule 4.23 hereto, no broker or
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finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of NetResponse.
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4.24 Environmental Matters.
(a) To the knowledge of NetResponse, no real property currently or
formerly owned or operated by NetResponse is contaminated with any Hazardous
Substance (as hereinafter defined).
(b) NetResponse is not a party to any litigation or administrative
proceeding nor, to the knowledge of NetResponse, is any litigation or
administrative proceeding threatened against it, that, in either case, asserts
or alleges that NetResponse (i) violated any Environmental Law (as hereinafter
defined); (ii) is required to clean up, remove or take remedial or other
responsive action due to the disposal, deposit, discharge, leak or other release
of any Hazardous Substance; or (iii) is required to pay all or a portion of the
cost of any past, present or future cleanup, removal or remedial or other action
that arises out of or is related to the disposal, deposit, discharge, leak or
other release of any Hazardous Substance.
(c) To the knowledge of NetResponse, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by NetResponse containing materials that, if
known to be present in soil or ground water, would require cleanup, removal or
other remedial action under Environmental Law.
(d) To the knowledge of NetResponse, NetResponse is not subject to any
judgment, order or citation related to or arising out of any Environmental Law
and has not been named or listed as a potentially responsible party by any
Governmental Entity in a matter related to or arising out of any Environmental
Law.
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including any petroleum products, asbestos or polychlorinated biphenyls.
4.25 Interest in Customers, Suppliers and Competitors. Except as provided
in Schedule 4.25 hereto, no officer, member or employee of NetResponse and no
-------------
family member (including a spouse, parent, sibling or lineal descendent of any
of the foregoing), has any direct or indirect material interest in any material
customer, supplier or competitor of NetResponse, or in any Person from whom or
to whom NetResponse leases any real or personal property, or in any other Person
with whom NetResponse is doing business whether directly or indirectly
(including as a debtor or creditor), whether in existence as of the Closing Date
or proposed, other than the ownership of stock of publicly traded corporations.
4.26 Accounts Receivable. All accounts, notes, contracts and other
receivables of NetResponse (collectively, "NetResponse Accounts Receivable")
were acquired by NetResponse in the ordinary course of business arising from
bona fide transactions. To the knowledge of
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NetResponse, except as provided in Schedule 4.26 hereto, there are no set-offs,
-------------
counterclaims or disputes asserted with respect to any NetResponse Accounts
Receivable that would result in claims in excess of the reserve for bad debts
set forth on the NetResponse Financial Statements and, to the knowledge of
NetResponse and subject to such reserve, all NetResponse Accounts Receivable are
collectible in full. NetResponse has previously provided Parent with a true and
materially complete aging report prepared as of September 14, 1998 which shows
the time elapsed since invoice date for all NetResponse Accounts Receivable as
of such date.
4.27 Accounts Payable. Except as shown on Schedule 4.27 hereto, all material
-------------
accounts, notes, contracts and other amounts payable of NetResponse
(collectively, "NetResponse Accounts Payable") are currently within their
respective terms, and are neither in material default nor otherwise past due by
more than 90 days. NetResponse has previously provided Parent with a true and
materially complete aging report prepared as of September 14, 1998 which shows
the time elapsed since invoice date for all NetResponse Accounts Payable as of
such date.
4.28 Insurance. NetResponse currently maintains, in full force and effect, all
insurance policies that, in its reasonable opinion, are required to be
maintained for the conduct of the NetResponse Business or the ownership of
NetResponse's property (both real and personal) (collectively, the "NetResponse
Insurance Policies"). The NetResponse Insurance Policies are listed on Schedule
--------
4.28 hereto, and true and materially complete copies of all NetResponse
- ----
Insurance Policies have previously been provided to Parent. NetResponse (a) is
not in material default regarding the provisions of any NetResponse Insurance
Policy; (b) has paid all premiums due thereunder; and (c) has not failed to
present any significant notice or material claim thereunder in a due and timely
fashion.
4.29 Bankruptcy. NetResponse has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 NetResponse Debt. As of the date hereof, the NetResponse Debt is not in
excess of $2,236,000.
4.31 Accredited Investors; Investment Purpose. Next Century represents that it
is an "accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Securities Act"). Next Century represents that it is
acquiring the Parent Stock solely for his or its own account for investment and
not with a view to, or for sale in connection with, any distribution thereof.
Next Century represents that it will not, directly or indirectly, offer,
transfer, sell, pledge, hypothecate or otherwise dispose of any Parent Stock (or
solicit any offers to buy, purchase or otherwise acquire or take a pledge of any
such shares) except in compliance with the Securities Act and the rules and
regulations thereunder, other applicable laws, rules and regulations, and the
Second Amended and Restated Stockholders' Agreement of Parent, dated December
17, 1997 (the "Stockholders' Agreement").
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4.32 Restrictions on Transfer. Next Century acknowledges that (a) the Parent
Stock received by it hereunder has not been registered under the Securities Act;
(b) the Parent Stock may be required to be held indefinitely, and it must
continue to bear the economic risk of the investment in such shares unless such
shares are subsequently registered under the Securities Act or an exemption from
such registration is available; (c) there may not be any public market for the
Parent Stock in the foreseeable future; (d) Rule 144 promulgated under the
Securities Act is not presently available with respect to sales of any
securities of Parent, and such Rule is not anticipated to be available in the
foreseeable future; (e) when and if Parent Stock may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
limited amounts and in accordance with the terms and conditions of such Rule,
except as otherwise provided by Rule 144(k); (f) if the exemption afforded by
Rule 144 is not available, public sale without registration will require the
availability of an exemption under the Securities Act; (g) the Parent Stock is
subject to the terms and conditions of the Stockholders' Agreement; (h)
restrictive legends shall be placed on the certificates representing Parent
Stock; and (i) a notation shall be made in the appropriate records of Parent
indicating that Parent Stock is subject to restrictions on transfer and, if
Parent should in the future engage the services of a stock transfer agent,
appropriate stop-transfer instructions will be issued to such transfer agent
with respect to Parent Stock.
4.33 Ability to Bear Risk; Access to Information; Sophistication. Next
Century represents and warrants that (a) its financial situation is such that it
can afford to bear the economic risk of holding Parent Stock acquired by it
hereunder for an indefinite period; (b) it can afford to suffer the complete
loss of such Parent Stock; (c) it has been granted the opportunity to ask
questions of, and receive answers from, representatives of Parent concerning the
terms and conditions of the Parent Stock and to obtain any additional
information that it deems necessary; (d) its knowledge and experience in
financial business matters is such that it is capable of evaluating the merits
and risk of ownership of the Parent Stock; (e) it has carefully reviewed the
terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; and (f) it (i) has reviewed the Private Placement
Memorandum of Parent dated September 8, 1998, as amended (the "Memorandum"),
(ii) has carefully examined the Memorandum and has had an opportunity to ask
questions of, and receive answers from, representatives of Parent, and to obtain
additional information concerning Parent and its Subsidiaries (as hereinafter
defined), and (iii) does not require additional information regarding Parent or
its Subsidiaries in connection with the Merger.
4.34 Disclosure. No statement of fact by NetResponse, Next Century or Jon
Rubin contained herein and no written statement of fact furnished by
NetResponse, Next Century or Jon Rubin to Parent or Sub in connection herewith
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein contained not
misleading.
4.35 Nature of Liabilities. None of the unpaid legal, accounting or other
fees of NetResponse are related to the Merger.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to
NetResponse and Next Century, which representations and warranties shall survive
the Closing in accordance with Section 10.1 hereof, as follows:
5.1 Organization and Qualification. Each of Parent and its Subsidiaries (as
defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached, respectively, to a closing
certificate and incumbency certificate, substantially in the form of Exhibit "A-
----------
1" hereto ("Parent's Closing Certificate"), and to Sub's Closing Certificate.
- --
5.2 Authority. Each of Parent and Sub has the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by NetResponse, Next Century and Jon
Rubin, constitutes the valid and binding obligation of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms,
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
5.3 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or Bylaws
of Parent or Sub, or the organizational documents of any other Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
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(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for (x)
compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL); or (ii)
any other Person.
5.4 Litigation. Except as set forth on Schedule 5.4 hereto, there is no
------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 Brokers. Except as disclosed on Schedule 5.5 hereto, no broker or finder
------------
is entitled to any broker's or finder's fee in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Parent or
Sub.
5.6 Parent Stock.
(a) As of the date hereof the authorized capital stock of Parent consists
of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value, of which
no shares are validly issued and outstanding, and (B) 100,000,000 shares of
Class B Common Stock, $.01 par value, of which 14,053,489 shares are validly
issued and outstanding (without taking into account any shares of Parent Stock
to be issued pursuant hereto, and excluding the potential acquisitions of Pequot
Systems, Inc., Pantheon Interactive, Inc., Ionix Development Corporation and
Two-Way Communications, L.L.C.), fully paid and nonassessable; (ii) 750,000
shares of blank check preferred stock, (A) 250,000 of which have been designated
as Class A Convertible Preferred Stock, of which 175,766 shares are validly
issued and outstanding, fully paid and nonassessable, (B) 200,000 of which have
been designated as Class B Convertible Preferred Stock, of which 98,767 shares
are validly issued and outstanding, fully paid and nonassessable, (C) 15,000 of
which have been designated as Class C Convertible Preferred Stock, of which
9,232 shares are validly issued and outstanding, fully paid and nonassessable
and (D) 50,000 of which have been designated as Class D Nonvoting Preferred
Stock, of which 30,100 shares are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 5.6 hereto, there are no options,
------------
warrants, calls, agreements, commitments or other rights presently outstanding
that would obligate Parent to issue, deliver or sell shares of its capital
stock, or to grant, extend or enter into any such option, warrant, call,
agreement, commitment or other right. In addition to the foregoing, as of the
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<PAGE>
Closing Date, Parent has no bonds, debentures, notes or other indebtedness
issued or outstanding that have voting rights in Parent.
(b) When delivered to Next Century in accordance with the terms hereof,
the Parent Stock will be (i) duly authorized, fully paid and nonassessable, and
(ii) free and clear of all Liens other than restrictions imposed by the
Stockholders' Agreement and by federal and state securities laws.
5.7 Subsidiaries. Except as set forth on Schedule 5.7 hereto, Parent has no
------------
subsidiaries and does not otherwise own or control, directly or indirectly, any
equity interest in, or any security convertible into an equity interest in, any
Entity. Schedule 5.7 lists the name of each of the Subsidiaries of Parent, and
------------
indicates their respective jurisdictions of incorporation.
5.8 Financial Statements. Parent has heretofore furnished NetResponse with a
true and complete copy of (a) the audited financial statements of iXL
Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31,
1993, 1994 and 1995, and for the four month period ended April 30, 1996; (b) the
audited combined financial statements for Creative Video, Inc. (n/k/a iXL,
Inc.), Creative Video Library, Inc. and Entrepreneur Television, Inc. for the
years ended December 31, 1993, 1994 and 1995, and for the four month period
ended April 30, 1996; (c) the audited consolidated financial statements for
Parent and its Subsidiaries for the eight months ended December 31, 1996 and for
the year ended December 31, 1997; and (d) the unaudited consolidated financial
statements for Parent and its Subsidiaries for the six month period ended June
30, 1998 (all of the foregoing, collectively, "Parent Financial Statements").
The Parent Financial Statements present fairly in all material respects the
consolidated financial position, results of operations, shareholders' equity and
cash flow of Parent at the respective dates or for the respective periods to
which they apply. Except as disclosed therein, such statements and related
notes have been prepared in accordance with GAAP consistently applied throughout
the periods involved (except, in the case of the unaudited financial statements,
for the exclusion of footnotes and normal year end adjustments).
5.9 Undisclosed Liabilities. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after June 30, 1998 that would not, whether individually or in the aggregate,
have a material adverse impact on the business or financial condition of Parent
and its Subsidiaries, taken as a whole; (b) liabilities reflected on the Parent
Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
5.10 Compliance with Applicable Laws. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
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<PAGE>
5.11 Board of Directors/Shareholder Consent. The board of directors of
Parent, and both the board of directors and shareholder of Sub, have, by
unanimous written consent or other action, adopted and approved this Agreement
and the transactions contemplated hereby (including the Merger).
5.12 Bankruptcy. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 Absence of Changes. Except as provided in Schedule 5.13 hereto, since
-------------
June 30, 1998, there has not been (a) any transaction, commitment, dispute or
other event or condition (financial or otherwise) of any character (whether or
not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
material change in Parent's accounting principles, practices or methods; (f) any
split, combination or reclassification of any of Parent's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Parent's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
5.14 Taxes. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent
and its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the Closing Date,
all deficiencies proposed as a result of any audits have been paid or settled.
5.15 Disclosure. No statement of fact by Parent or Sub contained herein and
no written statement of fact furnished or to be furnished by Parent or Sub to
NetResponse in connection herewith contains or will contain any untrue statement
of a material fact or omits or will omit to
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state a material fact necessary in order to make the statements herein or
therein contained not misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Conduct of Business by NetResponse Pending the Merger. From and after
the date hereof, prior to the Effective Time, except as contemplated hereby,
unless Parent shall otherwise agree in writing, NetResponse shall carry on its
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, use commercially reasonable efforts to preserve
intact its present business organization, keep available the services of its
employees and preserve its relationships with its customers, suppliers,
licensors, licensees, distributors and others having business dealings with
NetResponse to the end that its goodwill and on-going businesses shall not be
impaired in any material respect at the Effective Time. Without limiting the
generality of the foregoing, and except as contemplated hereby, unless Parent
shall otherwise agree in writing, prior to the Effective Time, NetResponse shall
not, directly or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of the NetResponse LLC Interests, (ii) split,
combine or reclassify any of the NetResponse LLC Interests, or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for, any of the NetResponse LLC Interests, or (iii) purchase,
redeem or otherwise acquire, any of the NetResponse LLC Interests or any other
equity security thereof or any right, warrant, or option to acquire any such
share or other security;
(b) issue, deliver, sell, pledge or otherwise encumber any of the
NetResponse LLC Interests, any other voting security issued by NetResponse or
any security convertible into, or any right, warrant or option to acquire any
such NetResponse LLC Interest or voting security;
(c) amend its Certificate of Formation, Operating Agreement or other
comparable organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to NetResponse;
(e) subject to a Lien or sell, lease or otherwise dispose of any of its
properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of
NetResponse, guarantee any debt security of another Person or enter into any
"keep well" or other agreement to maintain the financial condition of another
Person, make any loan, advance or capital contribution to, or investment in, any
other Person, or settle or compromise any material claim or litigation; or
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(g) authorize any of, commit or agree to take any of, the foregoing
actions.
6.2 Access to Information. From the date hereof through the Effective Time,
NetResponse and Parent shall afford to the other of them and the other's
accountants, counsel and other representatives reasonable access during normal
business hours (and at such other times as the parties may mutually agree) upon
reasonable prior notice and approval, which shall not be unreasonably withheld,
to its properties, books, contracts, commitments, records and personnel and,
during such period, shall furnish promptly to the other of them all information
concerning its business, properties and personnel as the other may reasonably
request. Such information shall be subject to the non-disclosure letter
agreement of July 9, 1998. Parent and NetResponse, and their respective
accountants, counsel and other representatives, shall, in the exercise of the
rights described in this Section 6.2, not unduly interfere with the operation of
the business of the other of them.
6.3 Filings; Tax Elections. NetResponse shall promptly provide Parent with
copies of all filings made by NetResponse with any Governmental Entity in
connection herewith and the transactions contemplated hereby. NetResponse
shall, before settling or compromising any material income tax liability of
NetResponse, consult with Parent and its advisors as to the positions and
elections that will be taken or made with respect to such matter.
6.4 Public Announcements. The parties agree that, except as may otherwise be
required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger. Any such disclosure shall be coordinated by Parent,
and neither Next Century or Jon Rubin shall make any such disclosure without
the prior written consent of Parent.
6.5 Transfer and Gains Taxes and Certain Other Taxes and Expenses. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 Options.
(a) NetResponse hereby covenants and agrees that at the Effective Time,
all of the NetResponse LLC Interest Rights (all of which are set forth on
Schedule 4.3(a) hereto) shall have been properly canceled and, except for the
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right to receive options to acquire Parent Stock described in Section 6.6(b)
below, all rights and obligations thereunder shall have been terminated.
(b) Parent hereby covenants and agrees that, at the Effective Time, each
of the holders of NetResponse LLC Interest Rights shall receive options to
purchase the number of shares of validly issued, fully paid and nonassessable
Parent Stock, at the exercise price per share, as set forth on Schedule 6.6(b)
---------------
hereto, all of which options shall have been issued pursuant to the IXL
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Holdings, Inc. 1996 Stock Option Plan, as amended (the "Parent Stock Option
Plan"), and shall be substantially in the form of Exhibit "D" hereto.
-----------
(c) In addition to those options issued in connection with Section 6.6(b)
above, Parent hereby covenants and agrees that it will issue ten-year options,
all in the form of Exhibit "D" hereto to purchase 500,000 shares of Parent
-----------
Stock, at $10 per share, to such persons as designated by NetResponse and
approved by Parent, such approval not to be unreasonably withheld, delayed or
conditioned; provided, however, that 100,000 of such options shall be granted to
Next Century and shall be immediately fully vested, and the 400,000 remaining
options shall be subject to Parent's standard five-year vesting schedule and the
Parent Stock Option Plan; provided further, however, that the options issuable
to Next Century and Jon Rubin hereunder, shall not require such holders to be
employees or officers of Parent or its subsidiaries, in order to receive or
exercise their options.
6.7 Further Assurances. From time to time after the Effective Time, upon the
reasonable request of any party hereto, the other party or parties hereto shall
execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof.
6.8 Repayment of Certain NetResponse Debt. To defray all debt of
NetResponse to Next Century, Parent agrees to pay $1,750,000 in cash or other
immediately available funds to Next Century, at the Closing.
6.9 Post-Closing Services. For a period of twelve months following the
Closing Date, Next Century shall purchase, and shall cause its subsidiaries to
purchase, substantially all of their internet and e-commerce related goods and
services from the Parent and its subsidiaries, including the Surviving
Corporation, and all projects undertaken by NetResponse for Next Century, its
subsidiaries or affiliates, prior to the Closing Date, which have been disclosed
to Parent or Sub, if not completed prior to the Closing Date, shall be completed
by the Surviving Corporation; provided, however, that, from and after the
Closing Date, the Surviving Corporation may charge for any of the above-
described goods and services the normal rates and other charges established
therefor by Parent and/or the Surviving Corporation if such rates and charges
are competitive for similar services offered by other internet and e-commerce
service providers; provided further, however, that Parent or Sub may terminate
any or all such projects if it cannot agree with Next Century on a price for
such services.
6.10 Post-Closing Referrals. From and after the Closing Date, Next Century
shall make every reasonable effort to, and shall cause its subsidiaries to make
every reasonable effort to, refer their existing customers and contacts to
Parent and the Surviving Corporation for internet and e-commerce related
services, provided such services are qualitatively and economically competitive
with services offered by other providers.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligation of NetResponse and Next Century to Effect the
Merger. The obligations of NetResponse and Next Century to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) Parent and Sub shall have performed in all material respects their
respective agreements contained herein required to be performed at or prior to
the Effective Time, and the representations and warranties of Parent and Sub
contained herein shall be true when made and (except for representations and
warranties made as of a specified date, which need only be true as of such date)
at and as of the Effective Time as if made at and as of such time, except as
contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to NetResponse at the Closing, Parent's Closing Certificate, and (ii)
the appropriate officers of Sub shall have executed and delivered to NetResponse
at the Closing, Sub's Closing Certificate;
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
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(d) NetResponse shall have received corporate certificates of good
standing for Parent and Sub, and a copy of the Certificate of Incorporation for
Parent and Sub, respectively, both as certified by the Secretary of State of
Delaware;
(e) there shall have been delivered to Next Century at the Closing, duly
executed by Parent, an Agreement to be Bound to the Registration Rights
Agreement of Parent, dated as of Closing Date (the "Agreement to be Bound to the
Registration Rights Agreement"), in the form of Exhibit "B" hereto;
-----------
(f) Parent shall have executed and delivered at the Closing an Option
Agreement for each of the Persons listed on Schedule 6.6(b) or Schedule 6.6(c)
--------------- ---------------
hereto as receiving options to purchase Parent Stock;
(g) NetResponse shall have received, at the Closing, a duly executed
opinion of counsel to Parent and Sub, substantially in the form of Exhibit "F"
-----------
hereto;
(h) NetResponse shall have received from Parent and Sub such other
documents as NetResponse's counsel shall have reasonably requested, in form and
substance reasonably satisfactory to NetResponse's counsel; and
(i) Parent shall have delivered to Next Century as required by Section
6.8 hereof $1,750,000 in cash or other immediately available funds.
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7.2 Conditions to Obligations of Parent and Sub to Effect the Merger. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) NetResponse and Next Century shall have performed in all material
respects their respective agreements contained herein required to be performed
at or prior to the Effective Time, and the representations and warranties of
NetResponse and Next Century contained herein shall be true when made and
(except for representations and warranties made as of a specified date, which
need only be true as of such date) at and as of the Effective Time as if made at
and as of such time, except as contemplated hereby;
(b) (i) the appropriate officers of NetResponse shall have executed and
delivered to Parent at the Closing, NetResponse's Closing Certificate and (ii)
the appropriate officers of Next Century shall have executed and delivered to
Parent at Closing, the Next Century Closing Certificate.
(c) NetResponse and Next Century shall have obtained or caused to be
obtained all of the Consents, if any, listed on Schedule 7.2(c) hereto;
---------------
(d) there shall have been delivered to Parent at the Closing, duly
executed by Next Century, (i) an Agreement to be Bound to the Stockholders'
Agreement, in the form of Exhibit "G" hereto; and (ii) an Agreement to be Bound
-----------
to the Registration Rights Agreement;
(e) Parent shall have received a certificate of good standing for
NetResponse, and a copy of the Certificate of Formation of NetResponse, both as
certified by the Delaware Secretary of State;
(f) as of the date three business days prior to the Closing Date the
NetResponse Debt shall be no greater than $2,236,000;
(g) NetResponse shall have complied with its obligations under Section
6.6(a) hereof;
(h) Parent shall have received, at the Closing, a duly executed opinion
of counsel to NetResponse and Next Century, substantially in the form of
Exhibit "C" hereto;
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(i) Parent shall have received from NetResponse or Next Century, as the
case may be, such other documents as Parent's counsel shall have reasonably
requested, in form and substance reasonably satisfactory to Parent's counsel;
and
(j) Parent shall have received evidence reasonably satisfactory to it
that at the Closing the assets and properties used in the NetResponse Business
are free and clear of all Liens other than Permitted Liens (as hereinafter
defined), and that Next Century is an accredited investor in accordance with
Section 4.31 hereof.
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ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Parent.
(a) Parent shall indemnify and hold Next Century, Jon Rubin and
NetResponse's directors, officers and employees (collectively, the "NetResponse
Indemnified Parties") harmless from and against, and shall promptly defend each
of the NetResponse Indemnified Parties from and reimburse each of the
NetResponse Indemnified Parties for, any and all losses, damages, costs,
expenses, liabilities, obligations and claims of any kind (including reasonable
attorney fees and other legal costs and expenses) (collectively, a "NetResponse
Loss") that any of the NetResponse Indemnified Parties may at any time suffer or
incur, or become subject to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Parent or Sub at the Closing in accordance
with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform, satisfy and
discharge any of its respective covenants, agreements, undertakings, liabilities
or obligations hereunder or under any of the documents and materials delivered
by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary and
subject to the next sentance, Parent shall not have any liability under Section
8.1(a)(i) above (i) unless the aggregate of all NetResponse Losses for which
Parent would be liable but for this sentence exceeds, on a cumulative basis, an
amount equal to $100,000, and then only to the extent of such excess, (ii) for
amounts in excess of $8,750,000 in the aggregate, and (iii) unless Next Century
or Jon Rubin have asserted a claim with respect to the matters set forth in
Section 8.1(a)(i), or 8.1(a)(iii) to the extent applicable to Section 8.1(a)(i),
within two years of the Effective Time. In the event that Parent completes an
initial public offering, which results in the Parent Stock being traded on a
national stock exchange or on Nasdaq, the maximum liability for indemnification
under Section 8(b)(ii) shall at any time be equal to the aggregate market price
of the total number of shares of Parent Stock received by Next Century pursuant
to this Agreement. The market price for such shares shall be determined on any
day by multiplying 701,375 times the closing price of such Parent Stock on the
immediately preceding day on Nasdaq or other the national stock exchange on
which such stock is traded. Notwithstanding any implication to the contrary
contained herein, the parties acknowledge and agree that a decrease in the value
of Parent Stock would not, by itself, constitute a NetResponse Loss, unless and
to the extent a decrease in the value of Parent Stock has been demonstrated to
be as a result of any event described in Sections 8.1(a)(i), (ii) or (iii)
above.
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8.2 Indemnification by Next Century and Jon Rubin.
(a) Next Century and Jon Rubin , severally, but not jointly, shall
indemnify and hold Parent, Sub, Surviving Corporation and their respective
shareholders, directors, officers and employees (collectively, the "Parent
Indemnified Parties") harmless from and against, and shall defend promptly each
of the Parent Indemnified Parties from and reimburse each of the Parent
Indemnified Parties for, any and all losses, damages, costs, expenses,
liabilities, obligations and claims of any kind (including reasonable attorneys'
fees and other legal costs and expenses) (collectively, a "Parent Loss") that
any of the Parent Indemnified Parties may at any time suffer or incur, or become
subject to, as a result of or in connection with:
(i) in the case of Next Century, any breach or inaccuracy of any of
the representations and warranties made by NetResponse, Jon Rubin or Next
Century in or pursuant hereto, or in any instrument certificate or affidavit
delivered by any of the same at the Closing in accordance with the provisions
hereof, or in the failure of NetResponse to have qualified to do business in the
States of New York or California, or in any suit, action or other proceeding
arising out of, or in any way related to, any of the matters subject to
indemnification by it pursuant to this Section 8.2;
(ii) in the case of Jon Rubin, any breach or inaccuracy of any of the
representations and warranties made by Jon Rubin in or pursuant hereto, or in
any instrument, certificate or affidavit delivered by any of the same at the
Closing in accordance with the provisions hereof, or in any suit, action or
other proceeding arising out of, or in any way related to, any of the matters
subject to indemnification by him pursuant to this Section 8.2; and
(iii) in the case of Next Century, any failure by NetResponse, Jon
Rubin or Next Century to carry out, perform, satisfy and discharge any of their
respective covenants, agreements, undertakings, liabilities (arising under this
Section 8.2(a)(iii)) or obligations hereunder or under any of the documents and
materials delivered by NetResponse pursuant hereto.
(b) Notwithstanding the above and subject to the following sentance,
neither Next Century nor Jon Rubin shall have any liability under Section
8.2(a)(i) or Section 8.2(a)(ii) above, respectively, (i) unless the aggregate of
all Parent Losses for which Next Century or Jon Rubin would be liable but for
this sentence exceeds, on a cumulative basis, an amount equal to $100,000, and
then only to the extent of such excess, (ii) for amounts in excess of $8,750,000
in the aggregate, and (iii) unless Parent has asserted a claim with respect to
the matters set forth in Sections 8.2(a)(i) or 8.2(a)(ii) within 18 months of
the Effective Time, except with respect to the matters arising under Sections
4.18, 4.19, 4.20 or 4.24 hereof, in which event Parent must have asserted a
claim within the applicable statute of limitations. In the event that Parent
completes an initial public offering, which results in the Parent Stock being
traded on a national stock exchange or on Nasdaq, the maximum liability for
indemnification under Section 8(b)(ii) shall at any time be equal to the
aggregate market price of the total number of shares of Parent Stock received by
Next Century pursuant to this Agreement. The market price for such shares shall
be determined on any day by multiplying 701,375 times the closing price of such
Parent Stock on the immediately preceding day on Nasdaq or other the national
stock exchange on which such stock is traded.
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Notwithstanding any implication to the contrary contained herein, the parties
acknowledge and agree that a decrease in the value of Parent Stock would not, by
itself, constitute a Parent Loss, unless and to the extent a decrease in the
value of Parent Stock has been demonstrated to be as a result of any event
described in Sections 8.2(a)(i), (ii) or (iii) above. The foregoing
notwithstanding, the direct personal liability of Jon Rubin to the Parent
Indemnified Parties under this Article VIII shall be secondary to that of Next
Century, that is, Jon Rubin shall have no indemnification obligation hereunder
unless and until the Parent Indemnified Parties shall have proceeded against
Next Century pursuant to Section 8.3 hereof, and Next Century shall have either
denied liability or failed to respond to the Claim (as defined below) within
thirty (30) days after receipt of written notice of the Claim. In no event shall
Jon Rubin's direct personal liability hereunder exceed $1,000,000 in aggregate.
8.3 Notification of Claims; Election to Defend
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder and shall provide in
any such notice, to the extent reasonably available to such Indemnified Party, a
reasonable description of the facts and circumstances constituting such claim.
Subject to the Indemnifying Party's right to defend in good faith third party
claims as hereinafter provided, the Indemnifying Party shall satisfy its
obligations under this Article VIII within 30 days after the receipt of written
notice thereof from the Indemnified Party. Any amounts paid thereafter shall
include interest thereon for the period commencing at the end of such 30-day
period and ending on the actual date of payment, at a rate of 10% per annum, or,
if lower, at the highest rate of interest permitted by applicable law at the
time of such payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of any
Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a Claim
asserted by a third party against the Indemnified Party that the Indemnifying
Party acknowledges is a Claim for which it must indemnify or hold harmless the
Indemnified Party under Section 8.1 or 8.2 hereof, as the case may be, the
Indemnifying Party shall have the right, at its sole cost and expense, to employ
counsel of its own choosing to defend any such Claim asserted against the
Indemnified Party. Notwithstanding anything to the contrary in the preceding
sentence, if the Indemnified Party (i) reasonably believes that its interests
with respect to a Claim (or any material portion thereof) are in conflict with
the interests of the Indemnifying Party with respect to such Claim (or portion
thereof), and (ii) promptly notifies the Indemnifying Party, in writing, of the
nature of such conflict, then the Indemnified Party shall be entitled to choose,
at the sole cost and expense of the Indemnifying Party, independent counsel to
defend such Claim (or the conflicting portion thereof). The Indemnified Party
shall have the right to participate in the defense of any Claim at its own
expense (except to the extent provided in the preceding sentence), but the
Indemnifying Party shall retain control over such litigation (except as provided
in the preceding sentence). The Indemnifying Party shall notify the Indemnified
Party in writing, as promptly as possible (but in any case before the due date
for the answer or response to a Claim) after receipt of the notice of Claim
given by the Indemnified Party to the Indemnifying Party under Section 8.3(a)
hereof, of its election to defend in good faith any such third party Claim. For
so long as the Indemnifying Party is defending in good
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faith any such Claim asserted by a third party against the Indemnified Party,
the Indemnified Party shall not settle or compromise such Claim without the
prior written consent of the Indemnifying Party. The Indemnified Party shall
cooperate with the Indemnifying Party in connection with any such defense and
shall make available to the Indemnifying Party or its agents all records and
other materials in the Indemnified Party's possession reasonably required by it
for its use in contesting any third party Claim; provided, however, that the
Indemnifying Party shall have agreed, in writing, to keep such records and other
materials confidential except (i) to the extent required for defense of the
relevant Claim, or (ii) as required by law or court order. Whether or not the
Indemnifying Party elects to defend any such Claim, the Indemnified Party shall
have no obligations to do so. Within 30 days after a final determination
(including a settlement) has been reached with respect to any Claim contested
pursuant to this Section 8.3(b), the Indemnifying Party shall satisfy its
obligations hereunder with respect thereto. Any amount paid thereafter shall
include interest thereon for the period commencing at the end of such 30-day
period and ending on the actual date of payment, at a rate of 10% per annum, or,
if lower, at the highest rate of interest permitted by applicable law at the
time of such payment.
8.4 Payment. To the extent that Next Century or Jon Rubin is an Indemnifying
Party, such person shall pay any amount due under this Article VIII by delivery
of cash and shares of Parent Stock having a value equal to the amount due
hereunder and such cash and shares of Parent Stock shall be delivered by such
Indemnifying Party in proportion to the amount of cash and Parent Stock received
by such Indemnifying Party hereunder (to the extent that such Indemnifying Party
owns sufficient shares of Parent Stock). For the purpose of this provision, the
value of Parent Stock shall be (a) deemed to be $10 per share, so long as the
Parent Stock is not traded on any national stock exchange or on Nasdaq or, (b),
if the Parent Stock is traded on a national stock exchange or on Nasdaq, the
closing price of such Parent Stock on the day immediately preceding its delivery
to the Company.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Merger Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual written consent of Parent and NetResponse;
(b) by NetResponse, upon a material breach hereof on the part of Parent
or Sub which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by September 18, 1998;
(c) by Parent, upon a material breach hereof on the part of NetResponse,
Next Century or Jon Rubin which has not been cured and which would cause any
condition set forth in Section 7.2 hereof to be incapable of being satisfied by
September 18, 1998;
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(d) by Parent or NetResponse if any court of competent jurisdiction shall
have issued, enacted, entered, promulgated or enforced any order, judgment,
decree, injunction or ruling which restrains, enjoins or otherwise prohibits the
Merger and such order, judgment, decree, injunction or ruling shall have become
final and nonappealable; or
(e) by either Parent or NetResponse if the Merger shall not have been
consummated on or before September 15, 1998 (provided the terminating party is
not otherwise in material breach of its representations, warranties or
obligations hereunder).
9.2 Fees and Expenses.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the Surviving Corporation; provided, however, that Next Century shall pay all
fees and expenses (including agents, counsel and other advisors) of NetResponse
and itself.
(b) If the Merger is not consummated for a reason other than the willful
and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
(c) If the Merger is not consummated because of a willful and material
breach hereof by any party, the nonbreaching party or parties shall be entitled
to pursue all legal and equitable remedies against the breaching party for such
breach including specific performance and all fees and expenses incurred by the
nonbreaching party or parties in connection with enforcing its or their rights
hereunder with respect to such breach shall be paid by the breaching party.
9.3 Amendment. This Merger Agreement may be amended by Parent, Sub and Next
Century at any time before or after approval hereof by Next Century, but, after
such approval, no amendment shall be made which (i) changes the form or
decreases the amount of the consideration to be received in the Merger, (ii) in
any way adversely affects the rights of Next Century, or (iii) under applicable
law would require approval of Next Century, in any such case referred to in
clauses (i), (ii) and (iii), without the further approval of Next Century. This
Agreement may not be amended except by an instrument in writing signed on behalf
of the parties hereto, provided that after the Effective Time, any such
amendment must be signed by Next Century.
9.4 Waiver. At any time prior to the Effective Time, the parties hereto may,
to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by or on behalf of such
party.
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ARTICLE X
GENERAL PROVISIONS
10.1 Survival; Recourse. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 10.9 and 10.10 hereof, shall survive the
Merger indefinitely (except to the extent a shorter period of time is explicitly
specified therein) and (ii) the representations and warranties made in Articles
IV and V hereof shall survive the Merger, and shall survive any independent
investigation by the parties, and any dissolution, merger or consolidation of
NetResponse or Parent, and shall bind the legal representatives, assigns and
successors of NetResponse, Next Century, Jon Rubin and Parent, for a period of
18 months after the Closing Date (other than the representations and warranties
contained in Sections 4.18, 4.19, 4.20 and 4.24 hereof, which shall survive for
the applicable statute of limitations).
10.2 Notices. All notices or other communications under this Agreement shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in Person, by telecopy (with confirmation of receipt),
or by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
<TABLE>
<S> <C>
If to NetResponse: NetResponse, L.L.C.
c/o Next Century Communications Corp.
1400 Key Boulevard, 1st Floor
Arlington, VA 22209
Attention: Mr. Jon Rubin
Telephone: 703/276-0500
Telecopy: 703/276-9281
With a copy to: Berlack, Israels & Liberman LLP
120 W. 45th Street
New York, NY 10036
Attention: Jesse R. Meer, Esq.
Telephone: 212/704-0100
Telecopy: 212/704-0196
If to Next Century: To the address listed under the signature
line of Next Century
</TABLE>
29
<PAGE>
<TABLE>
<S> <C>
If to Parent or Sub: IXL Holdings, Inc.
Two Park Place
1888 Emery St., 2nd Floor
Atlanta, GA 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Rd., Ste. 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Ave., 24th Floor
New York, NY 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
</TABLE>
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 Entire Agreement. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, except for the non-disclosure letter agreement between Parent and
NetResponse dated as of July 9, 1998. There are no other representations or
warranties, whether written or oral, between the parties in connection the
subject matter hereof, except as expressly set forth herein.
10.4 Assignments; Parties in Interest. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the rights, interests, and obligations
of Sub hereunder may be assigned, with recourse, to any direct wholly owned
Delaware subsidiary of Parent without such prior consent. Subject to the
preceding sentence, this Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing herein, express or implied, is
intended to or shall confer upon any Person not a party hereto any right,
benefit or remedy of any nature whatsoever under or by reason hereof, except as
otherwise provided herein.
30
<PAGE>
10.5 Governing Law. This Agreement, including the rights Next Century or the
other parties hereto with respect to the Merger, shall be governed in all
respects by the laws of the State of Delaware (without giving effect to the
provisions thereof relating to conflicts of law).
10.6 Headings. The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation hereof.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 Severability. If any term or other provision hereof is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions hereof shall nevertheless remain in full force and
effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.9 Post-Closing Access. For a period of three years after the Closing Date,
Next Century, Jon Rubin and their agents and representatives shall have
reasonable access to the books and records of the NetResponse Business.
10.10 Post-Closing Notice. To the extent the Surviving Corporation receives
written notice of any event or circumstance that materially affects Next
Century, the Surviving Corporation shall promptly notify Next Century of such
matter, information, or event and shall provide them with copies of all relevant
documentation or correspondence in connection thereto.
10.11 Certain Definitions. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the
NetResponse Real Property or interfering with the ordinary conduct of any of the
NetResponse Business; and (e) those Liens listed on Schedule 10.11 hereto;
--------------
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of NetResponse" shall refer to the
knowledge, subject to clause (i) above, of any of Jon Rubin or Miles Rubin; and
31
<PAGE>
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of which are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including Sub); provided, however, that
with respect to the Parent, the terms "Subsidiary" and "Subsidiaries" shall not
include NetResponse or University Netcasting, Inc
- SIGNATURES ON THE FOLLOWING PAGES -
32
<PAGE>
IN WITNESS WHEREOF, Parent, Sub, NetResponse and Next Century have caused this
Agreement to be signed and delivered by their respective duly authorized
officers, and Jon Rubin has signed and delivered this Agreement, all as of the
date first written above.
"NetResponse"
NetResponse, L.L.C., a Delaware limited liability company
By: /s/ Jon Rubin
------------------------------
Name: Jon Rubin
Title: President and CEO
"Parent"
IXL Holdings, Inc., a Delaware corporation
By: /s/ James V. Sandry
------------------------------
Title: Executive Vice President
"Sub"
iXL-DC, Inc., a Delaware corporation
By: /s/ James V. Sandry
------------------------------
Title: Executive Vice President
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
33
<PAGE>
"Next Century"
Next Century Communications Corp., a Delaware corporation
/s/ Jon Rubin
-----------------------------
Name: Jon Rubin
------------------------
Title: President
-----------------------
Address: 1400 Key Blvd., 1st Floor
Arlington, VA 22209
"Jon Rubin"
/s/ Jon Rubin
-----------------------------
Jon Rubin
Address: c/o NCCC
--------------------
1400 Key Blvd., 1st Floor
----------------------------
Arlington, VA 22209
34
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate.................................. Exhibit A-1
Sub's Closing Certificate..................................... Exhibit A-2
Agreement to be Bound to Registration Rights Agreement........ Exhibit B
Opinion of Counsel to NetResponse and Next Century............ Exhibit C
Option Agreement.............................................. Exhibit D
NetResponse's Closing Certificate............................. Exhibit E-1
Next Century's Closing Certificate............................ Exhibit E-2
Opinion of Counsel to Parent and Sub.......................... Exhibit F
Agreement to be Bound to Stockholders' Agreement.............. Exhibit G
<PAGE>
SCHEDULE 4.1
------------
Signed Consent to all Actions of the Members of NetResponse
SCHEDULE 4.3(a)
---------------
Holders of NetResponse LLC Interest Rights
SCHEDULE 4.3(b)
---------------
Liens on NetResponse LLC Interest
SCHEDULE 4.4
------------
Subsidiaries
SCHEDULE 4.5
------------
Consents; Required Filings
SCHEDULE 4.6
------------
Exceptions to Accuracy of Financial Statements
SCHEDULE 4.7
------------
Exceptions to Absence of Changes of NetResponse
<PAGE>
SCHEDULE 4.8
------------
Undisclosed Liabilities of NetResponse
SCHEDULE 4.9
------------
Exceptions to Title to Properties of NetResponse
SCHEDULE 4.10
-------------
Exceptions to Good Conditions of Equipment of NetResponse
SCHEDULE 4.11
-------------
Exceptions to Title of Intellectual Property of NetResponse
SCHEDULE 4.12
-------------
Liens on Real Property of NetResponse
SCHEDULE 4.13
-------------
Leases of NetResponse
SCHEDULE 4.14
-------------
Contracts of NetResponse
<PAGE>
SCHEDULE 4.15
-------------
Officers of NetResponse
SCHEDULE 4.16
-------------
Payroll Information of NetResponse
SCHEDULE 4.17
-------------
Litigation
SCHEDULE 4.18
-------------
Employee Benefit Plans/Labor Relations of NetResponse
SCHEDULE 4.19
-------------
ERISA Issues of NetResponse
SCHEDULE 4.20
-------------
Exceptions to Taxes of NetResponse being timely Filed
SCHEDULE 4.21
-------------
NetResponse Permits
<PAGE>
SCHEDULE 4.23
-------------
NetResponse Brokers
SCHEDULE 4.25
-------------
Interest in Customers, Suppliers, Competitors
SCHEDULE 4.26
-------------
Exceptions to Collectibility of Accounts Receivable of NetResponse
SCHEDULE 4.27
-------------
Deliquent Status of Accounts Payable of NetResponse
SCHEDULE 4.28
-------------
Insurance
SCHEDULE 5.3
------------
Conflicts, Required Filings and Consents of Parent and Sub
SCHEDULE 5.4
------------
Parent Litigation
<PAGE>
SCHEDULE 5.5
------------
Parent and Sub Brokers
SCHEDULE 5.6
------------
Outstanding Obligations of Parent to Issue Options, Warrants & other Parent
Stock Rights
SCHEDULE 5.7
------------
Subsidiaries of Parent
SCHEDULE 5.9
------------
Parent Undisclosed Liabilities
SCHEDULE 5.13
-------------
Exceptions to Absence of Changes of Parent
SCHEDULE 6.6(b)
---------------
Options Received by Holders of NetResponse LLC Interest Rights
<PAGE>
SCHEDULE 7.1(c)
---------------
Parent Consents
SCHEDULE 7.2(c)
---------------
NetResponse and NextCentury Consents
SCHEDULE 10.11
--------------
Permitted Liens of NetResponse
7
<PAGE>
EXHIBIT 2.32
AGREEMENT AND PLAN OF MERGER
by and among
IXL HOLDINGS, INC.,
iXL-CHICAGO, INC.,
IONIX DEVELOPMENT CORPORATION
AND
THE IONIX SHAREHOLDER
Dated as of SEPTEMBER 23, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 23rd day of
September, 1998, by and between Ionix Development Corporation, an Illinois
corporation ("Ionix"), IXL Holdings, Inc., a Delaware corporation ("Parent"),
iXL-Chicago, Inc., a Delaware corporation, or its successors or assigns ("Sub"),
and the sole shareholder of Ionix as listed on the signature page hereto (the
"Ionix Shareholder").
R E C I T A L S:
- - - - - - - -
A. Ionix is engaged in the business of developing internet sites and
furnishing internet services, including website design and maintenance (the
"Ionix Business").
B. Ionix and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The Ionix Shareholder owns 100% of the issued and outstanding capital
stock of Ionix (the "Ionix Stock").
D. The respective Boards of Directors of Parent, Sub and Ionix, and the
respective shareholders of Sub and Ionix, have approved the Merger, upon the
terms and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal income
tax purposes, as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, at the
Effective Time (as defined in Section 1.3 hereof), (a) Ionix shall be merged
with and into Sub, (b) the separate existence of Ionix shall cease, and (c) Sub
shall continue as the surviving corporation in the Merger under the laws of the
State of Delaware under the name iXL-Chicago, Inc. For purposes of this
Agreement, Sub shall be referred to, for the period commencing on the Effective
Time, as the "Surviving Corporation."
<PAGE>
1.2 Closing and Closing Date. Unless this Merger Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9.1 hereof, and subject to the satisfaction or waiver of the
conditions set forth in Article VII hereof, the closing of the Merger (the
"Closing") will take place as promptly as practicable (and in any event within
five business days after satisfaction of the conditions set forth in Sections
7.1 and 7.2 hereof) (the "Closing Date") at the offices of Minkin & Snyder, A
Professional Corporation, One Buckhead Plaza, 3060 Peachtree Rd., Ste. 1100,
Atlanta, GA 30305, unless another date or place is agreed to by the parties.
1.3 Effective Time of the Merger. At the Closing, the parties hereto shall
cause (a) a certificate of merger (the "Delaware Certificate of Merger") to be
filed with the office of the Secretary of State of Delaware in accordance with
the provisions of the Delaware General Corporation Law, as amended (the "DGCL");
and (b) Articles of Merger (the "Illinois Articles of Merger"; collectively with
the Delaware Certificate of Merger, the "Certificate of Merger") to be filed
with the office of the Secretary of State of Illinois in accordance with the
provisions of the Illinois Business Corporation Act (the "BCA"). When used
herein, the term "Effective Time" shall mean the time when the applicable
Certificate of Merger has been accepted for filing by the Secretary of State of
Delaware and Illinois, respectively, or such time as otherwise specified
therein.
1.4 Effect of the Merger. The Merger shall, from and after the Effective
Time, have all the effects provided by the DGCL and the BCA. If at any time
after the Effective Time, any further action is deemed necessary or desirable to
carry out the purposes of this Agreement, the parties hereto agree that the
Surviving Corporation and its proper officers and directors shall be authorized
to take, and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of Sub,
a form of which is attached to a closing certificate and incumbency certificate,
substantially in the form of Exhibit "A" hereto ("Sub's Closing Certificate"),
-----------
shall be the Certificate of Incorporation of the Surviving Corporation after the
Effective Time, until thereafter changed or amended as provided therein or by
applicable law.
2.2 Bylaws. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is attached to the Sub's Closing Certificate.
2.3 Board of Directors; Officers. The Board of Directors and officers of
Sub immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified.
-2-
<PAGE>
ARTICLE III
CONVERSION OF SHARES
3.1 Merger Consideration. As of the Effective Time:
(a) All shares of Ionix Stock owned by Ionix shall, by virtue of the
Merger and without any action on the part of any shareholder, officer or
director of Ionix or Sub, be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding share of Ionix Stock (other than any
Dissenting Shares, as defined in Section 3.2 hereof) shall, upon surrender to
Sub, at the Closing, of the underlying share certificates, be converted into,
and become exchangeable for, (i) a number of shares of validly issued, fully
paid and nonassessable Class B Common Stock of Parent, $.01 par value (the
"Parent Stock") based on the following equation:
PS= 345,000 + {[(C + ARc + WIP) - D] /$10
--------------------------------------
S
where:
PS = the number of shares of Parent Stock
(valued, as of the Closing, at $10 per
share) for which each share of Ionix Stock
shall be exchanged pursuant to the Merger
S = the number of issued and outstanding
shares of Ionix Stock on the Closing Date
D = any outstanding liabilities of Ionix (the "Ionix
Debt"), including debt for borrowed money and accrued
and unpaid interest thereon, capital leases, accounts
payable, accrued expenses, and any unpaid legal,
accounting or other fees, all to be determined as of
three business days prior to the Closing Date and all
as determined in accordance with generally accepted
accounting principles ("GAAP")
C, ARc and WIP = respectively, cash owned by Ionix; the net accounts
receivable of Ionix less than 60 days' old (from their
respective invoice dates); and unbilled work in process
of Ionix; all to be determined as of three business
days prior to the Closing Date and all as determined in
accordance with GAAP
provided, however, that 345,000 is the minimum number of shares payable
hereunder; to the extent that the sum of C plus ARc plus WIP exceeds D, it will
be split evenly between an increase in X
-3-
<PAGE>
and an increase in PS, until the increase in X is $100,000, after which all of
the remaining excess will accrue to PS;
and (ii) an amount of cash based on the following equation:
X= $1,200,000 - [D - (C + ARc + WIP)]
--------------------------------
S
where:
X= the amount of cash for which each share of Ionix Stock shall be
exchanged pursuant to the Merger
and other terms are as defined above; provided, however, that the maximum amount
of cash payable hereunder is $1.3 million; to the extent that the sum of C plus
ARc plus WIP exceeds D, it will be split evenly between an increase in X and an
increase in PS, until the increase in X is $100,000, after which all of the
remaining excess will accrue to PS; to the extent that D exceeds such sum, C
shall be decreased.
(c) Each issued and outstanding share of common stock of Sub shall, by
virtue of the Merger and without any action on the part of any shareholder,
officer or director of Ionix or Sub, be converted into and become one fully paid
and nonassessable share of common stock of the Surviving Corporation.
3.2 Dissenting Shares. Notwithstanding any provision hereof to the
contrary, any shares of Ionix Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be converted as described in Section 3.1(b)
hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Shareholder pursuant to the DGCL or BCA, as
applicable, provided, however, that if a Dissenting Shareholder shall fail to
perfect his demand, withdraw his demand or otherwise lose his right for
appraisal under the terms of the DGCL or BCA, as applicable, then the Ionix
Stock held by such Dissenting Shareholder (the "Dissenting Shares") shall be
deemed to be converted as of the Effective Time in accordance with the
provisions of Section 3.1 hereof. Ionix shall not voluntarily make any payment
with respect to, settle, or offer to settle or otherwise negotiate, any such
demands. All amounts paid to Dissenting Shareholders shall be paid without
interest thereon (to the extent permitted by applicable law) by the Surviving
Corporation. For purposes hereof, the term "Dissenting Shareholder" shall mean a
Ionix Shareholder who (a) objects to the Merger; and (b) complies with the
applicable provisions of the DGCL or BCA concerning dissenter's rights.
3.3 No Further Rights. From and after the Effective Time, holders of
certificates theretofore evidencing Ionix Stock shall cease to have any rights
as shareholders of Ionix, except as provided herein or by applicable law.
3.4 Closing of Ionix's Transfer Books. At the Effective Time, the stock
transfer books of Ionix shall be closed and no transfer of Ionix Stock shall be
made thereafter. If after the
-4-
<PAGE>
Effective Time, certificates for Ionix Stock are presented to Parent or the
Surviving Corporation, they shall be canceled and exchanged for a consideration
as set forth in Section 3.1 hereof, subject to applicable law in the case of
Dissenting Shareholders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF IONIX
Ionix, and the Ionix Shareholder, jointly and severally, represent and warrant
to Parent and Sub as follows, which representations and warranties shall survive
the Closing in accordance with Section 10.1 hereof.
4.1 Organization and Qualification. Ionix is a corporation duly organized,
validly existing and in good standing under the laws of the State of Illinois.
Ionix has the requisite corporate power and authority to carry on the Ionix
Business as it is now being conducted and is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except those jurisdictions where the failure to
qualify, singly or in the aggregate, would not have a material, adverse effect
on Ionix's financial condition or on the Ionix Business. Complete and correct
copies of the Articles of Incorporation and Bylaws of Ionix as in effect on the
date hereof are attached to a closing certificate and incumbency certificate,
substantially in the form of Exhibit "B" hereto ("Ionix's Closing Certificate").
-----------
The minute book of Ionix, a true and complete copy of which has been delivered
to Parent, (a) accurately reflects all action taken by the directors and
shareholders of Ionix at meetings of Ionix's Board of Directors or shareholders,
as the case may be; and (b) contains true and complete copies, or originals, of
the respective minutes of all meetings or consent actions of the directors or
shareholders.
4.2 Authority. Ionix has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery hereof and the consummation of
the transactions contemplated hereby by Ionix have been duly and validly
authorized and approved by Ionix's Board of Directors and the Ionix Shareholder,
and no other corporate or shareholder proceedings on the part of Ionix, its
Board of Directors or the Ionix Shareholder is necessary to authorize or approve
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Ionix and the Ionix
Shareholder, and assuming the due authorization, execution and delivery by
Parent and Sub, constitutes the valid and binding obligation of Ionix and the
Ionix Shareholder, enforceable against Ionix and the Ionix Shareholder in
accordance with its terms subject, in each case, to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors' rights and to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing.
-5-
<PAGE>
4.3 Capitalization.
(a) The authorized capital stock of Ionix consists of 1,000 shares of
common stock, $1.00 par value, of which 1,000 shares are validly issued and
outstanding, fully paid and nonassessable. All outstanding capital stock of
Ionix was issued in accordance with applicable federal and state securities
laws. Except as set forth on Schedule 4.3(a) hereto, there are no options,
---------------
warrants, calls, convertible notes, agreements, commitments or other rights
presently outstanding that would obligate Ionix or the Ionix Shareholder to
issue, deliver or sell shares of its capital stock, or to grant, extend or enter
into any such option, warrant, call, convertible note, agreement, commitment or
other right. In addition to the foregoing, as of the date hereof, Ionix has no
bonds, debentures, notes or other indebtedness issued or outstanding that have
voting rights in Ionix. Schedule 4.3(a) sets forth a list of (i) all holders
---------------
of record of (A) Ionix Stock, and (B) options, warrants, convertible notes or
other rights to purchase capital stock of Ionix (collectively, "Ionix Stock
Rights"); (ii) the number of shares held by each Ionix Shareholder and the
number of shares of capital stock of Ionix represented by the Ionix Stock
Rights; and (iii) the exercise price for each Ionix Stock Right.
(b) All of the issued and outstanding shares of capital stock of Ionix
are validly issued, fully paid and nonassessable. Except as set forth on
Schedule 4.3(b) hereto, the Ionix Shareholder represents and warrants that the
- ---------------
Ionix Stock held by him is free and clear of any lien, charge, security
interest, pledge, option, right of first refusal, voting proxy or other voting
agreement, or encumbrance of any kind or nature other than restrictions on
transfer imposed by federal and state securities laws (any of the foregoing, a
"Lien").
4.4 Subsidiaries. Ionix has no subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
- ------------
Ionix or the Ionix Shareholder, (ii) the consummation by Ionix and the Ionix
Shareholder of the transactions contemplated hereby or (iii) compliance by Ionix
with any of the provisions hereof will:
(a) conflict with or violate the Articles of Incorporation or Bylaws
of Ionix;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Ionix or the Ionix Shareholder, or by
which Ionix or any of its properties or assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
-6-
<PAGE>
other instrument or obligation, to which Ionix is a party or by which Ionix or
any of its properties or assets may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets of
Ionix; or
(e) require any consent, waiver, license, approval, authorization, order,
permit, registration or filing with, or notification to (any of the foregoing
being a "Consent"), (i) any government or subdivision thereof, whether domestic
or foreign, or any administrative, governmental, or regulatory authority,
agency, commission, court, tribunal or body, whether domestic, foreign or
multinational (any of the foregoing, a "Governmental Entity"), except for the
filing of the Certificate of Merger pursuant to the DGCL and the BCA; or (ii)
any other individual or Entity (collectively, a "Person").
4.6 Financial Statements. Ionix has heretofore furnished Parent with a true
and complete copy of (a) the unaudited financial statements of Ionix for the
years ended December 31, 1996 and 1997; and (b) the unaudited financial
statements of Ionix for the eight month period ended August 31, 1998 (all of the
foregoing collectively herein referred to as the "Ionix Financial Statements").
Except as disclosed therein, the Ionix Financial Statements have been prepared
in accordance with GAAP (except for the absence of footnotes and normal year end
adjustments in the case of the Ionix Financial Statements) consistently followed
throughout the period indicated, and present fairly, in all material respects,
the financial position and operating results of Ionix as of the dates, and
during the periods, indicated therein.
4.7 Absence of Changes. Except as provided in Schedule 4.7 hereto and
------------
except as contemplated hereby, since June 30, 1998 (a) Ionix has not entered
into any material transaction that was not in the ordinary course of business;
(b) except for sales of services and conveyances (whether by license, sale or
otherwise) to clients in the ordinary course of business of intellectual
property developed by Ionix pursuant to engagements with such clients, there has
been no sale, assignment, transfer, mortgage, pledge, encumbrance or lease of
any material asset or property of Ionix; (c) there has been (i) no declaration
or payment of a dividend, or any other declaration, payment or distribution of
any type or nature to any shareholder of Ionix in respect of its stock, whether
in cash or property, and (ii) no purchase or redemption of any share of the
capital stock of Ionix; (d) there has been no declaration, payment, or
commitment for the payment, by Ionix, of a bonus or other additional salary,
compensation, or benefit to any employee of Ionix that was not in the ordinary
course of business, except for normal year-end bonuses paid in the ordinary
course of business; (e) there has been no release, compromise, waiver or
cancellation of any debt to or claim by Ionix, or waiver of any right of Ionix;
(f) there have been no capital expenditures in excess of $10,000 for any single
item, or $25,000 in the aggregate; (g) there has been no change in accounting
methods or practices or revaluation of any asset of Ionix (other than Ionix
Accounts Receivable as defined in Section 4.26 hereof written down in the
ordinary course of business in excess of $10,000 for any single Ionix Accounts
Receivable, or $25,000 in the aggregate); (h) there has been no material damage,
or destruction to, or loss of, physical property (whether or not covered by
insurance) materially adversely affecting the Ionix Business or the operations
of Ionix; (i) there has been no loan by Ionix, or guaranty by Ionix of any loan,
to any employee of Ionix; (j) Ionix has not ceased to transact business with any
customer that, as of the date of such cessation, represented
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more than 5% of the annual gross revenues of Ionix; (k) there has been no
termination or resignation of any key employee or officer of Ionix, and to the
knowledge of Ionix, no such termination or resignation is threatened; (l) there
has been no amendment or termination of any material oral or written contract,
agreement or license related to the Ionix Business, to which Ionix is a party or
by which it is bound, except in the ordinary course of business, or except as
expressly contemplated hereby; (m) Ionix has not failed to satisfy any of its
debts, obligations or liabilities related to the Ionix Business or the assets of
Ionix as the same become due and owing (except for Ionix Accounts Payable (as
defined in Section 4.27 hereof) payable in accordance with past practices and in
the ordinary course of business); (n) there has been no agreement or commitment
by Ionix to do any of the foregoing; and (o) there has been no other event or
condition of any character pertaining to and materially and adversely affecting
the assets, business or financial condition of Ionix.
4.8 Undisclosed Liabilities. Except as set forth on Schedule 4.8 hereto,
------------
Ionix has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including any liability or obligation on account of taxes
or any governmental charge or penalty, interest or fine, except (a) liabilities
incurred in the ordinary course of business after June 30, 1998, that would not,
whether individually or in the aggregate, have a material adverse impact on the
business or financial condition of Ionix; (b) liabilities reflected on the Ionix
Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
4.9 Title to Properties. Except as set forth on Schedule 4.9 hereto,
------------
Ionix has good and marketable title to all tangible property and assets used in
the Ionix Business, and good and valid title to its leasehold interests, in each
case, free and clear of any and all Liens other than Permitted Liens (as defined
in Section 10.11 hereof).
4.10 Equipment. Ionix has heretofore furnished Parent with a true and
correct list of all items of tangible personal property (including computer
hardware) necessary for or used in the operation of the Ionix Business in the
manner in which it has been and is now operated by Ionix ("the Ionix
Equipment"), except for personal property having a net book value of less than
$1,000. Except as set forth on Schedule 4.10 hereto, each material item of
-------------
Ionix Equipment is in good condition and repair, ordinary wear and tear
excepted.
4.11 Intellectual Property.
(a) Ionix has heretofore furnished Parent with a true and complete
list of all material proprietary technology, patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights, and copyrights (and all pending applications for any of the foregoing)
used by Ionix in the conduct of the Ionix Business (provided that such list need
not and does not include (a) any software as to which Ionix has acquired a
perpetual, fully-paid license on a non-negotiated basis from the owner of such
software in the ordinary course of the owner's business (a "shrink-wrap
license") or (b) algorithms, sub-routines, objects and other software components
which Ionix has developed in the past and may incorporate in future engagements)
(together with trade secrets and know how used in the conduct of the Ionix
Business, but excluding software subject to shrink-wrap licenses, the "Ionix
Intellectual Property Rights").
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Ionix owns, or is validly licensed or otherwise has the right to use or exploit,
as currently used or exploited, all of the Ionix Intellectual Property Rights,
free of any obligation to make any payment (whether of a royalty, license fee,
compensation or otherwise). No claims are pending or, to the knowledge of Ionix,
threatened, that Ionix is infringing or otherwise adversely affecting the rights
of any Person with regard to any Ionix Intellectual Property Right. To Ionix's
knowledge, no Person is infringing the rights of Ionix with respect to any Ionix
Intellectual Property Right. Neither Ionix nor any employee, agent or
independent contractor of Ionix, in connection with the performance of such
Person's services with Ionix, has used, appropriated or disclosed, directly or
indirectly, any trade secret or other proprietary or confidential information of
any other Person, or otherwise violated any confidential relationship with any
other Person.
(b) Ionix has heretofore furnished Parent with a true and complete list of
all material third-party computer software used by Ionix in the conduct of the
Ionix Business (the "Ionix Software"). Ionix currently licenses, or otherwise
has the legal right to use, all of the Ionix Software (including any upgrade,
alteration or enhancement with respect thereto), and all of the Ionix Software
is being used in compliance with any applicable license or other agreement.
4.12 Real Property. Except as set forth on Schedule 4.12 hereto:
-------------
(a) Ionix has a good and valid leasehold interest in all real property
(including all buildings, improvements and fixtures thereon) used in the
operation of the Ionix Business (the "Ionix Real Property"). Ionix owns no real
property. Except for Permitted Liens, and for the items set forth on Schedule
--------
4.12, there are no Liens on Ionix's interest in any of the Ionix Real Property.
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Schedule 4.12 lists each county and state where any Ionix Real Property is
- -------------
located, or where Ionix has ever leased or owned any real property.
(b) There are no parties in possession of any portion of the Ionix
Real Property other than Ionix, whether as sublessees, subtenants at will or
trespassers.
(c) To the knowledge of Ionix, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, under the provisions of any of the
Ionix Leases (as hereinafter defined), any material expenditure by Ionix to
modify or improve any of the Ionix Real Property to bring it into compliance
therewith.
4.13 Leases. Schedule 4.13 hereto sets forth a list of all leases
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pursuant to which Ionix leases, as lessor or lessee, real or personal property
used in operating the Ionix Business or otherwise (the "Ionix Leases"). Copies
of the Ionix Leases, all of which have previously been provided to Parent, are
true and complete copies thereof. All of the Ionix Leases are valid, binding and
enforceable against Ionix and, to the knowledge of Ionix, against the other
parties thereto, in accordance with their respective terms, and there is not
under any such Ionix Lease any existing default by Ionix, or, to the knowledge
of Ionix, by any other party thereto, or any condition or event that, with
notice or lapse of time or both, would constitute a default, except such
defaults which would not give any non-defaulting party the right either to
terminate the Ionix Lease or to accelerate any material amount due thereunder.
Ionix has not received notice that the lessor of any of the
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Ionix Leases intends to cancel, suspend or terminate such Ionix Lease or to
exercise or not exercise any option thereunder.
4.14 Contracts. Schedule 4.14 hereto sets forth a true and complete list
-------------
of all contracts, agreements and commitments (whether written or oral) to which
Ionix is, directly or indirectly, a party (in its own name or as a successor in
interest), or by which it or any of its properties or assets is otherwise bound,
including any service agreements, customer agreements, supplier agreements,
agreements to lend or borrow money, shareholder agreements, employment
agreements, agreements relating to Ionix Intellectual Property Rights and the
like (collectively, the "Ionix Contracts"); excepting only those Ionix Contracts
which involve less than $10,000 and are cancelable, without penalty, on no more
than 90 days' notice. (Schedule 4.14 does not include contracts, such as leases,
-------------
specifically disclosed on any other disclosure schedule.) The aggregate value
of all payment obligations and rights to receive payments, under agreements,
contracts and commitments (whether oral or in writing) to which Ionix is a party
or by which it or any of its properties or assets is otherwise bound, and that
are not listed on Schedule 4.14, is less than $50,000 (calculating such value by
-------------
adding together the value of rights and obligations, and not by determining the
net amount thereof).
True and complete copies of all Ionix Contracts (or a true and complete
narrative description of any oral Ionix Contract) have previously been provided
to Parent. Neither Ionix nor, to the knowledge of Ionix, any other party to any
of the Ionix Contracts (x) is in default under (nor does there exist any
condition that, with notice or lapse of time or both, would cause such a default
under) any of the Ionix Contracts, or (y) has waived any right it may have under
any of the Ionix Contracts, the waiver of which would have a material adverse
effect on the business, assets or financial condition or prospects of Ionix.
All of the Ionix Contracts constitute the valid and binding obligations of
Ionix, enforceable in accordance with their respective terms, and, to the
knowledge of Ionix, of the other parties thereto.
4.15 Directors and Officers. Schedule 4.15 hereto sets forth a list, as
-------------
of the Closing Date, of the name of each director and officer of Ionix and the
position(s) held by each.
4.16 Payroll Information. Ionix has previously provided Parent with a true
and complete copy of the payroll report of Ionix dated September 11, 1998,
showing all current employees of Ionix and their current levels of compensation,
other than bonuses and other extraordinary compensation, all of which bonuses
and other extraordinary compensation are set forth in Schedule 4.16 hereto.
--------------
Ionix has paid all compensation required to be paid to employees of Ionix on or
prior to the date hereof other than compensation (and bonuses pursuant to
arrangements described in Schedule 4.16) accrued in the current pay period.
-------------
4.17 Litigation. Except as set forth on Schedule 4.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Ionix, threatened against or affecting Ionix or the Ionix Business, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Ionix.
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<PAGE>
4.18 Employee Benefit Plans/Labor Relations.
(a) Except as disclosed in Schedule 4.18 hereto, there are no
-------------
employee benefit plans, agreements or arrangements maintained by Ionix,
including (i) "employee benefit plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (ii)
current or deferred compensation, pension, profit sharing, vacation or severance
plans or programs; or (iii) medical, hospital, accident, disability or death
benefit plans (collectively, "Ionix Benefit Plans"). All Ionix Benefit Plans are
administered in accordance with, and are in material compliance with, all
applicable laws and regulations. No default exists with respect to the
obligations of Ionix under any Ionix Benefit Plan.
(b) Ionix is not a party to any collective bargaining agreement; no
collective bargaining agent has been certified as a representative of any of the
employees of Ionix; no representation campaign or election is now in progress
with respect to any employee of Ionix; and there are no labor disputes,
grievances, controversies, strikes or requests for union representation pending,
or, to the knowledge of Ionix, threatened, relating to or affecting the Ionix
Business. To the knowledge of Ionix, no event has occurred that could give rise
to any such dispute, controversy, strike or request for representation.
4.19 ERISA.
(a) All Ionix Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the Ionix Benefit Plans that is intended
to meet the requirements of Section 401(a) of the Code has been determined by
the Internal Revenue Service to meet such requirements within the meaning of
such provision. No Ionix Benefit Plan is subject to Title IV of ERISA or Section
412 of the Code. Ionix has not engaged in any nonexempt "prohibited
transactions," as such term is defined in Section 4975 of the Code or Section
406 of ERISA, involving Ionix Benefit Plans that would subject Ionix to the
penalty or tax imposed under Section 502(i) of ERISA or Section 4975 of the
Code. Ionix has not engaged in any transaction described in Section 4069 of
ERISA within the last five years. Except as disclosed in Schedule 4.19 hereto or
-------------
pursuant to the terms of the Ionix Benefit Plans, neither the execution and
delivery hereof nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including severance, unemployment compensation
or golden parachute) becoming due to any director or other employee of Ionix,
(ii) increase any benefit otherwise payable under any Ionix Benefit Plan or
(iii) result in the acceleration of the time of payment or vesting of any such
benefit to any extent.
(b) No notice of a "reportable event," within the meaning of Section
4043 of ERISA, for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Ionix Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code, or by any
entity that is considered one employer with Ionix under Section 4001 of ERISA or
Section 414 of the Code, within the 12-month period ending on the Closing Date.
Ionix has not incurred any liability to the Pension Benefit Guaranty Corporation
in respect of any Ionix Benefit Plan that remains unpaid.
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<PAGE>
4.20 Taxes.
(a) Except as set forth on Schedule 4.20 hereto, Ionix has duly and
-------------
timely filed all federal, state and local income, franchise, excise, real and
personal property and other tax returns and reports, including extensions,
required to have been filed by Ionix on or prior to the Closing Date. Ionix has
duly and timely paid all taxes and other governmental charges, and all interest
and penalties with respect thereto, required to be paid by Ionix (whether by way
of withholding or otherwise) to any federal, state, local or other taxing
authority (except to the extent the same are being contested in good faith, and
adequate reserves therefor have been provided in the Ionix Financial
Statements). As of the Closing Date, all deficiencies proposed as a result of
any audit have been paid or settled.
(b) Ionix is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) Ionix has not consented to have the provisions of Section
341(f)(2) of the Code (or comparable state law provisions) apply to it, and
Ionix has not agreed or been requested to make any adjustment under Section
481(c) of the Code by reason of a change in accounting method or otherwise.
4.21 Compliance with Applicable Laws. Ionix holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
Ionix, as appropriate, and to carry on the Ionix Business as now conducted (the
"Ionix Permits"). To the knowledge of Ionix, Ionix is in material compliance
with all applicable laws, ordinances and regulations and the terms of the Ionix
Permits. Except as set forth on Schedule 4.21 hereto, all of the Ionix Permits
-------------
are fully assignable by Ionix in connection with the Merger. Schedule 4.21 sets
-------------
forth a true and complete list of all Ionix Permits, true and complete copies of
which have previously been provided to Parent.
4.22 Board of Directors/Shareholder Consent. Both the Board of Directors
of Ionix and the Ionix Shareholder have adopted and approved this Agreement and
the transactions contemplated hereby (including the Merger).
4.23 Brokers. Except as set forth on Schedule 4.23 hereto, no broker or
-------------
finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of Ionix.
4.24 Environmental Matters.
(a) To the knowledge of Ionix, no real property currently or formerly
owned or operated by Ionix is contaminated with any Hazardous Substance (as
hereinafter defined).
(b) Ionix is not a party to any litigation or administrative
proceeding nor, to the knowledge of Ionix, is any litigation or administrative
proceeding threatened against it, that, in
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<PAGE>
either case, asserts or alleges that Ionix (i) violated any Environmental Law
(as hereinafter defined); (ii) is required to clean up, remove or take remedial
or other responsive action due to the disposal, deposit, discharge, leak or
other release of any Hazardous Substance; or (iii) is required to pay all or a
portion of the cost of any past, present or future cleanup, removal or remedial
or other action that arises out of or is related to the disposal, deposit,
discharge, leak or other release of any Hazardous Substance.
(c) To the knowledge of Ionix, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by Ionix containing materials that, if known to
be present in soil or ground water, would require cleanup, removal or other
remedial action under Environmental Law.
(d) To the knowledge of Ionix, Ionix is not subject to any judgment,
order or citation related to or arising out of any Environmental Law and has not
been named or listed as a potentially responsible party by any Governmental
Entity in a matter related to or arising out of any Environmental Law.
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including any petroleum products, asbestos or polychlorinated biphenyls.
4.25 Interest in Customers, Suppliers and Competitors. Except as provided
in Schedule 4.25 hereto, no officer, director, shareholder or employee of Ionix
-------------
and no family member (including a spouse, parent, sibling or lineal descendent
of any of the foregoing), has any direct or indirect material interest in any
material customer, supplier or competitor of Ionix, or in any Person from whom
or to whom Ionix leases any real or personal property, or in any other Person
with whom Ionix is doing business whether directly or indirectly (including as a
debtor or creditor), whether in existence as of the Closing Date or proposed,
other than the ownership of stock of publicly traded corporations.
4.26 Accounts Receivable. All accounts, notes, contracts and other
receivables of Ionix (collectively, "Ionix Accounts Receivable") were generated
by Ionix in the ordinary course of business arising from bona fide transactions.
There are no set-offs, counterclaims or disputes asserted with respect to any
Ionix Accounts Receivable that would result in claims in excess of the reserve
for bad debts set forth on the Ionix Financial Statements and, to the knowledge
of Ionix and subject to such reserve, all Ionix Accounts Receivable are
collectible in full. Ionix has previously provided Parent with a true and
complete aging report prepared as of September 18, 1998 which shows the time
elapsed since invoice date for all Ionix Accounts Receivable as of such date.
4.27 Accounts Payable. All material accounts, notes, contracts and other
amounts payable of Ionix (collectively, "Ionix Accounts Payable") are currently
within their respective
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<PAGE>
terms, and are neither in default nor otherwise past due by more than 90 days.
Ionix has previously provided Parent with a true and complete aging report
prepared as of September 18, 1998 which shows the time elapsed since invoice
date for all Ionix Accounts Payable as of such date.
4.28 Insurance. Ionix currently maintains, in full force and effect, all
insurance policies that are required to be maintained for the conduct of the
Ionix Business or the ownership of Ionix's property (both real and personal)
(collectively, the "Ionix Insurance Policies"). The Ionix Insurance Policies
are listed on Schedule 4.28 hereto, and true and complete copies of all Ionix
-------------
Insurance Policies have previously been provided to Parent. Ionix (a) is not in
default regarding the provisions of any Ionix Insurance Policy; (b) has paid all
premiums due thereunder; and (c) has not failed to present any notice or
material claim thereunder in a due and timely fashion.
4.29 Bankruptcy. Ionix has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 Ionix Debt. As of the date hereof, the Ionix Debt is not in excess of
$371,927.
4.31 Accredited Investors; Investment Purpose. The Ionix Shareholder
represents that he (a) is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"); (b) is
acquiring the Parent Stock solely for his own account for investment and not
with a view to, or for sale in connection with, any distribution thereof; and
(c) will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate
or otherwise dispose of any Parent Stock (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of any such shares) except in compliance
with the Securities Act and the rules and regulations thereunder, other
applicable laws, rules and regulations, and the Second Amended and Restated
Stockholders' Agreement of Parent, dated December 17, 1997 (the "Stockholders'
Agreement").
4.32 Restrictions on Transfer. The Ionix Shareholder acknowledges that (a)
the Parent Stock received by him hereunder has not been registered under the
Securities Act; (b) the Parent Stock may be required to be held indefinitely,
and he must continue to bear the economic risk of the investment in such shares
unless such shares are subsequently registered under the Securities Act or an
exemption from such registration is available; (c) there may not be any public
market for the Parent Stock in the foreseeable future; (d) Rule 144 promulgated
under the Securities Act is not presently available with respect to sales of any
securities of Parent, and such Rule is not anticipated to be available in the
foreseeable future; (e) when and if Parent Stock may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
limited amounts and in accordance with the terms and conditions of such Rule;
(f) if the exemption afforded by Rule 144 is not available, sale without
registration will require the availability of an exemption under the Securities
Act; (g) the Parent Stock is subject to the terms and conditions of the
Stockholders' Agreement; (h) restrictive legends shall be placed on the
certificates representing Parent Stock; and (i) a notation shall be made in the
appropriate records of Parent indicating that Parent Stock is
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subject to restrictions on transfer and, if Parent should in the future engage
the services of a stock transfer agent, appropriate stop-transfer instructions
will be issued to such transfer agent with respect to Parent Stock.
4.33 Ability to Bear Risk; Access to Information; Sophistication. The Ionix
Shareholder represents and warrants that (a) his financial situation is such
that he can afford to bear the economic risk of holding Parent Stock acquired by
him hereunder for an indefinite period; (b) he can afford to suffer the complete
loss of such Parent Stock; (c) he has been granted the opportunity to ask
questions of, and receive answers from, representatives of Parent concerning the
terms and conditions of the Parent Stock and to obtain any additional
information that he deems necessary; (d) his knowledge and experience in
financial business matters is such that he is capable of evaluating the merits
and risk of ownership of the Parent Stock; (e) he has carefully reviewed the
terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; and (f) he (i) has reviewed the Private Placement
Memorandum of Parent dated September 15, 1998 (the "Memorandum"), (ii) has
carefully examined the Memorandum and has had an opportunity to ask questions
of, and receive answers from, representatives of Parent, and to obtain
additional information concerning Parent and its Subsidiaries (as hereinafter
defined), and (iii) does not require additional information regarding Parent or
its Subsidiaries in connection with the Merger.
4.34 Disclosure. No statement of fact by Ionix or the Ionix Shareholder
contained herein and no written statement of fact furnished by Ionix or the
Ionix Shareholder to Parent or Sub in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein contained not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to
Ionix and the Ionix Shareholder, which representations and warranties shall
survive the Closing in accordance with Section 10.1 hereof, as follows:
5.1 Organization and Qualification. Each of Parent and its Subsidiaries (as
defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except those
jurisdictions where the failure to qualify, singly or in the aggregate, would
not have a material adverse effect on the business and financial condition of
Parent and its Subsidiaries, taken as a whole. Complete and correct copies of
the Certificates of Incorporation and Bylaws of Parent and Sub as in effect on
the date hereof are attached, respectively, to a closing
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certificate and incumbency certificate, substantially in the form of Exhibit "C"
----------
hereto ("Parent's Closing Certificate"), and to Sub's Closing Certificate.
5.2 Authority. Each of Parent and Sub has the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective boards of
directors and by Parent, in its capacity as Sub's sole shareholder, and no other
corporate or shareholder proceedings on the part of either Parent or Sub, or
their respective board of directors or shareholders, are necessary to authorize
or approve this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by each of Parent and Sub,
and assuming the due authorization, execution and delivery by Ionix and the
Ionix Shareholder, constitutes the valid and binding obligation of each of
Parent and Sub, enforceable against each of Parent and Sub in accordance with
its terms, subject, in each case, to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general application relating to or affecting
creditors' rights and to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing.
5.3 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
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Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or
Bylaws of Parent or Sub, or the organizational documents of any other
Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to any other any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for (x)
compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL and the
BCA); or (ii) any other Person.
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5.4 Litigation. Except as set forth on Schedule 5.4 hereto, there is no
------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 Brokers. Except as disclosed on Schedule 5.5 hereto, no broker or
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finder is entitled to any broker's or finder's fee in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Parent or Sub.
5.6 Parent Stock.
(a) As of the date hereof the authorized capital stock of Parent
consists of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value,
of which no shares are validly issued and outstanding, and (B) 100,000,000
shares of Class B Common Stock, $.01 par value, of which 14,053,489 shares are
validly issued and outstanding (without taking into account any shares of Parent
Stock to be issued pursuant hereto, and excluding the potential acquisitions of
Pequot Systems, Inc., Pantheon Interactive, Inc., Two-Way Communications, L.L.C.
and NetResponse L.L.C.), fully paid and nonassessable; (ii) 750,000 shares of
blank check preferred stock, (A) 250,000 of which have been designated as Class
A Convertible Preferred Stock, of which 176,291 shares are validly issued and
outstanding, fully paid and nonassessable, (B) 200,000 of which have been
designated as Class B Convertible Preferred Stock, of which 98,767 shares are
validly issued and outstanding, fully paid and nonassessable, (C) 15,000 of
which have been designated as Class C Convertible Preferred Stock, of which
9,232 shares are validly issued and outstanding, fully paid and nonassessable,
and (D) 50,000 of which have been designated as Class D Nonvoting Preferred
Stock, of which 35,700 shares are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 5.6 hereto, there are no
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options, warrants, calls, agreements, commitments or other rights presently
outstanding that would obligate Parent to issue, deliver or sell shares of its
capital stock, or to grant, extend or enter into any such option, warrant, call,
agreement, commitment or other right (excluding the same potential acquisitions
as referred to above). In addition to the foregoing, as of the Closing Date,
Parent has no bonds, debentures, notes or other indebtedness issued or
outstanding that have voting rights in Parent.
(b) When delivered to the Ionix Shareholder in accordance with the
terms hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
5.7 Subsidiaries. Except as set forth on Schedule 5.7 hereto, Parent
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has no subsidiaries and does not otherwise own or control, directly or
indirectly, any equity interest in, or any security convertible into an equity
interest in, any Entity. Schedule 5.7 lists the name of each of the Subsidiaries
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of Parent, and indicates their respective jurisdictions of incorporation.
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5.8 Financial Statements. Parent has heretofore furnished Ionix with a true
and complete copy of (a) the audited financial statements of iXL Interactive
Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31, 1993, 1994
and 1995, and for the four month period ended April 30, 1996; (b) the audited
combined financial statements for Creative Video, Inc. (n/k/a iXL, Inc.),
Creative Video Library, Inc. and Entrepreneur Television, Inc. for the years
ended December 31, 1993, 1994 and 1995, and for the four month period ended
April 30, 1996; (c) the audited consolidated financial statements for Parent and
its Subsidiaries for the eight months ended December 31, 1996 and for the year
ended December 31, 1997; and (d) the unaudited consolidated financial statements
for Parent and its Subsidiaries for the six month period ended June 30, 1998
(all of the foregoing, collectively, "Parent Financial Statements"). The Parent
Financial Statements present fairly in all material respects the consolidated
financial position, results of operations, shareholders' equity and cash flow of
Parent at the respective dates or for the respective periods to which they
apply. Except as disclosed therein, such statements and related notes have been
prepared in accordance with GAAP consistently applied throughout the periods
involved (except, in the case of the unaudited financial statements, for the
exclusion of footnotes and normal year-end adjustments).
5.9 Undisclosed Liabilities. Except as set forth on Schedule 5.9 hereto,
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neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalties,
interest or fines, except (a) liabilities incurred in the ordinary course of
business after June 30, 1998 that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Parent and its Subsidiaries, taken as a whole; (b) liabilities reflected on
the Parent Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
5.10 Compliance with Applicable Laws. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
5.11 Board of Directors/Shareholder Consent. The board of directors of
Parent, and both the board of directors and shareholder of Sub, have, by
unanimous written consent or other action, adopted and approved this Agreement
and the transactions contemplated hereby (including the Merger).
5.12 Bankruptcy. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
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5.13 Absence of Changes. Except as provided in Schedule 5.13 hereto, since
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June 30, 1998, there has not been (a) any transaction, commitment, dispute or
other event or condition (financial or otherwise) of any character (whether or
not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
material change in Parent's accounting principles, practices or methods; (f) any
split, combination or reclassification of any of Parent's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Parent's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
5.14 Taxes. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent
and its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the Closing Date,
all deficiencies proposed as a result of any audits have been paid or settled.
5.15 Disclosure. No statement of fact by Parent or Sub contained herein and
no written statement of fact furnished or to be furnished by Parent or Sub to
Ionix in connection herewith contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements herein or therein contained not misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Conduct of Business by Ionix Pending the Merger. From and after the
date hereof, prior to the Effective Time, except as contemplated hereby, unless
Parent shall otherwise agree in writing, Ionix shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, use reasonable efforts to preserve intact its present
business organization, keep available the services of its employees and preserve
its
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relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with Ionix to the end that its goodwill and on-
going businesses shall not be impaired in any material respect at the Effective
Time. Without limiting the generality of the foregoing, and except as
contemplated hereby, unless Parent shall otherwise agree in writing, prior to
the Effective Time, Ionix shall not, directly or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire, any share of
capital stock of Ionix or any other equity security thereof or any right,
warrant, or option to acquire any such share or other security;
(b) issue, deliver, sell, pledge or otherwise encumber any share of
its capital stock, any other voting security issued by Ionix or any security
convertible into, or any right, warrant or option to acquire any such share or
voting security;
(c) amend its Articles of Incorporation, Bylaws or other comparable
organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to Ionix;
(e) subject to a Lien or sell, lease or otherwise dispose of any of
its properties or assets, other than conveyance to clients of intellectual
property developed by Ionix pursuant to engagements by such clients;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of Ionix,
guarantee any debt security of another Person or enter into any "keep well" or
other agreement to maintain the financial condition of another Person, make any
loan, advance or capital contribution to, or investment in, any other Person, or
settle or compromise any material claim or litigation; or
(g) authorize any of, or commit or agree to take any of, the foregoing
actions.
6.2 Access to Information. From the date hereof through the Effective Time,
Ionix shall afford to Parent and Parent's accountants, counsel and other
representatives reasonable access during normal business hours (and at such
other times as the parties may mutually agree) upon reasonable prior notice and
approval of Ionix, which shall not be unreasonably withheld, to its properties,
books, contracts, commitments, records and personnel and, during such period,
shall furnish promptly to Parent all information concerning its business,
properties and personnel as Parent may reasonably request. Parent and its
accountants, counsel and other representatives shall, in the exercise of the
rights described in this Section 6.2, not unduly interfere with the operation of
the business of Ionix. Parent and its agents shall maintain the confidentiality
of all information
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produced or disclosed pursuant to this Section 6.2, on the terms and conditions
of the non-disclosure agreement between Parent and Ionix, referred to in Section
10.3 hereof.
6.3 Filings; Tax Elections. Ionix shall promptly provide Parent with copies
of all filings made by Ionix with any Governmental Entity in connection herewith
and the transactions contemplated hereby. Ionix shall, before settling or
compromising any material income tax liability of Ionix, consult with Parent and
its advisors as to the positions and elections that will be taken or made with
respect to such matter.
6.4 Public Announcements. The parties agree that, except as may otherwise
be required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger. Any such disclosure shall be coordinated by Parent,
and the Ionix Shareholder shall not make any such disclosure without the prior
written consent of Parent.
6.5 Transfer and Gains Taxes and Certain Other Taxes and Expenses. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 Options.
(a) Ionix hereby covenants and agrees that at the Effective Time,
all of the Ionix Stock Rights (all of which are set forth on Schedule 4.3(a)
---------------
hereto) shall have been properly canceled and all rights and obligations
thereunder shall have been terminated.
(b) Parent hereby covenants and agrees that, at the Effective Time, it
will issue options ("Options") to purchase 260,000 shares in aggregate of
validly issued, fully paid and nonassessable Parent Stock, to such employees of
Ionix who will continue as employees of Surviving Corporation, as designated by
Ionix and approved by Parent, and in such respective amounts, as set forth on
Schedule 6.6(b) hereto, exercisable at $10 per share, subject to the IXL
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Holdings, Inc. 1996 Stock Option Plan, as amended, and to a vesting schedule of
20% at date of grant, and 20% each at 12/31/98, 12/31/99, 12/31/00 and 12/31/01.
If any such Option recipient leaves Sub's (or Parent's) employ prior to full
vesting of his or her Options in accordance with the terms of the award thereof,
and therefore the unvested portion of the Options are cancelled, then options on
the number of shares of Parent Stock subject to such cancellation, and
corresponding as to exercise price and vesting, will be issued to the Ionix
Shareholder without the payment of any additional consideration therefor.
6.7 Further Assurances. From time to time after the Effective Time, upon
the reasonable request of any party hereto, the other party or parties hereto
shall execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
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conditions hereof, at the sole cost of the requesting party, except as otherwise
provided in Article VIII hereof.
6.8 Employment Agreement. The Ionix Shareholder shall enter into an
employment agreement with Sub, substantially in the form of Exhibit "I" hereto
-----------
("Hettwer Employment Agreement").
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligation of Ionix and the Ionix Shareholder to Effect
the Merger. The obligations of Ionix and the Ionix Shareholder to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) Parent and Sub shall have performed in all material respects their
respective agreements contained herein required to be performed at or prior to
the Effective Time, and the representations and warranties of Parent and Sub
contained herein shall be true when made (provided that, for those of such
representations and warranties that are not by their terms qualified as to
materiality or knowledge, this condition may be satisfied if they shall be true
when made in all material respects) and (except for representations and
warranties made as of a specified date, which need only be true as of such date)
at and as of the Effective Time as if made at and as of such time, except as
contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to Ionix at the Closing, Parent's Closing Certificate, and (ii) the
appropriate officers of Sub shall have executed and delivered to Ionix at the
Closing, Sub's Closing Certificate;
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
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(d) Ionix shall have received corporate certificates of good standing
for Parent and Sub, and a copy of the Certificate of Incorporation for Parent
and Sub, respectively, both as certified by the Secretary of State of Delaware;
(e) there shall have been delivered to the Ionix Shareholder at the
Closing, duly executed by Parent, (i) an Agreement to be Bound to the
Registration Rights Agreement of Parent, dated as of Closing Date (the
"Agreement to be Bound to the Registration Rights Agreement"), in the form of
Exhibit "D" hereto, and (ii) the Hettwer Employment Agreement;
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(f) Parent shall have executed and delivered at the Closing an
Option Agreement in the form of Exhibit "E" hereto for each of the Persons
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listed on Schedule 6.6(b) hereto as receiving options to purchase Parent Stock;
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<PAGE>
(g) Ionix shall have received, at the Closing, a duly executed opinion
of counsel to Parent and Sub, substantially in the form of Exhibit "F" hereto;
-----------
and
(h) Ionix shall have received from Parent and Sub such other documents
as Ionix's counsel shall have reasonably requested, in form and substance
reasonably satisfactory to Ionix's counsel.
7.2 Conditions to Obligations of Parent and Sub to Effect the Merger. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) Ionix and the Ionix Shareholder shall have performed in all
material respects their respective agreements contained herein required to be
performed at or prior to the Effective Time, and the representations and
warranties of Ionix and the Ionix Shareholder contained herein shall be true
when made (provided that, for those of such representations and warranties that
are not by their terms qualified as to materiality or knowledge, this condition
may be satisfied if they shall be true when made in all material respects) and
(except for representations and warranties made as of a specified date, which
need only be true as of such date) at and as of the Effective Time as if made at
and as of such time, except as contemplated hereby;
(b) the appropriate officers of Ionix shall have executed and
delivered to Parent at the Closing, Ionix's Closing Certificate.
(c) Ionix and the Ionix Shareholder shall have obtained or caused
to be obtained all of the Consents, if any, listed on Schedule 7.2(c) hereto;
---------------
(d) there shall have been delivered to Parent at the Closing, duly
executed by the Ionix Shareholder, (i) an Agreement to be Bound to the
Stockholders' Agreement, in the form of Exhibit "G" hereto; (ii) an Agreement to
-----------
be Bound to the Registration Rights Agreement; and (iii) the Hettwer Employment
Agreement;
(e) Parent shall have received a corporate certificate of good
standing for Ionix, and a copy of the Articles of Incorporation of Ionix, both
as certified by the Secretary of State of Illinois;
(f) as of the date three business days prior to the Closing Date the
Ionix Debt shall be no greater than $371,927;
(g) Parent shall have received, at the Closing, a duly executed
opinion of counsel to Ionix and the Ionix Shareholder, substantially in the form
of Exhibit "H" hereto;
-----------
(h) Parent shall have received from Ionix or the Ionix Shareholder, as
the case may be, such other documents as Parent's counsel shall have reasonably
requested, in form and substance reasonably satisfactory to Parent's counsel;
and
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(i) Parent shall have received evidence reasonably satisfactory to it
that at the Closing the assets and properties used in the Ionix Business are
free and clear of all Liens other than Permitted Liens (as hereinafter defined),
and that the Ionix Shareholder is an accredited investor in accordance with
Section 4.31(a) hereof.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Parent.
(a) Parent shall indemnify and hold the Ionix Shareholder and Ionix's
directors, officers and employees (collectively, the "Ionix Indemnified
Parties") harmless from and against, and agree promptly to defend each of the
Ionix Indemnified Parties from and reimburse each of the Ionix Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorney fees and other
legal costs and expenses) (collectively, a "Ionix Loss") that any of the Ionix
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Parent or Sub at the Closing in accordance
with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform,
satisfy and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations hereunder or under any of the documents and materials
delivered by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in
any way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary, Parent
shall not have any liability under Section 8.1(a)(i) above (or Section 8.1(a)
(iii) above, to the extent arising from or based upon matters subject to Section
8.1 (a) (i)) (i) unless the aggregate of all Ionix Losses for which Parent would
be liable but for this sentence exceeds, on a cumulative basis, an amount equal
to $150,000, and then only to the extent of such excess, (ii) for Ionix Losses
in excess of the total Merger consideration payable (in any form, with shares of
Parent Stock valued at $10 each) pursuant to Section 3.1 hereof ("Cap") in the
aggregate, and (iii) unless the Ionix Shareholder has asserted a claim with
respect to the matters set forth in Section 8.1(a)(i), or 8.1(a)(iii) to the
extent applicable to Section 8.1(a)(i), within 30 days after the final
completion, including Parent's receipt, of the audit of Parent's financial
statements for the year ending December 31, 1999. Notwithstanding any
implication to the contrary contained herein, the parties acknowledge and agree
that a decrease in the value of Parent Stock would not, by itself, constitute a
Ionix Loss, unless and then only to the extent a decrease in the value of Parent
Stock has been demonstrated to be as a result of any event described in Sections
8.1(a)(i), (ii) or (iii) above.
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8.2 Indemnification by the Ionix Shareholder.
(a) The Ionix Shareholder shall indemnify and hold Parent, Sub,
Surviving Corporation and their respective shareholders, directors, officers and
employees (collectively, the "Parent Indemnified Parties") harmless from and
against, and agree to defend promptly each of the Parent Indemnified Parties
from and reimburse each of the Parent Indemnified Parties for, any and all
losses, damages, costs, expenses, liabilities, obligations and claims of any
kind (including reasonable attorneys' fees and other legal costs and expenses)
(collectively, a "Parent Loss") that any of the Parent Indemnified Parties may
at any time suffer or incur, or become subject to, as a result of or in
connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Ionix or the Ionix Shareholder in or pursuant hereto, or in
any instrument certificate or affidavit delivered by any of the same at the
Closing in accordance with the provisions hereof;
(ii) any failure by Ionix or the Ionix Shareholder to carry
out, perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations hereunder or under any of
the documents and materials delivered by Ionix pursuant hereto; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above, the Ionix Shareholder shall not have
any liability under Section 8.2(a)(i) above (or Section 8.2(a)(iii) above, to
the extent arising from or based upon matters subject to Section 8.2(a)(i)) (i)
unless the aggregate of all Parent Losses for which the Ionix Shareholder would
be liable but for this sentence exceeds, on a cumulative basis, an amount equal
to $150,000, and then only to the extent of such excess, (ii) for Parent Losses
in excess of the Cap in the aggregate, and (iii) unless Parent has asserted a
claim with respect to the matters set forth in Sections 8.2(a)(i), or
8.2(a)(iii) to the extent applicable to Section 8.2(a)(i) within 30 days after
final completion, including Parent's receipt, of the audit of Parent's financial
statements for the year ending December 31, 1999, except with respect to the
matters arising under Sections 4.18, 4.19, 4.20 or 4.24 hereof, in which event
Parent must have asserted a claim within the applicable statute of limitations.
Notwithstanding any implication to the contrary contained herein, the parties
acknowledge and agree that a decrease in the value of Parent Stock would not, by
itself, constitute a Parent Loss, unless and then only to the extent a decrease
in the value of Parent Stock has been demonstrated to be as a result of any
event described in Sections 8.2(a)(i), (ii) or (iii) above.
8.3 Notification of Claims; Election to Defend
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has
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determined has given or could give rise to a right of indemnification hereunder.
The Indemnified Parties will furnish prompt notice as to all Claims involving
third party claims. Subject to the Indemnifying Party's right to defend in good
faith third party claims as hereinafter provided, the Indemnifying Party shall
satisfy its obligations under this Article VIII within 30 days after the receipt
of written notice thereof from the Indemnified Party. Any amounts paid
thereafter shall include interest thereon for the period commencing at the end
of such 30-day period and ending on the actual date of payment, at a rate of 12%
per annum, or, if lower, at the highest rate of interest permitted by applicable
law at the time of such payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of
any Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a
Claim asserted by a third party against the Indemnified Party that the
Indemnifying Party acknowledges is a Claim for which it must indemnify or hold
harmless the Indemnified Party under Section 8.1 or 8.2 hereof, as the case may
be, the Indemnifying Party shall have the right, at its sole cost and expense,
to employ counsel of its own choosing to defend any such Claim asserted against
the Indemnified Party. Notwithstanding anything to the contrary in the preceding
sentence, if the Indemnified Party (i) reasonably believes that its interests
with respect to a Claim (or any material portion thereof) are in conflict with
the interests of the Indemnifying Party with respect to such Claim (or portion
thereof), and (ii) promptly notifies the Indemnifying Party, in writing, of the
nature of such conflict, then the Indemnified Party shall be entitled to choose,
at the sole cost and expense of the Indemnifying Party, independent counsel to
defend such Claim (or the conflicting portion thereof). The Indemnified Party
shall have the right to participate in the defense of any Claim at its own
expense (except to the extent provided in the preceding sentence), but the
Indemnifying Party shall retain control over such litigation (except as provided
in the preceding sentence). The Indemnifying Party shall notify the Indemnified
Party in writing, as promptly as possible (but in any case before the due date
for the answer or response to a Claim) after receipt of the notice of Claim
given by the Indemnified Party to the Indemnifying Party under Section 8.3(a)
hereof, of its election to defend in good faith any such third party Claim. For
so long as the Indemnifying Party is defending in good faith any such Claim
asserted by a third party against the Indemnified Party, the Indemnified Party
shall not settle or compromise such Claim without the prior written consent of
the Indemnifying Party. The Indemnified Party shall cooperate with the
Indemnifying Party in connection with any such defense and shall make available
to the Indemnifying Party or its agents all records and other materials in the
Indemnified Party's possession reasonably required by it for its use in
contesting any third party Claim; provided, however, that the Indemnifying Party
shall have agreed, in writing, to keep such records and other materials
confidential except (i) to the extent required for defense of the relevant
Claim, or (ii) as required by law or court order. Whether or not the
Indemnifying Party elects to defend any such Claim, the Indemnified Party shall
have no obligations to do so. Within 30 days after a final determination
(including a settlement) has been reached with respect to any Claim contested
pursuant to this Section 8.3(b), the Indemnifying Party shall satisfy its
obligations hereunder with respect thereto. Any amount paid thereafter shall
include interest thereon for the period commencing at the end of such 30-day
period and ending on the actual date of payment, at a rate of 15% per annum, or,
if lower, at the highest rate of interest permitted by applicable law at the
time of such payment.
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8.4 Payment. The Ionix Shareholder may, at his option, pay all or part of
any amount due under this Article VIII by delivery of shares of Parent Stock
having a value equal to the amount due (to the extent that he owns sufficient
shares of Parent Stock); provided, however, that he may do so only after
satisfying any such amount due to the extent of any cash received by him as
Merger consideration hereunder. For the purpose of this provision, the value of
Parent Stock shall be deemed to be $10 per share.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Merger Agreement may be terminated at any time prior
to the Effective Time:
(a) by mutual written consent of Parent and Ionix;
(b) by Ionix, upon a material breach hereof on the part of Parent or
Sub which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by September 30, 1998;
(c) by Parent, upon a material breach hereof on the part of Ionix or
the Ionix Shareholder which has not been cured and which would cause any
condition set forth in Section 7.2 hereof to be incapable of being satisfied by
September 30, 1998;
(d) by Parent or Ionix if any court of competent jurisdiction shall
have issued, enacted, entered, promulgated or enforced any order, judgment,
decree, injunction or ruling which restrains, enjoins or otherwise prohibits the
Merger and such order, judgment, decree, injunction or ruling shall have become
final and nonappealable; or
(e) by either Parent or Ionix if the Merger shall not have been
consummated on or before September 30, 1998 (provided the terminating party is
not otherwise in material breach of its representations, warranties or
obligations hereunder).
9.2 Fees and Expenses.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the Surviving Corporation; provided, however, that the Ionix Shareholder shall
pay all fees and expenses (including agents, counsel and other advisors) of
Ionix and himself.
(b) If the Merger is not consummated for a reason other than the
willful and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
-27-
<PAGE>
(c) If the Merger is not consummated because of a willful and material
breach hereof by any party, the nonbreaching party or parties shall be entitled
to pursue all legal and equitable remedies against the breaching party for such
breach including specific performance and all fees and expenses incurred by the
nonbreaching party or parties in connection with enforcing its or their rights
hereunder with respect to such breach shall be paid by the breaching party.
9.3 Amendment. This Merger Agreement may be amended by the mutual agreement
of Parent, Sub, Ionix and the Ionix Shareholder at any time before or after
approval hereof by the Ionix Shareholder. This Agreement may not be amended
except by an instrument in writing signed on behalf of the parties hereto,
provided that after the Effective Time, any such amendment must be signed by the
Ionix Shareholder.
9.4 Waiver. At any time prior to the Effective Time, the parties hereto
may, to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival; Recourse. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof to the extent that they
relate to post-Closing periods, the obligations to indemnify contained in
Article VIII hereof and the agreements in this Article X to the extent that they
relate to post-Closing periods, shall survive the Merger indefinitely (except to
the extent a shorter period of time is explicitly specified therein) and (ii)
the representations and warranties made in Articles IV and V hereof shall
survive the Merger, and shall survive any independent investigation by the
parties, and any dissolution, merger or consolidation of Ionix or Parent, and
shall bind the legal representatives, assigns and successors of Ionix, the Ionix
Shareholder and Parent, for a period of two years after the Effective Time
(other than the representations and warranties contained in Sections 4.18, 4.19,
4.20 and 4.24 hereof, which shall survive for the applicable statute of
limitations).
10.2 Notices. All notices or other communications under this Agreement
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in Person, by telecopy (with confirmation of
receipt), or by registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
-28-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
If to Ionix : Ionix Development Corporation
2210 Midwest Rd.
Oakbrook, IL 60523
Attention: Mr. Mike Hettwer, President
Telephone: (312) 944-1141
Telecopy: (312) 944-4544
With copies to: Douglas Newkirk, Esq.
Sachnoff & Weaver
30 S. Wacker Dr., 29th Floor
Chicago, IL 60606-7484
Telephone: (312) 207-6481
Telecopy: (312) 207-6400
and to: Skip Heizer, Esq.
Heizer Companies
215 N. Maple Ct.
Lake Forest, IL 60045
Telephone: (847) 295-8300
Telecopy: (847) 295-8308
If to the Ionix To the address listed under the signature
Shareholder: line of the Ionix Shareholder
If to Parent or Sub: IXL Holdings, Inc.
1888 Emery St., 2nd Floor
Atlanta, GA 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Rd., Ste. 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Ave., 24th Floor
New York, NY 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
</TABLE>
-29-
<PAGE>
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 Entire Agreement. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, except for the non-disclosure letter agreement between Parent and
Ionix dated as of August 21, 1998. There are no other representations or
warranties, whether written or oral, between the parties in connection the
subject matter hereof, except as expressly set forth herein.
10.4 Assignments; Parties in Interest. Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that the rights, interests, and
obligations of Sub hereunder may be assigned to any direct wholly owned Delaware
subsidiary of Parent without such prior consent. Subject to the preceding
sentence, this Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and nothing herein, express or implied, is intended to or
shall confer upon any Person not a party hereto any right, benefit or remedy of
any nature whatsoever under or by reason hereof, except as otherwise provided
herein.
10.5 Governing Law. This Agreement, except to the extent that the BCA or
the DGCL is mandatorily applicable to the Merger, or to the rights of the Ionix
Shareholder or the other parties hereto with respect to the Merger, shall be
governed in all respects by the laws of the State of Georgia (without giving
effect to the provisions thereof relating to conflicts of law).
10.6 Headings. The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation hereof.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 Severability. If any term or other provision hereof is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions hereof shall nevertheless remain in full force
and effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
-30-
<PAGE>
10.9 Post-Closing Access. For a period of three years after the Closing
Date, the Ionix Shareholder and his agents and representatives shall have
reasonable access to the books and records of the Ionix Business.
10.10 Post-Closing Notice. To the extent the Surviving Corporation receives
written notice of any event or circumstance that materially affects the Ionix
Shareholder, the Surviving Corporation shall promptly notify the Ionix
Shareholder of such matter, information, or event and shall provide him with
copies of all relevant documentation or correspondence in connection thereto.
10.11 Certain Definitions. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the Ionix
Real Property or interfering with the ordinary conduct of any of the Ionix
Business; and (e) those Liens listed on Schedule 10.11 hereto;
--------------
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of Ionix" shall refer to the knowledge,
subject to clause (i) above, of the Ionix Shareholder; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of which are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including Sub); provided, however, that
with respect to the Parent, the terms "Subsidiary" and "Subsidiaries" shall not
include Ionix or University Netcasting, Inc.
- SIGNATURES ON THE FOLLOWING PAGE -
-31-
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and Ionix have caused this Agreement to be
signed and delivered by their respective duly authorized officers, and each
Ionix Shareholder has signed and delivered this Agreement, all as of the date
first written above.
"Ionix"
Ionix Development Corporation, an Illinois corporation
By: /s/ Mike Hettwer
------------------------------------------
Title: President
"Parent"
IXL Holdings, Inc., a Delaware corporation
By: /s/ James V. Sandry
------------------------------------------
Title: Executive Vice President
"Sub"
iXL-Chicago, Inc., a Delaware corporation
By: /s/ James V. Sandry
------------------------------------------
Title: Executive Vice President
"Ionix Shareholder"
/s/ Mike Hettwer
---------------------------------------------
Mike Hettwer
Address: 30 E. Division
Chicago, IL 60610
-32-
<PAGE>
EXHIBITS
--------
Sub's Closing Certificate.......................................... Exhibit A
Ionix's Closing Certificate........................................ Exhibit B
Parent's Closing Certificate....................................... Exhibit C
Agreement to be Bound to Registration Rights Agreement............. Exhibit D
Option Agreement................................................... Exhibit E
Opinion of Counsel to Parent and Sub............................... Exhibit F
Agreement to be Bound to the Stockholders' Agreement............... Exhibit G
Opinion of Counsel to Ionix........................................ Exhibit H
Hettwer Employment Agreement....................................... Exhibit I
<PAGE>
SCHEDULE 4.3(A)
---------------
CAPITALIZATION OF IONIX
SCHEDULE 4.3(B)
---------------
LIENS ON IONIX STOCK
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF IONIX
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF IONIX
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF IONIX
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF IONIX
SCHEDULE 4.10
-------------
BAD EQUIPMENT OF IONIX
<PAGE>
SCHEDULE 4.12
-------------
LIENS ON AND LOCATION OF REAL PROPERTY OF IONIX
SCHEDULE 4.13
-------------
LEASES OF IONIX
SCHEDULE 4.14
-------------
CONTRACTS OF IONIX
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF IONIX
SCHEDULE 4.16
-------------
PAYROLL INFORMATION OF IONIX
SCHEDULE 4.17
-------------
LITIGATION
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF IONIX
<PAGE>
SCHEDULE 4.19
-------------
ERISA ISSUES OF IONIX
SCHEDULE 4.20
-------------
EXCEPTIONS TO TAXES OF IONIX BEING TIMELY FILED
SCHEDULE 4.21
-------------
IONIX PERMITS
SCHEDULE 4.23
-------------
IONIX BROKERS
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS, COMPETITORS
SCHEDULE 4.28
-------------
INSURANCE OF IONIX
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
<PAGE>
SCHEDULE 5.4
------------
PARENT LITIGATION
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
OUTSTANDING OBLIGATIONS TO ISSUE OPTIONS, WARRANTS
OR OTHER PARENT STOCK RIGHTS
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES
SCHEDULE 6.6(B)
---------------
PARENT OPTIONS TO EMPLOYEES OF IONIX
<PAGE>
SCHEDULE 7.1(C)
---------------
PARENT CONSENTS
SCHEDULE 7.2(C)
---------------
IONIX AND IONIX SHAREHOLDER CONSENTS
SCHEDULE 10.11
--------------
PERMITTED LIENS OF IONIX
<PAGE>
EXHIBIT 2.33
AGREEMENT AND PLAN OF MERGER
by and between
IXL HOLDINGS, INC.,
iXL-CONNECTICUT, INC.,
PEQUOT SYSTEMS, INC.
AND
THE PEQUOT SHAREHOLDERS
Dated as of SEPTEMBER 24, 1998
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 24th day of
September, 1998, by and between Pequot Systems, Inc., a Connecticut corporation
("Pequot"), IXL Holdings, Inc., a Delaware corporation ("Parent"), iXL-
Connecticut, Inc., a Delaware corporation, or its successors or assigns ("Sub"),
and the shareholders of Pequot as listed on the signature page hereto (the
"Pequot Shareholders").
R E C I T A L S:
- - - - - - - -
A. Pequot is engaged in the business of developing internet sites and
furnishing internet services, including website design and maintenance (the
"Pequot Business").
B. Pequot and Sub each desire to merge their respective companies and
business operations, all on the terms and subject to the conditions set forth
herein (the "Merger").
C. The Pequot Shareholders collectively own 100% of the issued and
outstanding capital stock of Pequot (the "Pequot Stock").
D. The respective Boards of Directors of Parent, Sub and Pequot, and the
respective shareholders of Sub and Pequot, have approved the Merger, upon the
terms and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal income
tax purposes, as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits, conditions
and agreements set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is hereby
agreed as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, at the
Effective Time (as defined in Section 1.3 hereof), (a) Pequot shall be merged
with and into Sub, (b) the separate existence of Pequot shall cease, and (c) Sub
shall continue as the surviving corporation in the Merger under the laws of the
State of Delaware under the name iXL-Connecticut, Inc. For purposes of this
Agreement, Sub shall be referred to, for the period commencing on the Effective
Time, as the "Surviving Corporation."
<PAGE>
1.2 Closing and Closing Date. Unless this Merger Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9.1 hereof, and subject to the satisfaction or waiver of the
conditions set forth in Article VII hereof, the closing of the Merger (the
"Closing") will take place as promptly as practicable (and in any event within
five business days after satisfaction of the conditions set forth in Sections
7.1 and 7.2 hereof) (the "Closing Date") at the offices of Minkin & Snyder, A
Professional Corporation, One Buckhead Plaza, 3060 Peachtree Rd., Ste. 1100,
Atlanta, GA 30305, unless another date or place is agreed to by the parties.
1.3 Effective Time of the Merger. At the Closing, the parties hereto shall
cause (a) a certificate of merger (the "Delaware Certificate of Merger") to be
filed with the office of the Secretary of State of Delaware in accordance with
the provisions of the Delaware General Corporation Law, as amended (the "DGCL");
and (b) Certificate of Merger (the "Connecticut Certificate of Merger";
collectively with the Delaware Certificate of Merger, the "Certificate of
Merger") to be filed with the office of the Secretary of State of Connecticut in
accordance with the provisions of the Connecticut Business Corporation Act (the
"CBCA"). When used herein, the term "Effective Time" shall mean the time when
the Delaware Certificate of Merger has been accepted for filing by the Secretary
of State of Delaware, or such time as otherwise specified therein.
1.4 Effect of the Merger. The Merger shall, from and after the Effective Time,
have all the effects provided by the DGCL and the CBCA. If at any time after the
Effective Time, any further action is deemed necessary or desirable to carry out
the purposes of this Agreement, the parties hereto agree that the Surviving
Corporation and its proper officers and directors shall be authorized to take,
and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of Sub, a
form of which is attached to a closing certificate and incumbency certificate,
substantially in the form of Exhibit "A-2" hereto ("Sub's Closing Certificate"),
-------------
shall be the Certificate of Incorporation of the Surviving Corporation after the
Effective Time, until thereafter changed or amended as provided therein or by
applicable law.
2.2 Bylaws. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is attached to the Sub's Closing Certificate.
2.3 Board of Directors; Officers. The Board of Directors and officers of Sub
immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively,
2
<PAGE>
of the Surviving Corporation, until the earlier of their respective resignations
or the time that their respective successors are duly elected or appointed and
qualified.
ARTICLE III
CONVERSION OF SHARES
3.1 Merger Consideration. As of the Effective Time:
(a) All shares of Pequot Stock owned by Pequot shall, by virtue of the
Merger and without any action on the part of any shareholder, officer or
director of Pequot or Sub, be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding share of Pequot Stock (other than any
Dissenting Shares, as defined in Section 3.2 hereof) shall, upon surrender to
Sub, at the Closing, of the underlying share certificates, be converted into,
and become exchangeable for (i) a number of shares of validly issued, fully paid
and nonassessable Class B Common Stock of Parent, $.01 par value (the "Parent
Stock") based on the following equation:
PS = 382,500 - D
---
$10
--------------
S
where:
PS = the number of shares of Parent Stock (valued, as of the
Closing, at $10 per share) for which each share of Pequot
Stock shall be exchanged pursuant to the Merger
D = any outstanding indebtedness of Pequot (the "Pequot Debt"),
including debt for borrowed money and accrued interest
thereon, capital leases, and any unpaid legal or accounting
fees of Pequot which exceed $75,000, but excluding current
accounts payable (less than 60 days old), all to be
determined as of three business days prior to the Closing
Date and all as determined in accordance with generally
accepted accounting principles ("GAAP")
S = the number of issued and outstanding shares of Pequot Stock
on the Closing Date; and
3
<PAGE>
(ii) an amount of cash based upon the following equation:
C = $660,000
----------
S
where:
C = the amount of cash to be received for each share of Pequot
Stock
S = the number of issued and outstanding shares of Pequot Stock on
the Closing Date.
(c) Each issued and outstanding share of common stock of Sub shall, by
virtue of the Merger and without any action on the part of any shareholder,
officer or director of Pequot or Sub, be converted into and become one fully
paid and nonassessable share of common stock of the Surviving Corporation.
3.2 Dissenting Shares. Notwithstanding any provision hereof to the
contrary, any shares of Pequot Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be converted as described in Section 3.1(b)
hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Shareholder pursuant to the DGCL or CBCA, as
applicable, provided, however, that if a Dissenting Shareholder shall fail to
perfect his demand, withdraw his demand or otherwise lose his right for
appraisal under the terms of the DGCL or CBCA, as applicable, then the Pequot
Stock held by such Dissenting Shareholder (the "Dissenting Shares") shall be
deemed to be converted as of the Effective Time in accordance with the
provisions of Section 3.1 hereof. Pequot shall not voluntarily make any payment
with respect to, settle, or offer to settle or otherwise negotiate, any such
demands. All amounts paid to Dissenting Shareholders shall be paid without
interest thereon (to the extent permitted by applicable law) by the Surviving
Corporation. For purposes hereof, the term "Dissenting Shareholder" shall mean
a Pequot Shareholder who (a) objects to the Merger; and (b) complies with the
applicable provisions of the DGCL or CBCA concerning dissenter's rights.
3.3 No Further Rights. From and after the Effective Time, holders of
certificates theretofore evidencing Pequot Stock shall cease to have any rights
as stockholders of Pequot, except as provided herein or by applicable law.
3.4 Closing of Pequot's Transfer Books. At the Effective Time, the stock
transfer books of Pequot shall be closed and no transfer of Pequot Stock shall
be made thereafter. If after the Effective Time, certificates for Pequot Stock
are presented to Parent or the Surviving Corporation, they shall be canceled and
exchanged for a consideration as set forth in Section 3.1 hereof, subject to
applicable law in the case of Dissenting Shareholders.
4
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PEQUOT
Pequot, and the Pequot Shareholders, jointly and severally, represent and
warrant to Parent and Sub as follows, which representations and warranties shall
survive the Closing in accordance with Section 10.1 hereof.
4.1 Organization and Qualification. Pequot is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Connecticut. Pequot has the requisite corporate power and authority to carry on
the Pequot Business as it is now being conducted and is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary. Complete and correct copies of
the Certificate of Incorporation and Bylaws of Pequot as in effect on the date
hereof are attached to a closing certificate and incumbency certificate,
substantially in the form of Exhibit "E" hereto ("Pequot's Closing
-----------
Certificate"). The minute book of Pequot, a true and complete copy of which has
been delivered to Parent, (a) accurately reflects all action taken by the
directors and shareholders of Pequot at meetings of Pequot's Board of Directors
or shareholders, as the case may be; and (b) contains true and complete copies,
or originals, of the respective minutes of all meetings or consent actions of
the directors or shareholders.
4.2 Authority. Pequot has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery hereof and the consummation of
the transactions contemplated hereby by Pequot have been duly and validly
authorized and approved by Pequot's Board of Directors and the Pequot
Shareholders, and no other corporate or shareholder proceedings on the part of
Pequot, its Board of Directors or the Pequot Shareholders is necessary to
authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Pequot and each Pequot Shareholder, and assuming the due authorization,
execution and delivery by Parent and Sub, constitutes the valid and binding
obligation of Pequot and each Pequot Shareholder, enforceable against Pequot and
each Pequot Shareholder in accordance with its terms subject, in each case, to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
application relating to or affecting creditors' rights and to general principles
of equity, including principles of commercial reasonableness, good faith and
fair dealing.
4.3 Capitalization.
(a) The authorized capital stock of Pequot consists of 20,000 shares of
common stock, no par value, of which 20,000 shares are validly issued and
outstanding, fully paid and nonassessable. All outstanding capital stock of
Pequot was issued in accordance with applicable federal and state securities
laws; to the extent otherwise, the variance can not reasonably be expected to
have any material adverse effect. Except as set forth on Schedule 4.3(a) hereto,
there are no options, warrants, calls, convertible notes, agreements,
commitments or other rights presently outstanding that would obligate Pequot or
any of the Pequot Shareholders to issue,
5
<PAGE>
deliver or sell shares of its capital stock, or to grant, extend or enter into
any such option, warrant, call, convertible note, agreement, commitment or other
right. In addition to the foregoing, as of the date hereof, Pequot has no bonds,
debentures, notes or other indebtedness issued or outstanding that have voting
rights in Pequot. Schedule 4.3(a) sets forth a list of (i) all holders of record
---------------
of (A) Pequot Stock, and (B) options, warrants, convertible notes or other
rights to purchase capital stock of Pequot (collectively, "Pequot Stock
Rights"); (ii) the number of shares held by each Pequot Shareholder and the
number of shares of capital stock of Pequot represented by the Pequot Stock
Rights; and (iii) the exercise price, date of grant, duration and vesting
schedule for each Pequot Stock Right.
(b) All of the issued and outstanding shares of capital stock of Pequot
are validly issued, fully paid and nonassessable. Except as set forth on
Schedule 4.3(b) hereto, each Pequot Shareholder represents and warrants that the
- ---------------
Pequot Stock held by such Pequot Shareholder is free and clear of any lien,
charge, security interest, pledge, option, right of first refusal, voting proxy
or other voting agreement, or encumbrance of any kind or nature other than
restrictions on transfer imposed by federal and state securities laws (any of
the foregoing, a "Lien").
4.4 Subsidiaries. Pequot has no subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
- ------------
Pequot or the Pequot Shareholders, (ii) the consummation by Pequot and the
Pequot Shareholders of the transactions contemplated hereby or (iii) compliance
by Pequot with any of the provisions hereof will:
(a) conflict with or violate the Certificate of Incorporation or Bylaws
of Pequot;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Pequot or any of the Pequot
Shareholders, or by which Pequot or any of its properties or assets may be bound
or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which Pequot is a party or by which Pequot or
any of its properties or assets may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of Pequot; or
(e) require any consent, waiver, license, approval, authorization, order,
permit, registration or filing with, or notification to (any of the foregoing
being a "Consent"), (i) any
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government or subdivision thereof, whether domestic or foreign, or any
administrative, governmental, or regulatory authority, agency, commission,
court, tribunal or body, whether domestic, foreign or multinational (any of the
foregoing, a "Governmental Entity"), except for the filing of the Certificate of
Merger pursuant to the DGCL and the CBCA; or (ii) any other individual or Entity
(collectively, a "Person").
4.6 Financial Statements. Pequot has heretofore furnished Parent with a true
and complete copy of (a) the unaudited financial statements of Pequot for the
period ended December 31, 1996 and the year ended December 31, 1997; and (b) the
unaudited financial statements of Pequot for the six month period ended June 30,
1998 (all of the foregoing collectively herein referred to as the "Pequot
Financial Statements"). Except as disclosed therein, the Pequot Financial
Statements present fairly, in all material respects, the financial position and
operating results of Pequot as of the dates, and during the periods, indicated
therein on a consistent basis in accordance with the cash-basis method of
accounting.
4.7 Absence of Changes. Except as provided in Schedule 4.7 hereto and except
------------
as contemplated hereby, since June 30, 1998 (a) Pequot has not entered into any
transaction that was not in the ordinary course of business; (b) except for
sales of services and licenses of software in the ordinary course of business,
there has been no sale, assignment, transfer, mortgage, pledge, encumbrance or
lease of any material asset or property of Pequot; (c) there has been (i) no
declaration or payment of a dividend, or any other declaration, payment or
distribution of any type or nature to any shareholder of Pequot in respect of
its stock, whether in cash or property, and (ii) no purchase or redemption of
any share of the capital stock of Pequot; (d) there has been no declaration,
payment, or commitment for the payment, by Pequot, of a bonus or other
additional salary, compensation, or benefit to any employee of Pequot that was
not in the ordinary course of business, except for normal year-end bonuses paid
in the ordinary course of business; (e) there has been no release, compromise,
waiver or cancellation of any debt to or claim by Pequot, or waiver of any right
of Pequot; (f) there have been no capital expenditures in excess of $10,000 for
any single item, or $25,000 in the aggregate; (g) there has been no change in
accounting methods or practices or revaluation of any asset of Pequot (other
than Pequot Accounts Receivable as defined in Section 4.26 hereof written down
in the ordinary course of business in excess of $10,000 for any single Pequot
Accounts Receivable, or $25,000 in the aggregate); (h) there has been no
material damage, or destruction to, or loss of, physical property (whether or
not covered by insurance) adversely affecting the Pequot Business or the
operations of Pequot; (i) there has been no loan by Pequot, or guaranty by
Pequot of any loan, to any employee of Pequot; (j) Pequot has not ceased to
transact business with any customer that, as of the date of such cessation,
represented more than 5% of the annual gross revenues of Pequot; (k) there has
been no termination or resignation of any key employee or officer of Pequot, and
to the knowledge of Pequot, no such termination or resignation is threatened;
(l) there has been no amendment or termination of any material oral or written
contract, agreement or license related to the Pequot Business, to which Pequot
is a party or by which it is bound, except in the ordinary course of business,
or except as expressly contemplated hereby; (m) Pequot has not failed to satisfy
any of its debts, obligations or liabilities related to the Pequot Business or
the assets of Pequot as the same become due and owing (except for Pequot
Accounts Payable (as defined in Section 4.27 hereof) payable in accordance with
past practices and in the ordinary course of business); (n) there has been no
agreement or commitment by Pequot to
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do any of the foregoing; and (o) there has been no other event or condition of
any character pertaining to and materially and adversely affecting the assets,
business or financial condition of Pequot.
4.8 Undisclosed Liabilities. Except as set forth on Schedule 4.8 hereto,
------------
Pequot has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including any liability or obligation on account of taxes
or any governmental charge or penalty, interest or fine, except (a) liabilities
incurred in the ordinary course of business after June 30, 1998, that would not,
whether individually or in the aggregate, have a material adverse impact on the
business or financial condition of Pequot; (b) liabilities reflected on the
Pequot Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
4.9 Title to Properties. Except as set forth on Schedule 4.9 hereto, Pequot
------------
has good and marketable title to all tangible property and assets used in the
Pequot Business, and good and valid title to its leasehold interests, in each
case, free and clear of any and all Liens other than Permitted Liens (as defined
in Section 10.11 hereof).
4.10 Equipment. Pequot has heretofore furnished Parent with a true and
correct list of all items of tangible personal property (including computer
hardware) necessary for or used in the operation of the Pequot Business in the
manner in which it has been and is now operated by Pequot ("the Pequot
Equipment"), except for personal property having a net book value of less than
$1,000. Except as set forth on Schedule 4.10 hereto, each material item of
-------------
Pequot Equipment is in good condition and repair, ordinary wear and tear
excepted.
4.11 Intellectual Property.
(a) Pequot has no material proprietary technology, patents, patent
rights, trademarks, trademark rights, trade names, trade name rights, service
marks, service mark rights, or copyrights (or pending applications for any of
the foregoing) used by Pequot in the conduct of the Pequot Business (together
with trade secrets and know how used in the conduct of the Pequot Business, the
"Pequot Intellectual Property Rights"). Pequot has no obligation to make any
payment (whether of a royalty, license fee, compensation or otherwise) with
respect to any Pequot Intellectual Property Right. No claims are pending or, to
the knowledge of Pequot, threatened, that Pequot is infringing or otherwise
adversely affecting the rights of any Person with regard to any Pequot
Intellectual Property Right. No Person is infringing the rights of Pequot with
respect to any Pequot Intellectual Property Right. Neither Pequot nor any
employee, agent or independent contractor of Pequot, in connection with the
performance of such Person's services with Pequot, has used, appropriated or
disclosed, directly or indirectly, any trade secret or other proprietary or
confidential information of any other Person, or otherwise violated any
confidential relationship with any other Person.
(b) Pequot has heretofore furnished Parent with a true and complete list
of all material computer software used by Pequot in the conduct of the Pequot
Business (the "Pequot Software"). Pequot currently licenses, or otherwise has
the legal right to use, all of the Pequot
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Software (including any upgrade, alteration or enhancement with respect
thereto), and all of the Pequot Software is being used in compliance with any
applicable license or other agreement.
4.12 Real Property. Except as set forth on Schedule 4.12 hereto:
-------------
(a) Pequot has a good and valid leasehold interest in all real property
(including all buildings, improvements and fixtures thereon) used in the
operation of the Pequot Business (the "Pequot Real Property"). Pequot owns no
real property. Except for Permitted Liens, and for the items set forth on
Schedule 4.12, there are no Liens on Pequot's interest in any of the Pequot Real
- -------------
Property. Schedule 4.12 lists each county and state where any Pequot Real
-------------
Property is located, or where Pequot has ever leased or owned any real property.
(b) There are no parties in possession of any portion of the Pequot Real
Property other than Pequot, whether as sublessees, subtenants at will or
trespassers.
(c) To the knowledge of Pequot, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, under the provisions of any of the
Pequot Leases (as hereinafter defined), any material expenditure by Pequot to
modify or improve any of the Pequot Real Property to bring it into compliance
therewith.
4.13 Leases. Schedule 4.13 hereto sets forth a list of all leases pursuant
-------------
to which Pequot leases, as lessor or lessee, real or personal property used in
operating the Pequot Business or otherwise (the "Pequot Leases"). Copies of the
Pequot Leases, all of which have previously been provided to Parent, are true
and complete copies thereof. All of the Pequot Leases are valid, binding and
enforceable against Pequot and, to the knowledge of Pequot, against the other
parties thereto, in accordance with their respective terms, and there is not
under any such Pequot Lease any existing default by Pequot, or, to the knowledge
of Pequot, by any other party thereto, or any condition or event that, with
notice or lapse of time or both, would constitute a default. Pequot has not
received notice that the lessor of any of the Pequot Leases intends to cancel,
suspend or terminate such Pequot Lease or to exercise or not exercise any option
thereunder.
4.14 Contracts. Schedule 4.14 hereto sets forth a true and complete list of
-------------
all contracts, agreements and commitments (whether written or oral) to which
Pequot is, directly or indirectly, a party (in its own name or as a successor in
interest), or by which it or any of its properties or assets is otherwise bound,
including any service agreements, customer agreements, supplier agreements,
agreements to lend or borrow money, shareholder agreements, employment
agreements, agreements relating to Pequot Intellectual Property Rights and the
like (collectively, the "Pequot Contracts"); excepting only those Pequot
Contracts which involve less than $10,000 and are cancelable, without penalty,
on no more than 90 days' notice. Schedule 4.14 does not include any contracts,
-------------
agreements or commitments as to which performance has been completed. The
aggregate value of all payment obligations and rights to receive payments, under
agreements, contracts and commitments (whether oral or in writing) to which
Pequot is a party or by which it or any of its properties or assets is otherwise
bound, and that are not listed on Schedule 4.14, is less
-------------
9
<PAGE>
than $50,000 (calculating such value by adding together the value of rights and
obligations, and not by determining the net amount thereof).
True and complete copies of all Pequot Contracts (or a true and complete
narrative description of any oral Pequot Contract) have previously been provided
to Parent. Except as set forth on Schedule 4.8 hereto, neither Pequot nor, to
------------
the knowledge of Pequot, any other party to any of the Pequot Contracts (x) is
in default under (nor does there exist any condition that, with notice or lapse
of time or both, would cause such a default under) any of the Pequot Contracts,
or (y) has waived any right it may have under any of the Pequot Contracts, the
waiver of which would have a material adverse effect on the business, assets or
financial condition or prospects of Pequot. All of the Pequot Contracts
constitute the valid and binding obligations of Pequot, enforceable in
accordance with their respective terms, and, to the knowledge of Pequot, of the
other parties thereto.
4.15 Directors and Officers. Schedule 4.15 hereto sets forth a list, as of
-------------
the Closing Date, of the name of each director and officer of Pequot and the
position(s) held by each.
4.16 Payroll Information. Pequot has previously provided Parent with a true
and complete copy of the payroll report of Pequot dated September 11, 1998,
showing all current employees of Pequot and their current levels of
compensation, other than bonuses and other extraordinary compensation, all of
which bonuses and other extraordinary compensation are set forth in Schedule
--------
4.16 hereto. Pequot has paid all compensation required to be paid to employees
- -----
of Pequot on or prior to the date hereof other than compensation (and bonuses
pursuant to arrangements described in Schedule 4.16) accrued in the current pay
-------------
period.
4.17 Litigation. Except as set forth on Schedule 4.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Pequot, threatened against or affecting Pequot or the Pequot Business, nor is
there any judgment, decree, injunction or order of any applicable Governmental
Entity or arbitrator outstanding against Pequot.
4.18 Employee Benefit Plans/Labor Relations.
(a) Except as disclosed in Schedule 4.18 hereto, there are no employee
-------------
benefit plans, agreements or arrangements maintained by Pequot, including (i)
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); (ii) current or
deferred compensation, pension, profit sharing, vacation or severance plans or
programs; or (iii) medical, hospital, accident, disability or death benefit
plans (collectively, "Pequot Benefit Plans"). All Pequot Benefit Plans are
administered in accordance with, and are in material compliance with, all
applicable laws and regulations. No default exists with respect to the
obligations of Pequot under any Pequot Benefit Plan.
(b) Pequot is not a party to any collective bargaining agreement; no
collective bargaining agent has been certified as a representative of any of the
employees of Pequot; no representation campaign or election is now in progress
with respect to any employee of Pequot; and there are no labor disputes,
grievances, controversies, strikes or requests for union representation
10
<PAGE>
pending, or, to the knowledge of Pequot, threatened, relating to or affecting
the Pequot Business. To the knowledge of Pequot, no event has occurred that
could give rise to any such dispute, controversy, strike or request for
representation.
4.19 ERISA.
(a) All Pequot Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the Pequot Benefit Plans that is
intended to meet the requirements of Section 401(a) of the Code has been
determined by the Internal Revenue Service to meet such requirements within the
meaning of such provision. No Pequot Benefit Plan is subject to Title IV of
ERISA or Section 412 of the Code. Pequot has not engaged in any nonexempt
"prohibited transactions," as such term is defined in Section 4975 of the Code
or Section 406 of ERISA, involving Pequot Benefit Plans that would subject
Pequot to the penalty or tax imposed under Section 502(i) of ERISA or Section
4975 of the Code. Pequot has not engaged in any transaction described in Section
4069 of ERISA within the last five years. Except as disclosed in Schedule 4.19
-------------
hereto or pursuant to the terms of the Pequot Benefit Plans, neither the
execution and delivery hereof nor the consummation of the transactions
contemplated hereby will (i) result in any payment (including severance,
unemployment compensation or golden parachute) becoming due to any director or
other employee of Pequot, (ii) increase any benefit otherwise payable under any
Pequot Benefit Plan or (iii) result in the acceleration of the time of payment
or vesting of any such benefit to any extent.
(b) No notice of a "reportable event," within the meaning of Section 4043
of ERISA, for which the 30-day reporting requirement has not been waived, has
been required to be filed for any Pequot Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to meet the requirements of Section 401(a) of the Code, or by any
entity that is considered one employer with Pequot under Section 4001 of ERISA
or Section 414 of the Code, within the 12-month period ending on the Closing
Date. Pequot has not incurred any liability to the Pension Benefit Guaranty
Corporation in respect of any Pequot Benefit Plan that remains unpaid.
4.20 Taxes.
(a) Pequot has duly and timely filed all federal, state and local income,
franchise, excise, real and personal property and other tax returns and reports,
including extensions, required to have been filed by Pequot on or prior to the
Closing Date. Pequot has duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Pequot (whether by way of withholding or otherwise) to any federal,
state, local or other taxing authority (except to the extent the same are being
contested in good faith, and adequate reserves therefor have been provided in
the Pequot Financial Statements). As of the Closing Date, all deficiencies
proposed as a result of any audit have been paid or settled.
(b) Pequot is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
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(c) Pequot has not consented to have the provisions of Section 341(f)(2)
of the Code (or comparable state law provisions) apply to it, and Pequot has not
agreed or been requested to make any adjustment under Section 481(c) of the Code
by reason of a change in accounting method or otherwise.
4.21 Compliance with Applicable Laws. Pequot holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
Pequot, as appropriate, and to carry on the Pequot Business as now conducted
(the "Pequot Permits"). To the knowledge of Pequot, Pequot is in material
compliance with all applicable laws, ordinances and regulations and the terms of
the Pequot Permits. Except as set forth on Schedule 4.21 hereto, all of the
-------------
Pequot Permits are fully assignable by Pequot in connection with the Merger.
Schedule 4.21 sets forth a true and complete list of all Pequot Permits, true
- -------------
and complete copies of which have previously been provided to Parent.
4.22 Board of Directors/Shareholder Consent. Both the Board of Directors of
Pequot and the Pequot Shareholders have adopted and approved this Agreement and
the transactions contemplated hereby (including the Merger).
4.23 Brokers. Except as set forth on Schedule 4.23 hereto, no broker or
-------------
finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of Pequot.
4.24 Environmental Matters.
(a) To the knowledge of Pequot, no real property currently or formerly
owned or operated by Pequot is contaminated with any Hazardous Substance (as
hereinafter defined);
(b) Pequot is not a party to any litigation or administrative proceeding
nor, to the knowledge of Pequot, is any litigation or administrative proceeding
threatened against it, that, in either case, asserts or alleges that Pequot (i)
violated any Environmental Law (as hereinafter defined); (ii) is required to
clean up, remove or take remedial or other responsive action due to the
disposal, deposit, discharge, leak or other release of any Hazardous Substance;
or (iii) is required to pay all or a portion of the cost of any past, present or
future cleanup, removal or remedial or other action that arises out of or is
related to the disposal, deposit, discharge, leak or other release of any
Hazardous Substance.
(c) To the knowledge of Pequot, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by Pequot containing materials that, if known to
be present in soil or ground water, would require cleanup, removal or other
remedial action under Environmental Law.
(d) To the knowledge of Pequot, Pequot is not subject to any judgment,
order or citation related to or arising out of any Environmental Law and has not
been named or listed as a
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potentially responsible party by any Governmental Entity in a matter related to
or arising out of any Environmental Law.
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including any petroleum products, asbestos or polychlorinated biphenyls.
4.25 Interest in Customers, Suppliers and Competitors. Except as provided
in Schedule 4.25 hereto, no officer, director, shareholder or employee of Pequot
-------------
and no family member (including a spouse, parent, sibling or lineal descendent
of any of the foregoing), has any direct or indirect material interest in any
material customer, supplier or competitor of Pequot, or in any Person from whom
or to whom Pequot leases any real or personal property, or in any other Person
with whom Pequot is doing business whether directly or indirectly (including as
a debtor or creditor), whether in existence as of the Closing Date or proposed,
other than the ownership of stock of publicly traded corporations.
4.26 Accounts Receivable. All accounts, notes, contracts and other
receivables of Pequot (collectively, "Pequot Accounts Receivable") were acquired
by Pequot in the ordinary course of business arising from bona fide
transactions. To the knowledge of Pequot, there are no set-offs, counterclaims
or disputes asserted with respect to any Pequot Accounts Receivable that would
result in claims in excess of the reserve for bad debts set forth on the Pequot
Financial Statements and, to the knowledge of Pequot and subject to such
reserve, all Pequot Accounts Receivable are collectible in full. Pequot has
previously provided Parent with a true and complete aging report prepared as of
June 30, 1998 which shows the time elapsed since invoice date for all Pequot
Accounts Receivable as of such date.
4.27 Accounts Payable. All material accounts, notes, contracts and other
amounts payable of Pequot (collectively, "Pequot Accounts Payable") are
currently within their respective terms, and are neither in default nor
otherwise past due by more than 90 days. Pequot has previously provided Parent
with a true and complete aging report prepared as of July 31, 1998 which shows
the time elapsed since invoice date for all Pequot Accounts Payable as of such
date.
4.28 Insurance. Pequot currently maintains, in full force and effect, all
insurance policies that are required to be maintained for the conduct of the
Pequot Business or the ownership of Pequot's property (both real and personal)
(collectively, the "Pequot Insurance Policies"). The Pequot Insurance Policies
are listed on Schedule 4.28 hereto, and true and complete copies of all Pequot
-------------
Insurance Policies have previously been provided to Parent. Pequot (a) is not
in default regarding the provisions of any Pequot Insurance Policy; (b) has paid
all premiums due thereunder; and (c) has not failed to present any notice or
material claim thereunder in a due and timely fashion.
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4.29 Bankruptcy. Pequot has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 Pequot Debt. As of the date hereof, the Pequot Debt is not in excess of
$44,345.
4.31 Accredited Investors; Investment Purpose. Each Pequot Shareholder
represents that he (a) is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"); (b) is
acquiring the Parent Stock solely for his own account for investment and not
with a view to, or for sale in connection with, any distribution thereof; and
(c) will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate
or otherwise dispose of any Parent Stock (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of any such shares) except in compliance
with the Securities Act and the rules and regulations thereunder, other
applicable laws, rules and regulations, and the Second Amended and Restated
Stockholders' Agreement of Parent, dated December 17, 1997 (the "Stockholders'
Agreement").
4.32 Restrictions on Transfer. Each Pequot Shareholder acknowledges that (a)
the Parent Stock received by him hereunder has not been registered under the
Securities Act; (b) the Parent Stock may be required to be held indefinitely,
and he must continue to bear the economic risk of the investment in such shares
unless such shares are subsequently registered under the Securities Act or an
exemption from such registration is available; (c) there may not be any public
market for the Parent Stock in the foreseeable future; (d) Rule 144 promulgated
under the Securities Act is not presently available with respect to sales of any
securities of Parent, and such Rule is not anticipated to be available in the
foreseeable future; (e) when and if Parent Stock may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
limited amounts and in accordance with the terms and conditions of such Rule;
(f) if the exemption afforded by Rule 144 is not available, sale without
registration will require the availability of an exemption under the Securities
Act; (g) the Parent Stock is subject to the terms and conditions of the
Stockholders' Agreement; (h) restrictive legends shall be placed on the
certificates representing Parent Stock; and (i) a notation shall be made in the
appropriate records of Parent indicating that Parent Stock is subject to
restrictions on transfer and, if Parent should in the future engage the services
of a stock transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to Parent Stock.
4.33 Ability to Bear Risk; Access to Information; Sophistication. Each
Pequot Shareholder represents and warrants that (a) his financial situation is
such that he can afford to bear the economic risk of holding Parent Stock
acquired by him hereunder for an indefinite period; (b) he can afford to suffer
the complete loss of such Parent Stock; (c) he has been granted the opportunity
to ask questions of, and receive answers from, representatives of Parent
concerning the terms and conditions of the Parent Stock and to obtain any
additional information that he deems necessary; (d) his knowledge and experience
in financial business matters is such that he is capable of evaluating the
merits and risk of ownership of the Parent Stock; (e) he has carefully reviewed
the
14
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terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; and (f) he (i) has reviewed the Private Placement
Memorandum of Parent dated September 8, 1998, as amended (the "Memorandum"),
(ii) has carefully examined the Memorandum and has had an opportunity to ask
questions of, and receive answers from, representatives of Parent, and to obtain
additional information concerning Parent and its Subsidiaries (as hereinafter
defined), and (iii) does not require additional information regarding Parent or
its Subsidiaries in connection with the Merger.
4.34 Disclosure. No statement of fact by Pequot or any Pequot Shareholder
contained herein and no written statement of fact furnished by Pequot or any
Pequot Shareholder to Parent or Sub in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein contained not misleading.
4.35 Nature of Liabilities. Any unpaid legal, accounting or other fees of
Pequot are solely and directly related to the Merger.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to Pequot
and the Pequot Shareholders, which representations and warranties shall survive
the Closing in accordance with Section 10.1 hereof, as follows:
5.1 Organization and Qualification. Each of Parent and its Subsidiaries (as
defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached, respectively, to a closing
certificate and incumbency certificate, substantially in the form of Exhibit "A-
----------
1" hereto ("Parent's Closing Certificate"), and to Sub's Closing Certificate.
- --
5.2 Authority. Each of Parent and Sub has the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by Pequot and the Pequot Shareholders,
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<PAGE>
constitutes the valid and binding obligation of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms,
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
5.3 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
- ------------
Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or Bylaws
of Parent or Sub, or the organizational documents of any other Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of Parent or any of its Subsidiaries; or
(e) require any Consent of (i) any Governmental Entity (except for (x)
compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL and the
CBCA); or (ii) any other Person.
5.4 Litigation. Except as set forth on Schedule 5.4 hereto, there is no
------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 Brokers. Except as disclosed on Schedule 5.5 hereto, no broker or finder
------------
is entitled to any broker's or finder's fee in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Parent or
Sub.
5.6 Parent Stock.
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(a) As of the date hereof the authorized capital stock of Parent consists
of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value, of which
no shares are validly issued and outstanding, and (B) 100,000,000 shares of
Class B Common Stock, $.01 par value, of which 14,053,489 shares are validly
issued and outstanding (without taking into account any shares of Parent Stock
to be issued pursuant hereto, and excluding the potential acquisitions of Two-
Way Communications, L.L.C., Pantheon Interactive, Inc., NetResponse L.L.C. and
Ionix Development Corporation), fully paid and nonassessable; (ii) 750,000
shares of blank check preferred stock, (A) 250,000 of which have been designated
as Class A Convertible Preferred Stock, of which 176,291 shares are validly
issued and outstanding, fully paid and nonassessable, (B) 200,000 of which have
been designated as Class B Convertible Preferred Stock, of which 98,767 shares
are validly issued and outstanding, fully paid and nonassessable, (C) 15,000 of
which have been designated as Class C Convertible Preferred Stock, of which
9,232 shares are validly issued and outstanding, fully paid and nonassessable,
and (D) 50,000 of which have been designated as Class D Nonvoting Preferred
Stock, of which 35,700 shares are validly issued and outstanding, fully paid and
nonassessable. Except as set forth on Schedule 5.6 hereto, there are no options,
------------
warrants, calls, agreements, commitments or other rights presently outstanding
that would obligate Parent to issue, deliver or sell shares of its capital
stock, or to grant, extend or enter into any such option, warrant, call,
agreement, commitment or other right (excluding the same potential acquisitions
as referred to above). In addition to the foregoing, as of the Closing Date,
Parent has no bonds, debentures, notes or other indebtedness issued or
outstanding that have voting rights in Parent.
(b) When delivered to the Pequot Shareholders in accordance with the
terms hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
5.7 Subsidiaries. Except as set forth on Schedule 5.7 hereto, Parent has no
------------
subsidiaries and does not otherwise own or control, directly or indirectly, any
equity interest in, or any security convertible into an equity interest in, any
Entity. Schedule 5.7 lists the name of each of the Subsidiaries of Parent, and
------------
indicates their respective jurisdictions of incorporation.
5.8 Financial Statements. Parent has heretofore furnished Pequot with a true
and complete copy of (a) the audited financial statements of iXL Interactive
Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31, 1993, 1994
and 1995, and for the four month period ended April 30, 1996; (b) the audited
combined financial statements for Creative Video, Inc. (n/k/a iXL, Inc.),
Creative Video Library, Inc. and Entrepreneur Television, Inc. for the years
ended December 31, 1993, 1994 and 1995, and for the four month period ended
April 30, 1996; (c) the audited consolidated financial statements for Parent and
its Subsidiaries for the eight months ended December 31, 1996 and for the year
ended December 31, 1997; and (d) the unaudited consolidated financial statements
for Parent and its Subsidiaries for the three month period ended June 30, 1998
(all of the foregoing, collectively, "Parent Financial Statements"). The Parent
Financial Statements present fairly in all material respects the consolidated
financial position, results of operations, shareholders' equity and cash flow of
Parent at the respective dates or for the respective periods to which they
apply. Except as disclosed therein, such statements
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and related notes have been prepared in accordance with GAAP consistently
applied throughout the periods involved (except, in the case of the unaudited
financial statements, for the exclusion of footnotes and normal year-end
adjustments).
5.9 Undisclosed Liabilities. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after June 30, 1998 that would not, whether individually or in the aggregate,
have a material adverse impact on the business or financial condition of Parent
and its Subsidiaries, taken as a whole; (b) liabilities reflected on the Parent
Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
5.10 Compliance with Applicable Laws. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
5.11 Board of Directors/Shareholder Consent. The board of directors of
Parent, and both the board of directors and shareholder of Sub, have, by
unanimous written consent or other action, adopted and approved this Agreement
and the transactions contemplated hereby (including the Merger).
5.12 Bankruptcy. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented to the appointment
of a receiver or trustee, including a custodian under the United States
bankruptcy laws, whether such receiver or trustee is appointed in a voluntary or
involuntary proceeding.
5.13 Absence of Changes. Except as provided in Schedule 5.13 hereto, since
-------------
June 30, 1998, there has not been (a) any transaction, commitment, dispute or
other event or condition (financial or otherwise) of any character (whether or
not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
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material change in Parent's accounting principles, practices or methods; (f) any
split, combination or reclassification of any of Parent's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Parent's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
5.14 Taxes. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent
and its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the Closing Date,
all deficiencies proposed as a result of any audits have been paid or settled.
5.15 Disclosure. No statement of fact by Parent or Sub contained herein and
no written statement of fact furnished or to be furnished by Parent or Sub to
Pequot in connection herewith contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements herein or therein contained not misleading.
5.16 Section 368 of the Code.
(a) At all times prior to the Merger, Parent has owned all of the
outstanding equity interests in Sub (including rights to acquire an equity
interest in Sub, if any). Accordingly, both prior to and immediately after the
Merger, Parent will be in control of Sub within the meaning of Section 368(c) of
the Code. "Control" for these purposes means the ownership of stock possessing
at least eighty percent (80%) of the total combined voting power of all classes
of stock entitled to vote and at least eighty percent (80%) of the total number
of shares of each class of nonvoting stock. Following the Merger, Parent has no
plan or intention to cause Sub to issue additional equity interests that would
result in Parent losing "Control," as defined above, of Sub.
(b) After the Merger, Parent will own 100% of the outstanding equity
interest in Sub (including the right to acquire such an equity interest). Parent
has no plan or intention to liquidate Sub, to merge Sub with or into another
operation (including Parent), to sell, transfer ownership, or otherwise dispose
of the stock of Sub or transfer any portion of its assets (including those
assets acquired from Pequot) to any person or entity (including Parent), except
for dispositions made in the ordinary course of business or transfers of assets
to a corporation controlled by Sub (including payments to dissenters
("Permissible Transfers").
(c) Parent intends that, following the Merger, it will cause Sub either
to continue Pequot's historic business or to continue to use a significant
portion of Pequot's historic business assets in a business; provided, however,
to the extent that the business or assets of
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Pequot are subject to a Permissible Transfer, Parent intends that the transferee
will continue the historic business of Pequot or use a significant portion of
Pequot's assets in a business.
(d) Neither Parent nor Sub is an "investment company" as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(e) Neither Parent nor Sub is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368 (a)(3)(A) of the
Code.
(f) Sub will acquire at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross assets held by
Pequot immediately prior to the Merger.
(g) Parent and Sub will pay their respective expenses incurred in
connection with the Merger.
(h) There is no intercorporate indebtedness existing between Parent and
Pequot or between Sub and Pequot that was issued or acquired, or will be
settled, at a discount.
(i) No stock of Sub will be issued in the Merger.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Conduct of Business by Pequot Pending the Merger. From and after the
date hereof, prior to the Effective Time, except as contemplated hereby, unless
Parent shall otherwise agree in writing, Pequot shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, use reasonable efforts to preserve intact its present
business organization, keep available the services of its employees and preserve
its relationships with customers, suppliers, licensors, licensees, distributors
and others having business dealings with Pequot to the end that its goodwill and
on-going businesses shall not be impaired in any material respect at the
Effective Time. Without limiting the generality of the foregoing, and except as
contemplated hereby, unless Parent shall otherwise agree in writing, prior to
the Effective Time, Pequot shall not, directly or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire, any share of
capital stock of Pequot or any other equity security thereof or any right,
warrant, or option to acquire any such share or other security;
20
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(b) issue, deliver, sell, pledge or otherwise encumber any share of its
capital stock, any other voting security issued by Pequot or any security
convertible into, or any right, warrant or option to acquire any such share or
voting security;
(c) amend its Certificate of Incorporation, Bylaws or other comparable
organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to Pequot;
(e) subject to a Lien or sell, lease or otherwise dispose of any of its
properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of Pequot,
guarantee any debt security of another Person or enter into any "keep well" or
other agreement to maintain the financial condition of another Person, make any
loan, advance or capital contribution to, or investment in, any other Person, or
settle or compromise any material claim or litigation; or
(g) authorize any of, or commit or agree to take any of, the foregoing
actions.
6.2 Access to Information. From the date hereof through the Effective Time,
each of Pequot and Parent shall afford to the other of them and the other's
accountants, counsel and other representatives reasonable access during normal
business hours (and at such other times as the parties may mutually agree) upon
reasonable prior notice and approval, which shall not be unreasonably withheld,
to its properties, books, contracts, commitments, records and personnel and,
during such period, shall furnish promptly to the other of them all information
concerning its business, properties and personnel as the other may reasonably
request. Parent and Pequot, and their respective accountants, counsel and other
representatives, shall, in the exercise of the rights described in this Section
6.2, not unduly interfere with the operation of the business of the other of
them.
6.3 Filings; Tax Elections. Pequot shall promptly provide Parent with copies
of all filings made by Pequot with any Governmental Entity in connection
herewith and the transactions contemplated hereby. Pequot shall, before
settling or compromising any material income tax liability of Pequot, consult
with Parent and its advisors as to the positions and elections that will be
taken or made with respect to such matter.
6.4 Public Announcements. The parties agree that, except as may otherwise be
required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger. Any such disclosure shall be coordinated by Parent,
and none of the Pequot Shareholders shall make any such disclosure without the
prior written consent of Parent.
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6.5 Transfer and Gains Taxes and Certain Other Taxes and Expenses. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 Options. Parent hereby covenants and agrees that at or (in Pequot's
discretion) within three months after the Closing Date it will issue options to
purchase an aggregate of 60,000 shares of Parent Stock to such non-management
employees of Pequot (after Closing, of the Surviving Corporation) as designated
by Pequot and approved by Parent, which approval shall not be withheld
unreasonably, at an exercise price of $10 per share, all in the form of Exhibit
-------
"C" hereto ("Options") and subject to Parent's standard five-year vesting
- ---
schedule and Parent's 1996 Stock Option Plan, as amended. Schedule 6.6 hereto
------------
will include the name of each such option recipient, the number of shares and
whether the Option is to be granted at the Closing or at a specified date within
three months thereafter.
6.7 Further Assurances. From time to time after the Effective Time, upon the
reasonable request of any party hereto, the other party or parties hereto shall
execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof.
6.8 Use of Certain Names. When the Certificate of Merger has been accepted
for filing by the Secretary of State of Delaware and Connecticut, respectively,
Pequot, Parent and Sub will discontinue use of the "Pequot," "Pequot Systems"
and "Quotewave" names and any variants thereof, including use as service marks,
trademarks or trade names, except that they may make incidental use of the names
"Pequot" and "Pequot Systems" for a commercially reasonable period of time
internally, and to aid in post-Closing transition.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligation of Pequot and the Pequot Shareholders to Effect
the Merger. The obligations of Pequot and the Pequot Shareholders to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) Parent and Sub shall have performed in all material respects their
respective agreements contained herein required to be performed at or prior to
the Effective Time, and the representations and warranties of Parent and Sub
contained herein shall be true when made and (except for representations and
warranties made as of a specified date, which need only be true as of such date)
at and as of the Effective Time as if made at and as of such time, except as
contemplated hereby;
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(b) (i) the appropriate officers of Parent shall have executed and
delivered to Pequot at the Closing, Parent's Closing Certificate, and (ii) the
appropriate officers of Sub shall have executed and delivered to Pequot at the
Closing, Sub's Closing Certificate;
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
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(d) Pequot shall have received corporate certificates of good standing
for Parent and Sub, and a copy of the Certificate of Incorporation for Parent
and Sub, respectively, both as certified by the Secretary of State of Delaware;
(e) there shall have been delivered to each of the Pequot Shareholders at
the Closing, duly executed by Parent, an Agreement to be Bound to the
Registration Rights Agreement of Parent, dated as of Closing Date (the
"Agreement to be Bound to the Registration Rights Agreement"), in the form of
Exhibit "B" hereto;
- ----------
(f) Parent shall have executed and delivered at the Closing an Option
Agreement in the form of Exhibit "C" hereto for each of the Persons listed on
----------
Schedule 6.6 hereto as receiving options to purchase Parent Stock at that time;
- ------------
(g) Pequot shall have received, at the Closing, a duly executed opinion
of counsel to Parent and Sub, substantially in the form of Exhibit "D" hereto;
----------
and
(h) Pequot shall have received from Parent and Sub such other documents
as Pequot's counsel shall have reasonably requested, in form and substance
reasonably satisfactory to Pequot's counsel.
7.2 Conditions to Obligations of Parent and Sub to Effect the Merger. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) Pequot and the Pequot Shareholders shall have performed in all
material respects their respective agreements contained herein required to be
performed at or prior to the Effective Time, and the representations and
warranties of Pequot and the Pequot Shareholders contained herein shall be true
when made and (except for representations and warranties made as of a specified
date, which need only be true as of such date) at and as of the Effective Time
as if made at and as of such time, except as contemplated hereby;
(b) the appropriate officers of Pequot shall have executed and delivered
to Parent at the Closing, Pequot's Closing Certificate.
(c) Pequot and the Pequot Shareholders shall have obtained or caused to
be obtained all of the Consents, if any, listed on Schedule 7.2(c) hereto;
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(d) there shall have been delivered to Parent at the Closing, duly
executed by each of the Pequot Shareholders, (i) an Agreement to be Bound to the
Stockholders' Agreement, substantially in the form of Exhibit "F" hereto; and
-----------
(ii) an Agreement to be Bound to the Registration Rights Agreement;
(e) Parent shall have received a certificate of existence for Pequot, and
a copy of the Certificate of Incorporation of Pequot, both as certified by the
Secretary of State of Connecticut;
(f) as of the date three business days prior to the Closing Date the
Pequot Debt shall be no greater than $44,345;
(g) Each Person to receive Options at the Closing shall have executed and
delivered an Option Agreement;
(h) Parent shall have received, at the Closing, a duly executed opinion
of counsel to Pequot and the Pequot Shareholders, substantially in the form of
Exhibit "G" hereto;
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(i) Parent shall have received from Pequot or the Pequot Shareholders, as
the case may be, such other documents as Parent's counsel shall have reasonably
requested, in form and substance reasonably satisfactory to Parent's counsel;
and
(j) Parent shall have received evidence satisfactory to it that at the
Closing the assets and properties used in the Pequot Business are free and clear
of all Liens other than Permitted Liens (as hereinafter defined), and that all
Pequot Shareholders are accredited investors in accordance with Section 4.31(a)
hereof.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Parent.
(a) Parent shall indemnify and hold the Pequot Shareholders and Pequot's
directors, officers and employees (collectively, the "Pequot Indemnified
Parties") harmless from and against, and agree promptly to defend each of the
Pequot Indemnified Parties from and reimburse each of the Pequot Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorney fees and other
legal costs and expenses) (collectively, a "Pequot Loss") that any of the Pequot
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Parent or Sub at the Closing in accordance
with the provisions hereof;
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(ii) any failure by Parent or Sub to carry out, perform, satisfy and
discharge any of its respective covenants, agreements, undertakings, liabilities
or obligations hereunder or under any of the documents and materials delivered
by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary, Parent
shall not have any liability under Section 8.1(a)(i) above (i) unless the
aggregate of all Pequot Losses for which Parent would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $100,000, and then
only to the extent of such excess, (ii) for amounts in excess of $4,500,000 in
the aggregate, and (iii) unless the Pequot Shareholders have asserted a claim
with respect to the matters set forth in Section 8.1(a)(i), or 8.1(a)(iii) to
the extent applicable to Section 8.1(a)(i), within the longer of (A) the
applicable statute of limitations or (B) two years of the Effective Time.
Notwithstanding any implication to the contrary contained herein, the parties
acknowledge and agree that a decrease in the value of Parent Stock would not, by
itself, constitute a Pequot Loss, unless and to the extent a decrease in the
value of Parent Stock has been demonstrated to be as a result of any event
described in Sections 8.1(a)(i), (ii) or (iii) above.
8.2 Indemnification by the Pequot Shareholders.
(a) The Pequot Shareholders, jointly and severally, shall indemnify and
hold Parent, Sub, Surviving Corporation and their respective shareholders,
directors, officers and employees (collectively, the "Parent Indemnified
Parties") harmless from and against, and agree to defend promptly each of the
Parent Indemnified Parties from and reimburse each of the Parent Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorneys' fees and
other legal costs and expenses) (collectively, a "Parent Loss") that any of the
Parent Indemnified Parties may at any time suffer or incur, or become subject
to, as a result of or in connection with:
(i) any breach or inaccuracy of any of the representations and
warranties made by Pequot or the Pequot Shareholders in or pursuant hereto, or
in any instrument certificate or affidavit delivered by any of the same at the
Closing in accordance with the provisions hereof;
(ii) any failure by Pequot or any of the Pequot Shareholders to carry
out, perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations hereunder or under any of
the documents and materials delivered by Pequot pursuant hereto; and
(iii) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.2.
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(b) Notwithstanding the above, none of the Pequot Shareholders shall
have any liability under Section 8.2(a)(i) above (i) unless the aggregate of all
Parent Losses for which the Pequot Shareholders would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $100,000, and then
only to the extent of such excess, (ii) for amounts in excess of $4,500,000 in
the aggregate, and (iii) unless Parent has asserted a claim with respect to the
matters set forth in Sections 8.2(a)(i), or 8.2(a)(iii) to the extent applicable
to Section 8.2(a)(i) within the longer of (A) the applicable statute of
limitations or (B) two years of the Effective Time, except with respect to the
matters arising under Sections 4.18, 4.19, 4.20 or 4.24 hereof, in which event
Parent must have asserted a claim within the applicable statute of limitations.
Notwithstanding any implication to the contrary contained herein, the parties
acknowledge and agree that a decrease in the value of Parent Stock would not, by
itself, constitute a Parent Loss, unless and to the extent a decrease in the
value of Parent Stock has been demonstrated to be as a result of any event
described in Sections 8.2(a)(i), (ii) or (iii) above.
(c) Notwithstanding the above, except for claims for indemnification
based on (i) fraud, (ii) intentional misrepresentation or (iii) any breach of
any representation made in Section 4.3 hereof, or otherwise with respect to
title to Pequot Stock or any Pequot Stock Rights, the liability of each of the
Pequot Shareholders under Section 8.2(a) hereof will not exceed his or her
respective portion of the Merger consideration receivable hereunder, as
determined by multiplying by $10 the number of shares of Parent Stock, issued to
them pursuant to Section 3.1(b)(i) hereof and by adding the amount of cash paid
to them pursuant to Section 3.1(b)(ii) hereof.
8.3 Notification of Claims; Election to Defend
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder. Subject to the
Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of any
Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a Claim
asserted by a third party against the Indemnified Party that the Indemnifying
Party acknowledges is a Claim for which it must indemnify or hold harmless the
Indemnified Party under Section 8.1 or 8.2 hereof, as the case may be, the
Indemnifying Party shall have the right, at its sole cost and expense, to employ
counsel of its own choosing to defend any such Claim asserted against the
Indemnified Party. Notwithstanding anything to the contrary in the preceding
sentence, if the Indemnified Party (i) reasonably believes that its interests
with respect to a Claim (or any material portion thereof) are in conflict with
the interests of the Indemnifying Party with respect to such Claim (or portion
thereof), and (ii) promptly notifies the Indemnifying Party, in writing, of the
nature of such conflict, then the
26
<PAGE>
Indemnified Party shall be entitled to choose, at the sole cost and expense of
the Indemnifying Party, independent counsel to defend such Claim (or the
conflicting portion thereof). The Indemnified Party shall have the right to
participate in the defense of any Claim at its own expense (except to the extent
provided in the preceding sentence), but the Indemnifying Party shall retain
control over such litigation (except as provided in the preceding sentence). The
Indemnifying Party shall notify the Indemnified Party in writing, as promptly as
possible (but in any case before the due date for the answer or response to a
Claim) after receipt of the notice of Claim given by the Indemnified Party to
the Indemnifying Party under Section 8.3(a) hereof, of its election to defend in
good faith any such third party Claim. For so long as the Indemnifying Party is
defending in good faith any such Claim asserted by a third party against the
Indemnified Party, the Indemnified Party shall not settle or compromise such
Claim without the prior written consent of the Indemnifying Party. The
Indemnified Party shall cooperate with the Indemnifying Party in connection with
any such defense and shall make available to the Indemnifying Party or its
agents all records and other materials in the Indemnified Party's possession
reasonably required by it for its use in contesting any third party Claim;
provided, however, that the Indemnifying Party shall have agreed, in writing, to
keep such records and other materials confidential except (i) to the extent
required for defense of the relevant Claim, or (ii) as required by law or court
order. Whether or not the Indemnifying Party elects to defend any such Claim,
the Indemnified Party shall have no obligations to do so. Within 30 days after a
final determination (including a settlement) has been reached with respect to
any Claim contested pursuant to this Section 8.3(b), the Indemnifying Party
shall satisfy its obligations hereunder with respect thereto. Any amount paid
thereafter shall include interest thereon for the period commencing at the end
of such 30-day period and ending on the actual date of payment, at a rate of 15%
per annum, or, if lower, at the highest rate of interest permitted by applicable
law at the time of such payment.
8.4 Payment. Any Indemnifying Party may, at such Indemnifying Party's
option, pay all or part of any amount due under this Article VIII by delivery of
shares of Parent Stock having a value equal to the amount due (to the extent
that such Indemnifying Party owns sufficient shares of Parent Stock); provided,
however, that any Pequot Indemnifying Party may do so only after satisfying any
such amount due to the extent of any cash received by them as Merger
consideration hereunder. For the purpose of this provision, the value of Parent
Stock shall be deemed to be $10 per share.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Merger Agreement may be terminated at any time prior
to the Effective Time:
(a) by mutual written consent of Parent and Pequot;
27
<PAGE>
(b) by Pequot, upon a material breach hereof on the part of Parent or Sub
which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by September 30, 1998;
(c) by Parent, upon a material breach hereof on the part of Pequot or any
of the Pequot Shareholders which has not been cured and which would cause any
condition set forth in Section 7.2 hereof to be incapable of being satisfied by
September 30, 1998;
(d) by Parent or Pequot if any court of competent jurisdiction shall have
issued, enacted, entered, promulgated or enforced any order, judgment, decree,
injunction or ruling which restrains, enjoins or otherwise prohibits the Merger
and such order, judgment, decree, injunction or ruling shall have become final
and nonappealable; or
(e) by either Parent or Pequot if the Merger shall not have been
consummated on or before September 30, 1998 (provided the terminating party is
not otherwise in material breach of its representations, warranties or
obligations hereunder).
9.2 Fees and Expenses.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the Surviving Corporation; provided, however, that the Pequot Shareholders shall
pay all fees and expenses (including agents, counsel and other advisors) of
Pequot and themselves that are (i) not solely and directly related to the Merger
and (ii) all other such fees and expenses in excess of $75,000. The Surviving
Corporation will pay, at the Closing, $75,000 of such fees and expenses,
provided that they are solely and directly related to the Merger.
(b) If the Merger is not consummated for a reason other than the willful
and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
(c) If the Merger is not consummated because of a willful and material
breach hereof by any party, the nonbreaching party or parties shall be entitled
to pursue all legal and equitable remedies against the breaching party for such
breach including specific performance and all fees and expenses incurred by the
nonbreaching party or parties in connection with enforcing its or their rights
hereunder with respect to such breach shall be paid by the breaching party.
9.3 Amendment. This Merger Agreement may be amended by Parent, Sub, Pequot
and the Pequot Shareholders at any time before or after approval hereof by the
Pequot Shareholders, but, after such approval, no amendment shall be made which
(i) changes the form or decreases the amount of the consideration to be received
in the Merger, (ii) in any way materially adversely affects the rights of the
Pequot Shareholders, or (iii) under applicable law would require approval of the
Pequot Shareholders, in any such case referred to in clauses (i), (ii) and
(iii), without the further approval of the Pequot Shareholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of the
parties hereto, provided that after the
28
<PAGE>
Effective Time, any such amendment must be signed by the former holders of a
majority of the Pequot Stock.
9.4 Waiver. At any time prior to the Effective Time, the parties hereto may,
to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival; Recourse. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 10.9 and 10.10 hereof, shall survive the
Merger indefinitely (except to the extent a shorter period of time is explicitly
specified therein) and (ii) the representations and warranties made in Articles
IV and V hereof shall survive the Merger, and shall survive any independent
investigation by the parties, and any dissolution, merger or consolidation of
Pequot or Parent, and shall bind the legal representatives, assigns and
successors of Pequot, the Pequot Shareholders and Parent, for a period of two
years after the Closing Date (other than the representations and warranties
contained in Sections 4.18, 4.19, 4.20 and 4.24 hereof, which shall survive for
the applicable statute of limitations).
10.2 Notices. All notices or other communications under this Agreement shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in Person, by telecopy (with confirmation of receipt),
or by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Pequot : Pequot Systems, Inc.
50 Washington Street
Norwalk, CT 06854
Attention: Mr. Stefan Chopin, President
Telephone: (203) 852-5600
Telecopy: (203) 852-5601
With a copy to: James J. Brooks, Esq.
101 Lake Place South
Danbury, CT 06810
Telephone: (203) 798-8185
29
<PAGE>
Telecopy: (203) 798-8185
If to the Pequot To the address listed under the signature
Shareholders: line of the applicable Pequot Shareholder
If to Parent or Sub: IXL Holdings, Inc.
1888 Emery St., 2nd Floor
Atlanta, GA 30318
Attention: James V. Sandry
Telecopy: 404/267-3801
Telephone: 404/267-3800
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Rd., Ste. 1100
Atlanta, GA 30305
Attention: James S. Altenbach, Esq.
Telecopy: 404/233-5824
Telephone: 404/261-8000
and to: Kelso & Company
320 Park Ave., 24th Floor
New York, NY 10032
Attention: James J. Connors II, Esq.
Telecopy: 212/223-2379
Telephone: 212/751-3939
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 Entire Agreement. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, except for the non-disclosure letter agreement between Parent and
Pequot dated as of July 8, 1998. There are no other representations or
warranties, whether written or oral, between the parties in connection the
subject matter hereof, except as expressly set forth herein.
10.4 Assignments; Parties in Interest. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the rights, interests, and obligations
of Sub hereunder may be assigned to any direct wholly owned Delaware subsidiary
of Parent without such prior consent. Subject to the preceding sentence, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing
30
<PAGE>
herein, express or implied, is intended to or shall confer upon any Person not a
party hereto any right, benefit or remedy of any nature whatsoever under or by
reason hereof, except as otherwise provided herein.
10.5 Governing Law. This Agreement, except to the extent that the CBCA or
the DGCL is mandatorily applicable to the Merger, or to the rights of the Pequot
Shareholders or the other parties hereto with respect to the Merger, shall be
governed in all respects by the laws of the State of Georgia.
10.6 Headings. The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation hereof.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 Severability. If any term or other provision hereof is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions hereof shall nevertheless remain in full force and
effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.9 Post-Closing Access. For a period of five years after the Closing Date,
the Pequot Shareholders and their agents and representatives shall have
reasonable access to the books and records of the Pequot Business.
10.10 Post-Closing Notice. To the extent the Surviving Corporation receives
written notice of any event or circumstance that materially affects any of the
Pequot Shareholders, the Surviving Corporation shall promptly notify the
affected Pequot Shareholder of such matter, information, or event and shall
provide them with copies of all relevant documentation or correspondence in
connection thereto.
10.11 Certain Definitions. As used herein:
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially
31
<PAGE>
detracting from the value of the Pequot Real Property or interfering with the
ordinary conduct of any of the Pequot Business; and (e) those Liens listed on
Schedule 10.11 hereto;
- --------------
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of Pequot" shall refer to the knowledge,
subject to clause (i) above, of any of the Pequot Shareholders; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of which are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including Sub); provided, however, that
with respect to the Parent, the terms "Subsidiary" and "Subsidiaries" shall not
include Pequot or University Netcasting, Inc.
- SIGNATURES ON THE FOLLOWING PAGE -
32
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and Pequot have caused this Agreement to be
signed and delivered by their respective duly authorized officers, and each
Pequot Shareholder has signed and delivered this Agreement, all as of the date
first written above.
"Pequot"
Pequot Systems, Inc., a Connecticut corporation
By: /s/ Stefan Chopin
---------------------------------------
Title: President
------------------------------------
"Parent"
IXL Holdings, Inc., a Delaware corporation
By: /s/ James V. Sandry
---------------------------------------
Title: Executive Vice President
------------------------------------
"Sub"
iXL-Connecticut, Inc., a Delaware corporation
By: /s/ James V. Sandry
---------------------------------------
Title: Executive Vice President
------------------------------------
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
33
<PAGE>
"Pequot Shareholders"
/s/ Stefan Chopin
------------------------------------------
Stefan Chopin
Address: 35 Godfrey Rd.
Weston, CT
/s/ Barbara Cook
------------------------------------------
Barbara Cook
Address: Barbara B. Cook
35 Godfrey Rd.
Weston, CT 06883
/s/ Juergen Goersch
------------------------------------------
Juergen Goersch
Address: 5 Cross Rd.
Darien, CT 06820
34
<PAGE>
EXHIBITS
--------
Parent's Closing Certificate...................................... Exhibit A-1
Sub's Closing Certificate......................................... Exhibit A-2
Agreement to be Bound by Registration Rights Agreement............ Exhibit B
Option Agreement.................................................. Exhibit C
Opinion of Counsel to Parent and Sub.............................. Exhibit D
Pequot's Closing Certificate...................................... Exhibit E
Agreement to be Bound to Stockholders' Agreement.................. Exhibit F
Opinion of Counsel to Pequot...................................... Exhibit G
<PAGE>
SCHEDULE 4.3(A)
---------------
CAPITALIZATION OF PEQUOT
SCHEDULE 4.3(B)
---------------
LIENS ON STOCK
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PEQUOT
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF PEQUOT
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF PEQUOT
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF PEQUOT
SCHEDULE 4.10
-------------
BAD EQUIPMENT OF PEQUOT
<PAGE>
SCHEDULE 4.12
-------------
LIENS ON AND LOCATION OF REAL PROPERTY OF PEQUOT
SCHEDULE 4.13
-------------
LEASES OF PEQUOT
SCHEDULE 4.14
-------------
CONTRACTS OF PEQUOT
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF PEQUOT
SCHEDULE 4.16
-------------
PAYROLL INFORMATION OF PEQUOT
SCHEDULE 4.17
-------------
LITIGATION
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF PEQUOT
<PAGE>
SCHEDULE 4.19
-------------
ERISA ISSUES OF PEQUOT
SCHEDULE 4.21
-------------
PEQUOT PERMITS
SCHEDULE 4.23
-------------
PEQUOT BROKERS
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS, COMPETITORS
SCHEDULE 4.28
-------------
INSURANCE OF PEQUOT
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
<PAGE>
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
OUTSTANDING OBLIGATIONS TO ISSUE OPTIONS, WARRANTS
OR OTHER PARENT STOCK RIGHTS
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES
SCHEDULE 6.6
------------
PARENT OPTIONS TO NON-MANAGEMENT EMPLOYEES OF PEQUOT
SCHEDULE 7.1(C)
---------------
PARENT CONSENTS
<PAGE>
SCHEDULE 7.2(C)
---------------
PEQUOT CONSENTS
SCHEDULE 10.11
--------------
PERMITTED LIENS OF PEQUOT
<PAGE>
EXHIBIT 4.6
INVESTOR STOCKHOLDERS AGREEMENT
INVESTOR STOCKHOLDERS AGREEMENT, dated as of April 30, 1996 (the
"Investor Stockholders Agreement"), among IXL Holdings, Inc., a Delaware
corporation (the "Company"), Kelso Investment Associates V, L.P. ("KIA V"),
Kelso Equity Partners V, L.P. ("KEP V" and, together with KIA V, "Kelso")
and each of the stockholders listed in the Schedule of Individual Stockholders
attached hereto as Exhibit A (the "Individual Investors"). For the purposes of
this Agreement, "Class A Preferred Stock" shall mean the Class A Convertible
Preferred Stock of the Company, par value $.01 per share.
The Company, Kelso and the Individual Investors agree as follows:
1. Transfer of Class A Preferred Stock. (a) Prior to the closing of
-----------------------------------
an IPO (as such term is defined in the Stockholders Agreement referred to in
Section 3 (c)), no Individual Investor may, directly or indirectly, sell,
assign, mortgage, transfer, pledge, hypothecate or otherwise dispose of or
transfer (collectively, "Transfer") any shares of Class A Preferred Stock
(including, without limitation, to any Affiliate of such Individual Investor (as
defined below)), except for (a) Transfers which, prior thereto, Kelso shall have
-
consented to in writing, or (b) Transfers pursuant to the following paragraph
-
(b). For the purposes of this Agreement, "Affiliate" shall mean, with respect to
any individual, corporation, partnership, limited liability company, trust or
other entity or organization (each, a "Person"), any other Person directly or
indirectly controlling, controlled by, or under common control with such Person.
In no event shall an Individual Investor be deemed to be an Affiliate of Kelso.
(b) In the event that any of KIA V, KEP V or any of their respective
Affiliates intends to sell shares of Class A Preferred Stock to a third party or
parties unaffiliated with Kelso, each Individual Investor, upon the request of
Kelso, will be obligated to participate in such sale (in the proportion to the
number of shares of Class A Preferred Stock then owned by the Individual
Investor and all other persons or entities so intending, or obligated, to so
sell shares of Class A Preferred Stock) for a purchase price per share of Class
A Preferred Stock and on other terms and conditions not less favorable to the
Individual Investor than those applicable to Kelso or such Affiliate.
<PAGE>
2. Stock Certificate Legends. A copy of this Agreement shall be
-------------------------
filed with the Secretary of the Company and kept with the records of the
Company. Each certificate representing any shares of Class A Preferred Stock
owned by the Individual Investor shall bear the following legends:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED
OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL TO
THE STOCKHOLDER, WHICH COUNSEL MUST BE, AND THE FORM AND SUBSTANCE OF WHICH
WHICH OPINION ARE, SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS EXEMPT
FROM REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE ACT, SUCH LAWS AND
THE INVESTOR STOCKHOLDERS AGREEMENT, DATED AS OF APRIL 30, 1996."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AND OTHER CONDITIONS, AS SPECIFIED IN THE INVESTOR STOCKHOLDERS
AGREEMENT, DATED AS OF APRIL 30, 1996, AMONG IXL HOLDINGS, INC. (THE
"COMPANY") AND CERTAIN STOCKHOLDERS OF THE COMPANY. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE OFFICE OF THE COMPANY AND WILL BE FURNISHED
WITHOUT CHARGE TO THE HOLDER OF SUCH SHARES UPON WRITTEN REQUEST."
3. Agreement to be Bound. (a) Each Individual Investor shall hold,
---------------------
sell, exchange, liquidate, amend, convert and exercise all other rights,
privileges and opportunities under or with respect to the Class A Preferred
Stock and any equity securities of the Company into which the Class A Preferred
Stock is convertible in the manner, at the time and to the extent determined by
KIA V.
(b) Any Transfer of shares of Class A Preferred Stock or any equity
securities of the Company into which the Class A Preferred Stock is convertible
by the Individual Investor otherwise permitted under this Agreement shall be
permitted and shall be effective only if the transferee of such shares shall
agree in writing to be bound by the terms and conditions of this Agreement
pursuant to an instrument of assumption reasonably satisfactory in substance and
form to Kelso. Upon the execution of such instrument by such
2
<PAGE>
transferee, such transferee shall be deemed to be the Individual Investor for
all purposes of this Agreement.
4. Termination. Any party to this Agreement which ceases to own any
-----------
shares of Class A Preferred Stock or any equity securities of the Company into
which the Class A Preferred Stock is convertible shall cease to be a party to
this Agreement and, thereafter, shall have no rights or obligations hereunder,
provided that no sale of shares of Class A Preferred Stock or any equity
securities of the Company into which the Class A Preferred Stock is convertible
by any Individual Investor in breach of this Agreement shall relieve such
Individual Investor of liability for any such breach.
5. Further Assurances. Each party hereto or person or entity subject
------------------
hereto shall do and perform, or cause to be done and performed, all such further
acts and things and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party hereto, or person or
entity subject hereto may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6. Governing Law. This Agreement and the rights and obligations of
-------------
the parties hereunder shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Delaware, without giving effect to the
choice of law principles thereof.
7. Invalidity of Provision. The invalidity or unenforceability of
-----------------------
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction.
8. Notices. All notices or other communications required or
-------
contemplated by this Agreement shall be in writing and shall be given by
delivery in person or by first class mail, if to Kelso, addressed or delivered
to it at its principal place of business, and if to any Individual Investor,
addressed or delivered to such Individual Investor at the address appearing on
the records of Kelso for such Individual Investor.
9. Headings; Execution and Counterparts. The headings and captions
------------------------------------
contained herein are for convenience
3
<PAGE>
and shall not control or affect the meaning of our construction of any provision
hereof. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and which together shall constitute one
and the same instrument.
4
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by each of the
parties hereto as of the date first above written.
IXL HOLDINGS, INC.
By: /s/ U. Bertram Ellis, Jr.
--------------------------------
Name:
Title:
KELSO INVESTMENT ASSOCIATES V, L.P.
By: Kelso Partners V, L.P.
General Partner
By: /s/ Frank T. Nickell
---------------------------------
General Partner
KELSO EQUITY PARTNERS V, L.P.
By: /s/ Frank T. Nickell
---------------------------------
General Partner
/s/ John F. McGillicuddy
------------------------------------
JOHN F. MCGILLICUDDY
LOUIS AND PATRICIA KELSO TRUST
By: /s/ Patricia H. Kelso
---------------------------------
Patricia H. Kelso
Trustee
/s/ William A. Marquard
------------------------------------
WILLIAM A. MARQUARD
5
<PAGE>
EXHIBIT A
Individual Investors
--------------------
John F. McGillicuddy
Louis and Patricia Kelso Trust
William A. Marquard
6
<PAGE>
AGREEMENT TO BE BOUND TO INVESTOR STOCKHOLDERS AGREEMENT
Agreements to be Bound to Investor Stockholders Agreement of each Investor
7
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT, (the "Agreement") is made and entered into as of
the 1st day of August 1996 between BoxTop Interactive, Inc., a California
corporation (the "Company"), and Kevin Wall, an individual ("Employee").
WHEREAS, the Company desires to retain the services of Employee and
Employee desires provide such services for the term of this Agreement;
WHEREAS, the Company and the Employee desire that this Agreement supersede
and replace in their entirety any and all employment, consulting or similar
agreements, understandings, or arrangements (whether written or oral) that may
heretofore have been entered into between the Company and Employee (all of such
agreements, understandings, and arrangements being hereinafter collectively
referred to as the "Old Agreement").
WHEREAS, the Company and Employee have determined that it is in their
respective best interests to enter into this Agreement upon the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the receipt and sufficiency of which
is hereby acknowledged, the parties hereby agree as follows:
1. Employment.
----------
1.1 Term: Duties.
------------
(a) The Company hereby employs Employee, and Employee hereby accepts
employment by the Company, upon the terms and conditions set forth in this
Agreement, for the period commencing on the date hereof (the "Effective Date")
and ending on the fourth anniversary of the Effective Date, unless earlier
terminated pursuant to the terms of this Agreement (the "Employment Term");
provided, however, that the Company may engage Employee as a consultant pursuant
to Section 2 below on the terms and conditions stated therein.
(b) During the Employment Term, Employee shall devote (i)
substantially all of his business time, attention and skill, and (ii) all of his
time and efforts in the interactive media field, to the Company; and shall
perform faithfully, loyally and efficiently as the Chairman of the Board and
Chief Executive Officer of the Company. In such capacity, he shall have such
duties and responsibilities consistent therewith and such other duties and
responsibilities as may from time to time be assigned
1
<PAGE>
to or vested in him by the Board of Directors (as such term is hereinafter
defined).
1.2 Compensation: Benefits
----------------------
(a) In consideration of the services rendered to or for the benefit
of the Company hereunder by Employee during the Employment Term, the Company
shall, during the Employment Term, pay Employee a salary (the "Salary") at the
annual rate of $250,000 during the first year of the term, $275,000 during the
second year of the term, $302,500 during the third year of the term and $332,750
during the last year of the term. The Salary shall be payable in approximately
equal installments in accordance with the Company's normal payroll practices for
its employees, but such installments shall be payable not less frequently than
monthly. The Salary, and all other forms of compensation paid to Employee
hereunder shall be subject to all applicable income taxes, payroll taxes and
other amounts required to be withheld by the Company pursuant to applicable law.
Employee shall be solely responsible for all income taxes, payroll taxes and
other amounts imposed on Employee by reasons of any cash or non-cash
compensation and benefits provided to Employee pursuant to this Agreement.
(b) In addition to the Salary, during the Employment Term, Employee
shall be entitled to:
(i) Vacation at the rate of four weeks per annum during the
Employment Term. In addition, Employee shall be entitled to the usual national
holidays with pay and reasonable sick leave, in each case in accordance with and
subject to the Company's normal policies applicable to its senior executives.
Vacation shall be accrued ratably during each year of the Employment Term during
which Employee renders services hereunder, subject to the limitations set forth
in this Section. Any accrued but unused vacation may be carried forward into
subsequent years, provided, however, that accrued but unused vacation available
--------- -------
to Employee may not, at any time, exceed a total of six weeks. Vacation shall
not be earned during any period in which accrued but unused vacation time totals
six weeks and shall not again be earned until accrued but unused vacation time
again declines below six weeks. Such vacation shall be taken at such time or
times so as not to interfere with Employee's duties hereunder.
(ii) Fully vested options to purchase 250,000 shares of Common
Stock of the Company, exercisable for ten years from the date hereof at an
exercise price of $1.10 per share. With additional stock options to be issued on
the first, second
2
<PAGE>
and third anniversary of this Agreement, in the amount of 100,000 shares each.
(iii) An automobile allowance of $1,000 per month, plus
automobile insurance for such automobile.
(iv) A cellular telephone and service, an ISDN telephone line
and a home telephone line to be dedicated to business.
(v) While traveling on Company business the Employee shall be
entitled to travel by first class air travel and stay in first class hotels.
(vi) Participate in such employee benefit and incentive
compensation plans or programs as may from time to time be established by the
Company and as are applicable to the Company's senior executives, in each case
(A) to the extent approved by the Board of Directors and (B) subject to
compliance with all applicable laws.
1.3 Termination of Employment
-------------------------
(a) Death or Disability. The Employment Term shall terminate
-------------------
automatically upon Employee's death. If, in the good faith opinion of the Board
of Directors, Employee shall be prevented from performing his duties and
responsibilities hereunder as a result of physical or mental illness, injury or
other incapacity for a period for more than one hundred fifty days in the
aggregate in any twelve-month period, then, to the extent permitted by law, the
Company may, at the election and in the sole discretion of the Board of
Directors, terminate the Employment Term for "Disability," effective upon the
date specified for such termination in written notice thereof delivered to
Employee. In the event that Employee shall dispute the determination of the
Board of Directors as to the Disability of Employee, Employee may appeal the
determination to a panel of three doctors, one to be selected by Employee, one
to be selected by the Board of Directors and one to be selected by the doctors
chosen by Employee and the Board of Directors. The decision of the panel of
doctors shall be final. Any termination for Disability under this Agreement
shall not affect the rights, if any, that Employee may otherwise have under any
disability plan the Company may have in effect at the date of such termination
and in which Employee is then participating.
(b) Cause. The Company may, at the election and in the sole
-----
discretion of the Board of Directors, terminate the Employment Term for "Cause"
effective upon the date specified for termination in written notice thereof
delivered to Employee. For purposes of this Agreement, "Cause" shall mean that,
in the good faith judgment of the Board of Directors (not including Directors
3
<PAGE>
affiliated with or appointed by Employee), one or more of the following events
shall have occurred: (i) Employee's habitual or willful neglect of any of his
material duties and responsibilities hereunder provided that such neglect shall
continue for thirty days following written notice to Employee; (ii) Employee's
refusal to follow reasonable and lawful directions of the Board of Directors
provided that such refusal shall continue for thirty days following written
notice to Employee; (iii) Employee's conviction of, or pleading of nolo
----
contendere to, any felony of any type or any misdemeanor involving acts of moral
- ----------
turpitude or financial wrongdoing, including without limitation, bribery, fraud
or embezzlement; (iv) Employee's habitual or willful violation of any provision
of this Agreement provided that such violation shall continue for thirty days
after written notice to Employee; and (v) Employee's breach of any
confidentiality, nondisclosure, noncompetition, work for hire or other agreement
as may be entered into by Employee from time to time in connection with
Employee's employment by Company or (vi) a breach by Employee of his obligations
under that certain Letter Agreement dated as of June 5, 1996 among Employee, the
Company and certain other persons.
3. Covenants.
---------
3.1 Unauthorized Disclosure.
-----------------------
(a) Employee recognizes that his employment with the Company will
involve contact with information of substantial value to the Company, which is
not old and generally known in the trade and which gives the Company an
advantage over its competitors who do not know or use it, including, but not
limited to, techniques, designs, drawings, processes, inventions, developments,
equipment, prototypes, sales and customer information, and business and
financial information, relating to the business, products, practices or
techniques of the Company (hereinafter referred to as "Confidential
Information;" provided that Confidential Information shall not include
information which (i) is or becomes generally available to the public other than
as a result of a disclosure by Employee, or (ii) becomes available to Employee
on a non-confidential basis from a person other than the Company, but only to
the extent Employee has no reason to believe that such person is bound by a
confidentiality agreement with the Company and is not otherwise believed by
Employee to be prohibited from transmitting the information to Employee.
Employee will at all times regard and preserve as confidential such Confidential
Information obtained by Employee from whatever source and will not, either
during Employee's employment or thereafter, publish or disclose any part of such
Confidential
4
<PAGE>
Information in any manner, or use the same except on behalf of the Company,
without the prior written consent of the Company.
(b) Inventions.
----------
(i) Employee will promptly disclose in writing to the officials
designated by the Company to receive such disclosures, complete information
concerning each and every invention, discovery, improvement, device, design,
apparatus, practice, process, method or product (hereinafter referred to as
"Inventions"), whether Employee considers them patentable or not, made,
developed, perfected, devised, conceived or reduced to practice by Employee,
either solely or in collaboration with others, during the period of his
employment by the Company, and up to and including a period of twelve (12)
months after the Employment Term, whether or not during regular working hours,
relating either directly or indirectly to the business, products, practices or
techniques of the Company or to the Company's actual or demonstrably anticipated
research or development, or resulting from any work performed by Employee for
the Company.
(ii) Employee understands that any Inventions made, developed,
perfected, devised, conceived or reduced to practice by Employee during the
period of his employment by the Company, and any other Inventions made,
developed, perfected, devised, conceived or reduced to practice by Employee
during said period of twelve (12) months after the Employment Term, if based
upon the Confidential Information of the Company, relating either directly or
indirectly to the business, products, practices or techniques of the Company or
to the Company's actual or demonstrably anticipated research or development, or
resulting from any work performed by Employee for the Company, are the sole
property of the Company, and hereby assign and agree to assign to the Company
its successors and assigns, all of Employee's right, title and interest in and
to said Inventions, and any patent applications or Letters Patent thereon.
NOTIFICATION
------------
This Agreement does not apply to an invention for which no equipment,
supplies, facility, or trade secret information of the Company was
used and which was developed entirely on Employee's own time, and (a)
which does not relate (1) to the business of the Company or (2) to the
Company's actual or demonstrably anticipated research or development,
or (b) which does not result from any work performed by Employee for
the Company, as defined and provided by Section 2870 of the California
Labor code. A copy of this Section 2870 is attached hereto as
Appendix A.
----------
5
<PAGE>
(iii) Employee will, at any time during his employment or thereafter,
upon request and without further compensation therefore, but at no expense to
Employee, do all lawful acts, including the execution of papers and oaths and
the giving of testimony, that in the opinion of the Company, its successors or
assigns, may be necessary or desirable for obtaining, sustaining, reissuing or
enforcing Letters Patent in the United States and throughout the world for said
Inventions, and for perfecting, recording or maintaining the title of the
Company, its successors and assigns, to said Inventions and to any patent
applications made and any Letters Patent granted for said Inventions in the
United States and throughout the world. If after the Employment Term the Company
shall require Employee to travel, the Company shall cooperate with Employee to
schedule such travel time at a time reasonably satisfactory to Employee.
(c) Other Intellectual Property
---------------------------
(i) Employee will also disclose in writing to the officials
designated by the Company to receive such disclosures, complete information
concerning all other intellectual property, including, but not limited to,
original works of authorship, trademarks, service marks, and trade secrets,
(hereinafter sufficient to as "other intellectual property") whether Employee
considers them intellectual property or not, which is made, developed, created,
devised, conceived, perfected, reduced to practice, or discovered by Employee,
either solely or in collaboration with others, during the period of his
employment by the Company, and up to and including a period of twelve (12)
months after the Employment Term, whether or not during regular working hours,
relating either directly or indirectly to the business, products, practices or
techniques of the Company or to the Company's actual or demonstrably anticipated
research or development, or resulting from any work performed by Employee for
the Company.
(ii) All copyrightable works with regard to paragraph 3.1(c)
(i) above, will be deemed "work for hire" as defined in (S)101 of the Federal
Copyright Act and such copyrightable works shall exclusively belong to the
Company. In the event that (S)101 of the Copyright Act is found to be
inapplicable, Employee will assign all right, title and interest in and to such
copyrightable works to the Company. In addition, Employee will, upon request and
without further compensation therefore, but at no expense to Employee, assist
the Company in obtaining all registrations for such copyrights pursuant to
Section 3.1(c) (iii) below.
(iii) Employee will, at any time during his employment, or
thereafter, upon request and without further compensation therefore, but at no
expense to Employee, do all lawful acts, including the execution of papers and
oaths and the
6
<PAGE>
giving of testimony, that in the opinion of the Company, its successors or
assigns, may be necessary or desirable for obtaining registrations for other
intellectual property, including, but not limited to trademarks, service marks,
and copyrights, in the United States and throughout the world. If after the
Employment Term the Company shall require Employee to travel, the Company shall
cooperate with Employee to schedule such travel time at a time reasonably
satisfactory to Employee.
(d) As to any Inventions or other intellectual property which were
made, developed, perfected, devised, conceived or reduced to practice by
Employee during the period of his employment by the Company, and up to and
including a period of twelve (12) months after the Employment Term, but which
are claimed for any reason to belong to an entity or person other than the
Company, Employee will promptly after receiving notice of such claim disclose
the same in writing to the Company. Within twenty (20) days thereafter, the
Company shall claim ownership of such Inventions or other intellectual property
under the terms of this Agreement. If the Company makes such a claim, Employee
understands that any controversy relating to such claim will be settled and
determined by binding arbitration conducted in Los Angeles County, California,
in accordance with the rules of the American Arbitration Association then
existing.
3.2 Prohibited and Competitive Activities. Employee and the Company
-------------------------------------
recognize that due to the nature of Employee's engagement hereunder and the
relationship of Employee to the Company, both prior and subsequent to the date
of this Agreement, Employee has had and will have access to, has and will
acquire, and has assisted and may continue to assist in developing confidential
and proprietary information relating to the business and operations of the
Company and its affiliates, including, but not limited to Confidential
Information. Employee acknowledges that such information has been and will be
of central importance to the business of the Company and its affiliates and that
disclosure of this information to, or its use by others can and will cause
substantial loss to the Company. Employee and the Company also recognize that
an important part of Employee's duties will be to develop good will for the
Company and its affiliates through his personal contact with Clients (as defined
below), employees and others having business relationships with the Company, and
that there is a danger that this good will, a proprietary asset of the Company,
may follow Employee if and when his relationship with the Company is terminated.
Accordingly, Employee will perform as follows:
(a) Prohibited Activities. Employee will not at any time during the
---------------------
Employment Term: (i) (other than in the course of his employment) disclose or
furnish to any other person or, directly or indirectly, use for his own account
or the account of
7
<PAGE>
any other person, any Confidential Information, no matter from where or in
what manner he may have acquired such Confidential Information, and he shall
retain all such Confidential Information in trust for the benefit of the
Company, its affiliates and the successors and assigns of any of them, (ii)
directly or indirectly through one or more intermediaries, solicit for
employment or recommend to any subsequent employer of Employee the solicitation
for employment of, any person who, at the time of such solicitation, is employed
by the Company or any affiliate thereof, or (iii) directly or indirectly,
whether for his own account or for the account of any other person, solicit,
divert, or endeavor to entice away from the Company or any affiliate thereof, or
otherwise engage in any activity intended to terminate, disrupt, or interfere
with, the Company's or any of its affiliate's relationship with, Clients or
other business relationships of the Company or any affiliate thereof (any
activity described in clause (i), (ii), (iii) of this Section 3.2(a) being
herein referred to as a "Prohibited Activity"); provided, however, that if
--------- -------
Employee is legally compelled to disclose Confidential Information to any
tribunal or else stand liable for contempt or suffer other similar censure or
penalty, then the disclosure to such tribunal of only those Confidential
Information which are legally required to be disclosed shall not constitute a
Prohibited Activity. Employee shall give the Company as much advance notice of
such disclosure as is practicable and reasonable.
The term, "Clients," shall mean those persons who, at any time during
Employee's course of employment with the Company (including; but without
limitation, prior to the date of this Agreement) are or were clients or
customers of the Company or any affiliate thereof or any predecessor of any of
the foregoing.
(b) Non-Competition. By and in consideration of the Company's
---------------
entering into this Agreement and providing the Salary, and benefits (including,
without limitation, stock options pursuant to a Company stock option plan) to
the Employee, and further in consideration of the Employee's continued exposure
to the confidential and proprietary information of the Company (including, but
without limitation, the Company's Confidential Information), the Employee will
not, during the Employment Term engage in any Competitive Activity. The term
"Competitive Activity" means engaging in any of the following activities: (i)
serving as a director of any Competitor (as defined below), (ii) directly or
indirectly through one or more intermediaries, either (X) controlling any
Competitor or (Y) owning any equity or debt interests in any Competitor (other
than equity or debt interests which are publicly traded and, at the time of any
acquisition, do not exceed 5% of the particular class of interests outstanding)
(it being understood that, if interests in any Competitor are owned by an
investment vehicle or other entity in which the
8
<PAGE>
Employee owns an equity interest, a portion of the interests in such Competitor
owned by such entity shall be attributed to the Employee, such portion
determined by applying the percentage of the equity interest in such entity
owned by the Employee to the interests in such Competitor owned by such entity),
(iii) employment by (including serving as an officer, employee or partner of),
providing consulting services to (including, without limitation, as an
independent contractor) or, managing or operating the business or affairs of,
any Competitor or (iv) participating in the ownership, management, operation or
control of or being connected in any manner with any Competitor. The term
"Competitor" as used herein means any person (other than the Company or any
affiliate thereof) that directly or indirectly engages in the interactive media
business or any other line of business in which the Company or any subsidiary is
engaged during the Employment Term in the United States or any political
subdivision thereof, or in any other territory or any territory of the world in
which the Company or any subsidiary thereof has established a subsidiary or
sales or representative office or has retained a sales representative or
distributor. Notwithstanding the above, the term Competitor shall exclude the
business conducted by BoxTop Entertainment, Inc. including Television shows and
specials, concerts and one of a kind specials and the related world wide
distribution of any of the above.
(c) Adaption Rights. The Company shall have the express right to
---------------
edit, revise and adapt any Invention and to cause others to edit, revise and
adapt any Invention as the Board of Directors may deem appropriate.
(d) Waiver of Moral Rights. The Employee hereby expressly waives any
----------------------
"artist's rights" or "moral rights" which the Employee might otherwise have in
any Invention.
(e) Insurance. During the Employment Term, the Company shall at its
---------
expense, to apply for, obtain and maintain insurance on the life of Employee in
the amount of $1,250,000, for the sole benefit of his spouse (which shall be the
sole payee of such insurance). Employee shall cooperate fully in connection with
the Company obtaining such insurance. The Company at its expense, shall obtain
disability insurance in an amount acceptable to the Employee.
4. Power of Attorney.
-----------------
Employee will designate and appoint the Company and its duly authorized
officers and agents as its agents and attorneys-in-fact to execute and file any
certificates, applications or documents and to do all lawful acts necessary to
protect the Company's rights in any Invention and other intellectual property.
Employee expressly acknowledges that the foregoing
9
<PAGE>
power of attorney is coupled with an interest and is therefore irrevocable and
shall survive the termination of Employee's engagement by the Company for any
reason.
5. Miscellaneous.
-------------
5.1 Binding Effect: Assignment. This Agreement shall inure to the benefit
--------------------------
of and be binding upon the parties hereto and their respective heirs, executors,
representatives, estates, successors and assigns, including any successor or
assign to all or substantially all of the business and/or assets of the Company,
whether direct or indirect, by purchase, merger, consolidation, acquisition of
stock, or otherwise; provided, however, that neither the Employee nor any
-------- -------
beneficiary nor any legal representative of the Employee, may assign all or any
portion of the Employee's rights or obligations under this Agreement without the
prior written consent of the Board of Directors.
5.2 Notices. Whenever notice is required to be given under the terms of
-------
this Agreement, such notice shall be in writing and delivered by hand or by
registered or certified mail, postage prepaid, or transmitted by telecopier,
addressed as follows:
(a) If to the Company, to it at:
BoxTop Interactive, Inc.
9014 Melrose Avenue
Los Angeles, California 90069
Attention: Chief Executive Officer
Telecopy No: 310.246.9995
(b) If to the Employee, to him at:
Kevin Wall
1670 No. Dohney Dr
Los Angeles, California 90069
or to such other address as either party shall have specified for itself from
time to time to the other party in writing. All such notices shall be
conclusively deemed to be received and shall be effective, if sent by hand
delivery, upon receipt, or if sent by registered or certified may, upon receipt,
or if transmitted by telecopier.
5.3 Governing Law. This Agreement and the rights and obligations of the
-------------
parties hereto shall be governed by and construed and enforced in accordance
with the laws of the State
10
<PAGE>
of California without giving effect to the conflicts of law principles thereof.
5.4 Severability. If any term or other provision of this Agreement, or
------------
any application thereof to any circumstance is invalid, illegal or incapable of
being enforced by any rule of law, or public policy in whole or in part, such
provision or application shall to that extent be severable and shall not affect
any of the other provisions or applications of this Agreement.
5.5 Entire Agreement. This Agreement contains the entire understanding of
----------------
the parties hereto with respect to the subject matter hereof and supersedes and
replaces in its entirety the Old Agreement.
5.6 Existing Agreement. Employee confirms and acknowledges that he has no
------------------
claims against the Company (or its affiliates) under the Old Agreement.
5.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall be deemed to constitute one and the same instrument.
5.8 Plurals; Gender; Headings; Sections. In this Agreement, unless the
-----------------------------------
context otherwise requires, words in the singular number or in the plural number
shall each include the singular number and the plural number, and the use of any
gender shall include all genders. The headings in this Agreement are for
reference purpose only and shall not limit or otherwise affect the meaning or
interpretation of this Agreement. All references to sections, subsections and
paragraphs herein shall be deemed to refer to sections, subsections or
paragraphs of this Agreement unless the context otherwise requires.
5.9 Further Assurances. Each party hereto shall do and perform or cause
------------------
to be done and performed all further acts and things and shall execute and
deliver all other agreements, certificates, instruments, and documents as any
other party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
5.10 Amendment and Modification. This Agreement may not be amended, nor
--------------------------
may any provision hereof be modified, waived or discharged, nor may any breach
hereof be waived, except by an instrument in writing duly signed by the party to
be charged. The written approval of the Board of Directors shall be required
before any material amendment, modification, waiver or discharge
11
<PAGE>
contemplated by such Sections shall be effective as between the Company and
Employee.
5.11 Waiver. No provision of this Agreement may be waived or discharged
------
unless such waiver or discharge is agreed to in writing and signed by the
affected party. No such waiver or discharge by any party hereto at any time, or
any waiver or discharge any breach by any party hereto of any provision of this
Agreement to be performed by such party, shall be deemed to waive or discharge
any other provisions or be a waiver or discharge of any breach of any other
provisions, respectively, at the same or at any prior or subsequent time.
5.12 Withholding. The Company shall have the right to deduct from any
-----------
amounts payable hereunder or otherwise any taxes or other amounts to the extent
required by law to be withheld.
5.13 Certain Definitions.
-------------------
For purposes of this agreement:
(a) the term "affiliate" shall mean, with respect to any person, any
other person directly or indirectly controlling, controlled by, or under common
control with such person; and
(b) the term "person" shall mean an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
5.14 Arbitration.
-----------
(a) Except as set forth in this Section 5.14, all questions or disputes
arising out of or relating to this Agreement or any breach thereof shall be
finally settled by binding arbitration under the rules of the American
Arbitration Association and judgment upon such award may be entered in any court
having jurisdiction thereof. Any such arbitration proceeding shall take place
in Los Angeles County, California. THE PARTIES EACH HEREBY WAIVE THE RIGHT TO
TRIAL BY JURY IN CONNECTION WITH ANY DISPUTE ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY BREACH THEREOF.
(b) Employee acknowledges that the Company is relying for its protection
upon the existence and validity of, among other things, Sections 3.1, 3.2 and 4
of this Agreement, and that irreparable injury (which would not be adequately
compensated by an award of damages) will result to the Company from any
violation or continuing violation of such provisions. Accordingly, Employee
hereby agrees that in addition to the
12
<PAGE>
remedies available to the Company by law or under this Agreement, the Company
shall be entitled to seek and obtain, from a court of competent jurisdiction,
such equitable relief (including injunctive relief) as may be permitted by law
for violations of Sections 3.1, 3.2 and 4 of this Agreement. Any such action
shall be brought in the state courts presiding in the County of Los Angeles or
in the Federal Courts in the Central District of California. Each party hereby
consents to personal jurisdiction in such courts and waives any objection to
such venue.
5.15 Attorneys' Fees. In any dispute arising out of this Agreement the
---------------
prevailing party shall be entitled to recover reasonable attorneys' fees and
expenses and other costs in addition to any other relief awarded.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each
of the parties hereto, all as of the date first above written.
BOXTOP INTERACTIVE, INC., a
California corporation
BY: /s/ Nancy Smalley
------------------------------
Name: Nancy Smalley
Title: Secretary
/s/ Kevin Wall
---------------------------------
Kevin Wall, an individual
13
<PAGE>
Appendix A
NOTIFICATION TO EMPLOYEE
Set forth below is the text of Section 2870, 2871 and 2872 of the
California Labor Code, as published in West's Ann. Cal. Labor Code (1989) and
West's Ann. Cal. Labor Code (1994 Supp.) :
(S) 2870. EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
(c) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
(d) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
(S) 2871. CONDITIONS OF EMPLOYMENT OR CONTINUED EMPLOYMENT; DISCLOSURE OF
INVENTIONS
No employer shall require a provision made void and unenforceable by
Section 2870 as a condition of employment or continued employment. Nothing in
this article shall be construed to forbid or restrict the right of an employer
to provide in contracts or employment for disclosure, provided that any such
disclosures be received in confidence, of all of the employee's inventions made
solely or jointly with others during the term of his or her employment, a review
process by the employer to determine such issues as may arise, and for full
title to certain patients and inventions to be in the United States, as required
by the contracts between the employer and the United States or any of its
agencies.
(S) 2872. NOTICE TO EMPLOYEE; BURDEN OF PROOF
If an employee agreement entered into after January 1, 1980, contains a
provision requiring the employee to assign or offer to assign any of his or her
rights in any invention to his or her
14
<PAGE>
employer, the employer must also, at the time the agreement is made, provide a
written notification to the employee that the agreement does not apply to an
invention which qualifies fully under the provisions of Section 2870. In any
suit or action arising thereunder, the burden of proof shall be on the employee
claiming the benefit of its provisions.
15
<PAGE>
IXL HOLDINGS, INC.
MAY 30, 1997
Mr. Kevin Wall
BoxTop Interactive, Inc.
10960 Wilshire Boulevard
Suite #1550
Los Angeles, California 90024
Re: Merger of BoxTop Interactive, Inc. ("BII") into IXL Merger Corp. III,
Inc. ("Sub") (the "Merger")
Dear Kevin:
With regard to the above-referenced transaction, IXL Holding, Inc.
("Parent") hereby agrees as follows:
1. After the consummation of the Merger and thereafter on an on-going
basis, Parent will consult with you in good faith regarding its
international operations.
2. The Employment Agreement dated August 1, 1996 between BoxTop
Interactive, Inc. (a copy of which is attached hereto as Exhibit A)
---------
and you will be assumed by Sub (to be known after the Merger as
"BoxTop Interactive, Inc."), and will continue to govern the terms of
your employment; provided, however, that, notwithstanding anything to
the contrary contained therein, you will report to U. Bertram Ellis,
Jr.
3. Contemporaneously with the consummation of the Merger, Parent will
loan you $50,000, to be repaid by you, together with interest thereon
at the rate of 8% per annum, on the date one year from the date
hereof. All other terms of the loan shall be set forth in a promissory
note, dated of even date herewith, for the benefit of Parent (the
"Note"). Parent hereby agrees that the Note shall be treated as cash
of BII for purposes of calculating the amount of "BII Debt" (as such
term is defined in the Agreement and Plan of Merger, dated of even
date herewith, between Parent, Sub, BII and the BII shareholders),
reducing the amount of BII Debt.
16
<PAGE>
4. The Parties hereby agree and acknowledge that, immediately after the
consummation of the Merger, there will be warrants outstanding to
purchase 2,309 shares of Class B Common Stock of Parent (the "IXL
Warrants"). If, prior to November 30, 1997, you are able to cause a
reduction in the outstanding number of IXL Warrants, the total Merger
consideration shall be adjusted based on the agreement of the parties.
If this letter accurately reflects your understanding of our
agreement, please so indicate by executing this letter on the signature line
below.
SINCERELY,
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
-----------------------------
James V. Sandry
Executive Vice President
Confirmed and agreed this 30th day of May, 1997
/s/ Kevin Wall
- ------------------------------
Kevin Wall
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
--------------------------------
James V. Sandry, Executive Vice
President
17
<PAGE>
EXHIBIT A
---------
EMPLOYMENT AGREEMENT
--------------------
Original Employment Agreement of Mr. Kevin Wall dated August 1, 1996.
18
<PAGE>
ASSUMPTION OF AND FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This Assumption of and First Amendment to Employment Agreement by and among
IXL Holdings, Inc. ("IXL"), BoxTop Interactive, Inc. ("BoxTop"), and Kevin Wall
references that certain Employment Agreement dated as of August 1, 1998 by and
between BoxTop and Kevin Wall (the "Employment Agreement"). Capitalized terms
used but not defined herein shall have the meanings assigned to them in the
Employment Agreement.
WHEREAS, pursuant to the Employment Agreement, Kevin Wall is employed as
the Chairman of the Board and Chief Executive Officer of BoxTop Interactive,
Inc., the wholly-owned subsidiary of IXL.
WHEREAS, the Board of Directors of IXL has proposed to elect and appoint
Kevin Wall as the Vice Chairman of the Board of IXL.
WHEREAS, in connection with the appointment of Kevin Wall as the Vice
Chairman of the Board of IXL, IXL desires to assume the rights and obligations
of BoxTop under the Employment Agreement.
WHEREAS, in connection with the assumption of BoxTop's rights and
obligations under the Employment Agreement, the Employment Agreement must be
amended to accurately reflect Kevin Wall's employment by IXL.
NOW THEREFORE, in consideration of the mutual covenants, and obligations
set forth herein and in the Employment Agreement, the parties hereby agree as
follows:
1. Assumption of the Employment Agreement by IXL. IXL hereby assumes the
---------------------------------------------
rights and obligations of BoxTop under the Employment Agreement. Kevin Wall
hereby consents to such assumption and agrees to be bound by the terms of the
Employment Agreement, as amended hereby, as if IXL were an original party
thereto.
2. Amendments of the Employment Agreement. The Employment Agreement shall
--------------------------------------
be amended as follows:
(a) The term "Company" as it appears in the first paragraph of the
preamble of the Employment Agreement shall be amended to be defined as IXL
Holdings, Inc.
(b) Section 1.1(b) of the Employment Agreement shall be amended by
deleting such section in its entirety and substituting in lieu thereof the
following:
(b) During the Employment Term, Employee shall devote
(i) substantially all of his business time, attention and
skill, and (ii) all of his time and efforts in the
interactive media field to the Company; and shall perform
faithfully, loyally and efficiently as the Vice Chairman of
the Board of the Company. In such capacity, he shall have
such duties and responsibilities consistent therewith and
such other duties and
19
<PAGE>
responsibilities as may from time to time be assigned to or
vested in him by the Board of Directors (as such term is
hereinafter defined).
(c) The address for notices to the Company set forth in Section 5.2
shall be changed to the following:
IXL Holdings, Inc.
1888 Emery Street, N.W.
Atlanta, GA 30318
Attention: U. Bertram Ellis, Jr.
(d) No Further Amendments. Except as otherwise provided in this
---------------------
Section 2, the Employment Agreement shall not be amended or modified.
3. Resignation of BoxTop Offices. Kevin Wall hereby resigns as the
-----------------------------
Chairman of the Board of Directors and Chief Executive Officer of BoxTop
IN WITNESS WHEREOF, this Assumption of and First Amendment to Employment
Agreement has been executed by the parties hereto as of April 16, 1998.
IXL Holdings, Inc.
By: /s/ U. Bertram Ellis, Jr.
-------------------------------
Name: U. Bertram Ellis, Jr.
Title: Chairman & CEO
BOXTOP INTERACTIVE, INC.
By: /s/ U. Bertram Ellis, Jr.
-------------------------------
Name: U. Bertram Ellis, Jr.
Title: Chairman & CEO
/s/ Kevin Wall
------------------------------------
KEVIN WALL
20
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT, dated as of May 1, 1998, between iXL, Inc., a
Delaware corporation (the "Company"), and William C. Nussey (the "Executive").
------- ---------
The parties hereto agree as follows:
1. Employment.
----------
(a) Agreement to Employ. Upon the terms and subject to the conditions of
-------------------
this Agreement, the Company shall hereby employ the Executive and the Executive
hereby agrees to be employed by the Company.
(b) Term of Employment. Subject to Section 5, the Company shall employ the
------------------
Executive pursuant to the terms hereof for the period commencing on the date
hereof and ending on December 31, 2003, provided that the Executive's employment
--------
with the Company shall be deemed to be automatically renewed upon the same terms
and conditions for an additional one-year period on each of December 31, 2003
and December 31, 2004 unless either party hereto shall have given the other
party written notice that such party does not intend to renew the Agreement as
of such date at least three months in advance of the date on which this
Agreement would otherwise automatically be renewed. The period during which the
Executive is employed pursuant to this Agreement, including any renewal thereof
in accordance with this Section (1)(b), shall be referred to as the "Employment
----------
Period."
- -------
2. Position and Duties.
-------------------
During the Employment Period, the Executive shall serve as President and
Chief Operating Officer of the Company and the Executive shall have the duties,
responsibilities and obligations customarily assigned to individuals serving in
the position or positions in which the Executive serves hereunder. The Executive
shall report to U. Bertram Ellis, Jr.; all officers and employees of the Company
(other than Kevin Wall) shall report to the Executive. The Executive shall
devote his full time to the services required of him hereunder, except for
vacation time and reasonable periods of absence due to sickness, personal injury
or other disability, and shall use his best efforts, judgment, skill and energy
to perform such services in a manner consonant with the duties of his position
and to improve and advance the business and interests of the Company. The
Executive shall also serve as a Director of IXL Holdings, Inc. during the
Employment Period without additional compensation.
3. Compensation.
------------
(a) Salary and Bonus. The Company shall pay the Executive a base salary at
----------------
an annual rate of $250,000. The Company shall pay the Executive such base salary
in equal bi-monthly installments or in such other installments as the parties
may agree. Beginning with the fiscal year ended December 31, 1998 and continuing
until the end of the Employment Period, the Company
-1-
<PAGE>
shall pay the Executive an annual bonus (the "Bonus"). Such bonus shall be paid
within 15 days after the delivery of the annual audited financial statements of
the Company and its subsidiaries by the Company's independent accountant. The
amount of any such bonus shall be based upon certain strategic and financial
goals which shall be determined by the Executive and other senior officers of
the Company and shall be determined by the Board of Directors of IXL Holdings,
Inc., with a target maximum of $50,000 for the fiscal year ended December 31,
1998. The base salary and target bonus of the Executive shall be reviewed
annually, and may be increased from time to time by the Company to reflect the
Executives performance and the Company's profitability. Once increased, the base
salary may not be decreased and the target bonus may not be set at less than
$50,000 per full fiscal year.
(b) Reimbursement of Relocation Expenses. The Company shall reimburse the
------------------------------------
Executive all reasonable moving and relocation costs associated with the
Executive's relocation from Boston, Massachusetts to Atlanta, Georgia, including
(i) realtor fees associated with the sale of the Executive's home in Boston,
Massachusetts, and (ii) three months' temporary living costs in Atlanta,
Georgia.
(c) Stock Options. The Executive shall be granted an aggregate of
-------------
1,844,276 options to purchase Class B Common Stock, par value $.01 per share, of
IXL Holdings, Inc., as set forth on Exhibit A attached hereto, subject to a
vesting schedule as set forth on Exhibit A attached hereto.
(d) Stock Purchase. The Executive shall purchase 100 shares of the Class A
--------------
Convertible Preferred Stock of IXL Holdings, Inc. for a total purchase price of
$100,000.00.
4. Benefits and Vacation. During the Employment Period, the Executive shall be
---------------------
eligible to participate in the health, disability and life insurance plans
sponsored or maintained by the Company for the benefit of its senior executive
corporate officers to the extent that the Executive is eligible to participate
in any such plans under the generally applicable provisions thereof. The Company
may, in its discretion, amend or terminate any such plans in accordance with the
terms thereof. During the Employment Period, the Executive shall be entitled to
four weeks of paid vacation annually.
5. Termination of Employment. In the event the Executive's employment with the
-------------------------
Company terminates earlier than upon the expiration of the Employment Period,
the Executive shall be entitled to receive the following payments under the
following circumstances:
(a) Death. Upon the death of the Executive, the Executive's spouse, if
-----
any, or his estate shall receive the Executive's base salary payable in the year
of his death pursuant to Section 3(a) hereof, life insurance benefits and a pro
rata portion of the Executive's Bonus that would have been payable pursuant to
Section 3(b) hereof with respect to the fiscal year in which the Executive died.
Such pro rata portion shall be determined by multiplying (i) the total Bonus
that the Executive would have received in respect of the year of his death by
(ii) the quotient of the number of days in such year prior to his death, divided
by 365. Such pro rata Bonus payment will be
-2-
<PAGE>
payable at the same time that the full Bonus would have been payable to the
Executive pursuant to Section 3(b) hereof.
(b) Disability. Upon the Disability of the Executive, he shall receive his
----------
Earned Salary, any disability benefits payable under any disability program in
which he participates, any other benefits under any benefit plan of the Company
to which he is entitled pursuant to the terms of such plan and a portion of the
Executive's Bonus that would have been payable pursuant to Section 3(b) hereof
with respect to the fiscal year in which the Executive became disabled. Such pro
rata portion shall be determined by multiplying (i) the total Bonus that the
Executive would have received in respect of the year of his Disability by (ii)
the quotient of the number of days in such year prior to his Disability, divided
by 365. Such pro rata Bonus payment will be payable at the same time that the
full Bonus would have been payable to the Executive pursuant to Section 3(b)
hereof.
(c) Termination for Cause or a Resignation Other than for Good Reason. In
-----------------------------------------------------------------
the event the Executive's employment terminates due to a Termination for Cause
or a Resignation Other than for Good Reason, the Executive shall receive his
Earned Salary and any other benefits under any benefit plan of the Company to
which he is entitled pursuant to the terms of such plan.
(d) Termination Without Cause or Resignation for Good Reason. If the
--------------------------------------------------------
Executive's employment terminates due to a Termination Without Cause or a
Resignation for Good Reason (i) the Executive's entitlement to benefits pursuant
to Section 4 hereof shall continue until the earlier of (A) the date eighteen
months after the termination of Executive's employment, and (B) the date the
Executive begins employment with any other entity (such resulting period
hereinafter referred to as the "Severance Period"); (ii) the vesting of unvested
Stock Options granted to the Executive pursuant to Section 3(d) hereof shall be
immediately accelerated twelve months; provided that all such options which
remain unvested after such acceleration shall terminate; and (iii) the Executive
shall receive severance pay equal to the base salary payable to the Executive
under Section 3 for the Severance Period, plus the pro rata portion of the
Executive's total Bonus that would have been payable to the Executive pursuant
to Section 3(b) hereof with respect to the Severance Period; such pro rata Bonus
payment(s) will be payable at the same time that the full Bonus would have been
payable to the Executive pursuant to Section 3(b) hereof. Notwithstanding
anything herein to the contrary, in no event shall the Company be obligated to
pay any amount to the Executive with respect to any period after the Severance
Period.
6. Definitions. For purposes of this Agreement, capitalized terms have the
-----------
following meanings:
"Cause" shall mean a termination by the Company due to (i) the continued
-----
failure (other than any such failure resulting from incapacity due to reasonably
documented physical or mental illness) by the Executive substantially to perform
his duties, responsibilities or obligations as an officer, director or employee
of the Company or any of its subsidiaries after having been given written notice
of such failure to perform, listing in reasonable specificity such failures, and
after having failed to improve such performance within the time period (which
shall have been a reasonable time period) specified in such notice or (ii) the
engaging by the Executive in serious
-3-
<PAGE>
misconduct which is material to the performance by the Executive of his duties
and obligations for the Company, including, without limitation, gross
negligence, dishonesty, willful malfeasance, gross insubordination or gross
misconduct that is materially injurious to the Company or conviction of a felony
or the entering of a plea of nolo contendere to a felony.
---------------
"Disability" shall mean the Executive's inability for more than six months
----------
within any 12-month period of performing his duties, responsibilities or
obligations as an officer, director or employee of the Company on a full-time
basis because of a physical, mental or emotional incapacity resulting from
injury, sickness or disease and within 30 days after written notice of
termination has been given to the Executive, the Executive shall not have
returned to the full-time performance of his duties, responsibilities and
obligations. The date of termination in the case of a termination for
"Disability" shall be the last day of the aforementioned 30-day period.
"Earned Salary" means the base salary earned, but unpaid, for services
-------------
rendered to the Company on or prior to the date of disability, resignation or
termination of the Executive's employment, as the case may be. Earned Salary
shall be paid in a single lump sum as soon as practicable, but in no event more
than 30 days following such date.
"Resignation for Good Reason" means a resignation by the Executive as a
---------------------------
result of any of the following:
(a) a material breach by the Company of its obligations under this
Agreement with respect to the base salary, Bonus, benefits or vacation to which
the Executive is entitled under Sections 3 and 4 hereof: or
(b) the taking of any action by the Company that would substantially
diminish the aggregate value of the benefits provided to the Executive under the
benefit plans of the Company that may be in effect at such time in which he was
participating, other than any such reduction which is (i) required by law, (ii)
implemented in connection with a general concessionary arrangement affecting all
employees or affecting the group of senior corporate executive employees and
station general managers or (iii) generally applicable to all similarly situated
beneficiaries of such plans; or
(c) the material reduction by the Company of the Executive's duties
and positions under this Agreement; or
(d) an express requirement by the Company that the Executive
permanently relocate to any office of the Company not located in the Atlanta,
Georgia metropolitan area.
"Resignation Other than for Good Reason" shall be any resignation other
--------------------------------------
than a Resignation with Good Reason.
"Termination for Cause" shall be any termination of the Executive's
---------------------
employment by the Company for Cause.
-4-
<PAGE>
"Termination Without Cause" shall be any termination of the Executive's
-------------------------
employment by the Company other than a Termination for Cause.
7. Full Discharge of Company Obligations. The amounts payable to the Executive
-------------------------------------
pursuant to Section 5 following termination of his employment shall be in full
and complete discharge of the Executive's rights under this Agreement and any
other claims he may have in respect of his employment by the Company or any of
its subsidiaries other than any claims or rights the Executive may have under
the Stockholders' Agreement with respect to the Company's repurchase of his
equity interests in the Company. Such amounts payable shall constitute
liquidated damages with respect to any and all such rights and claims and, upon
the Executive's receipt of such amounts, the Company shall be released and
discharged from any and all liability to the Executive in connection with this
Agreement or otherwise in connection with the Executive's employment with the
Company and its subsidiaries.
8. Noncompetition and Confidentiality.
----------------------------------
(a) Noncompetition. If the Executive's employment with the Company
--------------
terminates during the Employment Period for any reason (other than due to his
death or Disability), during the one-year period following such termination or
resignation of the Executive (the "Restriction Period"), the Executive shall not
------------------
become associated with any entity, whether as a principal, partner, employee,
consultant or shareholder (other than as a holder of not in excess of 1% of the
outstanding voting shares of any publicly traded company), that is actively
engaged in the business of designing internet web sites and/or facilitating e-
commerce for third-party clients.
(b) Confidentiality. Without the prior written consent of the Company,
---------------
except for disclosures of Confidential Information (as defined below) in the
ordinary course of business that, individually and in the aggregate, are not
materially injurious to the Company or any of its subsidiaries, and except to
the extent required by an order of a court having competent jurisdiction or
under subpoena from an appropriate government agency, the Executive shall not
disclose any trade secrets, customer lists, computer programs, drawings,
designs, marketing or sales plans, management organization information
(including data and other information relating to members of the Board or
management), operating policies or manuals, business plans, financial records or
other financial, commercial, business or technical information relating to the
Company or any of its subsidiaries or information designated as confidential or
proprietary that the Company or any of its subsidiaries may receive belonging to
suppliers, customers or others who do business with the Company or any of its
subsidiaries (collectively, "Confidential Information") to any third person
------------------------
unless such Confidential Information has been previously disclosed to the public
by the Company or is in the public domain (other than by reason of the
Executive's breach of this Section 8(b)). In the event the Executive receives
an order of a court or a subpoena requiring the Executive to disclose any
Confidential Information, as described above, the Executive shall promptly
deliver a copy of such order or subpoena to the Company and the Company shall
use its best efforts to assist the Executive in responding thereto.
-5-
<PAGE>
(c) Company Property. Promptly following the Executive's termination of
----------------
employment, the Executive shall return to the Company all property of the
Company, and all copies thereof in the Executive's possession or under his
control, including, without limitation, all Confidential Information, in
whatever media.
(d) Nonsolicitation of Employees. During the Employment Period and the
----------------------------
Restriction Period, the Executive shall not directly or indirectly induce any
employee of the Company or any of its subsidiaries to terminate employment with
such entity, and will not directly or indirectly, either individually or as
owner, agent, employee, consultant or otherwise, employ or offer employment to
any person who is or was employed by the Company or a subsidiary thereof unless
such person shall have ceased to be employed by such entity for a period of at
least six months.
(e) Certain Payments to the Executive during the Restriction Period. If
---------------------------------------------------------------
the Executive's employment with the Company is terminated due to a Termination
for Cause or a Resignation Other than for Good Reason, then, as consideration
for the covenants set forth in Section 8(a) and Section 8(d), the Company shall
pay the Executive, for the duration of the Restriction Period, the salary he
otherwise would have received under Section 3(a). If the Executive's employment
with the Company is terminated due to a Termination Without Cause or a
Resignation for Good Reason, then, as consideration for the covenants set forth
in Section 8(a) and Section 8(d), the Company shall pay the Executive his salary
and Bonus as set forth in Section 5(d). If the Restriction Period extends beyond
the Employment Period, the Company shall continue to pay the Executive his then
current salary until the end of the Restriction Period and shall pay the
Executive a prorated Bonus for that portion of the Restricted Period which
extends beyond the Employment Period. Except in the case of a Termination
Without Cause or such Resignation for Good Reason, the Company may elect at any
time during the Restriction Period upon thirty (30) days prior written notice to
discontinue such salary and Bonus payments, in which event the Executive shall
be released from any further obligation to comply with the provisions of
Sections 8(a) and 8(d) herein. If the Company fails to timely make any payment
due under this Section 8(e) and if such failure continues for ten (10) business
days after notice by the Executive to the Company of such failure, the Executive
shall be released from any further obligation to comply with the provisions of
Sections 8(a) and 8(d) herein.
(f) Injunctive Relief with Respect to Covenants. The Executive
-------------------------------------------
acknowledges and agrees that the covenants and obligations of the Executive with
respect to noncompetition, nonsolicitation, confidentiality and Company property
relate to special, unique and extraordinary matters and that a violation of any
of the terms of such covenants and obligations will cause the Company and its
subsidiaries irreparable injury for which adequate remedies are not available at
law. Therefore, the Executive agrees that the Company and its subsidiaries shall
be entitled to an injunction, restraining order or such other equitable relief
(without the requirement to post bond) as a court of competent jurisdiction may
deem necessary or appropriate to restrain the Executive from committing any
violation of the covenants and obligations contained in this Section 8. These
injunctive remedies are cumulative and are in addition to any other rights and
remedies the Company or its subsidiaries may have at law or in equity.
-6-
<PAGE>
9. Miscellaneous.
-------------
(a) Binding Effect. This Agreement shall be binding on the Company and any
--------------
person or entity which succeeds to the interest of the Company (regardless of
whether such succession occurs by operation of law, by reason of the sale of all
or a portion of the Company's stock or assets or a merger, consolidation or
reorganization involving the Company). This Agreement shall also inure to the
benefit of the Executive's heirs, executors, administrators and legal
representatives.
(b) Assignment. Except as provided under Section 9(a) above, neither this
----------
Agreement nor any of the rights or obligations hereunder shall be assigned or
delegated by either party hereto without the prior written consent of the other
party.
(c) Entire Agreement. This Agreement supersedes any and all prior
----------------
agreements between the parties hereto, and constitutes the entire agreement
between the parties hereto with respect to the matters referred to herein, and
no other agreement, oral or otherwise, shall be binding between the parties
unless it is in writing and signed by the party against whom enforcement is
sought. There are no promises, representations, inducements or statements
between the parties other than those that are expressly contained herein. The
Executive acknowledges that he is entering into this Agreement of his own free
will and accord, and with no duress, that he has read this Agreement and that he
understands it and its legal consequences. No parol or other evidence may be
admitted to alter, modify or construe this Agreement, which may be changed only
by a writing signed by the parties hereto.
(d) Severability; Reformation. In the event that one or more of the
-------------------------
provisions of this Agreement shall become invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby. In the event any of
Section 8(a), (b), (c), (d) or (e) is not enforceable in accordance with its
terms, the Executive and the Company agree that such Section, or such portion of
such Section, shall be reformed to make it enforceable in a manner which
provides the Company the maximum rights permitted under applicable law.
(e) Waiver. Waiver by either party hereto of any breach or default by
------
the other party of any of the terms of this Agreement shall not operate as a
waiver of any other breach or default, whether similar to or different from the
breach or default waived. No waiver of any provision of this Agreement shall be
implied from any course of dealing between the parties hereto or from any
failure by either party hereto to assert its or his rights hereunder on any
occasion or series of occasions.
(f) Notices. Any notice required or desired to be delivered under this
-------
Agreement shall be in writing and shall be delivered personally, by courier
service, by registered mail, return receipt requested, or by telecopy and shall
be effective upon dispatch to the party to whom such notice shall be directed,
and shall be addressed as follows (or to such other address as the party
entitled to notice shall hereafter designate in accordance with the terms
hereof):
-7-
<PAGE>
If to the Company:
IXL Holdings, Inc.
1888 Emery Street, NW
Atlanta, GA 30318
Fax: 404/267-3801
Attention: U. Bertram Ellis, Jr.
with a copy to:
Minkin & Snyder, P.C.
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Fax: 404/261-5064
with an additional copy to:
Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10022
Attention: James J. Connors II, Esq.
Fax: 212/223-2379
If to the Executive:
William C. Nussey
c/o IXL Holdings, Inc.
1888 Emery Street, NW
Atlanta, GA 30318
Fax: 404/267-3801
(g) Amendments. This Agreement may not be altered, modified or amended
----------
except by a written instrument signed by each of the parties hereto.
(h) Headings. Headings to sections in this Agreement are for the
--------
convenience of the parties only and are not intended to be part of or to affect
the meaning or interpretation hereof.
(i) Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original but both of which together shall constitute
one and the same instrument.
-8-
<PAGE>
(j) Withholding. Any payments provided for herein shall be reduced by any
-----------
amounts required to be withheld by the Company from time to time under
applicable Federal, state or local income or employment tax laws or similar
statutes or other provisions of law then in effect.
(k) Governing Law. This Agreement shall be governed by the laws of the
-------------
State of Georgia, without reference to principles of conflicts or choice of law
under which the law of any other jurisdiction would apply.
[SIGNATURES ON FOLLOWING PAGE]
-9-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Executive has hereunto set his hand as of
the day and year first above written.
IXL, INC.
/s/ U. Bertram Ellis, Jr.
-------------------------------
By: U. Bertram Ellis, Jr.
Title: Chief Executive Officer
THE EXECUTIVE:
/s/ William C. Nussey
-------------------------------
William C. Nussey
-10-
<PAGE>
EXHIBIT A
STOCK OPTIONS
<TABLE>
<CAPTION>
-----------------------------------------------
NUMBER OF OPTIONS TO
PURCHASE CLASS B
EXERCISE PRICE COMMON STOCK
-----------------------------------------------
<S> <C>
$ 3.50 5,176
$ 4.00 389,100
$ 4.50 900,000
$10.00 550,000
-----------------------------------------------
</TABLE>
VESTING SCHEDULE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NUMBER OF
---------
DATE EXERCISE PRICE OPTIONS VESTED
- ---- -------------- --------------
<S> <C> <C>
May 1, 1998: $ 3.50 880
$ 4.00 66,147
$ 4.50 153,000
$10.00 93,500
The last day of each of the 48 calendar $ 3.50 89
months beginning June 1998: $ 4.00 6,728
$ 4.50 15,562
$10.00 9,510
- --------------------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT, dated as of August 17, 1998, between iXL, Inc., a
Delaware corporation (the "Company"), and David Clauson (the "Executive"). The
------- ---------
parties hereto agree as follows:
1. Employment.
----------
(a) Agreement to Employ. Upon the terms and subject to the conditions of
-------------------
this Agreement, the Company shall hereby employ the Executive and the Executive
hereby agrees to be employed by the Company.
(b) Term of Employment. Subject to Section 5, the Company shall employ the
------------------
Executive pursuant to the terms hereof for the period commencing on the date
hereof and ending on December 31, 2003, provided that the Executive's employment
--------
with the Company shall be deemed to be automatically renewed upon the same terms
and conditions for an additional one-year period on each of December 31, 2003
and December 31, 2004 unless either party hereto shall have given the other
party written notice that such party does not intend to renew the Agreement as
of such date at least six months in advance of the date on which this Agreement
would otherwise automatically be renewed. The period during which the Executive
is employed pursuant to this Agreement, including any renewal thereof in
accordance with this Section (1)(b), shall be referred to as the "Employment
----------
Period."
- ------
2. Position and Duties.
-------------------
During the Employment Period, the Executive shall serve as Executive Vice
President for Worldwide Marketing of the Company and the Executive shall have
the duties, responsibilities and obligations customarily assigned to individuals
serving in the position or positions in which the Executive serves hereunder
including, but not limited to, those responsibilities set forth on Exhibit B
hereto. The Executive shall report to William C. Nussey; all officers and
employees of the Company employed by the Company in a marketing capacity shall
report to the Executive. The Executive shall devote his full time to the
services required of him hereunder, except for vacation time and reasonable
periods of absence due to sickness, personal injury or other disability, and
shall use his best efforts, judgment, skill and energy to perform such services
in a manner consonant with the duties of his position and to improve and advance
the business and interests of the Company.
3. Compensation.
------------
(a) Salary and Bonus. The Company shall pay the Executive a base salary at
----------------
an annual rate of $250,000. The Company shall pay the Executive such base salary
in equal bi-monthly installments or in such other installments as the parties
may agree. Beginning with the fiscal year ended December 31, 1998 and continuing
until the end of the Employment Period, the Company shall pay the Executive an
annual bonus (the "Bonus"). Such bonus shall be paid within 15 days
-1-
<PAGE>
after the delivery of the annual audited financial statements of the Company and
its subsidiaries by the Company's independent accountant. The amount of any such
bonus shall be based upon certain strategic and financial goals which shall be
determined by the Executive and other senior officers of the Company, and shall
be determined by the Board of Directors of IXL Holdings, Inc., with a target
maximum of $50,000 per full fiscal year. The base salary and target bonus of the
Executive shall be reviewed annually, and may be increased from time to time by
the Company to reflect the Executive's performance and the Company's
profitability. Once increased, the base salary may not be decreased and the
target bonus may not be set at less than $50,000 per full fiscal year.
(b) Reimbursement of Relocation Expenses. The Company shall reimburse the
------------------------------------
Executive all reasonable moving and relocation costs associated with the
Executive's relocation from San Francisco, California to Atlanta, Georgia,
including, but not limited to, (i) realtor fees associated with the sale of the
Executive's home in San Francisco, California and (ii) roundtrip airfare as
necessary for the Executive's temporary commute from San Francisco, California
to Atlanta, Georgia through the earlier of (A) the date the Executive relocates
his permanent residence to Atlanta, Georgia, or (B) June 30, 1999. The
Executive shall be solely responsible for all temporary living expenses until
relocated to Atlanta, Georgia.
(c) Stock Options. Upon approval by the Stock Option Committee of the
-------------
Board of Directors, the Executive shall be granted an aggregate of 600,000 ten-
year options to purchase Class B Common Stock, par value $.01 per share, of IXL
Holdings, Inc., as more specifically described on Exhibit A attached hereto.
(d) Stock Purchase. The Executive shall purchase 1,000 shares of the Class
--------------
A Convertible Preferred Stock of IXL Holdings, Inc. for a total purchase price
of $1,000,000.00.
4. Benefits and Vacation. During the Employment Period, the Executive shall be
---------------------
eligible to participate in the health, disability and life insurance plans
sponsored or maintained by the Company for the benefit of its senior executive
corporate officers to the extent that the Executive is eligible to participate
in any such plans under the generally applicable provisions thereof. The Company
may, in its discretion, amend or terminate any such plans in accordance with the
terms thereof. During the Employment Period, the Executive shall be entitled to
four weeks of paid vacation annually.
5. Termination of Employment. If the Executive's employment with the Company
-------------------------
terminates earlier than upon the expiration of the Employment Period, the
Executive shall be entitled to receive the following payments under the
following circumstances:
(a) Death. Upon the death of the Executive, the Executive's spouse, if
-----
any, or his estate shall receive the Executive's base salary payable in the year
of his death pursuant to Section 3(a) hereof, life insurance benefits and a pro
rata portion of the Executive's Bonus that would have been payable pursuant to
Section 3(b) hereof with respect to the fiscal year in which the Executive died.
Such pro rata portion shall be determined by multiplying (i) the total Bonus
that the Executive would have received in respect of the year of his death by
(ii) the quotient of the number
-2-
<PAGE>
of days in such year prior to his death, divided by 365. Such pro rata Bonus
payment will be payable at the same time that the full Bonus would have been
payable to the Executive pursuant to Section 3(b) hereof.
(b) Disability. Upon the Disability of the Executive, he shall receive his
----------
Earned Salary, any disability benefits payable under any disability program in
which he participates, any other benefits under any benefit plan of the Company
to which he is entitled pursuant to the terms of such plan and a portion of the
Executive's Bonus that would have been payable pursuant to Section 3(b) hereof
with respect to the fiscal year in which the Executive became disabled. Such pro
rata portion shall be determined by multiplying (i) the total Bonus that the
Executive would have received in respect of the year of his Disability by (ii)
the quotient of the number of days in such year prior to his Disability, divided
by 365. Such pro rata Bonus payment will be payable at the same time that the
full Bonus would have been payable to the Executive pursuant to Section 3(b)
hereof.
(c) Termination for Cause or a Resignation Other than for Good Reason. If
-----------------------------------------------------------------
the Executive's employment terminates due to a Termination for Cause or a
Resignation Other than for Good Reason, the Executive shall receive his Earned
Salary and any other benefits under any benefit plan of the Company to which he
is entitled pursuant to the terms of such plan.
(d) Termination Without Cause or Resignation for Good Reason. If the
--------------------------------------------------------
Executive's employment terminates due to a Termination Without Cause or a
Resignation for Good Reason, (i) the Executive's entitlement to benefits
pursuant to Section 4 hereof shall continue until the earlier of (A) the date
eighteen months after the termination of Executive's employment, and (B) the
date the Executive begins employment with any other entity (such resulting
period hereinafter referred to as the "Severance Period"); (ii) the vesting of
unvested Stock Options granted to the Executive pursuant to Section 3(d) hereof
shall be immediately accelerated twelve months; provided that all such options
which remain unvested after such acceleration shall terminate; and (iii) the
Executive shall receive severance pay equal to the base salary payable to the
Executive under Section 3 for the Severance Period, plus the pro rata portion of
the Executive's Bonus that would have been payable to the Executive pursuant to
Section 3(b) hereof with respect to the Severance Period; such pro rata Bonus
payment(s) will be payable at the same time that the full Bonus would have been
payable to the Executive pursuant to Section 3(b) hereof. Notwithstanding
anything herein to the contrary, in no event shall the Company be obligated to
pay any amount to the Executive with respect to any period after the Severance
Period.
6. Definitions. For purposes of this Agreement, capitalized terms have the
-----------
following meanings:
"Cause" shall mean a termination by the Company due to (i) the continued
-----
failure (other than any such failure resulting from incapacity due to reasonably
documented physical or mental illness) by the Executive substantially to perform
his duties, responsibilities or obligations as an officer, director or employee
of the Company or any of its subsidiaries after having been given written notice
of such failure to perform, listing in reasonable specificity such failures, and
after having failed to improve such performance within the time period (which
shall have been a
-3-
<PAGE>
reasonable time period) specified in such notice or (ii) the engaging by the
Executive in serious misconduct which is material to the performance by the
Executive of his duties and obligations for the Company, including, without
limitation, gross negligence, dishonesty, willful malfeasance, gross
insubordination or gross misconduct that is materially injurious to the Company
or conviction of a felony or the entering of a plea of nolo contendere to a
---------------
felony.
"Disability" shall mean the Executive's inability for more than six months
----------
within any 12-month period of performing his duties, responsibilities or
obligations as an officer, director or employee of the Company on a full-time
basis because of a physical, mental or emotional incapacity resulting from
injury, sickness or disease and within 30 days after written notice of
termination has been given to the Executive, the Executive shall not have
returned to the full-time performance of his duties, responsibilities and
obligations. The date of termination in the case of a termination for
"Disability" shall be the last day of the aforementioned 30-day period.
"Earned Salary" means the base salary earned, but unpaid, for services
-------------
rendered to the Company on or prior to the date of disability, resignation or
termination of the Executive's employment, as the case may be. Earned Salary
shall be paid in a single lump sum as soon as practicable, but in no event more
than 30 days following such date.
"Resignation for Good Reason" means a resignation by the Executive as a
---------------------------
result of any of the following:
(a) a material breach by the Company of its obligations under this
Agreement with respect to the base salary, Bonus, benefits or vacation to which
the Executive is entitled under Sections 3 and 4 hereof: or
(b) the taking of any action by the Company that would substantially
diminish the aggregate value of the benefits provided to the Executive under the
benefit plans of the Company that may be in effect at such time in which he was
participating, other than any such reduction which is (i) required by law, (ii)
implemented in connection with a general concessionary arrangement affecting all
employees or affecting the group of senior corporate executive employees and
station general managers or (iii) generally applicable to all similarly situated
beneficiaries of such plans; or
(c) the material reduction by the Company of the Executive's duties
and positions under this Agreement; or
(d) an express requirement by the Company that the Executive
permanently relocate to any office of the Company not located in the Atlanta,
Georgia metropolitan area.
"Resignation Other than for Good Reason" shall be any resignation other
--------------------------------------
than a Resignation with Good Reason.
"Termination for Cause" shall be any termination of the Executive's
---------------------
employment by the Company for Cause.
-4-
<PAGE>
"Termination Without Cause" shall be any termination of the Executive's
-------------------------
employment by the Company other than a Termination for Cause.
7. Full Discharge of Company Obligations. The amounts payable to the Executive
-------------------------------------
pursuant to Section 5 following termination of his employment shall be in full
and complete discharge of the Executive's rights under this Agreement and any
other claims he may have in respect of his employment by the Company or any of
its subsidiaries other than any claims or rights the Executive may have under
the Stockholders' Agreement with respect to the Company's repurchase of his
equity interests in the Company. Such amounts payable shall constitute
liquidated damages with respect to any and all such rights and claims and, upon
the Executive's receipt of such amounts, the Company shall be released and
discharged from any and all liability to the Executive in connection with this
Agreement or otherwise in connection with the Executive's employment with the
Company and its subsidiaries.
8. Noncompetition and Confidentiality.
----------------------------------
(a) Noncompetition. If the Executive's employment with the Company
--------------
terminates during the Employment Period for any reason (other than due to his
death or Disability), during the one-year period following such termination or
resignation of the Executive (the "Restriction Period"), the Executive shall not
------------------
become associated with any entity, whether as a principal, partner, employee,
consultant or shareholder (other than as a holder of not in excess of 1% of the
outstanding voting shares of any publicly traded company), that is actively
engaged in the business of designing internet web sites and/or facilitating e-
commerce for third-party clients.
(b) Confidentiality. Without the prior written consent of the Company,
---------------
except for disclosures of Confidential Information (as defined below) in the
ordinary course of business that, individually and in the aggregate, are not
materially injurious to the Company or any of its subsidiaries, and except to
the extent required by an order of a court having competent jurisdiction or
under subpoena from an appropriate government agency, the Executive shall not
disclose any trade secrets, customer lists, computer programs, drawings,
designs, marketing or sales plans, management organization information
(including data and other information relating to members of the Board or
management), operating policies or manuals, business plans, financial records or
other financial, commercial, business or technical information relating to the
Company or any of its subsidiaries or information designated as confidential or
proprietary that the Company or any of its subsidiaries may receive belonging to
suppliers, customers or others who do business with the Company or any of its
subsidiaries (collectively, "Confidential Information") to any third person
------------------------
unless such Confidential Information has been previously disclosed to the public
by the Company or is in the public domain (other than by reason of the
Executive's breach of this Section 8(b)). In the event the Executive receives an
order of a court or a subpoena requiring the Executive to disclose any
Confidential Information, as described above, the Executive shall promptly
deliver a copy of such order or subpoena to the Company and the Company shall
use its best efforts to assist the Executive in responding thereto.
-5-
<PAGE>
(c) Company Property. Promptly following the Executive's termination of
----------------
employment, the Executive shall return to the Company all property of the
Company, and all copies thereof in the Executive's possession or under his
control, including, without limitation, all Confidential Information, in
whatever media.
(d) Nonsolicitation of Employees. During the Employment Period and the
----------------------------
Restriction Period, the Executive shall not directly or indirectly induce any
employee of the Company or any of its subsidiaries to terminate employment with
such entity, and will not directly or indirectly, either individually or as
owner, agent, employee, consultant or otherwise, employ or offer employment to
any person who is or was employed by the Company or a subsidiary thereof unless
such person shall have ceased to be employed by such entity for a period of at
least six months.
(e) Certain Payments to the Executive during the Restriction Period. If
---------------------------------------------------------------
the Executive's employment with the Company is terminated due to a Termination
for Cause or a Resignation Other than for Good Reason, then, as consideration
for the covenants set forth in Section 8(a) and Section 8(d), the Company shall
pay the Executive, for the duration of the Restriction Period, the salary he
otherwise would have received under Section 3(a). If the Executive's employment
with the Company is terminated due to a Termination Without Cause or a
Resignation for Good Reason, then, as consideration for the covenants set forth
in Section 8(a) and Section 8(d), the Company shall pay the Executive his salary
and Bonus as set forth in Section 5(d). If the Restriction Period extends beyond
the Employment Period, the Company shall continue to pay the Executive his then
current salary until the end of the Restriction Period. Except in the case of a
Termination Without Cause or such Resignation for Good Reason, the Company may
elect at any time during the Restriction Period upon thirty (30) days prior
written notice to discontinue such salary and Bonus payments, in which event the
Executive shall be released from any further obligation to comply with the
provisions of Sections 8(a) and 8(d) herein. If the Company fails to timely make
any payment due under this Section 8(e) and if such failure continues for ten
(10) business days after notice by the Executive to the Company of such failure,
the Executive shall be released from any further obligation to comply with the
provisions of Sections 8(a) and 8(d) herein.
(f) Injunctive Relief with Respect to Covenants. The Executive
-------------------------------------------
acknowledges and agrees that the covenants and obligations of the Executive with
respect to noncompetition, nonsolicitation, confidentiality and Company property
relate to special, unique and extraordinary matters and that a violation of any
of the terms of such covenants and obligations will cause the Company and its
subsidiaries irreparable injury for which adequate remedies are not available at
law. Therefore, the Executive agrees that the Company and its subsidiaries shall
be entitled to an injunction, restraining order or such other equitable relief
(without the requirement to post bond) as a court of competent jurisdiction may
deem necessary or appropriate to restrain the Executive from committing any
violation of the covenants and obligations contained in this Section 8. These
injunctive remedies are cumulative and are in addition to any other rights and
remedies the Company or its subsidiaries may have at law or in equity.
-6-
<PAGE>
9. Miscellaneous.
-------------
(a) Binding Effect. This Agreement shall be binding on the Company and
--------------
any person or entity which succeeds to the interest of the Company (regardless
of whether such succession occurs by operation of law, by reason of the sale of
all or a portion of the Company's stock or assets or a merger, consolidation or
reorganization involving the Company). This Agreement shall also inure to the
benefit of the Executive's heirs, executors, administrators and legal
representatives.
(b) Assignment. Except as provided under Section 9(a) above, neither this
----------
Agreement nor any of the rights or obligations hereunder shall be assigned or
delegated by either party hereto without the prior written consent of the other
party.
(c) Entire Agreement. This Agreement supersedes any and all prior
----------------
agreements between the parties hereto, and constitutes the entire agreement
between the parties hereto with respect to the matters referred to herein, and
no other agreement, oral or otherwise, shall be binding between the parties
unless it is in writing and signed by the party against whom enforcement is
sought. There are no promises, representations, inducements or statements
between the parties other than those that are expressly contained herein. The
Executive acknowledges that he is entering into this Agreement of his own free
will and accord, and with no duress, that he has read this Agreement and that he
understands it and its legal consequences. No parol or other evidence may be
admitted to alter, modify or construe this Agreement, which may be changed only
by a writing signed by the parties hereto.
(d) Severability; Reformation. In the event that one or more of the
-------------------------
provisions of this Agreement shall become invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby. In the event any of
Section 8(a), (b), (c), (d) or (e) is not enforceable in accordance with its
terms, the Executive and the Company agree that such Section, or such portion of
such Section, shall be reformed to make it enforceable in a manner which
provides the Company the maximum rights permitted under applicable law.
(e) Waiver. Waiver by either party hereto of any breach or default by the
------
other party of any of the terms of this Agreement shall not operate as a waiver
of any other breach or default, whether similar to or different from the breach
or default waived. No waiver of any provision of this Agreement shall be implied
from any course of dealing between the parties hereto or from any failure by
either party hereto to assert its or his rights hereunder on any occasion or
series of occasions.
(f) Notices. Any notice required or desired to be delivered under this
-------
Agreement shall be in writing and shall be delivered personally, by courier
service, by registered mail, return receipt requested, or by telecopy and shall
be effective upon dispatch to the party to whom such notice shall be directed,
and shall be addressed as follows (or to such other address as the party
entitled to notice shall hereafter designate in accordance with the terms
hereof):
-7-
<PAGE>
If to the Company:
iXL, Inc.
1888 Emery Street, NW
Atlanta, GA 30318
Fax: 404/267-3801
Attention: William C. Nussey
with a copy to:
Minkin & Snyder, P.C.
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
Fax: 404/261-5064
with an additional copy to:
Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10022
Attention: James J. Connors II, Esq.
Fax: 212/223-2379
If to the Executive:
David Clauson
2862 Sacramento St.
San Francisco, CA 94115
(g) Amendments. This Agreement may not be altered, modified or amended
----------
except by a written instrument signed by each of the parties hereto.
(h) Headings. Headings to sections in this Agreement are for the
--------
convenience of the parties only and are not intended to be part of or to affect
the meaning or interpretation hereof.
(i) Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original but both of which together shall constitute
one and the same instrument.
(j) Withholding. Any payments provided for herein shall be reduced by any
-----------
amounts required to be withheld by the Company from time to time under
applicable Federal, state or local income or employment tax laws or similar
statutes or other provisions of law then in effect.
-8-
<PAGE>
(k) Governing Law. This Agreement shall be governed by the laws of the
-------------
State of Georgia, without reference to principles of conflicts or choice of law
under which the law of any other jurisdiction would apply.
[SIGNATURES ON FOLLOWING PAGE]
-9-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Executive has hereunto set his hand as of
the day and year first above written.
iXL, INC.
/s/ William C. Nussey
-----------------------------------
By: William C. Nussey
Title: President
THE EXECUTIVE:
/s/ David Clauson 7-31-98
-----------------------------------
David Clauson
-10-
<PAGE>
EXHIBIT A
STOCK OPTIONS
<TABLE>
<CAPTION>
-------------------------------------------------------
NUMBER OF OPTIONS TO PURCHASE
-----------------------------
EXERCISE PRICE CLASS B COMMON STOCK
-------------- --------------------
<S> <C>
$ 5.00 100,000
$10.00 500,000
-------------------------------------------------------
</TABLE>
VESTING SCHEDULE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
NUMBER OF
----------
DATE EXERCISE PRICE OPTIONS VESTED
- ---- -------------- ---------------
<S> <C> <C>
Executive's start date: $ 5.00 16,000
$10.00 80,000
The last day of each of the 48 calendar months
immediately following the month of
Executive's start date: $ 5.00 1,750
$10.00 8,750
- ------------------------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
EXHIBIT B
RESPONSIBILITIES OF THE EXECUTIVE
Create and refine corporate strategy, competitive positioning, corporate image
and visual style.
Create product definitions, positioning and collateral material for iXL's
productized services (like Pitchman and Siteman); product managers will continue
to report to CTO.
Oversee the Practice Group departments.
Raise iXL's visibility in the client marketplace through press attention,
executive speaking engagements and frugal use of paid channels such as
advertising and trade shows.
Manage all Marketing Communication channels including paper collateral, web
sites, Pitchman and other sales tools.
Select and manage a corporate-wide PR agency and Advertising agency.
create a lead generation, management, measurement and distribution system.
-12-
<PAGE>
EXHIBIT 10.11
PROMISSORY NOTE
---------------
$50,000.00 May 30, 1997
Los Angeles, California
FOR VALUE RECEIVED, the undersigned, KEVIN WALL, an individual residing in
the State of California, ("Maker"), promises to pay to the order of IXL
HOLDINGS, INC., a Delaware corporation ("Holder"), the principal sum of FIFTY
THOUSAND AND NO/100 DOLLARS ($50,000.00), plus interest calculated at the rate
of eight percent (8.0%) per annum on such principal amount, said principal and
interest to be payable at such place as the Holder may designate in writing, as
set forth below.
Accrued interest and the outstanding principal amount shall be due and
payable on May 30, 1998.
Maker shall be in default hereunder if (i) Maker fails timely to make any
payment due hereunder; (ii) Maker files or has filed against it any proceeding
under any insolvency or bankruptcy statute; (iii) Maker ceases to operate its
business; or (iv) any of the other conditions hereinafter set out are violated
or breached by Maker. If a default occurs, all amounts due hereunder shall, at
the option of the Holder, become immediately due and payable.
Maker, whether principal, surety or endorser waives demand, protest and
notice of demand, protest and non-payment. Maker further waives notice of
default and notice of acceleration of the maturity hereof by reason of default.
The failure of the Holder to exercise the right of accelerating the maturity of
the debt, or the granting by the Holder of any indulgence from time to time,
shall in no event be considered a waiver of such right of acceleration or
prevent the Holder from thereafter exercising such right at any time thereafter
as if another default shall thereafter exist.
Notwithstanding anything to the contrary contained herein, in no event
shall the total of all charges payable under this Note which are or could be
held to be in the nature of interest, exceed the maximum rate permitted to be
charged under any applicable law. Should Holder receive any payment which is or
would be in excess of that permitted to be charged under any applicable law,
such payment shall be deemed to have been made in error and shall automatically
either be reduced immediately to the maximum amount permitted by law or, if
required to comply with applicable law, be cancelled and, if theretofore paid,
at the option of Holder, be refunded to Maker or applied to reduce the principal
balance outstanding on this Note.
Any and all notices, demands and responses thereto permitted or required to
be given under this Note shall be in writing, and shall be deemed to have been
properly given or served and shall be effective upon being personally delivered
or two (2) days after being deposited in
<PAGE>
the United States Mail, postage prepaid, registered or certified mail, return
receipt requested, to the other party at the address of such other party set
forth below or at such other address as such other party may designate by notice
specifically designated as a notice of change of address and given in accordance
herewith; provided, however, that no notice of change of address shall be
effective until the date of receipt thereof. Personal delivery to a party or to
any officer, partner, agent or employee of such party at said address shall
constitute receipt. Rejection or other refusal to accept or inability to
deliver because of changed address of which no notice has been received shall
also constitute receipt. Any such notice, demand, or request shall be addressed
as follows:
If to Maker: BoxTop Interactive, Inc.
10960 Wilshire Boulevard
Suite 1550
Los Angeles, California 90024
Attention: Kevin Wall, President
With a copy to: Weissmann, Wolff, Bergman, Coleman & Silverman, LLP
9665 Wilshire Boulevard
Suite 900
Beverly Hills, California 90212
Attention: Alan L. Grodin, Esq.
If a Holder: IXL Holdings, Inc.
1465 Northside Drive
Suite 110
Atlanta, Georgia 30318
Attention: James V. Sandry
With copies to: Minkin & Snyder, A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James S. Altenbach, Esq.
and to: Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10032
Attention: James J. Connors II, Esq.
The unpaid principal evidenced by this Note and unpaid accrued interest
thereon may be prepaid, in whole or in part, from time to time and at any time,
without premium or penalty.
All of the rights, privileges and obligations hereof, shall inure to the
benefit of and bind the respective successors and assigns of the parties hereto.
2
<PAGE>
In case, and as often as, this Note is collected by an attorney at law, all
costs of collection, including reasonable attorney's fees, actually incurred,
shall be paid by Maker.
This Note is to be construed in accordance with, and governed by, the
internal laws of the State of Georgia, without regard to its principles of
conflict of laws.
IN WITNESS WHEREOF, Maker has set its hand and seal, by its duly authorized
officers, as of the date first above written.
By: /s/ Kevin Wall
------------------------------
KEVIN WALL, a California resident
3
<PAGE>
EXHIBIT 10.12
DEMAND PROMISSORY NOTE
----------------------
$500,000.00 September 15, 1997
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, IXL HOLDINGS, INC., a Delaware
corporation ("Maker"), promises to pay to the order of U. BERTRAM ELLIS, JR., an
individual residing in the State of Georgia ("Holder"), the principal sum of
FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00), plus interest calculated
at the rate of twelve percent (12.0%) per annum on such principal amount, said
principal and interest to be payable at such place as the Holder may designate
in writing, as set forth below.
Accrued interest and the outstanding principal amount shall be due and
payable on demand by the Holder.
Maker shall be in default hereunder if (i) Maker fails timely to make any
payment due hereunder; (ii) Maker files or has filed against it any proceeding
under any insolvency or bankruptcy statute; (iii) Maker ceases to operate its
business; or (iv) any of the other conditions hereinafter set out are violated
or breached by Maker. If a default occurs, all amounts due hereunder shall, at
the option of the Holder, become immediately due and payable.
Maker, whether principal, surety or endorser waives demand, protest and
notice of demand, protest and non-payment. Maker further waives notice of
default and notice of acceleration of the maturity hereof by reason of default.
The failure of the Holder to exercise the right of accelerating the maturity of
the debt, or the granting by the Holder of any indulgence from time to time,
shall in no event be considered a waiver of such right of acceleration or
prevent the Holder from thereafter exercising such right at any time thereafter
as if another default shall thereafter exist.
Notwithstanding anything to the contrary contained herein, in no event
shall the total of all charges payable under this Note which are or could be
held to be in the nature of interest, exceed the maximum rate permitted to be
charged under any applicable law. Should Holder receive any payment which is or
would be in excess of that permitted to be charged under any applicable law,
such payment shall be deemed to have been made in error and shall automatically
either be reduced immediately to the maximum amount permitted by law or, if
required to comply with applicable law, be canceled and, if theretofore paid, at
the option of Holder, be refunded to Maker or applied to reduce the principal
balance outstanding on this Note.
<PAGE>
Any and all notices, demands and responses thereto permitted or required to
be given under this Note shall be in writing, and shall be deemed to have been
properly given or served and shall be effective upon being personally delivered
or two (2) days after being deposited in the United States Mail, postage
prepaid, registered or certified mail, return receipt requested, to the other
party at the address of such other party set forth below or at such other
address as such other party may designate by notice specifically designated as a
notice of change of address and given in accordance herewith; provided, however,
that no notice of change of address shall be effective until the date of receipt
thereof. Personal delivery to a party or to any officer, partner, agent or
employee of such party at said address shall constitute receipt. Rejection or
other refusal to accept or inability to deliver because of changed address of
which no notice has been received shall also constitute receipt. Any such
notice, demand, or request shall be addressed as follows:
If to Maker: IXL Holdings, Inc.
Two Park Place
1888 Emery Street, 2nd Floor
Atlanta, Georgia 30318
Attention: James V. Sandry
If to Holder: U. Bertram Ellis, Jr.
1180 Northmoor Court, N.W.
Atlanta, Georgia 30327
The unpaid principal evidenced by this Note and unpaid accrued interest
thereon may be prepaid, in whole or in part, from time to time and at any time,
without premium or penalty.
All rights, privileges and obligations hereof, shall inure to the benefit
of and bind the respective successors and assigns of the parties hereto.
In case, and as often as, this Note is collected by an attorney at law, all
costs of collection, including reasonable attorney's fees, actually incurred,
shall be paid by Maker.
This Note is to be construed in accordance with, and governed by, the
internal laws of the State of Georgia, without regard to its principles of
conflict of laws.
IN WITNESS WHEREOF, Maker has set its hand and seal, by its duly authorized
officers, as of the date first above written.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
----------------------------
Name: James V. Sandry
--------------------------
Title: EVP & CFO
-------------------------
2
<PAGE>
EXHIBIT 10.13
DEMAND PROMISSORY NOTE
----------------------
$300,000.00 September 18, 1997
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, IXL HOLDINGS, INC., a Delaware
corporation ("Maker"), promises to pay to the order of JAMES R. ROCCO, an
individual residing in the State of Georgia ("Holder"), the principal sum of
THREE HUNDRED THOUSAND AND NO/100 DOLLARS ($300,000.00), plus interest
calculated at the rate of twelve percent (12.0%) per annum on such principal
amount, said principal and interest to be payable at such place as the Holder
may designate in writing, as set forth below.
Accrued interest and the outstanding principal amount shall be due and
payable on demand by the Holder.
Maker shall be in default hereunder if (i) Maker fails timely to make any
payment due hereunder; (ii) Maker files or has filed against it any proceeding
under any insolvency or bankruptcy statute; (iii) Maker ceases to operate its
business; or (iv) any of the other conditions hereinafter set out are violated
or breached by Maker. If a default occurs, all amounts due hereunder shall, at
the option of the Holder, become immediately due and payable.
Maker, whether principal, surety or endorser waives demand, protest and
notice of demand, protest and non-payment. Maker further waives notice of
default and notice of acceleration of the maturity hereof by reason of default.
The failure of the Holder to exercise the right of accelerating the maturity of
the debt, or the granting by the Holder of any indulgence from time to time,
shall in no event be considered a waiver of such right of acceleration or
prevent the Holder from thereafter exercising such right at any time thereafter
as if another default shall thereafter exist.
Notwithstanding anything to the contrary contained herein, in no event
shall the total of all charges payable under this Note which are or could be
held to be in the nature of interest, exceed the maximum rate permitted to be
charged under any applicable law. Should Holder receive any payment which is or
would be in excess of that permitted to be charged under any applicable law,
such payment shall be deemed to have been made in error and shall automatically
either be reduced immediately to the maximum amount permitted by law or, if
required to comply with applicable law, be canceled and, if theretofore paid, at
the option of Holder, be refunded to Maker or applied to reduce the principal
balance outstanding on this Note.
<PAGE>
Any and all notices, demands and responses thereto permitted or required to
be given under this Note shall be in writing, and shall be deemed to have been
properly given or served and shall be effective upon being personally delivered
or two (2) days after being deposited in the United States Mail, postage
prepaid, registered or certified mail, return receipt requested, to the other
party at the address of such other party set forth below or at such other
address as such other party may designate by notice specifically designated as a
notice of change of address and given in accordance herewith; provided, however,
that no notice of change of address shall be effective until the date of receipt
thereof. Personal delivery to a party or to any officer, partner, agent or
employee of such party at said address shall constitute receipt. Rejection or
other refusal to accept or inability to deliver because of changed address of
which no notice has been received shall also constitute receipt. Any such
notice, demand, or request shall be addressed as follows:
If to Maker: IXL Holdings, Inc.
Two Park Place
1888 Emery Street, 2nd Floor
Atlanta, Georgia 30318
Attention: James V. Sandry
If to Holder: James R. Rocco
1853 Ardmore Rd.
Atlanta, Georgia 30309
The unpaid principal evidenced by this Note and unpaid accrued interest
thereon may be prepaid, in whole or in part, from time to time and at any time,
without premium or penalty.
All rights, privileges and obligations hereof, shall inure to the benefit
of and bind the respective successors and assigns of the parties hereto.
In case, and as often as, this Note is collected by an attorney at law, all
costs of collection, including reasonable attorney's fees, actually incurred,
shall be paid by Maker.
This Note is to be construed in accordance with, and governed by, the
internal laws of the State of Georgia, without regard to its principles of
conflict of laws.
IN WITNESS WHEREOF, Maker has set its hand and seal, by its duly authorized
officers, as of the date first above written.
IXL HOLDINGS, INC.
By: /s/ U. Bertram Ellis, Jr.
--------------------------
Name: U. Bertram Ellis, Jr.
------------------------
Title: Chairman and Chief
-----------------------
Executive Officer
-----------------------
2
<PAGE>
EXHIBIT 10.14
DEMAND PROMISSORY NOTE
----------------------
$100,000.00 September 29, 1997
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, IXL HOLDINGS, INC., a Delaware
corporation ("Maker"), promises to pay to the order of JAMES S. ALTENBACH, an
individual residing in the State of Georgia ("Holder"), the principal sum of ONE
HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00), plus interest calculated at
the rate of twelve percent (12.0%) per annum on such principal amount, said
principal and interest to be payable at such place as the Holder may designate
in writing, as set forth below.
Accrued interest and the outstanding principal amount shall be due and
payable on demand by the Holder.
Maker shall be in default hereunder if (i) Maker fails timely to make any
payment due hereunder; (ii) Maker files or has filed against it any proceeding
under any insolvency or bankruptcy statute; (iii) Maker ceases to operate its
business; or (iv) any of the other conditions hereinafter set out are violated
or breached by Maker. If a default occurs, all amounts due hereunder shall, at
the option of the Holder, become immediately due and payable.
Maker, whether principal, surety or endorser waives demand, protest and
notice of demand, protest and non-payment. Maker further waives notice of
default and notice of acceleration of the maturity hereof by reason of default.
The failure of the Holder to exercise the right of accelerating the maturity of
the debt, or the granting by the Holder of any indulgence from time to time,
shall in no event be considered a waiver of such right of acceleration or
prevent the Holder from thereafter exercising such right at any time thereafter
as if another default shall thereafter exist.
Notwithstanding anything to the contrary contained herein, in no event
shall the total of all charges payable under this Note which are or could be
held to be in the nature of interest, exceed the maximum rate permitted to be
charged under any applicable law. Should Holder receive any payment which is or
would be in excess of that permitted to be charged under any applicable law,
such payment shall be deemed to have been made in error and shall automatically
either be reduced immediately to the maximum amount permitted by law or, if
required to comply with applicable law, be canceled and, if theretofore paid, at
the option of Holder, be refunded to Maker or applied to reduce the principal
balance outstanding on this Note.
<PAGE>
Any and all notices, demands and responses thereto permitted or required to
be given under this Note shall be in writing, and shall be deemed to have been
properly given or served and shall be effective upon being personally delivered
or two (2) days after being deposited in the United States Mail, postage
prepaid, registered or certified mail, return receipt requested, to the other
party at the address of such other party set forth below or at such other
address as such other party may designate by notice specifically designated as a
notice of change of address and given in accordance herewith; provided, however,
that no notice of change of address shall be effective until the date of receipt
thereof. Personal delivery to a party or to any officer, partner, agent or
employee of such party at said address shall constitute receipt. Rejection or
other refusal to accept or inability to deliver because of changed address of
which no notice has been received shall also constitute receipt. Any such
notice, demand, or request shall be addressed as follows:
If to Maker: IXL Holdings, Inc.
Two Park Place
1888 Emery Street, 2nd Floor
Atlanta, Georgia 30318
Attention: James V. Sandry
If to Holder: James S. Altenbach
512 Reston Mill Lane
Marietta, Georgia 30067
The unpaid principal evidenced by this Note and unpaid accrued interest
thereon may be prepaid, in whole or in part, from time to time and at any time,
without premium or penalty.
All rights, privileges and obligations hereof, shall inure to the benefit
of and bind the respective successors and assigns of the parties hereto.
In case, and as often as, this Note is collected by an attorney at law, all
costs of collection, including reasonable attorney's fees, actually incurred,
shall be paid by Maker.
This Note is to be construed in accordance with, and governed by, the
internal laws of the State of Georgia, without regard to its principles of
conflict of laws.
IN WITNESS WHEREOF, Maker has set its hand and seal, by its duly authorized
officers, as of the date first above written.
IXL HOLDINGS, INC.
By: /s/ U. Bertram Ellis, Jr.
-----------------------------
Name: U. Bertram Ellis, Jr.
---------------------------
Title: Chairman & CEO
--------------------------
2
<PAGE>
EXHIBIT 10.15
DEMAND PROMISSORY NOTE
----------------------
$1,000,000.00 October 10, 1997
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, IXL HOLDINGS, INC., a Delaware
corporation ("Maker"), promises to pay to the order of U. BERTRAM ELLIS, JR., an
individual residing in the State of Georgia ("Holder"), the principal sum of ONE
MILLION AND NO/100 DOLLARS ($1,000,000.00), plus interest calculated at the
rate of twelve percent (12.0%) per annum on such principal amount, said
principal and interest to be payable at such place as the Holder may designate
in writing, as set forth below.
Accrued interest and the outstanding principal amount shall be due and
payable on demand by the Holder.
Maker shall be in default hereunder if (i) Maker fails timely to make any
payment due hereunder; (ii) Maker files or has filed against it any proceeding
under any insolvency or bankruptcy statute; (iii) Maker ceases to operate its
business; or (iv) any of the other conditions hereinafter set out are violated
or breached by Maker. If a default occurs, all amounts due hereunder shall, at
the option of the Holder, become immediately due and payable.
Maker, whether principal, surety or endorser waives demand, protest and
notice of demand, protest and non-payment. Maker further waives notice of
default and notice of acceleration of the maturity hereof by reason of default.
The failure of the Holder to exercise the right of accelerating the maturity of
the debt, or the granting by the Holder of any indulgence from time to time,
shall in no event be considered a waiver of such right of acceleration or
prevent the Holder from thereafter exercising such right at any time thereafter
as if another default shall thereafter exist.
Notwithstanding anything to the contrary contained herein, in no event
shall the total of all charges payable under this Note which are or could be
held to be in the nature of interest, exceed the maximum rate permitted to be
charged under any applicable law. Should Holder receive any payment which is or
would be in excess of that permitted to be charged under any applicable law,
such payment shall be deemed to have been made in error and shall automatically
either be reduced immediately to the maximum amount permitted by law or, if
required to comply with applicable law, be canceled and, if theretofore paid, at
the option of Holder, be refunded to Maker or applied to reduce the principal
balance outstanding on this Note.
<PAGE>
Any and all notices, demands and responses thereto permitted or required to
be given under this Note shall be in writing, and shall be deemed to have been
properly given or served and shall be effective upon being personally delivered
or two (2) days after being deposited in the United States Mail, postage
prepaid, registered or certified mail, return receipt requested, to the other
party at the address of such other party set forth below or at such other
address as such other party may designate by notice specifically designated as a
notice of change of address and given in accordance herewith; provided, however,
that no notice of change of address shall be effective until the date of receipt
thereof. Personal delivery to a party or to any officer, partner, agent or
employee of such party at said address shall constitute receipt. Rejection or
other refusal to accept or inability to deliver because of changed address of
which no notice has been received shall also constitute receipt. Any such
notice, demand, or request shall be addressed as follows:
If to Maker: IXL Holdings, Inc.
Two Park Place
1888 Emery Street, 2nd Floor
Atlanta, Georgia 30318
Attention: James V. Sandry
If to Holder: U. Bertram Ellis, Jr.
1180 Northmoor Court, N.W.
Atlanta, Georgia 30327
The unpaid principal evidenced by this Note and unpaid accrued interest
thereon may be prepaid, in whole or in part, from time to time and at any time,
without premium or penalty.
All rights, privileges and obligations hereof, shall inure to the benefit
of and bind the respective successors and assigns of the parties hereto.
In case, and as often as, this Note is collected by an attorney at law, all
costs of collection, including reasonable attorney's fees, actually incurred,
shall be paid by Maker.
This Note is to be construed in accordance with, and governed by, the
internal laws of the State of Georgia, without regard to its principles of
conflict of laws.
IN WITNESS WHEREOF, Maker has set its hand and seal, by its duly authorized
officers, as of the date first above written.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
--------------------------------
Name: James V. Sandry
-------------------------------
Title: Executive Vice President and
------------------------------
Chief Financial Officer
------------------------------
2
<PAGE>
EXHIBIT 10.16
DEMAND PROMISSORY NOTE
----------------------
$1,000,000.00 October 30, 1997
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, IXL HOLDINGS, INC., a Delaware
corporation ("Maker"), promises to pay to the order of U. BERTRAM ELLIS, JR., an
individual residing in the State of Georgia ("Holder"), the principal sum of ONE
MILLION AND NO/100 DOLLARS ($1,000,000.00), plus interest calculated at the
rate of twelve percent (12.0%) per annum on such principal amount, said
principal and interest to be payable at such place as the Holder may designate
in writing, as set forth below.
Accrued interest and the outstanding principal amount shall be due and
payable on demand by the Holder.
Maker shall be in default hereunder if (i) Maker fails timely to make any
payment due hereunder; (ii) Maker files or has filed against it any proceeding
under any insolvency or bankruptcy statute; (iii) Maker ceases to operate its
business; or (iv) any of the other conditions hereinafter set out are violated
or breached by Maker. If a default occurs, all amounts due hereunder shall, at
the option of the Holder, become immediately due and payable.
Maker, whether principal, surety or endorser waives demand, protest and
notice of demand, protest and non-payment. Maker further waives notice of
default and notice of acceleration of the maturity hereof by reason of default.
The failure of the Holder to exercise the right of accelerating the maturity of
the debt, or the granting by the Holder of any indulgence from time to time,
shall in no event be considered a waiver of such right of acceleration or
prevent the Holder from thereafter exercising such right at any time thereafter
as if another default shall thereafter exist.
Notwithstanding anything to the contrary contained herein, in no event
shall the total of all charges payable under this Note which are or could be
held to be in the nature of interest, exceed the maximum rate permitted to be
charged under any applicable law. Should Holder receive any payment which is or
would be in excess of that permitted to be charged under any applicable law,
such payment shall be deemed to have been made in error and shall automatically
either be reduced immediately to the maximum amount permitted by law or, if
required to comply with applicable law, be canceled and, if theretofore paid, at
the option of Holder, be refunded to Maker or applied to reduce the principal
balance outstanding on this Note.
<PAGE>
Any and all notices, demands and responses thereto permitted or required to
be given under this Note shall be in writing, and shall be deemed to have been
properly given or served and shall be effective upon being personally delivered
or two (2) days after being deposited in the United States Mail, postage
prepaid, registered or certified mail, return receipt requested, to the other
party at the address of such other party set forth below or at such other
address as such other party may designate by notice specifically designated as a
notice of change of address and given in accordance herewith; provided, however,
that no notice of change of address shall be effective until the date of receipt
thereof. Personal delivery to a party or to any officer, partner, agent or
employee of such party at said address shall constitute receipt. Rejection or
other refusal to accept or inability to deliver because of changed address of
which no notice has been received shall also constitute receipt. Any such
notice, demand, or request shall be addressed as follows:
If to Maker: IXL Holdings, Inc.
Two Park Place
1888 Emery Street, 2nd Floor
Atlanta, Georgia 30318
Attention: James V. Sandry
If to Holder: U. Bertram Ellis, Jr.
1180 Northmoor Court, N.W.
Atlanta, Georgia 30327
The unpaid principal evidenced by this Note and unpaid accrued interest
thereon may be prepaid, in whole or in part, from time to time and at any time,
without premium or penalty.
All rights, privileges and obligations hereof, shall inure to the benefit
of and bind the respective successors and assigns of the parties hereto.
In case, and as often as, this Note is collected by an attorney at law, all
costs of collection, including reasonable attorney's fees, actually incurred,
shall be paid by Maker.
This Note is to be construed in accordance with, and governed by, the
internal laws of the State of Georgia, without regard to its principles of
conflict of laws.
IN WITNESS WHEREOF, Maker has set its hand and seal, by its duly authorized
officers, as of the date first above written.
IXL HOLDINGS, INC.
By: /s/James V. Sandry
--------------------------
Name: James V. Sandry
------------------------
Title: EVP & CFO
-----------------------
2
<PAGE>
EXHIBIT 10.17
DEMAND PROMISSORY NOTE
----------------------
$1,000,000.00 November 25, 1997
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, IXL HOLDINGS, INC., a Delaware
corporation ("Maker"), promises to pay to the order of U. BERTRAM ELLIS, JR., an
individual residing in the State of Georgia ("Holder"), the principal sum of ONE
MILLION AND NO/100 DOLLARS ($1,000,000.00), plus interest calculated at the rate
of twelve percent (12.0%) per annum on such principal amount, said principal and
interest to be payable at such place as the Holder may designate in writing, as
set forth below.
Accrued interest and the outstanding principal amount shall be due and
payable on demand by the Holder.
Maker shall be in default hereunder if (i) Maker fails timely to make any
payment due hereunder; (ii) Maker files or has filed against it any proceeding
under any insolvency or bankruptcy statute; (iii) Maker ceases to operate its
business; or (iv) any of the other conditions hereinafter set out are violated
or breached by Maker. If a default occurs, all amounts due hereunder shall, at
the option of the Holder, become immediately due and payable.
Maker, whether principal, surety or endorser waives demand, protest and
notice of demand, protest and non-payment. Maker further waives notice of
default and notice of acceleration of the maturity hereof by reason of default.
The failure of the Holder to exercise the right of accelerating the maturity of
the debt, or the granting by the Holder of any indulgence from time to time,
shall in no event be considered a waiver of such right of acceleration or
prevent the Holder from thereafter exercising such right at any time thereafter
as if another default shall thereafter exist.
Notwithstanding anything to the contrary contained herein, in no event
shall the total of all charges payable under this Note which are or could be
held to be in the nature of interest, exceed the maximum rate permitted to be
charged under any applicable law. Should Holder receive any payment which is or
would be in excess of that permitted to be charged under any applicable law,
such payment shall be deemed to have been made in error and shall automatically
either be reduced immediately to the maximum amount permitted by law or, if
required to comply with applicable law, be canceled and, if theretofore paid, at
the option of Holder, be refunded to Maker or applied to reduce the principal
balance outstanding on this Note.
<PAGE>
Any and all notices, demands and responses thereto permitted or required to
be given under this Note shall be in writing, and shall be deemed to have been
properly given or served and shall be effective upon being personally delivered
or two (2) days after being deposited in the United States Mail, postage
prepaid, registered or certified mail, return receipt requested, to the other
party at the address of such other party set forth below or at such other
address as such other party may designate by notice specifically designated as a
notice of change of address and given in accordance herewith; provided, however,
that no notice of change of address shall be effective until the date of receipt
thereof. Personal delivery to a party or to any officer, partner, agent or
employee of such party at said address shall constitute receipt. Rejection or
other refusal to accept or inability to deliver because of changed address of
which no notice has been received shall also constitute receipt. Any such
notice, demand, or request shall be addressed as follows:
If to Maker: IXL Holdings, Inc.
Two Park Place
1888 Emery Street, 2nd Floor
Atlanta, Georgia 30318
Attention: James V. Sandry
If to Holder: U. Bertram Ellis, Jr.
1180 Northmoor Court, N.W.
Atlanta, Georgia 30327
The unpaid principal evidenced by this Note and unpaid accrued interest
thereon may be prepaid, in whole or in part, from time to time and at any time,
without premium or penalty.
All rights, privileges and obligations hereof, shall inure to the benefit
of and bind the respective successors and assigns of the parties hereto.
In case, and as often as, this Note is collected by an attorney at law, all
costs of collection, including reasonable attorney's fees, actually incurred,
shall be paid by Maker.
This Note is to be construed in accordance with, and governed by, the
internal laws of the State of Georgia, without regard to its principles of
conflict of laws.
IN WITNESS WHEREOF, Maker has set its hand and seal, by its duly authorized
officers, as of the date first above written.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
----------------------------
Name: James V. Sandry
--------------------------
Title: EVP & CFO
-------------------------
2
<PAGE>
EXHIBIT 10.18
DEMAND PROMISSORY NOTE
----------------------
$1,300,000.00 December 3, 1997
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, IXL HOLDINGS, INC., a Delaware
corporation ("Maker"), promises to pay to the order of U. BERTRAM ELLIS, JR., an
individual residing in the State of Georgia ("Holder"), the principal sum of ONE
MILLION THREE HUNDRED THOUSAND AND NO/100 DOLLARS ($1,300,000.00), plus interest
calculated at the rate of twelve percent (12.0%) per annum on such principal
amount, said principal and interest to be payable at such place as the Holder
may designate in writing, as set forth below.
Accrued interest and the outstanding principal amount shall be due and
payable on demand by the Holder.
Maker shall be in default hereunder if (i) Maker fails timely to make any
payment due hereunder; (ii) Maker files or has filed against it any proceeding
under any insolvency or bankruptcy statute; (iii) Maker ceases to operate its
business; or (iv) any of the other conditions hereinafter set out are violated
or breached by Maker. If a default occurs, all amounts due hereunder shall, at
the option of the Holder, become immediately due and payable.
Maker, whether principal, surety or endorser waives demand, protest and
notice of demand, protest and non-payment. Maker further waives notice of
default and notice of acceleration of the maturity hereof by reason of default.
The failure of the Holder to exercise the right of accelerating the maturity of
the debt, or the granting by the Holder of any indulgence from time to time,
shall in no event be considered a waiver of such right of acceleration or
prevent the Holder from thereafter exercising such right at any time thereafter
as if another default shall thereafter exist.
Notwithstanding anything to the contrary contained herein, in no event
shall the total of all charges payable under this Note which are or could be
held to be in the nature of interest, exceed the maximum rate permitted to be
charged under any applicable law. Should Holder receive any payment which is or
would be in excess of that permitted to be charged under any applicable law,
such payment shall be deemed to have been made in error and shall automatically
either be reduced immediately to the maximum amount permitted by law or, if
required to comply with applicable law, be canceled and, if theretofore paid, at
the option of Holder, be refunded to Maker or applied to reduce the principal
balance outstanding on this Note.
<PAGE>
Any and all notices, demands and responses thereto permitted or required to
be given under this Note shall be in writing, and shall be deemed to have been
properly given or served and shall be effective upon being personally delivered
or two (2) days after being deposited in the United States Mail, postage
prepaid, registered or certified mail, return receipt requested, to the other
party at the address of such other party set forth below or at such other
address as such other party may designate by notice specifically designated as a
notice of change of address and given in accordance herewith; provided, however,
that no notice of change of address shall be effective until the date of receipt
thereof. Personal delivery to a party or to any officer, partner, agent or
employee of such party at said address shall constitute receipt. Rejection or
other refusal to accept or inability to deliver because of changed address of
which no notice has been received shall also constitute receipt. Any such
notice, demand, or request shall be addressed as follows:
If to Maker: IXL Holdings, Inc.
Two Park Place
1888 Emery Street, 2nd Floor
Atlanta, Georgia 30318
Attention: James V. Sandry
If to Holder: U. Bertram Ellis, Jr.
1180 Northmoor Court, N.W.
Atlanta, Georgia 30327
The unpaid principal evidenced by this Note and unpaid accrued interest
thereon may be prepaid, in whole or in part, from time to time and at any time,
without premium or penalty.
All rights, privileges and obligations hereof, shall inure to the benefit
of and bind the respective successors and assigns of the parties hereto.
In case, and as often as, this Note is collected by an attorney at law, all
costs of collection, including reasonable attorney's fees, actually incurred,
shall be paid by Maker.
This Note is to be construed in accordance with, and governed by, the
internal laws of the State of Georgia, without regard to its principles of
conflict of laws.
IN WITNESS WHEREOF, Maker has set its hand and seal, by its duly authorized
officers, as of the date first above written.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
---------------------------------
Name: James V. Sandry
-------------------------------
Title: EVP & CFO
------------------------------
2
<PAGE>
EXHIBIT 10.19
PROMISSORY NOTE
---------------
$4,000,000.00 JUNE 19, 1998
ATLANTA, GEORGIA
FOR VALUE RECEIVED, the undersigned, IXL HOLDINGS, INC., a Delaware
corporation; IXL MEMPHIS, INC, a Delaware corporation; IXL, INC., a Delaware
corporation; CREATIVE VIDEO LIBRARY, INC., a Georgia corporation; IXL-CHARLOTTE,
INC, a Delaware corporation; BOXTOP INTERACTIVE, INC., a Delaware corporation;
IXL-NEW YORK, INC., a Delaware corporation; IXL-SAN FRANCISCO, INC., a Delaware
corporation; IXL-LOS ANGELES, INC., a Delaware corporation; IXL-DENVER, INC., a
Delaware corporation; IXL-SAN DIEGO, INC., a Delaware corporation; IXL-BOSTON,
INC., a Delaware Corporation (collectively "Maker") promises to pay to the order
of DEBORAH HICKS ELLIS, a resident of the State of Georgia ("Holder"), the
principal sum of FOUR MILLION AND NO/100 DOLLARS (4,000,000.00) ("Principal
Amount"), plus interest calculated at ten (10%) percent per annum, on such
Principal Amount, said Principal Amount and accrued interest to be payable at
such place as Holder may designate, in writing, as set forth below.
The Principal Amount and the accrued interest shall be due and payable on
August 18, 1998.
Should Maker fail timely to make any payment due hereunder or if any of the
other conditions hereinafter set out are violated or breached, Maker shall be in
default hereunder. Maker shall have the right to cure any defaults under this
Note within ten (10) days of the giving, in writing, by Holder of a notice to
Maker of non-payment or other default. If a default occurs and is not cured
within the ten (10) day period provided for herein, all amounts due hereunder
shall, at the option of Holder, become immediately due and payable.
Notwithstanding any other provision herein to the contrary, should any party
comprising Maker file or have filed against it any proceeding under any
insolvency or bankruptcy statute, or if any party comprising Maker shall cease
to operate its business, Maker shall be in default hereunder and all amounts due
hereunder shall, at the option of Holder, become immediately due and payable and
Maker shall not have ten (10) days to cure such default.
Maker, whether principal, surety or endorser, waives demand, protest and
notice of demand, protest and non-payment. Maker further waives notice of
default and notice of acceleration of the maturity hereof by reason of default.
The failure of Holder to exercise the right of accelerating the maturity of the
debt, or the granting by Holder of any indulgence, from time to time, shall in
no event be considered a waiver of such right of acceleration or prevent Holder
from thereafter exercising such right at any time thereafter as if another
default shall thereafter exist.
Any and all notices, demands and responses thereto permitted or required to
be given under this Note shall be in writing, and shall be deemed to have been
properly
<PAGE>
given or served and shall be effective upon being personally delivered or two
(2) days after being deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested. Personal delivery to a
party or to any officer, partner, agent or employee of such party at said
address shall constitute receipt. Rejection or other refusal to accept or
inability to deliver because of changed address of which no notice has been
received shall also constitute receipt.
The unpaid Principal Amount evidenced by this Note and unpaid accrued
interest thereon may be prepaid, in whole or in part, from time to time, and at
any time, without premium or penalty.
All of the rights, privileges and obligations hereof shall inure to the
benefit of and bind the respective successors and assigns of the parties hereto.
In case this Note is collected by an attorney at law, all costs of
collection, including attorney's fees, actually and reasonably incurred, shall
be paid by Maker.
This Note is to be construed in all respects and enforced according to the
laws of the State of Georgia.
IN WITNESS WHEREOF, Maker has set its hand and seal, by its duly authorized
officers, as of the 19th day of June, 1998.
IXL HOLDINGS, INC., A Delaware
corporation
By: /s/ James V. Sandry
---------------------------------
Name:_______________________________
Title:______________________________
IXL-MEMPHIS, INC., A Delaware
corporation
By: /s/ James V. Sandry
---------------------------------
Name:_______________________________
Title:______________________________
IXL, INC., A Delaware corporation
By: /s/ James V. Sandry
---------------------------------
Name:_______________________________
Title:______________________________
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
<PAGE>
CREATIVE VIDEO LIBRARY, INC., A
Georgia corporation
By: /s/ James V. Sandry
----------------------------------
Name: James V. Sandry
--------------------------------
Title: Executive Vice President
-------------------------------
IXL-CHARLOTTE, INC., A Delaware
corporation
By: /s/ James V. Sandry
----------------------------------
Name: James V. Sandry
--------------------------------
Title: Executive Vice President
-------------------------------
BOXTOP INTERACTIVE, INC., a
Delaware corporation
By: /s/ James V. Sandry
----------------------------------
Name: James V. Sandry
--------------------------------
Title: Executive Vice President
-------------------------------
IXL-NEW YORK, INC., a Delaware
corporation
By: /s/ James V. Sandry
----------------------------------
Name: James V. Sandry
--------------------------------
Title: Executive Vice President
-------------------------------
IXL-SAN FRANCISCO, INC., a
Delaware corporation
By: /s/ James V. Sandry
----------------------------------
Name: James V. Sandry
--------------------------------
Title: Executive Vice President
-------------------------------
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
<PAGE>
IXL-LOS ANGELES, INC., a Delaware
corporation
By: /s/ James V. Sandry
----------------------------------
Name: James V. Sandry
--------------------------------
Title: Executive Vice President
-------------------------------
IXL-DENVER, INC., a Delaware
corporation
By: /s/ James V. Sandry
----------------------------------
Name: James V. Sandry
--------------------------------
Title: Executive Vice President
-------------------------------
IXL-SAN DIEGO, INC., a Delaware
corporation
By: /s/ James V. Sandry
----------------------------------
Name: James V. Sandry
--------------------------------
Title: Executive Vice President
-------------------------------
IXL-BOSTON, INC., a Delaware
corporation
By: /s/ James V. Sandry
----------------------------------
Name: James V. Sandry
--------------------------------
Title: Executive Vice President
-------------------------------
<PAGE>
PLEDGE AND SECURITY AGREEMENT
-----------------------------
THIS PLEDGE AND SECURITY AGREEMENT made and entered into as of the 19th day
of June 1998, by and between IXL HOLDINGS, INC., a Delaware corporation; IXL-
MEMPHIS, INC, a Delaware corporation; iXL, INC., a Delaware corporation;
CREATIVE VIDEO LIBRARY, INC., a Georgia corporation; IXL-CHARLOTTE, INC, a
Delaware corporation; BOXTOP INTERACTIVE, INC., a Delaware corporation; iXL-NEW
YORK, INC., a Delaware corporation; IXL-SAN FRANCISCO, INC., a Delaware
corporation; iXL-LOS ANGELES, INC., a Delaware corporation; iXL DENVER, INC., a
Delaware corporation; iXL-SAN DIEGO, INC., a Delaware corporation; and iXL-
BOSTON, INC., a Delaware Corporation (hereinafter collectively referred to as
"Pledgor") and DEBORAH HICKS ELLIS (hereinafter referred to as "Lender").
W I T N E S E T H:
-----------------
WHEREAS, Lender has on even date herewith made a loan (the "Loan") to
Pledgor, evidenced by that certain Promissory Note dated of even date herewith
from Pledgor to Lender in the face principal amount of $4,000,000 (herein
referred to as the "Note"); and
WHEREAS, in order to induce Lender to extend the Loan to Pledgor, Pledgor
has agreed to pledge, convey and grant to Lender security title to and a
security interest in certain collateral described below;
NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars
($10.00), the recitals contained above, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
1.
SECURED OBLIGATIONS
-------------------
This Pledge and Security Agreement (this "Agreement") is given by Pledgor
to Lender for the purpose of securing the due and punctual payment and
performance of all indebtedness and obligations of Pledgor to Lender arising
under the Note, together with any modifications, extensions and renewals of any
of the foregoing indebtedness or obligations and attorneys' fees reasonably and
actually incurred and other related expenses incurred by Lender in connection
therewith (collectively the "Secured Obligations").
<PAGE>
2.
PLEDGE
------
Pledgor hereby pledges, grants, bargains, sells, conveys, assigns and
transfers to Lender a security interest in the following (the "Collateral"): the
accounts receivable (the "Accounts Receivable") of Pledgor together with any and
all proceeds arising therefrom; it being intended that the Collateral include
all "Accounts" and "Proceeds" thereof of each party comprising Pledgor, as
defined in the Uniform Commercial Code as in effect under the laws of the State
in which the respective principal place of business of such party is located.
3.
REPRESENTATIONS AND WARRANTIES
------------------------------
Pledgor represents and warrants to Lender as follows:
(a) That Pledgor is the owner of the Collateral, free from any prior
or adverse pledge, lien, security interest or encumbrance. Pledgor will defend
Lender against any claims and demands of other persons at any time claiming a
superior interest in or claim to the Collateral;
(b) That to the best of Pledgor's knowledge and in accordance with
credit policies typically applied in such Pledgor's industry for the evaluation
of accounts receivable, all persons appearing to be obligated on the Accounts
Receivable have authority and capacity to contract and are bound as they appear
to be;
(c) That the Accounts Receivable are bona fide existing obligations;
(d) That this Agreement is in all respects legal, valid and binding
according to its terms and grants to Lender a direct, valid and enforceable
security interest in the Collateral;
(e) That Pledgor has the right and authority to pledge, deliver,
assign, and transfer the Collateral to Lender as provided herein;
(f) That the consummation of the transactions hereby contemplated
will not result in any breach of, or constitute a default under, any agreement
or instrument to which Pledgor is a party or by which it may be bound or
affected; and
(g) That there are no actions, suits or proceedings pending, or, to
the knowledge of Pledgor threatened against or affecting Pledgor, or the
Collateral, at law or in equity, or before or by any governmental authority.
-2-
<PAGE>
4.
PAYMENT OF ACCOUNTS RECEIVABLE
------------------------------
Pending the full payment and satisfaction of the Secured Obligations,
Pledgor covenants and agrees upon request of Lender after an Event of Default
to require each of the payors identified to send their payment of all amounts
owing with respect to such Account directly to Lender at the address indicated
below in Section 13. Pledgor shall, on Lender's request after an Event of
Default endorse such payments over to Lender. Lender shall return to Pledgor any
amounts paid to Lender by such payors in excess of the Secured Obligations.
5.
PRESERVATION OF THE VALUE OF COLLATERAL
---------------------------------------
Pending the full payment and satisfaction of the Secured Obligations,
Pledgor covenants and agrees as follows:
(a) Pledgor shall keep the Collateral free from all security
interests and other encumbrances except for the security interest granted
herein;
(b) Pledgor shall not sell, transfer, pledge, hypothecate, or
otherwise dispose of the Collateral or any interest therein by operation of law
or by voluntary act;
(c) Pledgor shall pay all taxes and other charges of any nature which
may be levied or assessed against the Collateral or any part thereof; and
(d) Pledgor shall, diligently and in good faith, use its best efforts
to protect the value of the Collateral and to prevent any action from being
taken which could, jeopardize or diminish the security afforded to Lender by
this Agreement or diminish the value of the Collateral.
6.
AGENCY
------
Pledgor hereby irrevocably appoints Lender as the authorized agent and
attorney-in-fact of Pledgor to enforce directly any and all rights of Pledgor
under or with respect to the Collateral. All parties may rely on the
authorization and agency contained in this Section 6 in making or directing
payments to Lender or otherwise recognizing the rights of Lender under, or with
respect to, the Collateral. Pledgor acknowledges and agrees that Lender shall be
under no obligation whatsoever to take any affirmative action with respect to
the Collateral or pursuant to this Agreement. Lender makes no assumption of the
obligations of pledgor by virtue hereof. This power-of-attorney is coupled with
an interest and is irrevocable until the Secured Obligations have been paid in
full.
-3-
<PAGE>
7.
EVENTS OF DEFAULT
-----------------
The happening of any of the following events or conditions shall constitute
a "Event of Default" hereunder:
(a) Pledgor fails to pay to Lender when due any amount due and
payable under the Note (after notice and the expiration of any cure period
therein contained); or
(b) A levy shall be made under any process on, or a receiver be
appointed for, all or substantially all of the Collateral; or
(c) Any of the parties comprising Pledgor shall file a voluntary
petition in bankruptcy, or any other petition or answer seeking or acquiescing
in any reorganization, arrangement, composition, readjustment, liquidation or
similar relief, under any present or future federal, state or other stature, law
or regulation relating to bankruptcy, insolvency or other similar relief for
debtors; or
(d) Any of the parties comprising Pledgor shall seek or consent to or
acquiesce in the appointment of any trustee, receiver or liquidator of all or
any part of the Collateral or of any or all of the revenues, issues, earnings,
profits or income thereof; or
(e) Any of the parties comprising Pledgor shall make any general
assignment for the benefit of creditors; or
(f) Any of the parties comprising Pledgor shall, without the prior
written consent of the Lender, voluntarily or by operation of law, sell,
transfer, convey, assign, or encumber all or any part of the legal or equitable
title to the Collateral, or any part of, or interest in, the Collateral; or
(g) Pledgor shall fail to duly keep, observe, or perform any other
covenant, condition, or agreement contained in this Agreement, and such failure
has continued for a period of fifteen (15) calendar days after Pledgor shall
receive notice of the occurrence of such failure, or any representation or
warranty contained in this Agreement shall fail to be true when made, and such
failure is not rectified within fifteen (15) calendar days after Pledgor shall
receive notice thereof.
8.
REMEDIES UPON DEFAULT
---------------------
Upon the occurrence of any Event of Default, Lender may (i) take such
actions and advance such sums on behalf of Pledgor as Lender may deem necessary
to protect the security of Lender hereunder, (ii) sell, assign, or otherwise
transfer the Collateral or any part thereof upon such terms
-4-
<PAGE>
and in such manner as Lender may choose, (iii) exercise any other remedies
available at law, in equity, or by agreement, or (iv) exercise any and all
remedies available to Pledgor with respect to the Collateral on Pledgor's behalf
and in Pledgor's name, place and stead as may be necessary, in Lender's sole
discretion, to realize, preserve or otherwise obtain the Collateral. All
advances made by Lender for the protection of the Collateral, and all expenses
(including reasonable attorney fees) incurred by Lender in enforcing and
protecting the rights of Lender hereunder, shall be secured hereby and shall be
immediately repaid by Pledgor to Lender upon demand, with interest thereon at
the rate of ten percent (10%) per annum. Lender shall, at all times during the
term hereof, have the rights and remedies of a secured party under the Uniform
Commercial Code of the State in which the principal place of business of each of
the parties comprising Pledgor shall be located. Lender will give Pledgor
reasonable notice of the time at which any private sale or any other intended
disposition of the Collateral is to be made. The requirements of reasonable
notice shall be met if the notice is mailed, postage prepaid, to Pledgor's
address set forth in Section 13, at least ten (10) days before the time of the
sale or disposition. Lender shall act as the authorized agent and attorney-in-
fact of Pledgor in disposing of all or any part of the Collateral and in that
capacity is authorized to take such action on behalf of Pledgor as will further
such a disposition, including, without limitation, the provision of any
necessary endorsement or signature. The proceeds of any such sale shall be
applied first to expenses incurred by Lender in connection with the exercise of
its rights under this Agreement, including, without limitation, advances to
protect the security of the Lender hereunder and expenses of any such sale and
of all proceedings in connection therewith,including reasonable attorneys fees,
and then to the payment of the principal balance of the indebtedness secured
hereby and accrued interest and late charges thereon, and-finally, the
remainder, if any, shall be paid to Pledgor. Any purchaser (including, without
limitation, Lender) at a sale conducted by lender pursuant to the terms of this
Agreement shall hold the property acquired free from any claim or right on the
part of Pledgor and Pledgor and hereby waives any right of redemption, stay, or
appraisal under present or future law.
9.
PROCEEDINGS BY LENDER
---------------------
Lender shall have the power (a) to institute and maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the Collateral
by any acts which may be unlawful or any violation of this Agreement, (b) to
preserve or protect its interest in the Collateral, and (c) to seek through
legal means to restrain the enforcement of or compliance with any legislation or
any other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid, if the enforcement of or compliance with such enactment, rule
or order would impair the security hereunder or be prejudicial to the interest
of Lender in the Collateral; provided, however, Lender shall not institute or
maintain any such suits or proceedings against parties other than Pledgor unless
and until Lender shall first have made upon Pledgor such request to do so as
shall then be reasonable under the circumstances, and Pledgor shall have
thereupon failed either to institute and maintain such suit or otherwise to cure
or correct any such matters or circumstances. Pledgor shall pay or reimburse
Lender for all reasonable attorneys' fees, costs, and expenses incurred by
Lender in any proceeding involving the Collateral or in any action, Legal
proceeding or dispute of any kind in which Lender is made a party, or appears as
a party, plaintiff, or defendant,
-5-
<PAGE>
affecting the security interest established hereby; and any such amounts paid by
Lender shall be added to the indebtedness secured by this Agreement.
10.
FURTHER ASSURANCES
------------------
At any time, and from time to time, upon request by Lender, Pledgor shall
make, execute and deliver or cause to be made, executed and delivered, to
Lender, any and all other further instruments, certificates, financing
statements and other documents as may, in the opinion of Lender, be necessary or
desirable in order to effectuate, complete or perfect or to continue and
preserve the security interest of Lender in the Collateral. Upon any failure by
Pledgor to do so, Lender may make, execute and record any and all such
instruments, certificates and documents for and in the name of Pledgor, and
Pledgor hereby irrevocably appoints Lender the agent and attorney-in-fact of
Pledgor to do so, such power of attorney being deemed to be a power coupled with
an interest which cannot be revoked by dissolution or otherwise.
11.
NO WAIVER
---------
Lender shall not be deemed to have waived any of Lender's rights under this
Agreement unless the waiver is in writing and signed by Lender. No delay or
omission on the part of Lender in exercising any right shall operate as a waiver
of such right or any other right. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right or remedy on any future occasion.
12.
REMEDIES NOT EXCLUSIVE
----------------------
No right, power or remedy conferred upon or reserved by Lender by this
Agreement is intended to be exclusive of any other right, power or remedy, but
each and every right, power and remedy shall be cumulative and concurrent and
shall be in addition to any other right, power and remedy given hereunder, or
now or hereafter existing at law or in equity or by statute.
13.
NOTICES
-------
Any and all notices, demands and responses thereto permitted or required to
be given under this Agreement shall be in writing, and shall be deemed to have
been properly given or served and
-6-
<PAGE>
shall be effective upon being personally delivered, upon being sent by telecopy
with confirmation received, or two (2) days after being deposited in the United
States Mail, postage prepaid, registered or certified mail, return receipt
requested, to the other party at the address of such other party set forth below
or at such other address as such other party may designate by notice
specifically designated as a notice of change of address and given in accordance
herewith. Any such notice, demand, or request shall be addressed as follows:
Pledgor: c/o iXL Holdings, Inc,
1888 Emery Street
Ste. 200
Atlanta, Georgia 30318
Lender: Deborah Hicks Ellis
1180 Northmoor Ct.
Atlanta, Georgia 30327
14.
SUCCESSORS AND ASSIGNS
----------------------
This Agreement and all rights and liabilities under it and in the
indebtedness secured by it and the Collateral described in it shall inure to the
benefit of Lender, its successors and assigns and shall be binding upon Pledgor
and Pledgor's heirs, executors, administrators, successors and permitted
assigns.
15.
TERMINATION
-----------
Provided there is no outstanding Default or Event of Default hereunder,
this Agreement shall terminate immediately upon the payment in full of the Note,
including all accrued interest thereunder. Upon such termination, Lender shall
execute and deliver such cancellations and documents as may be necessary or
desirable to terminate Lender's interest in the Collateral hereunder.
16.
INVALIDITY OF ANY PROVISION
---------------------------
If any provision of this Agreement is held to be unenforceable or invalid,
then such unenforceable or invalid provision shall be deemed deleted or amended,
as necessary, but such
-7-
<PAGE>
unenforceability or invalidity shall not render unenforceable or impair the
remainder of this Agreement, it being the intention of the parties hereto that
the provisions of this Agreement be enforced to the fullest extent permissible
under the laws and public policies of each state in which such enforcement is
sought.
17.
EXECUTION IN COUNTERPARTS
-------------------------
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which taken together shall
constitute but one and the same instrument.
18.
GOVERNING LAW; AMENDMENTS
-------------------------
This Agreement and all rights and obligations hereunder, including matters
of construction, validity and performance, shall be governed by the laws of the
State of Georgia. This Agreement may not be amended or modified except in a
writing signed by each of the parties hereto.
19.
TIME OF ESSENCE
---------------
Time is of the essence in the performance of Pledgor's obligations
hereunder.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
-8-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and sealed as of
the date and year first above written.
IXL HOLDINGS, INC., a Delaware
corporation
By: /s/ James V. Sandry
------------------------------------
Name: James V. Sandry
----------------------------------
Title: Executive Vice President
---------------------------------
IXL-MEMPHIS, INC., A Delaware
corporation
By: /s/ James V. Sandry
------------------------------------
Name: James V. Sandry
----------------------------------
Title: Executive Vice President
---------------------------------
iXL, INC., A Delaware corporation
By: /s/ James V. Sandry
------------------------------------
Name: James V. Sandry
----------------------------------
Title: Executive Vice President
---------------------------------
CREATIVE VIDEO LIBRARY, INC., A
Georgia corporation
By: /s/ James V. Sandry
------------------------------------
Name: James V. Sandry
----------------------------------
Title: Executive Vice President
---------------------------------
IXL-CHARLOTTE, INC., A Delaware
corporation
By: /s/ James V. Sandry
------------------------------------
Name: James V. Sandry
----------------------------------
Title: Executive Vice President
---------------------------------
-9-
<PAGE>
BOXTOP INTERACTIVE, INC., a
Delaware corporation
By: /s/ James V. Sandry
------------------------------------
Name: James V. Sandry
----------------------------------
Title: Executive Vice President
---------------------------------
iXL-NEW YORK, INC., a Delaware
corporation
By: /s/ James V. Sandry
------------------------------------
Name: James V. Sandry
----------------------------------
Title: Executive Vice President
---------------------------------
iXL-SAN FRANCISCO, INC., a Delaware
corporation
By: /s/ James V. Sandry
------------------------------------
Name: James V. Sandry
----------------------------------
Title: Executive Vice President
---------------------------------
iXL-LOS ANGELES, INC., a Delaware
corporation
By: /s/ James V. Sandry
------------------------------------
Name: James V. Sandry
----------------------------------
Title: Executive Vice President
---------------------------------
iXL-DENVER, INC., a Delaware
corporation
By: /s/ James V. Sandry
------------------------------------
Name: James V. Sandry
----------------------------------
Title: Executive Vice President
---------------------------------
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
-10-
<PAGE>
iXL-SAN DIEGO, INC., a Delaware
corporation
By: /s/ James V. Sandry
-------------------------------
Name: James V. Sandry
-----------------------------
Title: Executive Vice President
----------------------------
iXL-BOSTON, INC., a Delaware
corporation
By: /s/ James V. Sandry
-------------------------------
Name: James V. Sandry
-----------------------------
Title: Executive Vice President
----------------------------
-11-
<PAGE>
EXHIBIT 10.20
DEMAND PROMISSORY NOTE
----------------------
$2,000,000.00 July 20, 1998
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, IXL HOLDINGS, INC., a Delaware
corporation ("Maker"), promises to pay to the order of U. BERTRAM ELLIS, JR., an
individual residing in the State of Georgia ("Holder"), the principal sum of TWO
MILLION AND NO/100 DOLLARS ($2,000,000.00), plus interest calculated at the rate
of twelve per cent (12.0%) per annum on such principal amount, said principal
and interest to be payable at such place as the Holder may designate in writing,
as set forth below.
Accrued interest and the outstanding principal amount shall be due and
payable on demand by the Holder.
Maker shall be in default hereunder if (i) Maker fails timely to make any
payment due hereunder; (ii) Maker files or has filed against it any proceeding
under any insolvency or bankruptcy statute; (iii) Maker ceases to operate its
business; or (iv) any of the other conditions hereinafter set out are violated
or breached by Maker. If a default occurs, all amounts due hereunder shall, at
the option of the Holder, become immediately due and payable.
Maker, whether principal, surety or endorser waives demand, protest and
notice of demand, protest and non-payment. Maker further waives notice of
default and notice of acceleration of the maturity hereof by reason of default.
The failure of the Holder to exercise the right of accelerating the maturity of
the debt, or the granting by the Holder of any indulgence from time to time,
shall in no event be considered a waiver of such right of acceleration or
prevent the Holder from thereafter exercising such right at any time thereafter
as if another default shall thereafter exist.
Notwithstanding anything to the contrary contained herein, in no event
shall the total of all charges payable under this Note which are or could be
held to be in the nature of interest, exceed the maximum rate permitted to be
charged under any applicable law. Should Holder receive any payment which is or
would be in excess of that permitted to be charged under any applicable law,
such payment shall be deemed to have been made in error and shall automatically
either be reduced immediately to the maximum amount permitted by law or, if
required to comply with applicable law, be canceled and, if theretofore paid, at
the option of Holder, be refunded to Maker or applied to reduce the principal
balance outstanding on this Note.
Any and all notices, demands and responses thereto permitted or required to
be given under this Note shall be in writing, and shall be deemed to have been
properly given or served and shall be effective upon being personally delivered
or two (2) days after being deposited in the United States Mail, postage
prepaid, registered or certified mail, return receipt requested, to the other
party at the address of such other party set forth below or at such other
address as such other party may designate by notice specifically designated as a
notice of change of address and given in accordance herewith; provided, however,
that no notice of change of address shall be effective until the date of
-1-
<PAGE>
receipt thereof. Personal delivery to a party or to any officer, partner, agent
or employee of such party at said address shall constitute receipt. Rejection or
other refusal to accept or inability to deliver because of changed address of
which no notice has been received shall also constitute receipt. Any such
notice, demand, or request shall be addressed as follows:
If to Maker: IXL Holdings, Inc.
1888 Emery Street
Atlanta, Georgia 30318
Attention: James V. Sandry
If to Holder: U. Bertram Ellis, Jr.
1180 Northmoor Court, N.W.
Atlanta, Georgia 30327
The unpaid principal evidenced by this Note and unpaid accrued interest
thereon may be prepaid, in whole or in part, from time to time and at any time,
without premium or penalty.
All rights, privileges and obligations hereof, shall inure to the benefit
of and bind the respective successors and assigns of the parties hereto.
In case, and often as, this Note is collected by an attorney at law, all
costs of collection, including reasonable attorney's fees, actually incurred,
shall be paid by Maker.
This Note is to be construed in accordance with, and governed by, the
internal laws of the State of Georgia, without regard to its principles of
conflict of laws.
IN WITNESS WHEREOF, Maker has set its hand and seal, by its duly authorized
officers, as of the date first above written.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
-------------------------------
Name: JAMES V. SANDRY
-------------------------------
Title: EVP
------------------------------
-2-
<PAGE>
EXHIBIT 10.21
================================================================================
CREDIT AGREEMENT
dated as of
July 29, 1998
as Amended and Restated as of
November 30, 1998
among
iXL ENTERPRISES, INC.,
The Lenders Party Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
_________________________
CHASE SECURITIES INC.,
as Arranger
================================================================================
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
Definitions
-----------
<S> <C>
SECTION 1.01. Defined Terms ..................................... 1
SECTION 1.02. Classification of Loans and
Borrowings ........................................ 20
SECTION 1.03. Terms Generally ................................... 20
SECTION 1.04. Accounting Terms; GAAP ............................ 20
ARTICLE II
The Credits
-----------
SECTION 2.01. Commitments ....................................... 20
SECTION 2.02. Loans and Borrowings .............................. 21
SECTION 2.03. Requests for Borrowings ........................... 21
SECTION 2.04. Letters of Credit ................................. 21
SECTION 2.05. Funding of Borrowings ............................. 26
SECTION 2.06. Termination and Reduction of Commitments .......... 26
SECTION 2.07. Repayment of Loans; Evidence of Debt .............. 27
SECTION 2.08. Amortization of Term Loans ........................ 27
SECTION 2.09. Prepayment of Loans ............................... 28
SECTION 2.10. Fees .............................................. 29
SECTION 2.11. Interest .......................................... 30
SECTION 2.12. Increased Costs ................................... 30
SECTION 2.13. Break Funding Payments ............................ 31
SECTION 2.14. Taxes ............................................. 32
SECTION 2.15. Payments Generally: Pro Rata Treatment; Sharing of
Set-offs ......................................... 33
SECTION 2.16. Mitigation Obligations; Replacement
of Lenders ....................................... 34
</TABLE>
1
<PAGE>
ARTICLE III
Representations and Warranties
------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 3.01. Organization; Powers .............................. 35
SECTION 3.02. Authorization; Enforceability ..................... 35
SECTION 3.03. Governmental Approvals; No Conflicts .............. 35
SECTION 3.04. Financial Condition; No Material Adverse Change ... 36
SECTION 3.05. Properties ........................................ 36
SECTION 3.06. Litigation and Environmental Matters .............. 37
SECTION 3.07. Compliance with Laws and Agreements ............... 37
SECTION 3.08. Investment and Holding Company Status ............. 37
SECTION 3.09. Taxes ............................................. 37
SECTION 3.10. ERISA ............................................. 38
SECTION 3.11. Disclosure ........................................ 38
SECTION 3.12. Subsidiaries ...................................... 38
SECTION 3.13. Insurance ......................................... 38
SECTION 3.14. Labor Matters ..................................... 38
SECTION 3.15. Solvency .......................................... 39
SECTION 3.16. Security Documents ................................ 39
SECTION 3.17. Year 2000 ......................................... 40
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date .................................... 40
SECTION 4.02. Each Credit Event ................................. 42
ARTICLE V
---------
Affirmative Covenants
---------------------
SECTION 5.01. Financial Statements and Other Information ........ 43
SECTION 5.02. Notices of Material Events ........................ 45
SECTION 5.03. Information Regarding Collateral .................. 45
SECTION 5.04. Existence; Conduct of Business .................... 46
SECTION 5.05. Payment of Obligations ............................ 46
SECTION 5.06. Maintenance of Properties ......................... 46
SECTION 5.07. Insurance ......................................... 46
SECTION 5.08. Books and Records, Inspection and
Collateral Review Rights ......................... 46
SECTION 5.09. Compliance with Laws .............................. 47
SECTION 5.10. Use of Proceeds and Letters of Credit ............. 47
SECTION 5.11. Additional Subsidiaries ........................... 47
SECTION 5.12. Further Assurances ................................ 48
SECTION 5.13. Federal Reserve Regulations ....................... 48
SECTION 5.14. Delivery of Securities ............................ 48
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
SECTION 5.15. [Intentionally Omitted] ........................... 49
SECTION 5.16. Bank Account ...................................... 49
SECTION 5.17. Fees .............................................. 49
ARTICLE VI
Negative Covenants
------------------
SECTION 6.01. Indebtedness and Preferred Stock .................. 49
SECTION 6.02. Liens ............................................. 50
SECTION 6.03. Fundamental Changes ............................... 51
SECTION 6.04. Investments, Loans, Advances,
Guarantees and Acquisitions ...................... 52
SECTION 6.05. Asset Sales ....................................... 54
SECTION 6.06. Sale and Lease-Back Transactions .................. 54
SECTION 6.07. Hedging Agreements ................................ 55
SECTION 6.08. Restricted Payments; Certain Payments
of Indebtedness .................................. 55
SECTION 6.09. Transactions with Affiliates ...................... 55
SECTION 6.10. Restrictive Agreements ............................ 56
SECTION 6.11. Amendment of Material Documents ................... 56
SECTION 6.12. Subsidiaries ...................................... 56
SECTION 6.13. Minimum Consolidated EBITDA ....................... 57
SECTION 6.14. Total Debt to Contributed Capital ................. 57
SECTION 6.15. Fiscal Year ....................................... 57
ARTICLE VII
Events of Default ............................ 57
-----------------
ARTICLE VIII
The Administrative Agent .......................... 60
------------------------
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Notices ........................................... 62
SECTION 9.02. Waivers; Amendments ............................... 62
SECTION 9.03. Expenses; Indemnity; Damage Waiver ................ 64
SECTION 9.04. Successors and Assigns ............................ 65
SECTION 9.05. Survival .......................................... 67
SECTION 9.06. Counterparts; Integration;
Effectiveness .................................... 68
SECTION 9.07. Severability ...................................... 68
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 9.08. Right of Set-off .................................. 68
SECTION 9.09. Governing Law; Jurisdiction; Consent
to Service of Process ............................ 69
SECTION 9.10. WAIVER OF JURY TRIAL .............................. 69
SECTION 9.11. Headings .......................................... 69
SECTION 9.12. Confidentiality .................................... 70
SECTION 9.13. Interest Rate Limitation .......................... 70
SECTION 9.14. Effect of Amendment and Restatement ............... 71
SCHEDULES:
- ---------
Schedule 2.01 - Commitments
Schedule 3.04 - Contingent Liabilities
Schedule 3.05 - Owned or Leased Property
Schedule 3.06 - Disclosed Matters
Schedule 3.12 - Subsidiaries
Schedule 3.13 - Insurance
Schedule 6.01 - Existing Indebtedness
Schedule 6.02 - Existing Liens
Schedule 6.04 - Existing Investments
Schedule 6.09 - Disclosed Affiliate Transactions
Schedule 6.10 - Existing Restrictions
EXHIBITS:
- --------
Exhibit A -- Form of Assignment and Acceptance
Exhibit B-1 -- Form of Opinion of Minkin & Snyder, Counsel to Loan Parties
Exhibit B-2 -- Form of Opinion of Debevoise & Plimpton, Counsel to Loan Parties
Exhibit C -- Form of Guarantee Agreement
Exhibit D -- Form of Indemnity, Subrogation and Contribution Agreement
Exhibit E -- Form of Pledge Agreement
Exhibit F -- Form of Security Agreement
Exhibit G -- Form of Borrowing Base Certificate
</TABLE>
4
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of July 29, 1998, as amended and restated as of
November 30, 1998, among iXL ENTERPRISES, INC., the
LENDERS party hereto and THE CHASE MANHATTAN
BANK, as Administrative Agent.
The Borrower (such term and the other capitalized terms used herein
having the meanings hereinafter provided) and The Chase Manhattan Bank, as sole
Lender and as Administrative Agent, have entered into the Credit Agreement dated
as of July 29, 1998 (as in effect immediately prior to the date hereof, the
"Original Credit Agreement"). The parties hereto desire to amend and restate the
Original Credit Agreement in the form hereof in order to provide for the
amendment of the definition of "Borrowing Base" and to make certain other
related changes as set forth herein. Accordingly, the parties hereto agree as
follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms. As used in this Agreement, the following
-------------
terms have the meanings specified below:
"Account" means any right to payment for goods sold or leased or for
-------
services rendered, whether or not earned by performance.
"Account Debtor" means, with respect to any Account, the obligor with
--------------
respect to such Account.
"Accounts Receivable Subsidiary" means any active, wholly owned
------------------------------
operating Subsidiary of the Borrower that is also a Subsidiary Loan Party and is
organized under the laws of any state of the United States or any territory
thereof or the District of Columbia.
"Administrative Agent" means The Chase Manhattan Bank, in its capacity
--------------------
as administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire
----------------------------
in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person
---------
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Alternate Base Rate" means, for any day, a rate per annum equal to
-------------------
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1% . Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
<PAGE>
2
"Amendment Effective Date" means November 30, 1998.
------------------------
"Applicable Percentage" means, with respect to any Revolving Lender,
---------------------
the percentage of the total Revolving Commitments represented by such Lender's
Revolving Commitment. If the Revolving Commitments have terminated or expired,
the Applicable Percentages shall be determined based upon the Revolving
Commitments most recently in effect, giving effect to any assignments.
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent.
"Billed Receivable Availability" means 75% of Eligible Billed
------------------------------
Accounts Receivable.
"Board" means the Board of Governors of the Federal Reserve System of
-----
the United States of America.
"Borrower" means iXL Enterprises, Inc., a Delaware corporation.
--------
"Borrowing" means a group of Loans of the same Class.
---------
"Borrowing Base" means, an amount equal to the sum, without
--------------
duplication of (i) the Billed Receivable Availability, (ii) the Unbilled
Receivable Availability, (iii) 35% of the Computer Equipment Valuation, (iv)
55% of the Video Equipment Valuation and (v) 100% of the Video Library
Valuation. The Borrowing Base shall be computed as of the end of each fiscal
month; provided that the Borrowing Base in effect at any time shall be
determined by reference to the most recent Borrowing Base Certificate delivered
to the Administrative Agent, absent any error in such Borrowing Base
Certificate. Standards for calculation of the Borrowing Base may be fixed from
time to time solely by the Administrative Agent in the exercise of its
reasonable judgment, with any changes in such standards to be effective 30 days
after delivery of notice thereof to the Borrower.
"Borrowing Base Certificate" has the meaning assigned to such term in
--------------------------
Section 5.01(f).
"Borrowing Request" means a request by the Borrower for a Borrowing in
-----------------
accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other
------------
day on which commercial banks in New York City are authorized or required by law
to remain closed.
"Capital Lease Obligations" of any Person means the obligations of
-------------------------
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
<PAGE>
3
"CB Capital" means CB Capital Investors, L.P.
----------
"CERCLA" means the Comprehensive Environmental Response, Compensation,
------
and Liability Act, 42 U.S.C. (S) 9601 et seq.
-- ----
"Change in Control" means, at any time, (a) the failure by Kelso, the
-----------------
Designated Affiliates and CB Capital to own, directly or indirectly,
beneficially and of record, shares in the aggregate representing at least 51%
of the aggregate ordinary voting power represented by the issued and outstanding
capital stock of the Borrower; provided that in the event any Designated
--------
Affiliate (other than Kelso Investment Associates, L.P. and Kelso Equity
Partners V, L.P.) shall, at any time after the Effective Date, own, directly or
indirectly, beneficially or of record, an amount of shares of capital stock of
the Borrower in excess of the amount owned by such Designated Affiliate as of
the Effective Date, such Designated Affiliate shall no longer constitute a
Designated Affiliate for purposes of this Credit Agreement; (b) the acquisition
of ownership, directly or indirectly, beneficially or of record, by any Person
or group (within the meaning of the Securities Exchange Act of 1934 and the
rules of the Securities and Exchange Commission thereunder as in effect on the
date hereof) other than Kelso and/or CB Capital, of shares representing more
than 30% of the aggregate ordinary voting power represented by the issued and
outstanding capital stock of the Borrower; (c) occupation of a majority of the
seats (other than vacant seats) on the board of directors of the Borrower by
Persons who were neither (i) nominated by the board of directors of the Borrower
nor (ii) appointed by directors so nominated; (d) the acquisition of direct or
indirect Control of the Borrower by any Person or group other than Kelso and/or
CB Capital; or (e) the acquisition at any time of ownership, directly or
indirectly, beneficially and of record, by any Person or group of shares of the
Borrower's capital stock that in the aggregate exceed the aggregate number of
shares of the Borrower's capital stock owned, directly or indirectly,
beneficially and of record by Kelso and CB Capital at such time.
"CFN" means Consumer Financial Network, Inc., a Delaware corporation.
---
"CFN Subsidiaries" means CFN and its subsidiaries.
----------------
"CFN Wholly owned Period" means the period commencing on the Effective
-----------------------
Date and ending on the date on which CFN issues an equity interest to a Person
other than the Borrower or its Subsidiaries.
"Change in Law" means (a) the adoption of any law, rule or regulation
-------------
after the Effective Date, (b) any change in any law, rule or regulation or in
the interpretation or application thereof by any Governmental Authority after
the Effective Date or (c) compliance by any Lender or the Issuing Bank (or, for
purposes of Section 2.12(b), by any lending office of such Lender or by such
Lender's or the Issuing Bank's holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the Effective Date.
"Class", when used in reference to any Loan or Borrowing, refers to
-----
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans
or
<PAGE>
4
Term Loans and when used in reference to any Commitment, refers to whether such
Commitment is a Revolving Commitment or a Term Commitment.
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time.
"Collateral" means any and all "Collateral", as defined in any
----------
applicable Security Document.
"Collateral Agent" means the "Collateral Agent", as defined in any
----------------
applicable Security Document.
"Commitment" means a Revolving Commitment or Term Commitment, or any
----------
combination thereof (as the context requires).
"Computer Equipment Valuation" means, at the time of any determination
----------------------------
thereof, the net book value of the Borrower's and its Accounts Receivable
Subsidiaries' computer equipment (depreciated on a straight-line basis),
determined in accordance with GAAP on a basis consistent with the Borrower's
historical and current accounting practices. Upon the Borrower's prior consent,
which consent shall not be unreasonably withheld, professionals retained by the
Collateral Agent may conduct annual appraisals of such computer equipment,
provided each such annual appraisal shall utilize appraisal techniques
consistent with the appraisal of such computer equipment conducted on behalf of
the Collateral Agent prior to the Amendment Effective Date. The Borrower shall
pay the fees and expenses of such professionals. For purposes of calculating the
Borrowing Base, no computer equipment may be included in the Computer Equipment
Valuation unless (i) the Borrower or an Accounts Receivable Subsidiary has good
and unencumbered title thereto (subject to Permitted Encumbrances), (ii) the
Collateral Agent on behalf of the Secured Parties possesses a valid first
priority perfected security interest therein pursuant to the Security Documents
and (iii) such equipment is in service at the end of the month for which the
Borrowing Base is being determined and is not construction-in-progress.
"Consolidated EBITDA" means, for any period, Consolidated Net Income
-------------------
for such period, plus, without duplication and to the extent deducted from
----
revenues in determining Consolidated Net Income, the sum of (a) the aggregate
amount of Consolidated Interest Expense for such period, (b) the aggregate
amount of letter of credit fees paid during such period, (c) the aggregate
amount of income tax expense for such period, (d) all amounts attributable to
depreciation and amortization for such period, (e) all extraordinary charges
during such period, (f) non-cash expenses resulting from the grant of stock
options to management personnel of the Borrower pursuant to a written plan or
agreement and (g) non-cash expenses resulting from the write-off of in-process
research and development incurred as result of the consummation of a Permitted
Acquisition, and minus, without duplication and to the extent added to revenues
-----
in determining Consolidated Net Income for such period, all extraordinary gains
during such period, all as determined on a consolidated basis with respect to
the Borrower and its Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the interest
-----------------------------
expense, both expensed and capitalized (including the interest component in
respect of Capital Lease Obligations), accrued or paid by the Borrower and its
Subsidiaries (other
<PAGE>
5
than the CFN Subsidiaries) during such period, determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, net income or loss of
-----------------------
the Borrower and its Subsidiaries (other than the CFN Subsidiaries) for such
period determined on a consolidated basis in accordance with GAAP; provided that
--------
there shall be excluded (a) the income (or non-cash loss to the extent recorded
as a loss on the books of the Borrower) of any Person in which any other Person
(other than the Borrower or any Subsidiary (other than the CFN Subsidiaries) or
any director holding qualifying shares in compliance with applicable law) has a
joint interest, except to the extent of the amount of dividends or other
distributions actually paid to the Borrower or any Subsidiary (other than the
CFN Subsidiaries) by such Person (or any cash losses incurred by such Person)
during such period and (b) the income (or loss) of any Person accrued prior to
the date it becomes a Subsidiary (other than the CFN Subsidiaries) or is merged
into or consolidated with the Borrower or any Subsidiary (other than the CFN
Subsidiaries) or the date that Person's assets are acquired by the Borrower or
any Subsidiary (other than the CFN Subsidiaries).
"Contributed Capital" means, as of any date of determination, the
-------------------
aggregate dollar value in accordance with GAAP of any equity capital of the
Borrower, in the form of preferred stock or common stock, as of the date of
issuance thereof.
"Control" means the possession, directly or indirectly, of the power
-------
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
----------- ----------
"Default" means any event or condition that constitutes an Event of
-------
Default or that upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Designated Affiliates" means Kelso Investment Associates V, L.P.,
---------------------
Kelso Equity Partners V, L.P., 1996 Connors Family Trust, Richard M. Cyert,
Louis and Patricia Kelso Trust, Marquard Family Partnership, LTD, John F.
McGillicuddy, Frank T. Nickell Retained Annuity Trust 1296-C-IXL, Michel
Rapoport, David M. Roderick, Peter F. Schweinfurth Family Trust and 1996
Wahrhaftig Family Trust.
"Disclosed Matters" means the actions, suits and proceedings and the
-----------------
environmental matters disclosed in Schedule 3.06.
"dollars" or "$" refers to lawful money of the United States of
---------
America.
"Effective Date" means July 29, 1998.
--------------
"Eligible Billed Accounts Receivable" means, at the time of any
-----------------------------------
determination thereof, each Account that satisfies the following criteria at the
time of creation and continues to meet the same at the time of such
determination: such Account (i) has been invoiced and represents the bona fide
amounts due to the Borrower or an Accounts Receivable Subsidiary to the
purchaser of merchandise or services, in each case in the ordinary course of
business of the Borrower or an Accounts Receivable Subsidiary in connection with
its trade operations and (ii) is not
<PAGE>
6
ineligible for inclusion in the calculation of the Borrowing Base pursuant to
any of clauses (a) through (m) below or otherwise deemed by the Collateral Agent
in good faith to be ineligible for inclusion in the calculation of the Borrowing
Base as described below. Without limiting the foregoing, to qualify as an
Eligible Billed Account Receivable, an Account shall indicate as sole payee and
as sole remittance party the Borrower or any of the Accounts Receivable
Subsidiaries. In determining the amount to be so included, the face amount of
an Account shall be reduced by, without duplication, to the extent not reflected
in such face amount, (i) the amount of all accrued and actual returns,
discounts, claims, credits or credits pending, charges, price adjustments,
freight or finance charges or other allowances (including any amount that the
Borrower or an Accounts Receivable Subsidiary, as applicable, may be obligated
to rebate to a customer pursuant to the terms of any agreement or understanding
(written or oral)), (ii) the aggregate amount of all limits and deductions
provided for in this definition and elsewhere in this Agreement and (iii) the
aggregate amount of all cash received in respect of such Account but not yet
applied by the Borrower or the applicable Subsidiary to reduce the amount of
such Account. Unless otherwise approved from time to time in writing by the
Administrative Agent, no Account shall be an Eligible Billed Account Receivable
if, without duplication:
(a) the Borrower or an Accounts Receivable Subsidiary does not
have sole lawful and absolute title to such Account; or
(b) it arises out of a sale made by the Borrower or an Accounts
Receivable Subsidiary to an Affiliate of the Borrower or any of the
Accounts Receivable Subsidiaries in which the Borrower or any officer
of the Borrower (or any direct or indirect owner of more than 20% of
the Borrower's outstanding common stock) has a 45% or more interest;
or
(c) (i) it is unpaid more than 90 days from the original date of
invoice or 60 days from the original due date or (ii) it has been
written off the books of the Borrower or an Accounts Receivable
Subsidiary or has been otherwise designated on such books as
uncollectible; or
(d) more than 50% in face amount of all Accounts of the same
Account Debtor which are in excess of $50,000 are ineligible pursuant
to clause (c) above; or
(e) the Account Debtor (i) has a potential offset in the form of
deferred revenue, with the ineligible portion being equal to the
lesser of the Account Debtor's (x) deferred revenue balance
(calculated in the aggregate and in accordance with GAAP on a basis
consistent with the Borrower's historical and current accounting
practices) and (y) accounts receivable balance (calculated in the
aggregate), (ii) is a creditor of any Loan Party, (iii) has or has
asserted a right of set-off against any Loan Party (unless such
Account Debtor has entered into a written agreement reasonably
acceptable to the Administrative Agent to waive such set-off rights)
or (iv) has disputed its liability (whether by chargeback or
otherwise) or made any claim with respect to the Account or any other
Account of any Loan Party which has not been resolved, in each case,
without duplication, to the extent of the amount owed by such Loan
<PAGE>
7
Party to the Account Debtor, the amount of such actual or asserted
right of set-off, or the amount of such dispute or claim, as the case
may be; or
(f) the Account Debtor is insolvent or the subject of any
bankruptcy case or insolvency proceeding of any kind; or
(g) the Account is not payable in Dollars or the Account Debtor
is either not incorporated under the laws of the United States of
America, any state thereof or the District of Columbia or is located
outside or has its principal place of business or substantially all of
its assets outside the United States, except to the extent the Account
is supported by an irrevocable letter of credit reasonably
satisfactory to the Administrative Agent (as to form, substance and
issuer) and assigned to and directly drawable by the Collateral Agent;
or
(h) the sale to the Account Debtor is on a bill-and-hold,
guaranteed sale, sale-and-return, ship-and-return, extended terms or
consignment or other similar basis or made pursuant to any other
agreement providing for repurchase or return of any merchandise which
has been claimed to be defective or otherwise unsatisfactory; or
(i) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless the Borrower or
the relevant Accounts Receivable Subsidiary duly assigns its rights to
payment of such Account to the Collateral Agent pursuant to the
Assignment of Claims Act of 1940, as amended, which assignment and
related documents and filings shall be in form and substance
reasonably satisfactory to the Collateral Agent; or
(j) the Account does not comply in all material respects with the
requirements of all applicable laws and regulations, whether Federal,
state or local, including the Federal Consumer Credit Protection Act,
the Federal Truth in Lending Act and Regulation Z of the Board; or
(k) the Account is subject to any adverse security deposit,
retainage or other similar advance made by or for the benefit of the
Account Debtor, in each case to the extent thereof; or
(1) (i) it is not subject to a valid and perfected first priority
Lien in favor of the Collateral Agent for the benefit of the Secured
Parties, subject to no other Liens other than the Liens (if any)
permitted by the Loan Documents or (ii) it does not otherwise conform
in all material respects to the representations and warranties
contained in the Loan Documents relating to Accounts; or
(m) as to all or any part of such Account, a check, promissory
note, draft, trade acceptance or other instrument for the payment of
money has been received, presented for payment and returned
uncollected for any reason.
<PAGE>
8
Notwithstanding the foregoing, all Accounts of any single Account
Debtor and its Affiliates which, in the aggregate (after subtracting the
relevant Account Debtor's deferred revenue balance), exceed 25% of the
total amount of all Eligible Billed Accounts Receivable (less the aggregate
deferred revenue balance for the Borrower and the Accounts Receivable
Subsidiaries as a whole) at the time of any determination shall be deemed
not to be Eligible Billed Accounts Receivable to the extent of such excess.
In determining the aggregate amount of Accounts from the same Account
Debtor that are unpaid more than 90 days from the date of invoice or more
than 60 days from the due date pursuant to clause (c) above, there shall be
excluded the amount of any net credit balances relating to Accounts with
invoice dates more than 90 days prior to the date of determination or more
than 60 days from the due date.
"Eligible Unbilled Accounts" means, at the time of any determination
--------------------------
thereof, all unbilled Accounts that meet the criteria for Eligible Billed
Accounts Receivable, with the exception that (x) unbilled Accounts will not be
considered Eligible Unbilled Accounts if aged over 90 days from the date of
creation and (y) the "extended terms" provision in clause (h) of the definition
of Eligible Billed Accounts Receivable shall not apply.
"Environmental Laws" means all laws, rules, regulations, codes,
------------------
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the environment, preservation or reclamation
of natural resources, the handling, treatment, storage, disposal, Release or
threatened Release of any Hazardous Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or otherwise
-----------------------
(including, but not limited to, any liability for damages, natural resource
damage, costs of environmental remediation, administrative oversight costs,
fines, penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
-----------
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the
<PAGE>
9
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any ERISA Affiliate of any liability
under Title IV of ERISA with respect to the termination of any Plan; (e) the
receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower or any ERISA Affiliate of any liability with respect to the withdrawal
or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
the Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Event of Default" has the meaning assigned to such term in Article
----------------
VII.
"Excluded Taxes" means, with respect to the Administrative Agent, any
--------------
Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction (or any political subdivision thereof or taxing
authority therein) in which the Borrower, or, in the case of any Lender, its
applicable lending office, is located and (c) in the case of a Foreign Lender
(other than an assignee pursuant to a request by the Borrower under Section
2.16(b)), any withholding tax that is imposed on amounts payable to such Foreign
Lender at the time such Foreign Lender becomes a party to this Agreement (or
designates a new lending office) or is attributable to such Foreign Lender's
failure to comply with Section 2.14(e), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts from the
Borrower with respect to such withholding tax pursuant to Section 2.14(a).
"Federal Funds Effective Rate" means, for any day, the weighted
----------------------------
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" means the chief financial officer, principal
-----------------
accounting officer, treasurer or controller of the Borrower.
"Foreign Lender" means any Lender that is organized under the laws of
--------------
a jurisdiction other than that in which the Borrower is located. For purposes of
this
<PAGE>
10
definition, the United States of America, each State thereof and the District of
Columbia shall be deemed to constitute a single jurisdiction.
"Foreign Subsidiary" means any Subsidiary that is organized under the
------------------
laws of a jurisdiction other than the United States of America or any State
thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the United
----
States of America.
"Governmental Authority" means the government of the United States of
----------------------
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any
--------- ----------
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
---------------
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided that the term "Guarantee" shall not include
--------
endorsements for collection or deposit in the ordinary course of business.
"Guarantee Agreement" means the Guarantee Agreement, substantially in
-------------------
the form of Exhibit C, made by the Subsidiary Loan Parties in favor of the
Administrative Agent for the benefit of the Secured Parties.
"Hazardous Materials" means all explosive or radioactive substances or
-------------------
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law, including any material listed as a hazardous substance under
Section 101(14) of CERCLA.
"Hedging Agreement" means any interest rate protection agreement,
-----------------
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" of any Person means, without duplication, (a) all
------------
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of
<PAGE>
11
such Person under conditional sale or other title retention agreements relating
to property acquired by such Person, (d) all obligations of such Person in
respect of the deferred purchase price of property or services (excluding
current accounts payable incurred in the ordinary course of business), (e) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (f) all Guarantees by such Person of
Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (i) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
-----------------
"Indemnity Subrogation and Contribution Agreement" means the
-------------------------------------------------
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit D, among the Loan Parties and the Administrative Agent.
"Interest Payment Date" means, with respect to any Loan, the last day
---------------------
of each March, June, September and December.
"Issuing Bank" means The Chase Manhattan Bank, in its capacity as the
------------
issuer of Letters of Credit hereunder, and its successors in such capacity as
provided in Section 2.04(i). The Issuing Bank may, in its discretion, arrange
for one or more Letters of Credit to be issued by Affiliates of the Issuing
Bank, in which case the term "Issuing Bank" shall include any such Affiliate
with respect to Letters of Credit issued by such Affiliate.
"Joint Venture" means, as to a Person, any corporation, partnership or
-------------
other legal entity or arrangement in which such Person has any direct or
indirect equity interest (or owns securities convertible into such an equity
interest) and that is not a subsidiary of such Person.
"Kelso" means Kelso & Company, L.P., a Delaware limited partnership.
-----
"Kelso Advisory Agreement" means that certain Advisory Agreement dated
------------------------
April 30, 1996, between Kelso and the Borrower.
"LC Availability Period" means the period from and including the
----------------------
second Business Day following the Amendment Effective Date to but excluding the
earlier of (a) the date that is five Business Days prior to the Revolving
Maturity Date and (b) the date of termination of the Revolving Commitments.
"LC Disbursement" means a payment made by the Issuing Bank pursuant to
---------------
a Letter of Credit.
<PAGE>
12
"LC Exposure" means, at any time, the sum of (a) the aggregate undrawn
-----------
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Borrower at such time. The LC Exposure of any Revolving Lender at any
time shall be its Applicable Percentage of the total LC Exposure at such time.
"Lenders" means the Persons listed on Schedule 2.01 and any other
-------
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance.
"Letter of Credit" means any letter of credit issued pursuant to this
----------------
Agreement.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
----
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means this Agreement, the Guarantee Agreement, the
--------------
Indemnity, Subrogation and Contribution Agreement and the Security Documents.
"Loan Parties" means the Borrower and the Subsidiary Loan Parties.
------------
"Loans" means the loans made by the Lenders to the Borrower pursuant
-----
to this Agreement.
"Margin Stock" has the meaning assigned to such term in Regulation U.
------------
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, assets, operations, prospects or condition, financial or otherwise, of
the Borrower and its Subsidiaries taken as a whole, (b) the ability of any Loan
Party to perform any of its obligations under any Loan Document or (c) the
rights of or benefits available to the Lenders under any Loan Document.
"Material Indebtedness" means Indebtedness (other than the Loans and
---------------------
Letters of Credit), or obligations in respect of one or more Hedging Agreements,
of any one or more of the Borrower and its Subsidiaries in an aggregate
principal amount exceeding $1,000,000. For purposes of determining Material
Indebtedness, the "principal amount" of the obligations of the Borrower or any
of its Subsidiaries in respect of any Hedging Agreement at any time shall be the
maximum aggregate amount (giving effect to any netting agreements) that the
Borrower or such Subsidiary would be required to pay if such Hedging Agreement
were terminated at such time.
"Moody's" means Moody's Investors Service, Inc.
-------
"Multiemployer Plan" means a multiemployer plan as defined in Section
------------------
4001(a)(3) of ERISA.
<PAGE>
13
"Net Proceeds" means, with respect to any event (a) the cash proceeds
------------
received by the Borrower and the Subsidiary Loan Parties in respect of such
event, including any cash received in respect of any non-cash proceeds, but only
as and when received, net of (b) the sum of (i) all reasonable fees and out-of-
pocket expenses paid by the Borrower and the Subsidiary Loan Parties to third
parties (other than to the Borrower or a Subsidiary) in connection with such
event, (ii) the amount of all payments required to be made by the Borrower and
the Subsidiary Loan Parties as a result of such event to repay Indebtedness
(other than Loans) secured by such asset or otherwise subject to mandatory
prepayment as a result of such event and (iii) the amount of all taxes paid (or
reasonably estimated to be payable) by the Borrower and the Subsidiary Loan
Parties, and the amount of any reserves established by the Borrower and its
Subsidiaries to fund contingent liabilities reasonably estimated to be payable,
in each case during the year that such event occurred or the next succeeding
year and that are directly attributable to such event (as determined reasonably
and in good faith by the chief financial officer of the Borrower). In the case
of Net Proceeds denominated in a currency other than dollars, the amount of such
Net Proceeds shall be the dollar equivalent thereof based upon the exchange
rates prevailing at the time.
"Obligations" has the meaning assigned to such term in the Security
-----------
Agreement.
"Other Taxes" means any and all current or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
----
defined in ERISA and any successor entity performing similar functions.
"Perfection Certificate" means a certificate in the form of Annex 1 to
----------------------
the Security Agreement or any other form approved by the Collateral Agent.
"Permitted Acquisition" means any acquisition of all or substantially
---------------------
all the assets of, or all the shares or other equity interests in, a Person or
division or line of business of a Person if, immediately after giving effect
thereto, (a) no Default has occurred and is continuing or would result
therefrom, (b) all transactions related thereto are consummated in accordance
with applicable laws, (c) in the case of an acquisition of shares or other
equity interests in a Person, 100% of the capital stock of or other equity
interests in such Person, and any other Subsidiary resulting from such
acquisition, shall be owned directly by the Borrower or a Subsidiary Loan Party
and all actions required to be taken, if any, with respect to each Subsidiary
resulting from such acquisition under Sections 5.11 and 5.12 have been taken,
(d) the Borrower and its consolidated Subsidiaries (other than the CFN
Subsidiaries) are in compliance, on a pro forma basis after giving effect to
such acquisition, with the covenants contained in Sections 6.13 and 6.14
recomputed as at the last day of the most recently ended fiscal quarter of the
Borrower for which financial statements are available as if such acquisition had
occurred on the first day of each relevant period for testing such compliance
and (e) the Borrower has delivered to the Administrative Agent an officer's
certificate to the effect set forth in clauses (a), (b), (c) and (d) above,
together with all relevant financial information for the business or entity
being acquired.
<PAGE>
14
"Permitted CFN Indebtedness" means unsecured Indebtedness of any of
--------------------------
the CFN Subsidiaries in respect of debt securities that (a) mature at least one
year after, and do not require any scheduled payment of principal or any
mandatory redemption or prepayment (or any right on the part of the holder
thereof to require any payment) of principal, in each case prior to the date one
year after, the later of the Revolving Maturity Date and the Term Maturity Date,
(b) are not Guaranteed by any Loan Party or any Foreign Subsidiary and (c) are
subordinated to the Borrower's Obligations on terms and conditions reasonably
satisfactory to the Required Lenders.
"Permitted Encumbrances" means:
----------------------
(a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 5.05;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens imposed by law, arising in the ordinary course of
business and securing obligations that are not overdue by more than 30 days
or are being contested in compliance with Section 5.05;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations and deposits made in the ordinary
course of business and securing liability to insurance providers;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary course
of business;
(e) judgment liens in respect of judgments that do not constitute an
Event of Default under clause (k) of Article VII;
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere
with the ordinary conduct of business of the Borrower or any Subsidiary;
(g) any interest of a landlord in or to property of the tenant imposed
by law, arising in the ordinary course of business and securing lease
obligations that are not overdue by more than 60 days or are being
contested in compliance with Section 5.05, or any possessory rights of a
lessee to the leased property under the provisions of any lease permitted
by the terms of this Agreement; and
(h) Liens of a collection bank arising in the ordinary course of
business under (S) 4-208 of the Uniform Commercial Code in effect in the
relevant jurisdiction;
provided that the term "Permitted Encumbrances" shall not include any Lien
- --------
securing Indebtedness.
<PAGE>
15
"Permitted Preferred Stock" means any class of preferred stock of the
-------------------------
Borrower (a) the terms and conditions of which are reasonably satisfactory in
all material respects to the Required Lenders or (b) that does not materially
conflict with or is more restrictive than the terms under the Loan Documents or
include any of the following terms: (i) current pay dividend requirements prior
to the date six months following the later of the Revolving Maturity Date and
the Term Maturity Date, (ii) repayment or redemption requirements (other than at
the sole option of the Borrower) prior to the date six months following the
later of the Revolving Maturity Date and the Term Maturity Date, (iii)
provisions that provide for the exchange or conversion of such preferred stock
with or into Indebtedness prior to the date six months following the later of
the Revolving Maturity Date and the Term Maturity Date or (iv) other terms
similar to or consistent with terms included in documents, instruments or
agreements in respect of Indebtedness.
"Permitted Subordinated Indebtedness" means unsecured Indebtedness of
-----------------------------------
the Borrower in respect of debt securities that (a) mature at least one year
after, and do not require any scheduled payment of principal or any mandatory
redemption or prepayment (or any right on the part of the holder thereof to
require any payment) of principal, in each case prior to the date one year
after, the later of the Revolving Maturity Date and the Term Maturity Date, (b)
are not Guaranteed by any Subsidiary Loan Party or any Foreign Subsidiary, (c)
are subordinated to the Borrower's Obligations on terms and conditions
reasonably satisfactory to the Required Lenders, (d) are issued for cash
consideration, the net proceeds of which are invested in the Borrower and (e)
have terms and conditions that are reasonably satisfactory in all material
respects to the Required Lenders.
"Permitted Investments" means:
---------------------
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from S&P or Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 365 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof that
has a combined capital and surplus and undivided profits of not less than
$500,000,000;
(d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered into
with a financial institution satisfying the criteria described in clause
(c) above; and
(e) shares of funds registered under the Investment Company Act of
1940, as amended, that have assets of at least $500,000,000 and invest only
in
<PAGE>
16
obligations described in clauses (a) through (c) above to the extent that
such shares are rated by Moody's or S&P in one of the two highest rating
categories assigned by such agency for shares of such nature.
"Person" means any natural person, corporation, limited liability
------
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity .
"Plan" means any employee pension benefit plan (other than a
----
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any of its ERISA Affiliates is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Pledge Agreement" means the Pledge Agreement, substantially in the
----------------
form of Exhibit E, among the Loan Parties and the Collateral Agent for the
benefit of the Secured Parties.
"Prepayment Event" means any sale, transfer or other disposition
----------------
(including pursuant to a sale and lease-back transaction) of any property or
asset of the Borrower or any of the Subsidiary Loan Parties, other than
dispositions described in clauses (a) and (b) of Section 6.05; provided that, if
--------
the Borrower shall deliver a certificate of a Financial Officer to the
Administrative Agent at the time of such event (i) setting forth the intent of
the Borrower or one of the Subsidiary Loan Parties to use the Net Proceeds of
such event to acquire other assets to be used in a line of business of the type
conducted by the Borrower and the Subsidiary Loan Parties as of the Effective
Date within 365 days of receipt of such Net Proceeds and (ii) certifying that no
Default has occurred and is continuing, then such event shall not constitute a
Prepayment Event except to the extent the Net Proceeds therefrom are not so used
at the end of such 365-day period, at which time such event shall be deemed a
Prepayment Event with Net Proceeds equal to the Net Proceeds so remaining
unused.
"Prime Rate" means the rate of interest per annum publicly announced
----------
from time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Register" has the meaning set forth in Section 9.04.
--------
"Regulation U" means Regulation U of the Board as from time to time in
------------
effect and all official rulings and interpretations thereunder or thereof.
"Related Parties" means, with respect to any specified Person, such
---------------
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Release" has the meaning set forth in Section 101(22) of CERCLA.
-------
"Required Lenders" means, at any time, Lenders having Revolving
----------------
Exposures, Term Loans and unused Commitments representing more than 50% of the
<PAGE>
17
sum of the total Revolving Exposures, outstanding Term Loans and unused
Commitments at such time.
"Restricted Payment" means any dividend or other distribution (whether
------------------
in cash, securities or other property) with respect to any shares of any class
of capital stock of the Borrower or any of its Subsidiaries, or any payment
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancelation or termination of any such shares of capital stock of
the Borrower or any of its Subsidiaries or any option, warrant or other right to
acquire any such shares of capital stock of the Borrower or any of its
Subsidiaries.
"Revolving Availability Period" means the period from and including
-----------------------------
the second Business Day following the Amendment Effective Date to but excluding
the earlier of the Revolving Maturity Date and the date of termination of the
Revolving Commitments.
"Revolving Commitment" means, with respect to each Lender, the
--------------------
commitment, if any, of such Lender to make Revolving Loans and to acquire
participations in Letters of Credit hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender's Revolving Exposure
hereunder, as such commitment may be (a) reduced from time to time pursuant to
Section 2.06 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04. The initial amount of
each Lender's Revolving Commitment is set forth on Schedule 2.01, or in the
Assignment and Acceptance pursuant to which such Lender shall have assumed its
Commitment, as applicable. The initial aggregate amount of the Lenders'
Revolving Commitments is $10,000,000.
"Revolving Exposure" means, with respect to any Lender at any time,
------------------
the sum of the outstanding principal amount of such Lender's Revolving Loans and
its LC Exposure at such time.
"Revolving Lender" means a Lender with a Revolving Commitment or, if
----------------
the Revolving Commitments have terminated or expired, a Lender with Revolving
Exposure.
"Revolving Loan" means a Loan made pursuant to clause (b) of Section
--------------
2.01.
"Revolving Maturity Date" means June 30, 2001.
-----------------------
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-
---
Hill Companies, Inc.
"Secured Parties" has the meaning assigned to such term in the
---------------
Security Agreement.
"Security Agreement" means the Security Agreement, substantially in
------------------
the form of Exhibit F, among the Loan Parties and the Collateral Agent for the
benefit of the Secured Parties.
<PAGE>
18
"Security Documents" means the Security Agreement, the Pledge
------------------
Agreement and each other security agreement or other instrument or document
executed and delivered pursuant to Section 5.11 or 5.12 to secure any of the
Obligations.
"Subsidiary" means, with respect to any Person (the "parent") at any
---------- ------
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Borrower.
----------
"Subsidiary Loan Party" means any Subsidiary of the Borrower other
---------------------
than (a) the CFN Subsidiaries and (b) any Foreign Subsidiaries.
"Taxes" means any and all present or future taxes, levies, imposts,
-----
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Tax Sharing Agreement" means, with respect to any Person, an
---------------------
agreement between such Person and its direct or indirect parent entities and its
direct or indirect subsidiaries to the effect that such parties will make
payments between themselves such that, with respect to any period, the amount of
taxes to be paid by such Person generally will be determined as though such
Person were to file separate federal, state and local income tax returns.
"Term Commitment" means, with respect to each Lender, the commitment,
---------------
if any, of such Lender to make a Term Loan hereunder on the Effective Date,
expressed as an amount representing the maximum principal amount of the Term
Loan to be made by such Lender hereunder, as such commitment may be (a) reduced
from time to time pursuant to Section 2.06 and (b) reduced or increased from
time to time pursuant to assignments by or to such Lender pursuant to Section
9.04. The initial amount of each Lender's Term Commitment is set forth on
Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender
shall have assumed its Term Commitment, as applicable. The initial aggregate
amount of the Lenders' Term Commitments is $10,000,000.
"Term Lender" means a Lender with a Term Commitment or an outstanding
-----------
Term Loan.
"Term Loan" means a Loan made pursuant to clause (a) of Section 2.01.
---------
"Term Maturity Date" means June 30, 2001.
------------------
<PAGE>
19
"Total Debt" means, as of any date of determination, without
----------
duplication, the aggregate principal amount of Indebtedness of the Borrower and
its Subsidiaries (other than the CFN Subsidiaries) outstanding as of such date
and net of any cash or cash equivalents held by the Borrower and such
Subsidiaries (other than the CFN Subsidiaries), determined on a consolidated
basis in accordance with GAAP (other than Indebtedness of the type referred to
in clause (h) of the definition of the term "Indebtedness", except to the extent
of any unreimbursed drawings thereunder).
"Transactions" means the execution, delivery and performance by each
------------
Loan Party of the Loan Documents to which it is to be a party, the borrowing of
Loans, the use of the proceeds thereof and the issuance of Letters of Credit
hereunder.
"Unbilled Receivable Availability" means the lesser of (a) 60% of
--------------------------------
Eligible Unbilled Accounts and (b) 75% of the Billed Receivable Availability.
"Video Equipment Valuation" means, at the time of any determination
-------------------------
thereof, the net book value of the Borrower's and its Accounts Receivable
Subsidiaries' video equipment (depreciated on a straight-line basis), determined
in accordance with GAAP on a basis consistent with the Borrower's historical and
current accounting practices. Upon the Borrower's prior consent, which consent
shall not be unreasonably withheld, professionals retained by the Collateral
Agent may conduct annual appraisals of such video equipment, provided each such
annual appraisal shall utilize appraisal techniques consistent with the
appraisal of such video equipment conducted on behalf of the Collateral Agent
prior to the Amendment Effective Date. The Borrower shall pay the fees and
expenses of such professionals. For purposes of calculating the Borrowing Base,
no video equipment may be included in the Video Equipment Valuation unless (i)
the Borrower or an Accounts Receivable Subsidiary has good and unencumbered
title thereto (subject to Permitted Encumbrances), (ii) the Collateral Agent on
behalf of the Secured Parties possesses a valid first priority perfected
security interest therein pursuant to the Security Documents and (iii) such
equipment is in service at the end of the month for which the Borrowing Base is
being determined and is not construction-in-progress.
"Video Library Valuation" means, at the time of any determination
-----------------------
thereof, the value of the Borrower's and its Accounts Receivable Subsidiaries'
video library as determined by the most recent fixed asset appraisal (excluding
any portion thereof that has been sold or otherwise disposed of since such
appraisal). Upon the Borrower's prior consent, which consent shall not be
unreasonably withheld, professionals retained by the Collateral Agent may
conduct annual appraisals of such video library, provided each such annual
appraisal shall utilize appraisal techniques consistent with the appraisal of
such video library conducted on behalf of the Collateral Agent prior to the
Amendment Effective Date. The Borrower shall pay the fees and expenses of such
professionals. For purposes of calculating the Borrowing Base, no part of the
video library may be included in the Video Library Valuation unless (i) the
Borrower or an Accounts Receivable Subsidiary has good and unencumbered title
thereto (subject to Permitted Encumbrances or any licenses or sublicenses to
third parties) and (ii) the Collateral Agent on behalf of the Secured Parties
possesses a valid first priority perfected security interest therein pursuant to
the Security Documents.
<PAGE>
20
"Withdrawal Liability" means liability to a Multiemployer Plan as a
--------------------
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For purposes of
--------------------------------------
this Agreement, Loans may be classified and referred to by Class (e.g., a
----
"Revolving Loan"). Borrowings also may be classified and referred to by Class
(e.g., a "Revolving Borrowing").
----
SECTION 1.03. Terms Generally. The definitions of terms herein shall
---------------
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
SECTION 1.04. Accounting Terms: GAAP. Except as otherwise expressly
----------------------
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
--------
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
The Credits
-----------
SECTION 2.01. Commitments. Subject to the terms and conditions set
-----------
forth herein, each Lender agrees (a) to make a Term Loan to the Borrower on the
Effective Date in a principal amount not exceeding its Term Commitment and (b)
to make Revolving Loans to the Borrower from time to time during the Revolving
<PAGE>
21
Availability Period in an aggregate principal amount that will not result in (i)
such Lender's Revolving Exposure exceeding such Lender's Revolving Commitment or
(ii) the sum of the Revolving Exposures and the Term Loans at any time exceeding
the Borrowing Base then in effect. Within the foregoing limits and subject to
the terms and conditions set forth herein, the Borrower may borrow, prepay and
reborrow Revolving Loans. Amounts repaid in respect of the Term Loans may not be
reborrowed.
SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made as
--------------------
part of a Borrowing consisting of Loans of the same Class made by the Lenders
ratably in accordance with their respective Commitments of the applicable Class.
The failure of any Lender to make any Loan required to be made by it shall not
relieve any other Lender of its obligations hereunder; provided that the
--------
Commitments of the Lenders are several and no Lender shall be responsible for
any other Lender's failure to make Loans as required.
(b) At the time that each Revolving Borrowing is made, such Borrowing
shall be in an aggregate amount that is an integral multiple of $100,000 and not
less than $200,000; provided that a Revolving Borrowing may be in an aggregate
--------
amount that is equal to the entire unused balance of the total Revolving
Commitments or that is required to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.04(e). Borrowings of more than one
Class may be outstanding at the same time.
SECTION 2.03. Requests for Borrowings. To request a Borrowing, the
-----------------------
Borrower shall notify the Administrative Agent of such request by telephone not
later than 11:00 a.m., New York City time, one Business Day before the date of
the proposed Borrowing; provided that any such notice of a Revolving Borrowing
--------
to finance the reimbursement of an LC Disbursement as contemplated by Section
2.04(e) may be given not later than 10:00 a.m., New York City time, on the date
of the proposed Borrowing. Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Borrowing Request in a form approved by the
Administrative Agent and signed by the Borrower. Each such telephonic and
written Borrowing Request shall specify the following information in compliance
with Section 2.02:
(i) whether the requested Borrowing is to be a Revolving Borrowing
or Term Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) the date of such Borrowing, which shall be a Business Day; and
(iv) the location and number of the account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.05.
Promptly following receipt of a Borrowing Request in accordance with this
Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made as part of the
requested Borrowing.
SECTION 2.04. Letters of Credit. (a) General. Subject to the terms and
----------------- -------
conditions set forth herein, the Borrower may request the issuance of Letters of
<PAGE>
22
Credit for its account, in a form reasonably acceptable to the Administrative
Agent and the Issuing Bank, at any time and from time to time during the LC
Availability Period. In the event of any inconsistency between the terms and
conditions of this Agreement and the terms and conditions of any form of letter
of credit application or other agreement submitted by the Borrower to, or
entered into by the Borrower with, the Issuing Bank relating to any Letter of
Credit, the terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
----------------------------------------------------------
Conditions. To request the issuance of a Letter of Credit (or the amendment,
- ----------
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent (reasonably in advance of the requested date
of issuance, amendment, renewal or extension) a notice requesting the issuance
of a Letter of Credit, or identifying the Letter of Credit to be amended,
renewed or extended, the date of issuance, amendment, renewal or extension
(which shall be a Business Day), the date on which such Letter of Credit is to
expire (which shall comply with paragraph (c) of this Section), the amount of
such Letter of Credit, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend, renew or extend such
Letter of Credit. If requested by the Issuing Bank, the Borrower also shall
submit a letter of credit application on the Issuing Bank's standard form in
connection with any request for a Letter of Credit. A Letter of Credit shall be
issued, amended, renewed or extended only if (and upon issuance, amendment,
renewal or extension of each Letter of Credit the Borrower shall be deemed to
represent and warrant that), after giving effect to such issuance, amendment,
renewal or extension (i) the LC Exposure shall not exceed $3,000,000, (ii) the
total Revolving Exposures shall not exceed the total Revolving Commitments and
(iii) the sum of the total Revolving Exposures and the Term Loans shall not
exceed the Borrowing Base then in effect.
(c) Expiration Date. Each Letter of Credit shall expire at or prior
---------------
to the close of business on the earlier of (i) the date one year after the date
of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Revolving Maturity Date.
(d) Participations. By the issuance of a Letter of Credit (or an
--------------
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Revolving Lender, and each Revolving Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal
to such Lender's Applicable Percentage of the aggregate amount available to be
drawn under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to
pay to the Administrative Agent, for the account of the Issuing Bank, such
Lender's Applicable Percentage of each LC Disbursement made by the Issuing Bank
and not reimbursed by the Borrower on the date due as provided in paragraph (e)
of this Section, or of any reimbursement payment required to be refunded to the
Borrower for any reason. Each Lender acknowledges and agrees that its obligation
to acquire participations pursuant to this paragraph in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any
<PAGE>
23
Letter of Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC Disbursement
-------------
in respect of a Letter of Credit, the Borrower shall reimburse such LC
Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than 12:00 noon, New York City time, on the date that
such LC Disbursement is made, if the Borrower shall have received notice of such
LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if
such notice has not been received by the Borrower prior to such time on such
date, then not later than 12:00 noon, New York City time, on (i) the Business
Day that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day
immediately following the day that the Borrower receives such notice, if such
notice is not received prior to such time on the day of receipt; provided that,
--------
if such LC Disbursement is not less than $200,000, the Borrower may, subject to
the conditions to borrowing set forth herein, request in accordance with Section
2.03 that such payment be financed with a Revolving Borrowing in an equivalent
amount and, to the extent so financed, the Borrower's obligation to make such
payment shall be discharged and replaced by the resulting Revolving Borrowing.
If the Borrower fails to make such payment when due, the Administrative Agent
shall notify each Revolving Lender of the applicable LC Disbursement, the
payment then due from the Borrower in respect thereof and such Lender's
Applicable Percentage thereof. Promptly following receipt of such notice, each
Revolving Lender shall pay to the Administrative Agent its Applicable Percentage
of the payment then due from the Borrower, in the same manner as provided in
Section 2.05 with respect to Loans made by such Lender (and Section 2.05 shall
apply, mutatis mutandis, to the payment obligations of the Revolving Lenders),
------- --------
and the Administrative Agent shall promptly pay to the Issuing Bank the amounts
so received by it from the Revolving Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the Issuing
Bank or, to the extent that Revolving Lenders have made payments pursuant to
this paragraph to reimburse the Issuing Bank, then to such Lenders and the
Issuing Bank as their interests may appear. Any payment made by a Revolving
Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC
Disbursement (other than the funding of Revolving Loans as contemplated above)
shall not constitute a Loan and shall not relieve the Borrower of its obligation
to reimburse such LC Disbursement.
(f) Obligations Absolute. The Borrower's obligation to reimburse LC
--------------------
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a
<PAGE>
24
right of set-off against, the Borrower's obligations hereunder. Neither the
Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related
Parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment
or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
--------
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by the Issuing Bank's failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or wilful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised care in each such determination.
In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented that appear on their
face to be in substantial compliance with the terms of a Letter of Credit, the
Issuing Bank may, in its sole discretion, either accept and make payment upon
such documents without responsibility for further investigation, regardless of
any notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
-----------------------
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any failure to give or
--------
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Revolving Lenders with respect to any such LC
Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
----------------
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to Revolving Loans; provided
--------
that, if the Borrower fails to reimburse such LC Disbursement when due pursuant
to paragraph (e) of this Section, then Section 2.11(b) shall apply. Interest
accrued pursuant to this paragraph shall be for the account of the Issuing Bank,
except that interest accrued on and after the date of payment by any Revolving
Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank
shall be for the account of such Lender to the extent of such payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may be replaced
-------------------------------
at any time by written agreement among the Borrower, the Administrative Agent,
the
<PAGE>
25
replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent
shall notify the Lenders of any such replacement of the Issuing Bank. At the
time any such replacement shall become effective, the Borrower shall pay all
unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 2.10(b). From and after the effective date of any such replacement, (i)
the successor Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and
----------------------
be continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Revolving Lenders with LC Exposure representing greater
than 51% of the total LC Exposure) demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders, an amount in cash equal to the LC Exposure as of such
date attributable to all Letters of Credit issued for the account of the
Borrower plus any accrued and unpaid interest thereon; provided that the
--------
obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with
respect to the Borrower described in clause (h) or (i) of Article VII. The
Borrower also shall deposit cash collateral pursuant to this paragraph as and to
the extent required by Section 2.09(b), and any such cash collateral so
deposited and held by the Administrative Agent hereunder shall constitute part
of the Borrowing Base for purposes of determining compliance with Section
2.09(b). Each such deposit shall be held by the Administrative Agent as
collateral for the payment and performance of the obligations of the Borrower
under this Agreement. The Administrative Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such account. Other
than any interest earned on the investment of such deposits, which investments
shall be made at the option and sole discretion of the Administrative Agent and
at the Borrower's risk and expense, such deposits shall not bear interest.
Interest or profits, if any, on such investments shall accumulate in such
account. Moneys in such account shall be applied by the Administrative Agent to
reimburse the Issuing Bank for LC Disbursements for which it has not been
reimbursed and, to the extent not so applied, shall be held for the satisfaction
of the reimbursement obligations of the Borrower for the LC Exposure at such
time or, if the maturity of the Loans has been accelerated (but subject to the
consent of Revolving Lenders with LC Exposure representing greater than 51% of
the total LC Exposure), be applied to satisfy other obligations of the Borrower
under this Agreement. If the Borrower is required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default, such
amount (to the extent not applied as aforesaid) shall be returned to the
Borrower within three Business Days after all Events of Default have been cured
or waived. If the Borrower is required to provide an amount of cash collateral
hereunder pursuant to Section 2.09(b), such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower as and to the extent that, after
giving effect to such return.
<PAGE>
26
the Borrower would remain in compliance with Section 2.09(b) and no Default
shall have occurred and be continuing.
SECTION 2.05. Funding of Borrowings. (a) Each Lender shall make each
---------------------
Loan to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 12:00 noon, New York City time, to the account of
the Administrative Agent most recently designated by it for such purpose by
notice to the Lenders. The Administrative Agent will make such Loans available
to the Borrower by promptly crediting the amounts so received, in like funds, to
an account of the Borrower maintained with the Administrative Agent in New York
City and designated by the Borrower in the applicable Borrowing Request;
provided that Revolving Loans made to finance the reimbursement of an LC
- --------
Disbursement as provided in Section 2.04(e) shall be remitted by the
Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to Loans pursuant to Section 2.11(a). If such
Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender's Loan included in such Borrowing.
SECTION 2.06. Termination and Reduction of Commitments.
----------------------------------------
(a) Unless previously terminated, (i) the Term Commitments shall terminate at
5:00 p.m., New York City time, on the Effective Date and (ii) the Revolving
Commitments shall terminate on the Revolving Maturity Date.
(b) The Borrower may at any time terminate, or from time to time
reduce, the Commitments of any Class; provided that (i) each reduction of the
--------
Commitments of any Class shall be in an amount that is an integral multiple of
$100,000 and not less than $1,000,000 and (ii) the Borrower shall not terminate
or reduce the Revolving Commitments if, after giving effect to any concurrent
prepayment of the Revolving Loans in accordance with Section 2.09, the sum of
the Revolving Exposures would exceed the total Revolving Commitments.
(c) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable;
<PAGE>
27
provided that a notice of termination of the Revolving Commitments delivered by
- --------
the Borrower may state that such notice is conditioned upon the effectiveness of
other credit facilities, in which case such notice may be revoked by the
Borrower (by notice to the Administrative Agent on or prior to the specified
effective date) if such condition is not satisfied. Any termination or reduction
of the Commitments of any Class shall be permanent. Each reduction of the
Commitments of any Class shall be made ratably among the Lenders in accordance
with their respective Commitments of such Class.
SECTION 2.07. Repayment of Loans; Evidence of Debt. (a) The Borrower
------------------------------------
hereby unconditionally promises to pay to the Administrative Agent for the
account of each Lender the then unpaid principal amount of (i) each Revolving
Loan held by such Lender on the Revolving Maturity Date and (ii) each Term Loan
held by such Lender as provided in Section 2.08.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder and the Class thereof,
(ii) the amount of any principal or interest due and payable or to become due
and payable from the Borrower to each Lender hereunder and (iii) the amount of
any sum received by the Administrative Agent hereunder for the account of the
Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
----- -----
amounts of the obligations recorded therein; provided that the failure of any
--------
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligations of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans of any Class made by it be
evidenced by a promissory note. In such event, the Borrower shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent. Thereafter, the
Loans evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 9.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).
SECTION 2.08. Amortization of Term Loans. (a) Subject to adjustment
--------------------------
pursuant to paragraph (c) of this Section, the Borrower shall repay Term
<PAGE>
28
Borrowings on each date set forth below in the aggregate principal amount set
forth opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
September 30, 1998 $ 50,000
December 31, 1998 50,000
March 31, 1999 50,000
June 30, 1999 50,000
September 30, 1999 50,000
December 31, 1999 50,000
March 31,2000 50,000
June 30, 2000 50,000
September 30, 2000 50,000
December 31, 2000 50,000
March 31, 2001 50,000
June 30, 2001 9,450,000
</TABLE>
(b) To the extent not previously paid, all Term Loans shall be due
and payable on the Term Maturity Date.
(c) If the initial aggregate amount of the Lenders' Term Commitments
exceeds the aggregate principal amount of Term Loans that are made on the
Effective Date, then the scheduled repayments of Term Borrowings to be made
pursuant to this Section shall be reduced ratably by an aggregate amount equal
to such excess. Any prepayment of a Term Borrowing shall be applied to reduce
the subsequent scheduled repayments of the Term Borrowings to be made pursuant
to this Section ratably.
(d) Each repayment of Term Borrowings shall be applied ratably to the
outstanding Term Loans. Repayments of Term Borrowings shall be accompanied by
accrued interest on the amount repaid.
SECTION 2.09. Prepayment of Loans. (a) The Borrower shall have the
-------------------
right at any time and from time to time to prepay any Borrowing in whole or in
part, subject to the requirements of this Section.
(b) In the event and on such occasion that the sum of the Revolving
Exposures and the Term Loans exceeds the Borrowing Base, the Borrower shall
prepay Revolving Borrowings (or, if no such Borrowings are outstanding, prepay
Term Borrowings or deposit cash collateral in an account with the Administrative
Agent pursuant to Section 2.04(j)) in an aggregate amount equal to such excess.
(c) In the event and on each occasion that any Net Proceeds are
received by or on behalf of the Borrower or any Subsidiary Loan Party in respect
of any Prepayment Event, the Borrower shall, immediately after such Net Proceeds
are received, prepay Term Borrowings in an aggregate amount equal to such Net
Proceeds.
<PAGE>
29
(d) The Borrower shall notify the Administrative Agent by telephone
(confirmed by telecopy) of any prepayment of a Borrowing hereunder not later
than 11:00 a.m., New York City time, one Business Day before the date of
prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the Class and principal amount of Borrowings to be prepaid;
provided that, if a notice of optional prepayment is given in connection with a
- --------
conditional notice of termination of the Revolving Commitments as contemplated
by Section 2.06, then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.06. Promptly following
receipt of any such notice, the Administrative Agent shall advise the Lenders of
the contents thereof. Each partial prepayment of any Borrowing shall be in an
amount that would be permitted in the case of an advance of a Revolving
Borrowing as provided in Section 2.02. Each prepayment of a Borrowing of either
Class shall be applied ratably to the outstanding Loans of such Class.
Prepayments shall be accompanied by accrued interest to the extent required by
Section 2.11.
SECTION 2.10. Fees. (a) The Borrower agrees to pay to the
----
Administrative Agent for the account of each Lender a commitment fee, which
shall accrue at a rate of 0.50% per annum on the average daily unused amount of
the Revolving Commitment of such Lender during the period from and including the
Effective Date to but excluding the date on which such Commitment terminates.
Accrued commitment fees shall be payable in arrears on the last day of March,
June, September and December of each year and on the date on which the Revolving
Commitments terminate, commencing on the first such date to occur after the
Effective Date. All commitment fees shall be computed on the basis of a year of
360 days and shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). For purposes of computing commitment
fees with respect to Revolving Commitments, a Revolving Commitment of a Lender
shall be deemed to be used to the extent of the outstanding Revolving Loans and
LC Exposure of such Lender.
(b) The Borrower agrees to pay (i) to the Administrative Agent for
the account of each Revolving Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at a rate per annum of
4.00% on the average daily amount of such Lender's LC Exposure (excluding any
portion thereof attributable to unreimbursed LC Disbursements) during the period
from and including the Effective Date to but excluding the later of the date on
which such Lender's Revolving Commitment terminates and the date on which such
Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting
fee, which shall accrue at a rate of 0.25% per annum on the average daily
amount of the LC Exposure (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date of termination of the
Revolving Commitments and the date on which there ceases to be any LC Exposure,
as well as the Issuing Bank's standard fees with respect to the issuance,
amendment, renewal or extension of any Letter of Credit or processing of
drawings thereunder. Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year shall
be payable on the third Business Day following such last day, commencing on the
first such date to occur after the Effective Date; provided that all such fees
--------
shall be payable on the date on which the Revolving Commitments terminate and
any such fees accruing after the date on which the Revolving Commitments
terminate shall be payable on demand. Any
<PAGE>
30
other fees payable to the Issuing Bank pursuant to this paragraph shall be
payable within 10 days after demand. All participation fees and fronting fees
shall be computed on the basis of a year of 360 days and shall be payable for
the actual number of days elapsed (including the first day but excluding the
last day).
(c) The Borrower agrees to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
commitment fees and participation fees, to the Lenders entitled thereto. Fees
paid shall not be refundable under any circumstances.
SECTION 2.11. Interest. (a) The Loans shall bear interest at a rate
--------
per annum equal to 2.00% plus the Alternate Base Rate.
(b) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to 2% plus the rate otherwise applicable to the Loans as
provided in paragraph (a) of this Section.
(c) Accrued interest on each Loan shall be payable in arrears (i) on
each Interest Payment Date and (ii) in the case of Revolving Loans, upon
termination of the Revolving Commitments; provided that (A) interest accrued
--------
pursuant to paragraph (b) of this Section shall be payable on demand and (B) in
the event of any repayment or prepayment of any Loan (other than a prepayment of
a Revolving Loan prior to the end of the Revolving Availability Period), accrued
interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment.
(d) All interest hereunder shall be computed on the basis of a year
of 360 days, except that interest computed by reference to the Alternate Base
Rate at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate shall
be determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.
SECTION 2.12. Increased Costs. (a) If any Change in Law shall:
---------------
(i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Lender or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank any other condition
affecting this Agreement or any Letter of Credit or participation therein;
<PAGE>
31
and the result of any of the foregoing shall be to increase the cost to such
Lender or the Issuing Bank of participating in, issuing or maintaining any
Letter of Credit or to reduce the amount of any sum received or receivable by
such Lender or the Issuing Bank hereunder (whether of principal, interest or
otherwise), then the Borrower agrees to pay to such Lender or the Issuing Bank,
as the case may be, such additional amount or amounts as will compensate such
Lender or the Issuing Bank, as the case may be, for such additional costs
incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's or the Issuing Bank's capital or on the capital
of such Lender's or the Issuing Bank's holding company, if any, as a consequence
of this Agreement or the Loans made by, or participations in Letters of Credit
held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a
level below that which such Lender or the Issuing Bank or such Lender's or the
Issuing Bank's holding company could have achieved but for such Change in Law
(taking into consideration such Lender's or the Issuing Bank's policies and the
policies of such Lender's or the Issuing Bank's holding company with respect to
capital adequacy), then from time to time the Borrower agrees to pay to such
Lender or the Issuing Bank, as the case may be, such additional amount or
amounts as will compensate such Lender or the Issuing Bank or such Lender's or
the Issuing Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the
case may be, the amount shown as due on any such certificate within 10 days
after receipt by the Borrower thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; provided
--------
that the Borrower shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased costs or reductions incurred
more than 180 days prior to the date that such Lender or the Issuing Bank, as
the case may be, notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; provided further that, if the Change
-------- -------
in Law giving rise to such increased costs or reductions is retroactive, then
the 180-day period referred to above shall be extended to include the period of
retroactive effect thereof.
SECTION 2.13. Break Funding Payments. In the event of the failure to
----------------------
borrow or prepay any Revolving Loan or Term Loan on the date specified in any
notice delivered pursuant hereto, then, in any such event, the Borrower agrees
to compensate each Lender for the loss, cost and expense attributable to such
event. A certificate of any Lender setting forth any amount or amounts that such
Lender is entitled to receive pursuant to this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt by the Borrower thereof.
<PAGE>
32
SECTION 2.14. Taxes. (a) Any and all payments by or on account of any
-----
obligation of the Borrower hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower shall be required to deduct any Indemnified
--------
Taxes or Other Taxes from such payments, then (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section) the
Administrative Agent, Lender or Issuing Bank (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall pay
the full amount deducted to the relevant Governmental Authority in accordance
with applicable law.
(b) In addition, the Borrower agrees to pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrowers indemnifies the Administrative Agent, each Lender
and the Issuing Bank, within 10 days after written demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent,
such Lender or the Issuing Bank, as the case may be, on or with respect to any
payment by or on account of any obligation of the Borrower hereunder or under
any other Loan Document (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section) and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability delivered to the
Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its
own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive
absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Each Foreign Lender, and any Issuing Bank that is not a "United
States person" within the meaning of Section 7701(a)(30) of the Code (together
with the Foreign Lenders, the "Non-U.S. Lenders"), shall deliver to the Borrower
(with a copy to the Administrative Agent) two copies of either United States
Internal Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S.
Lender claiming exemption from U.S. Federal withholding tax under Section 871(h)
or 881(c) of the Code with respect to payments of "portfolio interest", a Form
W-8, or any subsequent versions thereof or successors thereto (and, if such Non-
U.S. Lender delivers a Form W-8, a certificate representing that such Non-U.S.
Lender is not a bank for purposes of Section 881(c) of the Code, is not a 10-
percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of
the Borrower and is not a controlled foreign corporation related to the Borrower
(within the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such Non-U.S. Lender claiming complete exemption from, or
reduced rate of, U.S. Federal withholding tax on payments by the Borrower under
this Agreement or any other Loan Document. Such
<PAGE>
33
forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement or designates a new lending office. In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence, expiration or invalidity of any form previously delivered by such
Non-U.S. Lender. Notwithstanding any other provision of this Section 2.14, a
Non-U.S. Lender shall not be required to deliver any form pursuant to this
Section 2.14(e) that such Non-U.S. Lender is not legally able to deliver.
SECTION 2.15. Payments Generally: Pro Rata Treatment: Sharing of Set-
-------------------------------------------------------
offs. (a) The Borrower shall make each payment required to be made by it
- ----
hereunder or under any other Loan Document (whether of principal, interest, fees
or reimbursement of LC Disbursements, or of amounts payable under Section 2.12,
2.13 or 2.14, or otherwise) prior to 12:00 noon, New York City time, on the date
when due, in immediately available funds, without set-off or counterclaim. Any
amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 270 Park Avenue, New
York, New York, except payments to be made directly to the Issuing Bank as
expressly provided herein and except that payments pursuant to Sections 2.12,
2.13, 2.14 and 9.03 shall be made directly to the Persons entitled thereto and
payments pursuant to other Loan Documents shall be made to the Persons specified
therein. The Administrative Agent shall distribute any such payments received by
it for the account of any other Person to the appropriate recipient promptly
following receipt thereof. If any payment under any Loan Document shall be due
on a day that is not a Business Day, the date for payment shall be extended to
the next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension.
All payments under each Loan Document shall be made in dollars.
(b) If at any time insufficient funds are received by and available
to the Administrative Agent to pay fully all amounts of principal, unreimbursed
LC Disbursements, interest and fees then due hereunder, such funds shall be
applied (i) first, towards payment of interest and fees then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, towards payment of
principal and unreimbursed LC Disbursements then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of principal and
unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans, Term Loans or participations in LC
Disbursements resulting in such Lender receiving payment of a greater proportion
of the aggregate amount of its Revolving Loans, Term Loans and participations in
LC Disbursements and accrued interest thereon than the proportion received by
any other Lender, then the Lender receiving such greater proportion shall
purchase (for cash at face value) participations in the Revolving Loans, Term
Loans and participations in LC Disbursements of other Lenders to the extent
necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Revolving Loans, Term and participations in
LC Disbursements; provided that (i) if any such
--------
<PAGE>
34
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in LC Disbursements to any assignee or participant, other than to the Borrower
or any Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph shall apply). The Borrower consents to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Borrower
in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Bank hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing Bank,
as the case may be, the amount due. In such event, if the Borrower has not in
fact made such payment, then each of the Lenders or the Issuing Bank, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.
(e) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.04(d) or (e), 2.05(b), 2.15(d) or 9.03(c), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender's obligations under
such Sections until all such unsatisfied obligations are fully paid.
SECTION 2.16. Mitigation Obligations: Replacement of Lenders.
----------------------------------------------
(a) If any Lender requests compensation under Section 2.12, or if the Borrower
is required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.14, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.12 or 2.14, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.12, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental
<PAGE>
35
Authority for the account of any Lender pursuant to Section 2.14, or if any
Lender defaults in its obligation to fund Loans hereunder, then the Borrower
may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
--------
shall have received the prior written consent of the Administrative Agent (and,
if a Revolving Commitment is being assigned, the Issuing Bank), which consent
shall not unreasonably be withheld, (ii) such Lender shall have received payment
of an amount equal to the outstanding principal of its Loans and participations
in LC Disbursements, accrued interest thereon, accrued fees and all other
amounts payable to it hereunder, from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrower (in the
case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.12 or payments required
to be made pursuant to Section 2.14, such assignment will result in a material
reduction in such compensation or payments. A Lender shall not be required to
make any such assignment and delegation if, prior thereto, as a result of a
waiver by such Lender or otherwise, the circumstances entitling the Borrower to
require such assignment and delegation cease to apply.
ARTICLE III
Representations and Warranties
------------------------------
The Borrower represents and warrants to the Lenders that:
SECTION 3.01. Organization: Powers. Each of the Borrower and its
--------------------
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.
SECTION 3.02. Authorization: Enforceability. The Transactions to be
-----------------------------
entered into by each Loan Party are within such Loan Party's corporate powers
and have been duly authorized by all necessary corporate and, if required,
stockholder action. This Agreement has been duly executed and delivered by the
Borrower and constitutes, and each other Loan Document to which any Loan Party
is to be a party, when executed and delivered by such Loan Party, will
constitute, a legal, valid and binding obligation of the Borrower or such Loan
Party (as the case may be), enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.
SECTION 3.03. Governmental Approvals: No Conflicts. The Transactions
------------------------------------
(a) do not require any consent or approval of, registration or filing with,
<PAGE>
36
or any other action by, any Governmental Authority, except such as have been
obtained or made and are in full force and effect and except filings necessary
to perfect Liens created under the Loan Documents, (b) will not violate any
applicable law or regulation or the charter, by-laws or other organizational
documents of the Borrower or any of its Subsidiaries or any order of any
Governmental Authority, (c) will not violate or result in a default under any
indenture, agreement or other instrument binding upon the Borrower or any of its
Subsidiaries or its assets, except such violations or defaults which,
individually and in the aggregate, would not be reasonably likely to result in a
Material Adverse Effect, or give rise to a right thereunder to require any
payment to be made by the Borrower or any of its Subsidiaries, and (d) will not
result in the creation or imposition of any Lien on any asset of the Borrower or
any of its Subsidiaries, except Liens created under the Loan Documents.
SECTION 3.04. Financial Condition: No Material Adverse Change.
-----------------------------------------------
(a) The Borrower has heretofore furnished to the Lenders its (i) consolidated
balance sheet and statements of income, stockholders equity and cash flows (A)
as of and for the fiscal year ended December 31, 1997, reported on by Price
Waterhouse LLP, independent public accountants, (B) as of and for the fiscal
quarter and the portion of the fiscal year ended March 31, 1998, certified by
its chief financial officer and (ii) consolidated balance sheet and statements
of income and stockholders equity as of and for any month and the portion of the
fiscal year ended on the last day of such month that has been completed during
the fiscal quarter ended June 30, 1998, certified by its chief financial
officer. Such financial statements present fairly, in all material respects, the
financial position and results of operations and cash flows of the Borrower and
its consolidated Subsidiaries as of such dates and for such periods in
accordance with GAAP, subject to year-end audit adjustments and the absence of
footnotes in the case of the statements referred to in clauses (ii) and (iii)
above.
(b) The Borrower has heretofore furnished to the Lenders its pro
forma consolidated balance sheet as of March 31, 1998, prepared giving effect to
the Transactions as if the Transactions had occurred on such date. Such pro
forma consolidated balance sheet (i) has been prepared in good faith (which
assumptions are believed by the Borrower to be reasonable), (ii) is based on the
best information available to the Borrower after due inquiry, (iii) accurately
reflects all material adjustments necessary to give effect to the Transactions
and (iv) presents fairly, in all material respects, the pro forma financial
position of the Borrower and its consolidated Subsidiaries as of March 31, 1998
as if the Transactions had occurred on such date.
(c) Except as disclosed on Schedule 3.04 or in the financial
statements referred to above or the notes thereto and except for the Disclosed
Matters, after giving effect to the Transactions, none of the Borrower or any of
its Subsidiaries has, as of the Effective Date, any material contingent
liabilities, unusual long-term commitments or unrealized losses.
(d) Since December 31, 1997, there has been no material adverse
change in the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and its Subsidiaries, taken as a whole.
SECTION 3.05. Properties. (a) Each of the Borrower and its
----------
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business, except for minor defects in
title that do not interfere
<PAGE>
37
with its ability to conduct its business as currently conducted or to utilize
such properties for their intended purposes.
(b) Each of the Borrower and its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
property material to its business, and the use thereof by the Borrower and its
Subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
(c) Schedule 3.05 sets forth the address of each real property that
is owned or leased by the Borrower or any of its Subsidiaries as of the
Effective Date after giving effect to the Transactions.
SECTION 3.06. Litigation and Environmental Matters. (a) There are no
------------------------------------
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve any of the Loan Documents or the Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, none of the Borrower or its
Subsidiaries (i) has failed to comply with any Environmental Law or to obtain,
maintain or comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability, (iii)
has received notice of any claim with respect to any Environmental Liability or
(iv) knows of any basis for any Environmental Liability.
(c) Since the Effective Date, there has been no change in the status
of the Disclosed Matters that, individually or in the aggregate, has resulted
in, or materially increased the likelihood of, a Material Adverse Effect.
SECTION 3.07. Compliance with Laws and Agreements. Each of the
-----------------------------------
Borrower and its Subsidiaries is in compliance with all laws, regulations and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Default has
occurred and is continuing.
SECTION 3.08. Investment and Holding Company Status. None of the
-------------------------------------
Borrower or any of its Subsidiaries is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has
-----
timely filed or caused to be filed all Tax returns or extensions and reports
required to
<PAGE>
38
have been filed and has paid or caused to be paid all Taxes required to have
been paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
-----
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No.87) did not, as of the date of
the most recent financial statements reflecting such amounts, exceed by more
than $500,000 the fair market value of the assets of such Plan, and the present
value of all accumulated benefit obligations of all underfunded Plans (based on
the assumptions used for purposes of Statement of Financial Accounting Standards
No.87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $500,000 the fair market value of
the assets of all such underfunded Plans.
SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders
----------
all agreements, instruments and corporate or other restrictions to which the
Borrower or any of its Subsidiaries is subject, and all other matters known to
any of them, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. None of the reports, financial
statements, certificates or other information furnished by or on behalf of any
Loan Party to the Administrative Agent or any Lender in connection with the
negotiation of this Agreement or any other Loan Document or delivered hereunder
or thereunder (as modified or supplemented by other information so furnished)
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that, with respect to
--------
projected financial information, the Borrower represents only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.
SECTION 3.12. Subsidiaries. Schedule 3.12 sets forth the name of, and
------------
the direct or indirect ownership interest of the Borrower in, each direct and
indirect Subsidiary of the Borrower and identifies each such Subsidiary that is
a Subsidiary Loan Party, in each case as of the Effective Date.
SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of all
---------
insurance maintained by or on behalf of the Borrower and its Subsidiaries as of
the Effective Date. As of the Effective Date, all premiums in respect of such
insurance have been paid in accordance with their terms.
SECTION 3.14. Labor Matters. As of the Effective Date, there are no
-------------
strikes, lockouts or slowdowns against the Borrower or any of its Subsidiaries
pending or, to the knowledge of the Borrower, threatened. The hours worked by
and payments made to employees of the Borrower and its Subsidiaries have not
been in violation of the Fair Labor Standards Act or any other applicable
Federal, state, local or foreign law dealing with such matters except where any
such violations, individually or in the aggregate, could not be reasonably
expected to result in a Material Adverse Effect. All
<PAGE>
39
payments due from the Borrower or any Subsidiary, or for which any claim may be
made against the Borrower or any Subsidiary, on account of wages and employee
health and welfare insurance and other benefits, have been paid or accrued as a
liability on the books of the Borrower or such Subsidiary. The consummation of
the Transactions will not give rise to any right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement
to which the Borrower or any Subsidiary is bound.
SECTION 3.15. Solvency. Immediately after the consummation of the
--------
Transactions to occur on the Effective Date and immediately following the making
of each Loan made on the Effective Date and after giving effect to the
application of the proceeds of such Loans, (a) the fair value of the assets of
each Loan Party, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of each Loan Party will be greater than the amount that will be
required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (c) each Loan Party will be able to pay its debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) each Loan Party will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted
following the Effective Date.
SECTION 3.16. Security Documents. (a) The Pledge Agreement is
------------------
effective to create in favor of the Collateral Agent, for the ratable benefit of
the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Pledge Agreement) and, when the Collateral is
delivered to the Collateral Agent, the Pledge Agreement shall constitute a fully
perfected first priority Lien on, and security interest in, all right, title and
interest of the pledgor thereunder in such Collateral, in each case prior and
superior in right to any other person.
(b) The Security Agreement is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable security interest in the Collateral (as defined in the Security
Agreement) and, when financing statements in appropriate form are filed in the
offices specified pursuant to the Perfection Certificate, the Security Agreement
shall constitute a fully perfected Lien on, and security interest in, all right,
title and interest of the grantors thereunder in such Collateral (other than the
Intellectual Property (as defined in the Security Agreement), in each case prior
and superior in right to any other person, other than with respect to Liens
expressly permitted by Section 6.02.
(c) When the Security Agreement is filed in the United States Patent and
Trademark Office and the United States Copyright Office, the Security Agreement
shall constitute a fully perfected Lien on, and security interest in, all right,
title and interest of the Loan Parties in the Intellectual Property (as defined
in the Security Agreement) in which a security interest may be perfected by
filing, recording or registering a security agreement, financing statement or
analogous document in the United States Patent and Trademark Office or the
United States Copyright Office, as applicable, in each case prior and superior
in right to any other person (it being understood that subsequent recordings in
the United States Patent and Trademark Office and the United States Copyright
Office may be necessary to perfect a lien on registered trademarks,
<PAGE>
40
trademark applications and copyrights acquired by the Loan Parties after the
Effective Date).
SECTION 3.17. Year 2000. Any reprogramming required to permit the
---------
proper functioning, in and following the year 2000, of (i) the computer systems
of the Borrower and its Subsidiaries and (ii) equipment containing embedded
microchips (including, to the Borrower's knowledge, systems and equipment
supplied by others or, such material systems or equipment with which the systems
of the Borrower and its Subsidiaries interface) and the testing of all such
systems and equipment, as so reprogrammed, will be completed in all material
respects by June 30, 1999. The cost to the Borrower and its Subsidiaries of such
reprogramming and testing and of the reasonably foreseeable consequences of year
2000 to the Borrower and its Subsidiaries (including reprogramming errors and,
to the Borrower's knowledge, the failure of the systems or equipment of others
material to the Borrower or its Subsidiaries) will not result in a Default or a
Material Adverse Effect. Except for such of the reprogramming referred to in the
preceding sentence as may be necessary, the computer and management information
systems of the Borrower and its Subsidiaries are and, with ordinary course
upgrading and maintenance, will continue for the term of this Agreement to be
sufficient to permit the Borrower to conduct its business without a Material
Adverse Effect.
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date. The obligations of the Lenders to make
--------------
Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have received
from each party hereto either (i) a counterpart of this Agreement signed on
behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart
of this Agreement.
(b) The Administrative Agent shall have received a favorable written
opinion (addressed to the Administrative Agent and the Lenders and dated
the Effective Date) of each of (i) Minkin & Snyder, counsel for the Loan
Parties, substantially in the form of Exhibit B-1, and (ii) Debevoise &
Plimpton, counsel for the Loan Parties, substantially in the form of
Exhibit B-2, and in each case covering such other matters relating to the
Loan Parties, the Loan Documents or the Transactions as the Required
Lenders shall reasonably request. The Borrower hereby requests such counsel
to deliver such opinions.
(c) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing of each
Loan Party, the authorization of the Transactions and any other legal
matters relating to the
<PAGE>
41
Loan Parties, the Loan Documents or the Transactions, all in form and
substance satisfactory to the Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a certificate, dated
the Effective Date and signed by the President, a Vice President or a
Financial Officer of the Borrower, confirming compliance with the
conditions set forth in paragraphs (a) and (b) of Section 4.02.
(e) The Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the Effective Date, including, to
the extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by any Loan Party hereunder or under any
other Loan Document.
(f) The Administrative Agent shall have received counterparts of the
Pledge Agreement signed on behalf of each Loan Party, together with stock
certificates representing all the outstanding shares of capital stock of
each Subsidiary of the Borrower (other than IXL-London, LTD. and IXL-Madrid
S.A.) owned by or on behalf of any Loan Party as of the Effective Date
after giving effect to the Transactions (except that such delivery of stock
certificates representing shares of common stock of a Foreign Subsidiary
may be limited to 65% of the outstanding shares of common stock of such
Foreign Subsidiary), promissory notes evidencing all intercompany
Indebtedness owed to any Loan Party by the Borrower or any Subsidiary as of
the Effective Date after giving effect to the Transactions and stock powers
and instruments of transfer, endorsed in blank, with respect to such stock
certificates and promissory notes.
(g) The Administrative Agent shall have received counterparts of the
Security Agreement signed on behalf of each Loan Party, together with the
following:
(i) all documents and instruments, including Uniform Commercial
Code financing statements, required by law or reasonably requested by
the Administrative Agent to be filed, registered or recorded to create
or perfect the Liens intended to be created under the Security
Agreement; and
(ii) a completed Perfection Certificate dated the Effective Date
and signed by a Financial Officer and Legal Officer of the Borrower,
together with all attachments contemplated thereby, including the
results of a search of the Uniform Commercial Code (or equivalent)
filings made with respect to the Loan Parties in the jurisdictions
contemplated by the Perfection Certificate and copies of the financing
statements (or similar documents) disclosed by such search and
evidence reasonably satisfactory to the Administrative Agent that the
Liens indicated by such financing statements (or similar documents)
are permitted by Section 6.02 or have been released.
(h) The Administrative Agent shall have received (i) counterparts of
the Guarantee Agreement signed on behalf of each Loan Party and each CFN
<PAGE>
42
Subsidiary and (ii) counterparts of the Indemnity, Subrogation and
Contribution Agreement signed on behalf of each Loan Party.
(i) The Administrative Agent shall have received evidence
satisfactory to it that the insurance required by Section 5.07 is in
effect.
(j) The Lenders shall be reasonably satisfied as to the amount and
nature of any Environmental Liabilities to which the Borrower and its
Subsidiaries may be subject, and the plans of the Borrower with respect
thereto, after giving effect to the Transactions and the consummation of
the other transactions contemplated hereby.
(k) The Lenders shall be reasonably satisfied with the sufficiency of
amounts available under this Agreement to meet the ongoing working capital
requirements of the Borrower following the Transactions and the
consummation of the other transactions contemplated hereby.
(l) After giving effect to the Transactions, none of the Borrower and
its Subsidiaries (other than the CFN Subsidiaries) shall have outstanding
any shares of preferred stock (other than the Borrower's Class A Preferred
Stock, Class B Preferred Stock and Class C Preferred Stock, outstanding as
of the Effective Date) or any Indebtedness, other than Indebtedness
incurred under the Loan Documents.
(m) None of the Borrower and its Subsidiaries are obligated to pay
any fee to any Affiliate or third party in respect of management,
consulting or similar services other than the advisory fees payable to
Kelso pursuant to the Kelso Advisory Agreement.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at
or prior to 3:00 p.m., New York City time, on August 5, 1998 (and, in the event
such conditions are not so satisfied or waived, the Commitments shall terminate
at such time).
SECTION 4.02. Each Credit Event. The obligation of each Lender to make
-----------------
a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue,
amend, renew or extend any Letter of Credit, is subject to the satisfaction of
the following conditions:
(a) The representations and warranties of each Loan Party and CFN
Subsidiary set forth in the Loan Documents shall be true and correct on and
as of the date of such Borrowing or the date of issuance, amendment,
renewal or extension of such Letter of Credit, as applicable, except to the
extent such representations and warranties expressly relate to an earlier
date in which case such representations and warranties shall be true and
correct as of such earlier date.
<PAGE>
43
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter
of Credit, as applicable, no Default shall have occurred and be continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
ARTICLE V
Affirmative Covenants
---------------------
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements shall have been reimbursed, the Borrower covenants and
agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. The Borrower
------------------------------------------
will furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year of the Borrower,
its audited consolidated and unaudited consolidating balance sheet and
related statements of operations, stockholders' equity and cash flows as of
the end of and for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, all reported on by Price
Waterhouse Coopers LLP or other independent public accountants of
recognized national standing (without a "going concern" or like
qualification or exception and without any qualification or exception as to
the scope of such audit) to the effect that such consolidated financial
statements present fairly in all material respects the financial condition
and results of operations of the Borrower and its consolidated Subsidiaries
on a consolidated basis in accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower, its consolidated and
consolidating balance sheets and related statements of operations,
stockholders' equity and cash flows as of the end of and for such fiscal
quarter and the then elapsed portion of the fiscal year, setting forth in
each case in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial condition and
results of operations of the Borrower and its consolidated Subsidiaries on
a consolidated basis in accordance with GAAP consistently applied, subject
to normal year-end audit adjustments and the absence of footnotes;
(c) within 30 days after the end of each of the first two fiscal
months of each fiscal quarter of the Borrower, its consolidated balance
sheet and related statements of operations, stockholders' equity and cash
flows as of the end of and for such fiscal month and the then elapsed
portion of the fiscal year, all certified by one of its Financial Officers
as presenting in all material respects
<PAGE>
44
the financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes;
(d) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of the
Borrower (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, (ii) setting forth reasonably
detailed calculations demonstrating compliance with Sections 6.13 and 6.14
and (iii) stating whether any change in GAAP or in the application thereof
has occurred since the date of the Borrower's audited financial statements
referred to in Section 3.04 and, if any such change has occurred,
specifying the effect of such change on the financial statements
accompanying such certificate;
(e) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during
the course of their examination of such financial statements of any Default
(which certificate may be limited to the extent required by accounting
rules or guidelines);
(f) on the Amendment Effective Date (as of the end of the most recent
calendar month ended prior to the Amendment Effective Date) and within 20
days after the end of each calendar month ended thereafter (and, if
requested by the Administrative Agent at any other time when the
Administrative Agent reasonably believes that the then-existing Borrowing
Base is materially inaccurate, as soon as reasonably available but no later
than 10 days after the request), a completed Borrowing Base Certificate in
the form of Exhibit G calculating and certifying the Borrowing Base as of
the last day of such calendar month (or as of such other requested date, as
the case may be), with supporting documentation (including, without
limitation, the documentation described in Schedule 1 to the Borrowing Base
Certificate), in each case signed on behalf of the Borrower by a Financial
Officer thereof and certified as being complete and correct in all material
respects;
(g) at least 30 days prior to the commencement of each fiscal year of
the Borrower, a detailed consolidated budget for such fiscal year
(including a projected consolidated balance sheet and related statements of
projected operations and cash flow as of the end of and for such fiscal
year) and, promptly when available, any significant revisions of such
budget;
(h) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
the Borrower or any of its Subsidiaries with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of the
functions of said Commission, or with any national securities exchange, or
distributed by the Borrower to its shareholders generally, as the case may
be; and
<PAGE>
45
(i) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Borrower or any of its Subsidiaries, or compliance with the terms of any
Loan Document, as the Administrative Agent or any Lender may reasonably
request.
SECTION 5.02. Notices of Material Events. The Borrower will furnish to
---------- ---------------
the Administrative Agent and each Lender prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by
or before any arbitrator or Governmental Authority against or affecting the
Borrower or any Affiliate thereof that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with
any other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and its Subsidiaries in an aggregate
amount exceeding $500,000; and
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
SECTION 5.03. Information Regarding Collateral. (a) The Borrower will
--------------------------------
furnish to the Administrative Agent prompt written notice of any change (i) in
any Loan Party's corporate name or in any trade name used to identify it in the
conduct of its business or in the ownership of its properties, (ii) in the
location of any Loan Party's chief executive office, its principal place of
business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by it
is located (including the establishment of any such new office or facility),
(iii) in any Loan Party's identity or corporate structure or (iv) in any Loan
Party's Federal Taxpayer Identification Number. The Borrower agrees not to
effect or permit any change referred to in the preceding sentence unless all
filings have been made under the Uniform Commercial Code or otherwise that are
required in order for the Administrative Agent to continue at all times
following such change to have a valid, legal and perfected security interest in
all the Collateral. The Borrower also agrees promptly to notify the
Administrative Agent if any material portion of the Collateral is damaged or
destroyed.
(b) Each year, at the time of delivery of annual financial statements
with respect to the preceding fiscal year pursuant to clause (a) of Section
5.01, the Borrower shall deliver to the Administrative Agent a certificate of a
Financial Officer (i) setting forth the information required pursuant to Section
2 of the Perfection Certificate or confirming that there has been no change in
such information since the date of the Perfection Certificate delivered on the
Effective Date or the date of the most recent certificate delivered pursuant to
this Section and (ii) certifying that all Uniform
<PAGE>
46
Commercial Code financing statements (including fixture filings, as applicable)
or other appropriate filings, recordings or registrations, including all
refilings, rerecordings and reregistrations, containing a description of the
Collateral have been filed of record in each governmental, municipal or other
appropriate office in each jurisdiction identified pursuant to clause (i) above
to the extent necessary to protect and perfect the security interests under the
Security Agreement for a period of not less than 18 months after the date of
such certificate (except as noted therein with respect to any continuation
statements to be filed within such period).
SECTION 5.04. Existence; Conduct of Business. The Borrower will, and
------------------------------
will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges, franchises, patents,
copyrights, trademarks and trade names material to the conduct of its business;
provided that the foregoing shall not prohibit any merger, consolidation,
- --------
liquidation or dissolution permitted under Section 6.03.
SECTION 5.05. Payment of Obligations. The Borrower will, and will
----------------------
cause each of its Subsidiaries to, pay its Indebtedness and other obligations,
including Tax liabilities, before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has
set aside on its books adequate reserves with respect thereto in accordance with
GAAP, (c) such contest effectively suspends collection of the contested
obligation and the enforcement of any Lien securing such obligation and (d) the
failure to make payment pending such contest could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 5.06. Maintenance of Properties. The Borrower will, and will
-------------------------
cause each of its Subsidiaries to, keep and maintain all property material to
the conduct of its business in good working order and condition, ordinary wear
and tear excepted.
SECTION 5.07. Insurance. The Borrower will, and will cause each of its
---------
Subsidiaries to, maintain, with financially sound and reputable insurance
companies (i) adequate insurance for its insurable properties, all to such
extent and against such risks, including fire, casualty and other risks insured
against by extended coverage, as is customary with companies in the same or
similar businesses operating in the same or similar locations and (ii) such
other insurance as is required pursuant to the terms of any Security Document.
SECTION 5.08. Books and Records; Inspection and Collateral Review
---------------------------------------------------
Rights. (a) The Borrower will, and will cause each of its Subsidiaries to, keep
- ------
proper books of record and account in which full, true and correct entries in
conformity with GAAP in all material respects and all requirements of law are
made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of its Subsidiaries to,
permit any representatives designated by the Administrative Agent or any Lender,
upon reasonable prior notice, to visit and inspect its financial records and
properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested.
<PAGE>
47
(b) The Borrower will, and will cause each of its Subsidiaries to,
permit any representatives designated by the Collateral Agent or the
Administrative Agent (including any consultants, accountants, lawyers and
appraisers retained by the Collateral Agent or the Administrative Agent) to
conduct evaluations and appraisals of the Borrower's computation of the
Borrowing Base and the assets included in the Borrowing Base, all at such
reasonable times and as often as reasonably requested. The Borrower shall pay
the reasonable fees and expenses of any such representatives retained by the
Collateral Agent or the Administrative Agent to conduct any such evaluation or
appraisal, including the reasonable fees and expenses associated with collateral
monitoring services performed by the Collateral Agent Services Group of the
Administrative Agent; provided that the Borrower shall not be required to pay
--------
such fees and expenses for more than two such evaluations or appraisals during
any calendar year unless an Event of Default has occurred and is continuing. To
the extent required by the Collateral Agent as a result of any such evaluation,
appraisal or monitoring, the Borrower also agrees to modify or adjust the
computation of the Borrowing Base (which may include maintaining additional
reserves, modifying the advance rates or modifying the eligibility criteria for
the components of the Borrowing Base).
(c) In the event that historical accounting practices, systems or
reserves relating to the components of the Borrowing Base are modified in a
manner that is adverse to the Lenders in any material respect, the Borrower will
agree to maintain such additional reserves (for purposes of computing the
Borrowing Base) in respect the components of the Borrowing Base and make such
other adjustments to its parameters for including the components of the
Borrowing Base as the Collateral Agent or the Administrative Agent, on behalf of
the Required Lenders, shall reasonably require based upon such modifications.
SECTION 5.09. Compliance with Laws. The Borrower will, and will cause
--------------------
each of its Subsidiaries to, comply with all laws, rules, regulations and orders
of any Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 5.10. Use of Proceeds and Letters of Credit. The proceeds of
-------------------------------------
the Term Loans will be used only for (a) general corporate purposes, including
working capital, acquisitions and capital expenditures, (b) the payment of fees
and expenses payable in connection with the Transactions and (c) the repayment
of certain Indebtedness owed by the Borrower to Debbie Ellis in an aggregate
principal amount of approximately $4,000,000. The proceeds of Revolving Loans
will be used only for general corporate purposes, including working capital,
acquisitions and capital expenditures. No part of the proceeds of any Loan will
be used, whether directly or indirectly, and whether immediately, incidentally
or ultimately, for any purpose that entails a violation of, or that is
inconsistent with, any of the Regulations of the Board, including Regulations U
and X. Letters of Credit will be issued only to support obligations incurred by
the Borrower in the ordinary course of their businesses, including operating
leases with respect to premises used by the Borrower and its Subsidiaries (other
than any CFN Subsidiary) in the conduct of its business.
SECTION 5.11. Additional Subsidiaries. If any additional Subsidiary of
-----------------------
the Borrower (other than a CFN Subsidiary) is formed or acquired after the
Effective Date, the Borrower will notify the Administrative Agent and the
Lenders thereof and
<PAGE>
48
(a) will cause such Subsidiary (other than a Foreign Subsidiary) to become a
party to the Guarantee Agreement, the Indemnity, Subrogation and Contribution
Agreement and each applicable Security Document in the manner provided therein
within three Business Days after such Subsidiary is formed or acquired and
promptly take such actions to create and perfect Liens on such Subsidiary's
assets to secure the Obligations as the Administrative Agent or the Required
Lenders shall reasonably request and (b) if any shares of capital stock or
Indebtedness of such Subsidiary are owned by or on behalf of any Loan Party,
will cause such shares and promissory notes evidencing such Indebtedness to be
pledged pursuant to the Pledge Agreement within three Business Days after such
Subsidiary is formed or acquired (except that, if such Subsidiary is a Foreign
Subsidiary, shares of common stock of such Subsidiary that are owned by or on
behalf of any Loan Party and that are to be pledged pursuant to the Pledge
Agreement may be limited to 65% of the outstanding shares of common stock of
such Subsidiary).
SECTION 5.12. Further Assurances. (a) The Borrower will, and will
------------------
cause each Subsidiary Loan Party to, execute any and all further documents,
financing statements, agreements and instruments, and take all such further
actions (including the filing and recording of financing statements, fixture
filings, mortgages, deeds of trust and other documents), that may be required
under any applicable law, or which the Administrative Agent or the Required
Lenders may reasonably request, to effectuate the transactions contemplated by
the Loan Documents or to grant, preserve, protect or perfect the Liens created
or intended to be created by the Security Documents or the validity or priority
of any such Lien, all at the expense of the Loan Parties. The Borrower also
agrees to provide to the Administrative Agent, from time to time upon request,
evidence reasonably satisfactory to the Administrative Agent as to the
perfection and priority of the Liens created or intended to be created by the
Security Documents.
(b) If any material assets (including any real property or
improvements thereto or any interest therein) are acquired by the Borrower or
any Subsidiary Loan Party after the Effective Date (other than assets
constituting Collateral under the Security Agreement that become subject to the
Lien of the Security Agreement upon acquisition thereof), the Borrower will
notify the Administrative Agent and the Lenders thereof, and, if requested by
the Administrative Agent or the Required Lenders, the Borrower will cause such
assets to be subjected to a Lien securing the Obligations and will take, and
cause the Subsidiary Loan Parties to take, such actions as shall be necessary or
reasonably requested by the Administrative Agent to grant and perfect such
Liens, including actions described in paragraph (a) of this Section, all at the
expense of the Loan Parties.
SECTION 5.13. Federal Reserve Regulations. Neither the Borrower nor
---------------------------
any of its Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of buying or
carrying Margin Stock.
SECTION 5.14. Delivery of Securities. The Borrower shall deliver to
----------------------
the Collateral Agent 65% of the outstanding shares of common stock of IXL -
Madrid. S.A., and stock powers or instruments of transfer, endorsed in blank,
with respect to such stock certificates, or such other documents as may be
reasonably acceptable to the Administrative Agent, no later than December 31,
1998.
<PAGE>
49
SECTION 5.15 [Intentionally Omitted]
SECTION 5.16. Bank Account. The Borrower will establish and maintain
------------
a cash concentration account (the "Chase Account") with the Collateral Agent
-------------
within three Business Days following the Effective Date. The Borrower will, and
the Borrower will cause each of its Subsidiaries (other than the CFN
Subsidiaries) to, transfer to the Chase Account on a weekly basis all its cash
other than prudent reserves to satisfy the weekly cash needs of such Subsidiary,
but in no event will the aggregate weekly cash needs of the Subsidiaries (other
than the CFN Subsidiaries) exceed $2,000,000; provided that (i) the Borrower
--------
will cause each of the banks (other than Chase) holding accounts of the Borrower
or its Subsidiaries in the ten locations in the United States which generate the
greatest percentage of revenues for the Borrower and its Subsidiaries, taken as
a whole, to enter into a depositary agreement, in a form to be mutually agreed
upon between the Administrative Agent and the Borrower, no later than December
31, 1998 and (ii) if an Event of Default has occurred and is continuing, the
Collateral Agent may, in its sole discretion, review the cash management system
of the Borrowers and its Subsidiaries and require the Borrower to institute a
new cash management system (including, without limitation, the use of a lockbox
system).
SECTION 5.17. Fees. None of the Borrower and its Subsidiaries shall
----
be obligated after the Effective Date to pay any fee to any Affiliate or third
party in respect of management, consulting or similar services other than the
advisory fees payable to Kelso pursuant to the Kelso Advisory Agreement.
ARTICLE VI
Negative Covenants
------------------
Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit have expired or terminated and all LC Disbursements
shall have been reimbursed, the Borrower covenants and agrees with the Lenders
that:
SECTION 6.01. Indebtedness and Preferred Stock. (a) The Borrower
--------------------------------
will not, nor will it permit any of its Subsidiaries (other than the CFN
Subsidiaries, except at any time that loans or advances by the Borrower to any
of the CFN Subsidiaries pursuant to Section 6.04(d) shall remain outstanding)
to, create, incur, assume or permit to exist any Indebtedness, except:
(i) Indebtedness created under the Loan Documents;
(ii) Indebtedness existing on the Effective Date and set forth in
Schedule 6.01, and any extensions, renewals or replacements of any such
Indebtedness that (A) do not increase the outstanding principal amount
thereof, (B) do not result in an earlier maturity date or decreased
weighted average life thereof and (C) are consummated on terms and subject
to conditions no more restrictive than are in existence with respect to
such Indebtedness as of the Effective Date; provided, that any Indebtedness
--------
owed by any of the CFN Subsidiaries to the Borrower or any Subsidiary Loan
Party shall not be reborrowed following repayment thereof;
<PAGE>
50
(iii) Indebtedness of any Loan Party to any other Loan Party;
(iv) Guarantees by the Borrower of Indebtedness of any other
Subsidiary Loan Party permitted hereunder;
(v) Indebtedness of the Borrower, any Subsidiary Loan Party or any
CFN Subsidiary incurred to finance the acquisition, construction or
improvement of any fixed or capital assets, including Capital Lease
Obligations and any Indebtedness assumed in connection with the acquisition
of any such assets or secured by a Lien on any such assets prior to the
acquisition thereof, and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount thereof;
provided that (A) such Indebtedness is incurred prior to or within 90 days
--------
after such acquisition or the completion of such construction or
improvement and (B) (x) in the case of the Borrower and the Subsidiary Loan
Parties, the aggregate principal amount of Indebtedness permitted by this
clause (v) shall not exceed $1,000,000 at any time outstanding and (y) in
the case of the CFN Subsidiaries, the aggregate principal amount of
Indebtedness permitted by this clause (v) shall not exceed $2,000,000 at
any time outstanding;
(vi) Indebtedness of any Person that becomes a Subsidiary after the
Effective Date; provided that (A) such Indebtedness exists at the time such
--------
Person becomes a Subsidiary and is not created in contemplation of or in
connection with such Person becoming a Subsidiary and (B) the aggregate
principal amount of Indebtedness permitted by this clause (vi) shall not
exceed $2,000,000 at any time outstanding;
(vii) Indebtedness not yet due that arises pursuant to provisions in
acquisition agreements relating to purchase price adjustments in connection
with Permitted Acquisitions;
(viii) Permitted Subordinated Indebtedness; and
(ix) Permitted CFN Indebtedness.
(b) The Borrower will not, nor will it permit any of its
Subsidiaries (other than the CFN Subsidiaries) to issue or permit to exist any
shares of preferred stock, except shares of Permitted Preferred Stock.
SECTION 6.02. Liens. The Borrower will not, nor will the Borrower
-----
permit any of its Subsidiaries (other than the CFN Subsidiaries, except at any
time that loans or advances by the Borrower to any of the CFN Subsidiaries
pursuant to Section 6.04(d) shall remain outstanding) to, create, incur, assume
or permit to exist
<PAGE>
51
any Lien on any property or asset now owned or hereafter acquired by it, or
assign or sell any income or revenues (including accounts receivable) or rights
in respect of any thereof, except:
(i) Liens created under the Loan Documents;
(ii) Permitted Encumbrances;
(iii) any Lien on any property or asset of any Subsidiary of
the Borrower existing on the Effective Date and set forth in Schedule 6.02;
provided that (A) such Lien shall not apply to any other property or asset
--------
of any Subsidiary of the Borrower and (B) such Lien shall secure only those
obligations that it secures on the Effective Date and extensions, renewals
and replacements thereof that do not increase the outstanding principal
amount thereof.
(iv) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the
Effective Date hereof prior to the time such Person becomes a Subsidiary;
provided that (A) such Lien is not created in contemplation of or in
--------
connection with such acquisition or such Person becoming a Subsidiary, as
the case may be, (B) such Lien shall not apply to any other property or
assets of the Borrower or any Subsidiary and (C) such Lien shall secure
only those obligations that it secures on the date of such acquisition or
the date such Person becomes a Subsidiary, as the case may be, and
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;
(v) Liens on fixed or capital assets acquired, constructed
or improved by the Borrower or any Subsidiary; provided that (A) such
--------
security interests secure Indebtedness permitted by clause (v) of Section
6.01, (B) such security interests and the Indebtedness secured thereby are
incurred prior to or within 90 days after such acquisition or the
completion of such construction or improvement, (C) the Indebtedness
secured thereby does not exceed 100% of the cost of acquiring, constructing
or improving such fixed or capital assets and (D) such security interests
shall not apply to any other property or assets of the Borrower or any
Subsidiary; and
(vi) Liens (other than those permitted by paragraphs (i) through (v)
above and other than Liens on Collateral) securing liabilities permitted
hereunder in an aggregate amount not exceeding $500,000 at any time
outstanding.
SECTION 6.03. Fundamental Changes. (a) The Borrower will not, nor
-------------------
will the Borrower permit any of its Subsidiaries (other than the CFN
Subsidiaries) to, merge into or consolidate with any other Person, or permit any
other Person to merge into or consolidate with it, or liquidate or dissolve,
except that, if at the time thereof and immediately after giving effect thereto
no Default shall have occurred and be continuing (i) any Subsidiary (other than
a CFN Subsidiary) may merge into the Borrower in a transaction in which the
Borrower is the surviving corporation, (ii) any Subsidiary may merge into any
Subsidiary Loan Party in a transaction in which the surviving entity is a
Subsidiary Loan Party, (iii) any Foreign Subsidiary may merge
<PAGE>
52
into any other Foreign Subsidiary and (iv) any Subsidiary of the Borrower may
liquidate or dissolve if the Borrower determines in good faith that such
liquidation or dissolution is in the best interests of the Borrower and is not
materially disadvantageous to the Lenders; provided that any such merger
--------
involving a Person that is not a wholly owned Subsidiary immediately prior to
such merger shall not be permitted unless also permitted by Section 6.04.
(b) The Borrower will not, nor will the Borrower permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and its Subsidiaries on the
date of execution of this Agreement and businesses reasonably related thereto.
(c) The Borrower will not engage in any business or activity other
than (i) the ownership of all the outstanding shares of capital stock of the
Subsidiary Loan Parties and any Foreign Subsidiaries, (ii) the maintenance of
investments permitted under Section 6.04 and (iii) activities incidental
thereto. The Borrower will not own or acquire any assets (other than shares of
capital stock of the Subsidiary Loan Parties, CFN or any Foreign Subsidiaries,
cash and Permitted Investments) or incur any liabilities (other than
Indebtedness permitted by Section 6.01, liabilities under the Loan Documents,
liabilities imposed by law, including tax liabilities, and other liabilities
incidental to its existence and permitted business and activities).
SECTION 6.04. Investments, Loans, Advances, Guarantees and
--------------------------------------------
Acquisitions. The Borrower will not, nor will the Borrower permit any of its
- ------------
Subsidiaries (other than the CFN Subsidiaries) to, purchase, hold or acquire
(including pursuant to any merger with any Person that was not a wholly owned
Subsidiary prior to such merger) any capital stock, evidences of indebtedness or
other securities (including any option, warrant or other right to acquire any of
the foregoing) of, make or permit to exist any loans or advances to, Guarantee
any obligations of, or make or permit to exist any investment or any other
interest in, any other Person, or purchase or otherwise acquire (in one
transaction or a series of transactions) any assets of any other Person
constituting a business unit, except:
(a) Permitted Investments;
(b) investments existing on the Effective Date and set forth on
Schedule 6.04, to the extent such investments would not be permitted under
any other clause of this Section;
(c) investments by the Borrower in the capital stock of CFN, the
Subsidiary Loan Parties and any Foreign Subsidiaries and investments by any
Subsidiary Loan Party or CFN Subsidiary in the capital stock of its
Subsidiaries; provided that (i) any such shares of capital stock owned by
--------
or on behalf of a Loan Party shall be pledged pursuant to the Pledge
Agreement (subject to the limitations applicable to common stock of a
Foreign Subsidiary referred to in Section 5.12), (ii) the Subsidiary Loan
Parties shall not make any investment in, loan or advance to or guarantee
in respect of any CFN Subsidiary, (iii) any investments by the Borrower in
any of the CFN Subsidiaries after the Effective Date shall be made as loans
and evidenced by a promissory note pledged pursuant to the Pledge Agreement
and (iv) the sum of the amount of such investments by the Borrower in the
CFN Subsidiaries plus
<PAGE>
53
the amount of loans and advances by the Borrower to the CFN Subsidiaries
shall not exceed, in the aggregate at any time outstanding, $5,000,000 plus
the amount of any investment by the Borrower in the CFN Subsidiaries
permitted under clause (b) above; provided further that, from and after
-------- -------
November 2, 1998, the total amount of loans and advances by the Borrower to
the CFN Subsidiaries shall not exceed, in the aggregate at any time
outstanding, $1,300,000.
(d) loans or advances made by (i) any Subsidiary Loan Party to any
other Subsidiary Loan Party, (ii) any Foreign Subsidiary to any other
Foreign Subsidiary and (iii) subject to the limitations set forth in clause
(c) above, the Borrower to any CFN Subsidiary; provided that any such loans
--------
and advances by a Loan Party shall be evidenced by a promissory note
pledged pursuant to the Pledge Agreement;
(e) Guarantees by the Borrower constituting Indebtedness permitted by
Section 6.01; provided that no Loan Party may enter into any Guarantee in
--------
respect of a CFN Subsidiary;
(f) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;
(g) Permitted Acquisitions;
(h) prepaid expenses in the ordinary course of business;
(i) loans to employees of the Borrower and the Subsidiaries in their
capacity as such, in an aggregate principal amount not to exceed $250,000
at any time outstanding;
(j) Hedging Agreements permitted under Section 6.07;
(k) investments in Joint Ventures in an aggregate amount not to
exceed $500,000;
(l) promissory notes received upon a sale of assets permitted under
Section 6.05;
(m) investments in an employee stock ownership plan sponsored by the
Borrower (i) if such investments are made with the Borrower's common stock
or are to be used by such employee stock ownership plan to immediately
purchase common stock from the Borrower or (ii) in an amount up to $75,000
per year for operational expenses of such employee stock ownership plan;
(n) Loans or Advances to Permit.Com, a Delaware corporation, by the
Borrower in an aggregate amount not to exceed $1,000,000; provided that any
--------
such loans or advances shall be evidenced by a promissory note pledged
pursuant to the Pledge Agreement;
<PAGE>
54
(o) Loans by the Borrower to Foreign Subsidiaries in an aggregate
amount not to exceed $5,000,000; provided that any such loans shall be
--------
evidenced by a promissory note pledged pursuant to the Pledge Agreement;
(p) other investments in an aggregate amount not to exceed $250,000
at any time outstanding; and
(q) non-recourse loans made by the Borrower to any of its employees
in connection with the purchase of stock of the Borrower by such employee;
provided that (i) such employee pledges such purchased stock as collateral
--------
with respect to such non-recourse loan and (ii) any such transaction does
not involve the payment of cash by the Borrower to such employee.
SECTION 6.05. Asset Sales. The Borrower will not, nor will the
-----------
Borrower permit any of its Subsidiaries (other than the CFN Subsidiaries) to,
sell, transfer, lease or otherwise dispose of any asset, including any capital
stock owned by any of them, nor will the Borrower permit any of its Subsidiaries
(other than the CFN Subsidiaries) to issue any additional shares of its capital
stock or other ownership interest in such Subsidiary, except:
(a) sales of inventory, used or surplus equipment and Permitted
Investments in the ordinary course of business;
(b) sales, transfers and dispositions by any Subsidiary of the
Borrower to any other Subsidiary of the Borrower; provided that (i) capital
--------
stock of a Subsidiary Loan Party shall not be sold or transferred to a
Subsidiary that is not a Subsidiary Loan Party and (ii) any such sales,
transfers or dispositions involving a Subsidiary that is not a Subsidiary
Loan Party shall be made in compliance with Section 6.09; and
(c) sales, transfers and dispositions of assets by Subsidiaries of
the Borrower (other than capital stock of a Subsidiary) that are not
permitted by any other clause of this Section; provided that the
--------
aggregate fair market value of all assets sold, transferred or otherwise
disposed of in reliance upon this clause (c) shall not exceed $500,000 in
the aggregate;
provided that all sales, transfers, leases and other dispositions permitted
- --------
hereby shall be made for fair value and for at least 80% cash consideration.
SECTION 6.06. Sale and Lease-Back Transactions. The Borrower will
--------------------------------
not, nor will the Borrower permit any of its Subsidiaries to, enter into any
arrangement, directly or indirectly, with any Person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred, except for any such sale of
fixed or capital assets that is consummated within 90 days after the date the
Borrower, any Subsidiary Loan Party or any CFN Subsidiary, as applicable,
acquires or finished construction of such fixed or capital asset.
<PAGE>
55
SECTION 6.07. Hedging Agreements. The Borrower will not, nor will
------------------
the Borrower permit any of its Subsidiaries (other than the CFN Subsidiaries)
to, enter into any Hedging Agreement, other than Hedging Agreements entered into
by the Borrower in the ordinary course of business to hedge or mitigate risks to
which the Borrower or its Subsidiaries (other than the CFN Subsidiaries) is
exposed in the conduct of its business or the management of its liabilities.
SECTION 6.08. Restricted Payments: Certain Payments of Indebtedness.
-----------------------------------------------------
(a) The Borrower will not, nor will the Borrower permit any of its Subsidiaries
(other than the CFN Subsidiaries) to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, or incur any obligation
(contingent or otherwise) to do so, except (i) the Borrower may declare and pay
dividends ratably with respect to its capital stock payable solely in additional
shares of its common stock, (ii) any Subsidiary Loan Party may declare and pay
dividends ratably with respect to its capital stock; (iii) any Subsidiary of a
Subsidiary Loan Party may declare and pay dividends ratably with respect to its
capital stock, (iv) the Borrower's Subsidiaries may make payments to the
Borrower pursuant to and in accordance with the Tax Sharing Agreement and (v)
the Borrower may, pursuant to and in accordance with stock option plans, warrant
plans or other benefit plans for management or employees of the Borrower and its
Subsidiaries, make Restricted Payments not exceeding $500,000 during any fiscal
year. The Borrower will not permit any CFN Subsidiary to make any payment
(whether in cash, securities or other property) on account of the purchase,
redemption, retirement, acquisition, cancelation or termination of any shares of
capital stock of the Borrower or any option, warrant or other right to acquire
any such shares.
(b) The Borrower will not, nor will the Borrower permit any of its
Subsidiaries (other than the CFN Subsidiaries) to, make or agree to pay or make,
directly or indirectly, any payment or other distribution (whether in cash
securities or other property) of or in respect of principal of or interest on
any Indebtedness, or any payment or other distribution (whether in cash,
securities or other property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition, cancelation or
termination of any Indebtedness, except:
(i) payment of Indebtedness created under the Loan Documents;
(ii) payment of regularly scheduled interest and principal payments
as and when due in respect of any Indebtedness (to the extent not
prohibited by applicable subordination provisions, if any);
(iii) refinancings of Indebtedness to the extent permitted by Section
6.01; and
(iv) payment of Indebtedness permitted by Section 6.01(ii), (iii),
(v), (vi), (vii) or (viii).
SECTION 6.09. Transactions with Affiliates. Except as set forth in
----------------------------
Schedule 6.09, the Borrower will not nor will the Borrower permit any of its
Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or
purchase, lease or otherwise acquire any property or assets from, or otherwise
engage in any
<PAGE>
56
other transactions with, any of its Affiliates, except (a) transactions in the
ordinary course of business that are at prices and on terms and conditions not
less favorable to any Subsidiary of the Borrower than could be obtained on an
arm' s-length basis from unrelated third parties, (b) transactions between or
among the Loan Parties not involving any other Affiliate and (c) any Restricted
Payment permitted by Section 6.08.
SECTION 6.10. Restrictive Agreements. The Borrower will not, nor
----------------------
will the Borrower permit any Subsidiary Loan Party to, directly or indirectly,
enter into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the ability of the
Borrower or any Subsidiary Loan Party to create, incur or permit to exist any
Lien upon any of its property or assets, or (b) the ability of any Subsidiary
Loan Party to pay dividends or other distributions with respect to any shares of
its capital stock or to make or repay loans or advances to any other Subsidiary
Loan Party or to Guarantee Indebtedness of any other Subsidiary Loan Party;
provided that (i) the foregoing shall not apply to restrictions and conditions
- --------
imposed by law or by any Loan Document, (ii) the foregoing shall not apply to
restrictions and conditions existing on the Effective Date identified on
Schedule 6.10 (but shall apply to any extension or renewal of, or any amendment
or modification expanding the scope of, any such restriction or condition),
(iii) the foregoing shall not apply to customary restrictions and conditions
contained in agreements relating to the sale of a Subsidiary pending such sale;
provided such restrictions and conditions apply only to the Subsidiary that is
- --------
to be sold and such sale is permitted hereunder, (iv) clause (a) of the
foregoing shall not apply to restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness and (v) clause (a) of the foregoing shall not apply to customary
provisions in leases restricting the assignment thereof.
SECTION 6.11. Amendment of Material Documents. The Borrower will not,
-------------------------------
nor will the Borrower permit any of its Subsidiaries to, amend, modify or waive
any of its rights under (a) its certificate of incorporation, by-laws or other
organizational documents (other than the CFN Subsidiaries following the CFN
Wholly owned Period), (b) the Tax Sharing Agreement or (c) any of the
instruments, agreements or documents evidencing or related to the Borrower's
Class A Preferred Stock, Class B Preferred Stock or Class C Preferred Stock,
Permitted Preferred Stock and any Permitted Subordinated Indebtedness; provided
--------
that the Borrower or any Subsidiary may amend, modify or waive any of its rights
under clause (c) above if such amendment, modification or waiver (i) is on terms
no less favorable to the Borrower and its Subsidiaries than would be obtained on
an arm's length basis from unrelated third parties and (ii) is not, individually
or in the aggregate, in any manner adverse to the Lenders in any material
respect.
SECTION 6.12. Subsidiaries. The Borrower will not have any
------------
Subsidiary (other than the CFN Subsidiaries) unless such Subsidiary is wholly
owned, directly or indirectly, by the Borrower, and the Borrower will not take
any action that would result in any Subsidiary (other than the CFN Subsidiaries)
ceasing to be a wholly owned Subsidiary of the Borrower; provided that the
--------
Borrower may permit the sale of up to 10% of the outstanding capital stock of
iXL - Madrid, S.A.
<PAGE>
57
SECTION 6.13. Minimum Consolidated EBITDA. The Borrower will not
---------------------------
permit Consolidated EBITDA of the Borrower and its Subsidiaries for any of the
following periods ending on any date set forth below to be less than the amount
set forth below opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
Six Months Ending December 31, $(13,000,000)
1998
Nine Months Ending March 31, (16,000,000)
1999
Twelve Months Ending June 30, (14,000,000)
1999
Twelve Months Ending September (5,000,000)
30, 1999
Twelve Months Ending December 3,000,000
31, 1999
Twelve Months Ending March 31, 3,000,000
2000
Twelve Months Ending June 30, 6,000,000
2000
Twelve Months Ending September 6,000,000
30, 2000
Twelve Months Ending December 10,000,000
31, 2000
Twelve Months Ending March 31, 10,000,000
2001
Twelve Months Ending June 30, 10,000,000
2001
</TABLE>
SECTION 6.14. Total Debt to Contributed Capital. The Borrower will
---------------------------------
not permit the ratio of Total Debt to Contributed Capital as of any date to be
in excess of 1.00 to 1.00.
SECTION 6.15. Fiscal Year. The Borrower will not change the end of
-----------
its fiscal year from December 31 to any other date.
ARTICLE VII
Events of Default
-----------------
If any of the following events ("Events of Default") shall occur:
-----------------
(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise;
<PAGE>
58
(b) the Borrower shall fail to pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in clause (a) of
this Article) payable under this Agreement or any other Loan Document, when
and as the same shall become due and payable, and such failure shall
continue unremedied for a period of three Business Days;
(c) any representation or warranty made or deemed made by or on
behalf of any Loan Party in or in connection with any Loan Document or any
amendment or modification thereof or waiver thereunder, or in any report,
certificate, financial statement or other document furnished pursuant to or
in connection with any Loan Document or any amendment or modification
thereof or waiver thereunder, shall prove to have been incorrect (in the
case of any representation or warranty that is not qualified as to
materiality, in any material respect) when made or deemed made;
(d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Section 5.01(f), 5.02, 5.04 (with
respect to the existence of the Borrower) or 5.10 or in Article VI;
(e) any Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in any Loan Document (other than those
specified in clause (a), (b) or (d) of this Article), and such failure
shall continue unremedied for a period of 30 days after notice thereof from
the Administrative Agent to the Borrower (which notice will be given at the
request of any Lender);
(f) the Borrower or any of its Subsidiaries shall fail to make any
payment (whether of principal or interest and regardless of amount) in
respect of any Material Indebtedness, when and as the same shall become due
and payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables
or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee or
agent on its or their behalf to cause any Material Indebtedness to become
due, or to require the prepayment, repurchase, redemption or defeasance
thereof, prior to its scheduled maturity; provided that this clause (g)
--------
shall not apply to secured Indebtedness that becomes due as a result of the
voluntary sale or transfer of the property or assets securing such
Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of the Borrower or any of its Subsidiaries or its debts,
or of a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any of
its Subsidiaries or for a substantial part of its assets, and, in any such
case, such proceeding or petition shall continue undismissed for 60 days or
an order or decree approving or ordering any of the foregoing shall be
entered;
<PAGE>
59
(i) the Borrower or any of its Subsidiaries shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely
and appropriate manner, any proceeding or petition described in clause (h)
of this Article, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any of its Subsidiaries or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) the Borrower or any of its Subsidiaries shall become unable,
admit in writing its inability or fail generally to pay its debts as they
become due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $1,000,000 shall be rendered against the Borrower, any
of its Subsidiaries or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any assets of the Borrower or any
of its Subsidiaries to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in a Material Adverse
Effect;
(m) any Lien purported to be created under any Security Document
shall cease to be, or shall be asserted by any Loan Party not to be, a
valid and perfected Lien on any Collateral, with the priority required by
the applicable Security Document, except (i) as a result of the sale or
other disposition of the applicable Collateral in a transaction permitted
under the Loan Documents or (ii) as a result of the Administrative Agent's
failure to maintain possession of any stock certificates, promissory notes
or other instruments delivered to it under the Pledge Agreement; or
(n) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall become due
and payable immediately, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower;
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60
and in case of any event with respect to the Borrower described in clause (h) or
(i) of this Article, the Commitments shall automatically terminate and the
principal of the Loans then outstanding, together with accrued interest thereon
and all fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
ARTICLE VIII
The Administrative Agent
------------------------
Each of the Lenders and the Issuing Bank hereby irrevocably appoints
the Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms of the Loan Documents, together with such
actions and powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower or any of its Subsidiaries or other
Affiliate thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations
except those expressly set forth in the Loan Documents. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by the Loan Documents
that the Administrative Agent is required to exercise in writing by the Required
Lenders (or such other number or percentage of the Lenders as shall be necessary
under the circumstances as provided in Section 9.02), and (c) except as
expressly set forth in the Loan Documents, the Administrative Agent shall not
have any duty to disclose, and shall not be liable for the failure to disclose,
any information relating to the Borrower or any of its Subsidiaries that is
communicated to or obtained by the bank serving as Administrative Agent or any
of its Affiliates in any capacity. The Administrative Agent shall not be liable
for any action taken or not taken by it with the consent or at the request of
the Required Lenders (or such other number or percentage of the Lenders as shall
be necessary under the circumstances as provided in Section 9.02) or in the
absence of its own gross negligence or wilful misconduct. The Administrative
Agent shall not be deemed not to have knowledge of any Default unless and until
written notice thereof is given to the Administrative Agent by the Borrower or a
Lender, and the Administrative Agent shall not be responsible for or have any
duty to ascertain or inquire into (i) any statement, warranty or representation
made in or in connection with any Loan Document, (ii) the contents of any
certificate, report or other document delivered thereunder or in connection
therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth in any Loan Document, (iv) the
validity, enforceability, effectiveness or genuineness of any Loan Document or
any other
<PAGE>
61
agreement, instrument or document, or (v) the satisfaction of any condition set
forth in Article IV or elsewhere in any Loan Document, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of each Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor the
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders, the Issuing Bank and the Borrower.
Upon any such resignation, the Required Lenders shall have the right, in
consultation with the Borrower, to appoint a successor. If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and the Issuing Bank, appoint a successor Administrative Agent that
shall be a bank with an office in New York, New York, or an Affiliate of any
such bank. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder. The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the
Administrative Agent's resignation hereunder, the provisions of this Article and
Section 9.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender
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62
and based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Loan Document or related agreement
or any document furnished hereunder or thereunder.
The provisions of this Article applicable to the Administrative Agent
also shall apply to the Collateral Agent in its capacity as such.
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Notices. Except in the case of notices and other
-------
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to iXL Enterprises, Inc., 1888 Emery Street,
N.W., Atlanta, GA 30318, Attention of Wayne Boylston (Telecopy No.404-267-
3801);
(b) if to the Administrative Agent, to The Chase Manhattan Bank, Loan
and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York,
New York 10081, Attention of Vito Cipriano (Telecopy No. (212) 552-7402),
with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York 10017,
Attention of Neil Boylan (Telecopy No. 212-972-0009);
(c) if to the Issuing Bank, to The Chase Manhattan Bank, Loan and
Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York, New
York 10081, Attention of Vito Cipriano (Telecopy No. (212) 552-7402), with
a copy to The Chase Manhattan Bank, 270 Park Avenue, New York 10017,
Attention of Neil Boylan (Telecopy No. 212-972-0009); and
(d) if to any other Lender, to it at its address (or telecopy number)
set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the
-------------------
Administrative Agent, the Issuing Bank or any Lender in exercising any right or
power hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent, the Issuing
Bank and the Lenders hereunder and under the other Loan Documents are cumulative
and are not exclusive of any rights or remedies
<PAGE>
63
that they would otherwise have. No waiver of any provision of any Loan Document
or consent to any departure by any Loan Party therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent, any Lender or the Issuing Bank may have had notice or knowledge of such
Default at the time.
(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or, in the case of any
other Loan Document, pursuant to an agreement or agreements in writing entered
into by the Administrative Agent and the Loan Party or Loan Parties that are
parties thereto, in each case with the consent of the Required Lenders;
provided that no such agreement shall (i) increase the Commitment of any Lender
- --------
without the written consent of such Lender, (ii) reduce the principal amount of
any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce
any fees payable hereunder, without the written consent of each Lender affected
thereby, (iii) postpone the Term Maturity Date or the Revolving Maturity Date or
the scheduled date of payment of the principal amount of any LC Disbursement, or
any interest thereon, or any fees payable hereunder, or reduce the amount of,
waive or excuse any such payment, or postpone the scheduled date of expiration
of any Commitment, without the written consent of each Lender affected thereby,
(iv) change Section 2.15(b) or (c) in a manner that would alter the pro rata
sharing of payments required thereby, without the written consent of each
Lender, (v) change any of the provisions of this Section or the definition of
the term "Required Lenders" or any other provision of any Loan Document
specifying the number or percentage of Lenders (or Lenders of any Class)
required to waive, amend or modify any rights thereunder or make any
determination or grant any consent thereunder, without the written consent of
each Lender (or each Lender of such Class, as the case may be), (vi) release any
Loan Party from its Guarantee under the Guarantee Agreement (except as expressly
provided in the Guarantee Agreement), or limit its liability in respect of such
Guarantee, without the written consent of each Lender, (vii) release all or
substantially all of the Collateral from the Liens of the Security Documents,
without the written consent of each Lender or (viii) change any provisions of
any Loan Document in a manner that by its terms adversely affects the rights in
respect of payments due to Lenders holding Loans of any Class differently than
those holding Loans of any other Class, without the written consent of Lenders
holding a majority in interest of the outstanding Loans and unused Commitments
of each affected Class; provided further that (A) no such agreement shall
----------------
amend, modify or otherwise affect the rights or duties of the Administrative
Agent or the Issuing Bank without the prior written consent of the
Administrative Agent or the Issuing Bank, as the case may be, and (B) any
waiver, amendment or modification of this Agreement that by its terms affects
the rights or duties under this Agreement of the Revolving Lenders (but not the
Term Lenders) or the Term Lenders (but not the Revolving Lenders) may be
affected by an agreement or agreements in writing entered into by the Borrower
and the requisite percentage in interest of the affected Class of Lenders. If,
in connection with any proposed change, waiver, discharge or termination of or
to any of the provisions of this Agreement as contemplated by this Section
9.02(b), the consent of the Required Lenders is obtained but the consent of one
or more other Lenders whose consent is
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64
required pursuant to one of the provisos to the immediately preceding sentence
is not obtained, then the Borrower may, at its sole expense and effort, upon
notice to such non-consenting Lender or Lenders and the Administrative Agent,
require such non-consenting Lender or Lenders to assign or delegate (so long as
all non-consenting Lenders are so required), without recourse (in accordance
with and subject to the restrictions contained in Section 9.04), all its
interests, rights and obligations under this Agreement to an assignee (so long
as such assignee at the time of the assignment consents to such proposed change,
waiver, discharge or termination) that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment), provided
--------
that (i) the Borrower shall have received the prior written consent of the
Administrative Agent (and, if a Revolving Commitment is being assigned, the
Issuing Bank), which consent shall not unreasonably be withheld, and (ii) such
non-consenting Lender shall have received payment of an amount equal to the
outstanding principal amount of its Loans and participations in LC
Disbursements, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts).
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower
----------------------------------
agrees to pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent, the Collateral Agent and their Affiliates, including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent and the Collateral Agent, in connection with the syndication of the credit
facilities provided for herein, the preparation and administration of the Loan
Documents or any amendments, modifications or waivers of the provisions thereof
(whether or not the transactions contemplated hereby or thereby shall be
consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing
Bank in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder and (iii) all out-of-
pocket expenses incurred by the Administrative Agent, the Collateral Agent, the
Issuing Bank or any Lender, including the fees, charges and disbursements of any
counsel for the Administrative Agent, the Collateral Agent, the Issuing Bank or
any Lender, in connection with the enforcement or protection of its rights in
connection with the Loan Documents, including its rights under this Section, or
in connection with the Loans made or Letters of Credit issued hereunder,
including all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit.
(b) The Borrower agrees to indemnify the Administrative Agent, the
Collateral Agent, the Issuing Bank and each Lender, and each Related Party of
any of the foregoing Persons (each such Person being called an "Indemnitee")
----------
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the fees, charges and
disbursements of any counsel for any Indemnitee, incurred by or asserted against
any Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of any Loan Document or any other agreement or instrument
contemplated hereby, the performance by the parties to the Loan Documents of
their respective obligations thereunder or the consummation of the Transactions
or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit
or the use of the proceeds therefrom (including any refusal by the Issuing Bank
to honor a demand for payment under a Letter of Credit if the documents
presented in connection with such demand do not strictly comply with the terms
of such Letter of Credit), (iii) any actual or alleged presence or release of
<PAGE>
65
Hazardous Materials on or from any property currently or formerly owned or
operated by the Borrower or any of its Subsidiaries, or any Environmental
Liability related in any way to the Borrower or any of its Subsidiaries, or (iv)
any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory and regardless of whether any Indemnitee is a party thereto; provided
--------
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or wilful misconduct of such
Indemnitee.
(c) To the extent that the Borrower fails to pay any amount required
to be paid by them to the Administrative Agent or the Issuing Bank under
paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the
Administrative Agent or the Issuing Bank, as the case may be, such Lender's pro
rata share (determined as of the time that the applicable unreimbursed expense
or indemnity payment is sought) of such unpaid amount; provided that the
--------
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent or the Issuing Bank in its capacity as such. For purposes
hereof, a Lender's "pro rata share" shall be determined based upon its share of
the sum of the total Revolving Exposures, outstanding Term Loans and unused
Commitments at the time.
(d) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby, the
Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable promptly after
written demand therefor.
SECTION 9.04. Successors and Assigns. (a) The provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit), except that the
Borrower may not assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the Borrower without such consent shall be null and
void). Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby (including any Affiliate of the Issuing
Bank that issues any Letter of Credit) and, to the extent expressly contemplated
hereby, the Related Parties of each of the Administrative Agent, the Issuing
Bank and the Lenders) any legal or equitable right, remedy or claim under or by
reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion of
its rights and obligations under this Agreement (including all or a portion of
its Commitment and the Loans at the time owing to it); provided that (i) except
--------
in the case of an assignment to a Lender or an Affiliate of a Lender, each of
the Borrower and the
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66
Administrative Agent (and, in the case of an assignment of all or a portion of a
Revolving Commitment or any Lender's obligations in respect of its LC Exposure,
the Issuing Bank) must give their prior written consent to such assignment
(which consent shall not be unreasonably withheld), (ii) except in the case of
an assignment to a Lender or an Affiliate of a Lender or an assignment of the
entire remaining amount of the assigning Lender's Commitment or Loans, the
amount of the Commitment or Loans of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Administrative Agent) shall not be less
than $2,500,000 unless each of the Borrower and the Administrative Agent
otherwise consent, (iii) each partial assignment shall be made as an assignment
of a proportionate part of all the assigning Lender's rights and obligations
under this Agreement, except that this clause (iii) shall not be construed to
prohibit the assignment of a proportionate part of all the assigning Lender's
rights and obligations in respect of one Class of Commitments or Loans, (iv) the
parties to each assignment shall execute and deliver to the Administrative Agent
an Assignment and Acceptance, together with a processing and recordation fee of
$3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire; provided further that any
----------------
consent of the Borrower otherwise required under this paragraph shall not be
required if an Event of Default under clause (h) or (i) of Article VII has
occurred and is continuing. Subject to acceptance and recording thereof pursuant
to paragraph (d) of this Section, from and after the effective date specified in
each Assignment and Acceptance the assignee thereunder shall be a party hereto
and, to the extent of the interest assigned by such Assignment and Acceptance,
have the rights and obligations of a Lender under this Agreement, and the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of the
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.12, 2.13, 2.14 and 9.03). Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
--------
the Register shall be conclusive, and the Borrower, the Administrative Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by any of the Borrower, the Issuing Bank and any
Lender, at any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any
<PAGE>
67
written consent to such assignment required by paragraph (b) of this Section,
the Administrative Agent shall accept such Assignment and Acceptance and record
the information contained therein in the Register. No assignment shall be
effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Issuing Bank, sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such Lender's
-----------
rights and obligations under this Agreement (including all or a portion of its.
Commitment and the Loans owing to it); provided that (i) such Lender's
--------
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower, the Administrative Agent, the Issuing
Bank and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce the Loan Documents and to approve any amendment, modification or waiver
of any provision of the Loan Documents; provided that such agreement or
--------
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the
first proviso to Section 9.02(b) that affects such Participant. Subject to
paragraph (f) of this Section, the Borrower agrees that each Participant shall
be entitled to the benefits of Sections 2.12, 2.13 and 2.14 to the same extent
as if it were a Lender and had acquired its interest by assignment pursuant to
paragraph (b) of this Section. To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 9.08 as though it were a
Lender; provided such Participant agrees to be subject to Section 2.15(c) as
--------
though it were a Lender.
(f) A Participant shall not be entitled to receive any greater payment
under Section 2.12 or 2.14 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower's
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 2.14 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 2.14(e) as
though it were a Lender.
(g) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
--------
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.
SECTION 9.05. Survival. All covenants, agreements, representations and
--------
warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the
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68
making of any Loans and issuance of any Letters of Credit, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that the Administrative Agent, the Issuing Bank or any Lender may have had
notice or knowledge of any Default or incorrect representation or warranty at
the time any credit is extended hereunder, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
fee or any other amount payable under this Agreement is outstanding and unpaid
or any Letter of Credit is outstanding and so long as the Commitments have not
expired or terminated. The provisions of Sections 2.12, 2.13, 2.14 and 9.03 and
Article VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement
----------------------------------------
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement, the other
Loan Document and any separate letter agreements with respect to fees payable to
the Administrative Agent constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Except as provided in Section 4.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof that, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement held to be
------------
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.08. Right of Set-off. If an Event of Default shall have
----------------
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set-off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Borrower against any of and all the obligations of the Borrower now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
are in addition to other rights and remedies (including other rights of set-off)
that such Lender may have.
<PAGE>
69
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
--------------------------------------------------
Process. (a) This Agreement shall be construed in accordance with and governed
- -------
by the law of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to any
Loan Document, or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in such
New York State or, to the extent permitted by law, in such Federal court. Each
of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement or any other Loan Document shall affect any right that the
Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring
any action or proceeding relating to this Agreement or any other Loan Document
against the Borrower or its respective properties in the courts of any
jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other Loan Document in any
court referred to in paragraph (b) of this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
--------------------
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. Headings. Article and Section headings and the Table of
--------
Contents used herein are for convenience of reference only, are not part of this
<PAGE>
70
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Administrative Agent, the
---------------
Issuing Bank and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to any
assignee of or Participant in, or any prospective assignee of or Participant in,
any of its rights or obligations under this Agreement, (g) with the consent of
the Borrower or (h) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section or (ii) becomes
available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis from a source other than the Borrower. For the purposes of
this Section, "Information" means all information received from the Borrower
-----------
relating to the Borrower or its business, other than any such information that
is available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by the Borrower; provided that, in the
--------
case of information received from the Borrower after the Effective Date, such
information is clearly identified at the time of delivery as confidential. Any
Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so
if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.
SECTION 9.13. Interest Rate Limitation. Notwithstanding anything
------------------------
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts that are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") that may be contracted for, charged,
-------------
taken, received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
<PAGE>
71
SECTION 9.14. Effect of Amendment and Restatement. Upon the
-----------------------------------
effectiveness of the amendment and restatement of the Original Credit Agreement
in the form hereof:
(a) the Original Credit Agreement (including all Exhibits and
Schedules thereto) will be amended and restated in its entirety as set
forth herein; and
(b) all Loans outstanding under the Original Credit Agreement as
of the Amendment Effective Date shall continue to remain outstanding
hereunder;
provided that the amendment and restatement of the Original Credit Agreement in
the form hereof shall not affect the Borrower's obligations accrued in respect
of any principal, interest, fees or other amounts under the Original Credit
Agreement, discharge or release the Lien under any Security Document, constitute
a novation of the obligations and liabilities existing under the Original Credit
Agreement, or be deemed to evidence or constitute repayment of all or any
portion of any such obligations or liabilities.
<PAGE>
72
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
iXL ENTERPRISES, INC.,
by /s/ M. Wayne Boylston
----------------------------
Name: M. Wayne Boylston
Title: Chief Financial Officer/EVP
THE CHASE MANHATTAN BANK,
individually and as Administrative Agent,
by /s/ Neil R. Boylan
----------------------------
Name: Neil R. Boylan
Title: Vice President
<PAGE>
73
SCHEDULES:
- ---------
Schedule 2.01 - Commitments
Schedule 3.04 - Contingent Liabilities
Schedule 3.05 - Owned or Leased Property
Schedule 3.06 - Disclosed Matters
Schedule 3.12 - Subsidiaries
Schedule 3.13 - Insurance
Schedule 6.01 - Existing Indebtedness
Schedule 6.02 - Existing Liens
Schedule 6.04 - Existing Investments
Schedule 6.09 - Disclosed Affiliate Transactions
Schedule 6.10 - Existing Restrictions
EXHIBITS:
- --------
Exhibit A -- Form of Assignment and Acceptance
Exhibit B-1 -- Form of Opinion of Minkin & Snyder, Counsel to Loan Parties
Exhibit B-2 -- Form of Opinion of Debevoise & Plimpton, Counsel to Loan Parties
Exhibit D -- Form of Indemnity, Subrogation and Contribution Agreement
Exhibit E -- Form of Pledge Agreement
Exhibit G -- Form of Borrowing Base Certificate
ANNEXES:
- -------
Annex 1 -- Perfection Certificate
<PAGE>
EXHIBIT K
GUARANTEE AGREEMENT dated as of July 29, 1998, among each of
the subsidiaries listed on Schedule I hereto (each such
subsidiary individually, a "Loan Party Guarantor" and
--------------------
collectively, the "Loan Party Guarantors") of IXL HOLDINGS, INC.
---------------------
(the "Borrower"), CONSUMER FINANCIAL NETWORK, INC., a Delaware
--------
corporation ("CFN"), CFN AGENCY, INC., a Delaware corporation
---
("Agency"), CFN FINANCE, INC., a Delaware corporation ("Finance"
------ -------
and together with CFN and Agency, the "CFN Guarantors"), and THE
--------------
CHASE MANHATTAN BANK, a New York banking corporation ("Chase"),
-----
as collateral agent (the "Collateral Agent") for the Lenders
----------------
under the Credit Agreement referred to below.
Reference is made to the Credit Agreement dated as of July 29, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), among the Borrower, the lenders from time to time party thereto
- ---------
(the "Lenders") and Chase, as administrative agent (the "Administrative Agent")
------- --------------------
for the Lenders. Capitalized terms used herein and not defined herein shall have
the meanings assigned to such terms in the Credit Agreement or the Security
Agreement referred to therein. For purposes of this Agreement, "Guarantors"
----------
shall be defined as the Loan Party Guarantors and, until such time as the CFN
Guarantors are terminated as Guarantors hereunder pursuant to Section 10 of this
Agreement, the CFN Guarantors.
The Lenders have agreed to make Loans to the Borrower, and the Issuing Bank
has agreed to issue Letters of Credit for the account of the Borrower, pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. The Borrower has requested that the Guarantors guarantee the
Obligations (as defined below) by entering into this Agreement. Each of the
Guarantors is a direct or indirect Subsidiary of the Borrower and each of the
Guarantors acknowledges that it will derive substantial benefit from the making
of the Loans by the Lenders, and the issuance of the Letters of Credit by the
Issuing Bank. The obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit are conditioned on, among other things, the
execution and delivery by the Guarantors of a Guarantee Agreement in the form
hereof. As consideration therefor and in order to induce the Lenders to make
Loans and the Issuing Bank to issue Letters of Credit, the Guarantors are
willing to execute this Agreement.
<PAGE>
Accordingly, the parties hereto agree as follows:
SECTION 1. Guarantee. Each Guarantor unconditionally guarantees,
---------
jointly with the other Guarantors and severally, as a primary obligor and not
merely as a surety, (a) the due and punctual payment by the Borrower of (i) the
principal of and premium, if any, and interest (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, (ii) each payment required to be
made by the Borrower under the Credit Agreement in respect of any Letter of
Credit, when and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral and
(iii) all other monetary obligations, including fees, costs, expenses and
indemnities, whether primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), of the Loan Parties to the Secured
Parties under the Credit Agreement and the other Loan Documents, (b) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Loan Parties under or pursuant to the Credit Agreement and the other Loan
Documents, (c) unless otherwise agreed upon in writing by the applicable Lender
party thereto, the due and punctual payment and performance of all obligations
of the Borrower, monetary or otherwise, under each Hedging Agreement entered
into with any counterparty that was a Lender (or an Affiliate thereof) at the
time such Hedging Agreement was entered into and (d) the due and punctual
payment and performance of all obligations in respect of overdrafts and related
liabilities owed to the Administrative Agent or any of its Affiliates and
arising from treasury, depository and cash management services in connection
with any automated clearing house transfers of funds (all the monetary and other
obligations described in the preceding clauses (a) through (d) being
collectively called the "Obligations"). Each Guarantor further agrees that the
-----------
Obligations may be extended or renewed, in whole or in part, without notice to
or further assent from it, and that it will remain bound upon its guarantee
notwithstanding any extension or renewal of any Obligation.
Anything contained in this Agreement to the contrary notwithstanding, the
obligations of each Guarantor hereunder shall be limited to a maximum aggregate
amount equal to the greatest amount that would not render such Guarantor's
2
<PAGE>
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
provisions of applicable state law (collectively, the "Fraudulent Transfer
-------------------
Laws"), in each case after giving effect to all other liabilities of such
- ----
Guarantor, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Guarantor (a) in respect of intercompany indebtedness to the Borrower or
Affiliates of the Borrower to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by such Guarantor hereunder and
(b) under any Guarantee of senior unsecured indebtedness or Indebtedness
subordinated in right of payment to the Obligations which Guarantee contains a
limitation as to maximum amount similar to that set forth in this paragraph,
pursuant to which the liability of such Guarantor hereunder is included in the
liabilities taken into account in determining such maximum amount) and after
giving effect as assets to the value (as determined under the applicable
provisions of the Fraudulent Transfer Laws) of any rights to subrogation,
contribution, reimbursement, indemnity or similar rights of such Guarantor
pursuant to (i) applicable law or (ii) any agreement providing for an equitable
allocation among such Guarantor and other Affiliates of the Borrower of
obligations arising under Guarantees by such parties (including the Indemnity,
Subrogation and Contribution Agreement).
SECTION 2. Obligations Not Waived. To the fullest extent permitted by
----------------------
applicable law, each Guarantor waives presentment to, demand of payment from and
protest to the other Loan Parties of any of the Obligations, and also waives
notice of acceptance of its guarantee and notice of protest for nonpayment. To
the fullest extent permitted by applicable law, the obligations of each
Guarantor hereunder shall not be affected by (a) the failure of the Collateral
Agent or any other Secured Party to assert any claim or demand or to enforce or
exercise any right or remedy against the Borrower or any other Guarantor under
the provisions of the Credit Agreement, any other Loan Document or otherwise,
(b) any rescission, waiver, amendment or modification of, or any release from
any of the terms or provisions of this Agreement, any other Loan Document, any
Guarantee or any other agreement, including with respect to any other Guarantor
under this Agreement, or (c) the failure to perfect any security interest in, or
the release of, any of the security held by or on behalf of the Collateral Agent
or any other Secured Party.
3
<PAGE>
SECTION 3. Security. Each of the guarantors authorizes the Collateral
--------
Agent and each of the other Secured Parties to (a) take and hold security
pursuant to the Security Documents for the payment of this Guarantee and the
Obligations and exchange, enforce, waive and release any such security, (b)
apply such security and direct the order or manner of sale thereof as they in
their sole discretion may determine and (c) release or substitute any one or
more endorsees, other Guarantors or other obligors.
SECTION 4. Guarantee of Payment. Each Guarantor further agrees that its
--------------------
guarantee constitutes a guarantee of payment when due and not of collection, and
waives any right to require that any resort be had by the Collateral Agent or
any other Secured Party to any of the security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
the Collateral Agent or any other Secured Party in favor of the Borrower or any
other Person.
SECTION 5. No Discharge or Diminishment of Guarantee. The obligations
-----------------------------------------
of each Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment in
full in cash of the Obligations), including any claim of waiver, release,
surrender, alteration or compromise of any of the Obligations, and shall not be
subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
obligations or otherwise. Without limiting the generality of the fore-going,
the obligations of each Guarantor hereunder shall not be discharged or impaired
or otherwise affected by the failure of the Collateral Agent or any other
Secured Party to assert any claim or demand or to enforce any remedy under the
Credit Agreement, any other Loan Document or any other agreement, by any waiver
or modification of any provision of any thereof, by any default, failure or
delay, wilful or otherwise, in the performance of the Obligations, or by any
other act or omission that may or might in any manner or to any extent vary the
risk of any Guarantor or that would otherwise operate as a discharge of any
Guarantor as a matter of law or equity (other than the indefeasible payment in
full in cash of all the obligations.)
SECTION 6. Defenses of Borrower Waived. To the fullest extent permitted
---------------------------
by applicable law, each of the Guarantors waives any defense based on or arising
out of any defense of the Borrower or the unenforceability of the Obligations or
any part thereof from any cause, or the cessation from any cause of the
liability of the Borrower,
4
<PAGE>
other than the final and indefeasible payment in full in cash of the
Obligations. The Collateral Agent and the other Secured Parties may, at their
election, foreclose on any security held by one or more of them by one or more
judicial or nonjudicial sales, accept an assignment of any such security in lieu
of foreclosure, compromise or adjust any part of the Obligations, make any other
accommodation with the Borrower or any other guarantor or exercise any other
right or remedy available to them against the Borrower or any other guarantor,
without affecting or impairing in any way the liability of any Guarantor
hereunder except to the extent the Obligations have been fully, finally and
indefeasibly paid in cash. Pursuant to applicable law, each of the Guarantors
waives any defense arising out of any such election even though such election
operates, pursuant to applicable law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor against
the Borrower or any other Guarantor or guarantor, as the case may be, or any
security.
SECTION 7. Agreement to Pay; Subordination. In furtherance of the foregoing
-------------------------------
and not in limitation of any other right that the Collateral Agent or any other
Secured Party has at law or in equity against any Guarantor by virtue hereof,
upon the failure of the Borrower or any other Loan Party to pay any Obligation
when and as the same shall become due, whether at maturity, by acceleration,
after notice of prepayment or otherwise, each Guarantor hereby promises to and
will forthwith pay, or cause to be paid, to the Collateral Agent or such other
Secured Party as designated thereby in same day funds the amount of such unpaid
Obligations. Upon payment by any Guarantor of any sums to the Collateral Agent
or any Secured Party as provided above, all rights of such Guarantor against any
other Loan Party arising as a result thereof by way of right of subrogation,
contribution, reimbursement, indemnity or otherwise shall in all respects be
subordinate and junior in right of payment to the prior indefeasible payment in
full in same day funds of all the Obligations. In addition, any indebtedness of
any other Loan Party now or hereafter held by any Guarantor is hereby
subordinated in right of payment to the prior payment in full of the
Obligations. If any amount shall erroneously be paid to any Guarantor on account
of (i) such subrogation, contribution, reimbursement, indemnity or similar right
or (ii) any such indebtedness of a Loan Party, such amount shall be held in
trust for the benefit of the Secured Parties and shall forthwith be paid to the
Collateral Agent to be credited against the payment of the Obligations, whether
matured or unmatured, in accordance with the terms of the Loan Documents.
5
<PAGE>
SECTION 8. Information. Each of the Guarantors assumes all responsibility
-----------
for being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks that such
Guarantor assumes and incurs hereunder, and agrees that none of the Collateral
Agent or the other Secured Parties will have any duty to advise any of the
Guarantors of information known to it or any of them regarding such
circumstances or risks.
SECTION 9. Representations and Warranties. Each of the Guarantors
------------------------------
represents and warrants as to itself that all representations and warranties
relating to it contained in the Credit Agreement are true and correct.
SECTION 10. Termination. The Guarantees made hereunder (a) shall terminate
-----------
when all the Obligations have been indefeasibly paid in full and the Lenders
have no further commitment to lend under the Credit Agreement, the LC Exposure
has been reduced to zero and the Issuing Bank has no further obligation to issue
Letters of Credit under the Credit Agreement and (b) shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any Obligation is rescinded or must otherwise be restored by
any Secured Party or any Guarantor upon the bankruptcy or reorganization of the
Borrower, any Guarantor or otherwise; provided, however, that following the last
-------- -------
day of the CFN Wholly-Owned Period, the rights and obligations of the CFN
Guarantors (other than obligations of the CFN Guarantors to make payments
pursuant to Section 7 of this Agreement that arose during the CFN Wholly-Owned
Period) under this Agreement shall automatically be deemed to have terminated
and this Agreement shall be of no further effect with respect thereto.
SECTION 11. Binding Effect; Several Agreement; Assignments. Whenever in
----------------------------------------------
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Guarantors that are contained in
this Agreement shall bind and inure to the benefit of each party hereto and
their respective successors and assigns. This Agreement shall become effective
as to any Guarantor when a counterpart hereof executed on behalf of such
Guarantor shall have been delivered to the Collateral Agent, and a counterpart
hereof shall have been executed on behalf of the Collateral Agent, and
thereafter shall be binding upon such Guarantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Guarantor,
6
<PAGE>
the Collateral Agent and the other Secured Parties, and their respective
successors and assigns, except that no Guarantor shall have the right to assign
its rights or obligations hereunder or any interest herein (and any such
attempted assignment shall be void). If all of the capital stock of a Guarantor
is sold, transferred or otherwise disposed of (other than to a Loan Party)
pursuant to a transaction permitted by the Credit Agreement (or any waiver
thereof), such Guarantor shall be released from its obligations under this
Agreement without further action. This Agreement shall be construed as a
separate agreement with respect to each Guarantor and may be amended, modified,
supplemented, waived or released with respect to any Guarantor without the
approval of any other Guarantor and without affecting the obligations of any
other Guarantor hereunder.
SECTION 12. Waivers; Amendment. (a) No failure or delay of the
------------------
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other or right power. The rights and remedies of the Collateral Agent hereunder
and of the other Secured Parties under the other Loan Documents are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agreement or consent to any departure by any
Guarantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Guarantors with respect to which such waiver, amendment or modification relates
and the collateral Agent, with the prior written consent of the Required Lenders
(except as otherwise provided in the Credit Agreement).
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
7
<PAGE>
SECTION 14. Notices. All communications and notices hereunder shall be in
-------
writing and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to each Guarantor shall be given to it in
care of the Borrower.
SECTION 15. Survival of Agreement; Severability. (a) All covenants,
-----------------------------------
agreements, representations and warranties made by the Guarantors herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Collateral Agent and the other Secured Parties and
shall survive the making by the Lenders of the Loans and the issuance of the
Letters of Credit by the Issuing Bank regardless of any investigation made by
the Secured Parties or on their behalf, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
other fee or amount payable under this Agreement or any other Loan Document is
outstanding and unpaid or the LC Exposure does not equal zero and as long as the
Commitments have not been terminated.
(b) In the event any one or more of the provisions contained in this
Agreement or in any other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 16. Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute a single contract, and shall become effective as
provide in Section 11 of this Agreement. Delivery of an executed signature page
to this Agreement by facsimile transmission shall be as effective as delivery of
a manually executed counterpart of this Agreement.
SECTION 17. Rules of Interpretation. The rules of interpretation
-----------------------
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
8
<PAGE>
SECTION 18. Jurisdiction; Consent to Service of Process. (a) Each Guarantor
-------------------------------------------
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement or the other
Loan Documents, or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees that, to the
extent permitted by applicable law, all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent or any other Secured Party may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan Documents
against any Guarantor or its properties in the courts of any jurisdiction.
(b) Each Guarantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
court referred to in paragraph (a) of this Section 18. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 14 of this Agreement.
Nothing in this Agreement will affect the right of any party to this Agreement
to serve process in any other manner permitted by law.
SECTION 19. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
--------------------
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
9
<PAGE>
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 19.
SECTION 20. Additional Guarantors. Pursuant to Section 5.11 of the Credit
----------------------
Agreement, each Loan Party and, until such time as the CFN Guarantors are
released from their respective obligations pursuant to Section 10 of this
Agreement, each subsidiary of CFN, that was not in existence on the date of the
Credit Agreement is required to enter into this Agreement as a Guarantor upon
becoming a Subsidiary Loan Party. Upon execution and delivery after the date
hereof by the Collateral Agent and such a Subsidiary of Holdings of an
instrument in the form of Annex 1, such Subsidiary shall become a Guarantor
hereunder with the same force and effect as if originally named as a Guarantor
herein. The execution and delivery of any instrument adding an additional
Guarantor as a party to this Agreement shall not require the consent of any
other Guarantor hereunder. The rights and obligations of each Guarantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Guarantor as a party to this Agreement.
SECTION 21. Right of Setoff. If an Event of Default shall have occurred and
----------------
be continuing, each Secured Party is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other Indebtedness at any time owing by such Secured Party to or
for the credit or the account of any Guarantor against any or all the
obligations of such Guarantor now or hereafter existing under this Agreement and
the other Loan Documents held by such Secured Party, irrespective of whether or
not such Secured Party shall have made any demand under this Agreement or any
other Loan Document and although such obligations may be unmatured. The rights
of each Secured Party under this
10
<PAGE>
Section 21 are in addition to other rights and remedies (including other rights
of setoff) which such Secured Party may have.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
IXL HOLDINGS, INC.,
by
/s/ James V. Sandry
---------------------
Name:
Title:
EACH OF THE LOAN PARTY
GUARANTORS LISTED ON
SCHEDULE I HERETO,
by
/s/ James V. Sandry
---------------------
Name:
Title: Authorized Officer
CONSUMER FINANCIAL NETWORK, INC.,
by
/s/ James V. Sandry
---------------------
Name:
Title:
CFN AGENCY, INC.,
by
/s/ James V. Sandry
---------------------
Name:
Title:
CFN FINANCE, INC.,
by
/s/ James V. Sandry
---------------------
Name:
Title:
11
<PAGE>
THE CHASE MANHATTAN BANK, as
Collateral Agent,
by
/s/ Neil R. Boylan
------------------------------
Name:
Title:
12
<PAGE>
SCHEDULE I TO THE
GUARANTEE AGREEMENT
Loan Party Guarantors
---------------------
Boxtop Interactive, Inc.
Creative Video Library, Inc.
Entrepreneur Television, Inc.
iXL, Inc.
iXL-Boston, Inc.
IXL-Charlotte, Inc.
iXL-Chicago, Inc.
iXL-DC, Inc.
iXL-Denver, Inc.
iXL-Los Angeles, Inc.
IXL-Memphis, Inc.
iXL-New York, Inc.
iXL-Richmond, Inc.
iXL-San Diego, Inc.
iXL-San Francisco, Inc.
iVisit, Inc.
<PAGE>
Annex 1 to the
Guarantee Agreement
Form of Supplement
<PAGE>
EXECUTION COPY
SECURITY AGREEMENT dated as of July 29, 1998, among IXL
HOLDINGS, INC., a Delaware corporation (the "Borrower"), each
--------
subsidiary of the Borrower listed on Schedule I hereto (each such
subsidiary individually, a "Loan Party Guarantor" and
--------------------
collectively, the "Loan Party Guarantors"; the Loan Party
---------------------
Guarantors and the Borrower are referred to collectively herein
as the "Grantors") and THE CHASE MANHATTAN BANK, a New York
--------
banking corporation ("Chase"), as collateral agent (in such
-----
capacity, the "Collateral Agent") for the Secured Parties (as
----------------
defined herein).
Reference is made to (a) the Credit Agreement dated as of July 29, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), among the Borrower, the lenders from time to time party thereto
- ---------
(the "Lenders") and Chase, as administrative agent (in such capacity, the
-------
"Administrative Agent") for the Lenders, and (b) the Guarantee Agreement
--------------------
referred to in the Credit Agreement.
The Lenders have agreed to make Loans to the Borrower, and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower, in
an amount up to $20,000,000, pursuant to, and upon the terms and subject to the
conditions specified in, the Credit Agreement. The Loan Party Guarantors have
agreed to guarantee, among other things, all the obligations of the Borrower
under the Credit Agreement. The obligations of the Lenders to make Loans and of
the Issuing Bank to issue Letters of Credit under the Credit Agreement are
conditioned upon, among other things, the execution and delivery by the Grantors
of an agreement in the form hereof to secure (a) the due and punctual payment by
the Borrower of (i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loans, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (ii) each payment required to be made by the Borrower under the
Credit Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral and (iii) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary
<PAGE>
2
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of the Loan Parties to the Secured Parties under
the Credit Agreement and the other Loan Documents, (b) the due and punctual
performance of all covenants, agreements, obligations and liabilities of the
Loan Parties under or pursuant to the Credit Agreement and the other Loan
Documents, (c) unless otherwise agreed upon in writing by the applicable Lender
party thereto, the due and punctual payment and performance of all obligations
of the Borrower, monetary or otherwise, under each Hedging Agreement entered
into with any counterparty that was a Lender (or an Affiliate thereof) at the
time such Hedging Agreement was entered into and (d) the due and punctual
payment and performance of all obligations in respect of overdrafts and related
liabilities owed to the Administrative Agent or any of its Affiliates and
arising from treasury, depository and cash management services in connection
with any automated clearing house transfers of funds (all the monetary and other
obligations described in the preceding clauses (a) through (d) being
collectively called the "Obligations").
-----------
Accordingly, the Grantors and the Collateral Agent, on behalf of
itself and each Secured Party (and each of their respective successors or
assigns), hereby agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Definition of Terms Used Herein. Unless the context
-------------------------------
otherwise requires, all capitalized terms used but not defined herein shall have
the meanings set forth in the Credit Agreement and all references to the Uniform
Commercial Code shall mean the Uniform Commercial Code in effect in the State of
New York as of the date hereof.
SECTION 1.02. Definition of Certain Terms Used Herein. As used
---------------------------------------
herein, the following terms shall have the following meanings:
"Account Debtor" shall mean any Person who is or who may become
--------------
obligated to any Grantor under, with respect to or on account of an Account.
<PAGE>
3
"Accounts" shall mean any and all right, title and interest of any
--------
Grantor to payment for goods and services sold or leased, including any such
right evidenced by chattel paper, whether due or to become due, whether or not
it has been earned by performance, and whether now or hereafter acquired or
arising in the future, including accounts receivable from Affiliates of the
Grantors.
"Accounts Receivable" shall mean all Accounts and all right, title and
-------------------
interest in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary, in each case whether now existing or
owned or hereafter arising or acquired.
"Collateral" shall mean all (a) Accounts Receivable, (b) Documents,
----------
(c) Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash
accounts, (g) Investment Property and (h) Proceeds.
"Commodity Account" shall mean an account maintained by a Commodity
-----------------
Intermediary in which a Commodity Contract is carried out for a Commodity
Customer.
"Commodity Contract" shall mean a commodity futures contract, an
------------------
option on a commodity futures contract, a commodity option or any other contract
that, in each case, is (a) traded on or subject to the rules of a board of trade
that has been designated as a contract market for such a contract pursuant to
the federal commodities laws or (b) traded on a foreign commodity board of
trade, exchange or market, and is carried on the books of a Commodity
Intermediary for a Commodity Customer.
"Commodity Customer" shall mean a Person for whom a Commodity
------------------
Intermediary carries a Commodity Contract on its books.
"Commodity Intermediary" shall mean (a) a Person who is registered as
----------------------
a futures commission merchant under the federal commodities laws or (b) a Person
who in the ordinary course of its business provides clearance or settlement
services for a board of trade that has been designated as a contract market
pursuant to federal commodities laws.
"Copyright License" shall mean any written agreement, now or
-----------------
hereafter in effect, granting any right to any third party under any Copyright
now or hereafter owned by any Grantor or which such Grantor otherwise has the
right to
<PAGE>
4
license, or granting any right to such Grantor under any Copyright now or
hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"Copyrights" shall mean all of the following now owned or hereafter
----------
acquired by any Grantor: (a) all copyright rights in any work subject to the
copyright laws of the United States or any other country, whether as author,
assignee, transferee or otherwise, and (b) all registrations and applications
for registration of any such copyright in the United States or any other
country, including registrations, recordings, supplemental registrations and
pending applications for registration in the United States Copyright Office,
including those listed on Schedule II.
"Credit Agreement" shall have the meaning assigned to such term in the
----------------
preliminary statement of this Agreement.
"Documents" shall mean all instruments, files, records, ledger sheets
---------
and documents covering or relating to any of the Collateral.
"Entitlement Holder" shall mean a Person identified in the records of
------------------
a Securities Intermediary as the person having a Security Entitlement against
the Securities Intermediary. If a Person acquires a Security Entitlement by
virtue of Section 8-501(b) (2) or (3) of the Uniform Commercial Code, such
Person is the Entitlement Holder.
"Equipment" shall mean all equipment, furniture and furnishings, and
---------
all tangible personal property similar to any of the foregoing, including tools,
parts and supplies of every kind and description, and all improvements,
accessions or appurtenances thereto, that are now or hereafter owned by any
Grantor. The term Equipment shall include Fixtures.
"Financial Asset" shall mean (a) a Security, (b) an obligation of a
---------------
Person or a share, participation or other interest in a Person or in property or
an enterprise of a Person, which is, or is of a type, dealt with in or traded on
financial markets, or which is recognized in any area in which it is issued or
dealt in as a medium for Investment or (c) any property that is held by a
Securities Itermediary for another Person in a Securities Account if the
Securities Intermediary has expressly agreed with the other Person that the
property is to be treated as a Financial Asset under Article 8 of the Uniform
Commercial Code. As the context requires, the term Financial Asset shall mean
either the interest itself or the means by which a Person's claim to it is
evidenced, including a certifi-
<PAGE>
5
cated or uncertificated Security, a certificate representing a Security or a
Security Entitlement.
"Fixtures" shall mean all items of Equipment, whether now owned or
--------
hereafter acquired, of any Grantor that become so related to particular real
estate that an interest in them arises under any real estate law applicable
thereto.
"General Intangibles" shall mean all choses in action and causes of
-------------------
action and all other assignable intangible personal property of any Grantor of
every kind and nature (other than Accounts Receivable) now owned or hereafter
acquired by any Grantor, including all rights and interests in partnerships,
limited partnerships, limited liability companies and other unincorporated
entities, corporate or other business records, indemnification claims, contract
rights (including rights under leases, whether entered into as lessor or lessee,
Hedging Agreements and other agreements (other than rights under contracts that
prohibit assignment or a grant of a security interest therein)), Intellectual
Property, goodwill, registrations, franchises, tax refund claims and any letter
of credit, guarantee, claim, security interest or other security held by or
granted to any Grantor to secure payment by an Account Debtor of any of the
Accounts Receivable.
"Intellectual Property" shall mean all intellectual and similar
---------------------
property of any Grantor of every kind and nature now owned or hereafter acquired
by any Grantor, including inventions, designs, Patents, Copyrights, Licenses,
Trademarks, trade secrets, confidential or proprietary technical and business
information, know-how, show-how or other data or information, software and
databases and all embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and accessions to,
and books and records describing or used in connection with, any of the
foregoing.
"Inventory" shall mean all goods of any Grantor, whether now owned or
---------
hereafter acquired, held for sale or lease, or furnished or to be furnished by
any Grantor under contracts of service, or consumed in any Grantor's business,
including raw materials, intermediates, work in process, packaging materials,
finished goods, semi-finished inventory, scrap inventory, manufacturing supplies
and spare parts, and all such goods that have been returned to or repossessed by
or on behalf of any Grantor.
"Investment Property" shall mean all Securities (whether certificated
-------------------
or uncertificated), Security
<PAGE>
6
Entitlements, Securities Accounts, Commodity Contracts and Commodity Accounts of
any Grantor, whether now owned or hereafter acquired by any Grantor.
"License" shall mean any Patent License, Trademark License, Copyright
-------
License or other franchise agreement, license or sublicense to which any Grantor
is a party, including those listed on Schedule III (other than those agreements
in existence on the date hereof and those agreements entered into after the date
hereof, which by their terms prohibit assignment or a grant of a security
interest by such Grantor as licensee thereunder).
"Obligations" shall have the meaning assigned to such term in the
-----------
preliminary statement of this Agreement.
"Patent License" shall mean any written agreement, now or hereafter in
--------------
effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by any Grantor or which any Grantor
otherwise has the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of any Grantor under
any such agreement.
"Patents" shall mean all of the following now owned or hereafter
-------
acquired by any Grantor: (a) all letters patent of the United States or any
other country, all registrations and recordings thereof, and all applications
for letters patent of the United States or any other country, including
registrations, recordings and pending applications in the United States Patent
and Trademark Office or any similar offices in any other country, including
those listed on Schedule IV, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.
"Perfection Certificate" shall mean a certificate substantially in the
----------------------
form of Annex 2 hereto, completed and supplemented with the schedules and
attachments contemplated thereby, and duly executed by a Financial Officer and
the chief legal officer of each of the Borrower and the Loan Party Guarantors.
"Proceeds" shall mean any consideration received from the sale,
--------
exchange, license, lease or other disposition of any asset or property that
constitutes Collateral, any value received as a consequence of the possession of
any
<PAGE>
7
Collateral and any payment received from any insurer or other Person or entity
as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property which constitutes
Collateral, and shall include (a) any claim of any Grantor against any third
party for (and the right to sue and recover for and the rights to damages or
profits due or accrued arising out of or in connection with) (i) past, present
or future infringement of any Patent now or hereafter owned by any Grantor, or
licensed under a Patent License, (ii) past, present or future infringement or
dilution of any Trademark now or hereafter owned by any Grantor or licensed
under a Trademark License or injury to the goodwill associated with or
symbolized by any Trademark now or hereafter owned by any Grantor, (iii) past,
present or future breach of any License and (iv) past, present or future
infringement of any Copyright now or hereafter owned by any Grantor or licensed
under a Copyright License and (b) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.
"Secured Parties" shall mean (a) the Lenders, (b) the Administrative
---------------
Agent, (c) the Collateral Agent, (d) the Issuing Bank, (e) each counterparty to
an Hedging Agreement entered into with the Borrower if such counterparty was a
Lender (or an Affiliate of a Lender) at the time the Hedging Agreement was
entered into, (f) the beneficiaries of each indemnification obligation
undertaken by any Grantor under any Loan Document and (g) the permitted
successors and assigns of each of the foregoing.
"Securities" shall mean any obligations of an issuer or any shares,
----------
participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series, or by its terms is divisible into a class or series, of
shares, participations, interests or obligations and (c) (i) are, or are of a
type, dealt with or traded on securities exchanges or securities markets or (ii)
are a medium for investment and by their terms expressly provide that they are a
security governed by Article 8 of the Uniform Commercial Code.
"Securities Account" shall mean an account to which a Financial Asset
------------------
is or may be credited in accordance with an agreement under which the Person
maintaining the account undertakes to treat the Person for whom the account
<PAGE>
8
is maintained as entitled to exercise rights that comprise the Financial Asset.
"Securities Intermediary" shall mean (a) a clearing corporation or (b)
-----------------------
a Person, including a bank or broker, that in the ordinary course of its
business maintains securities accounts for others and is acting in that
capacity.
"Security Entitlements" shall mean the rights and property interests
---------------------
of an Entitlement Holder with respect to a Financial Asset.
"Security Interest" shall have the meaning assigned to such term in
-----------------
Section 2.01.
"Trademark License" shall mean any written agreement, now or hereafter
-----------------
in effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or which any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.
"Trademarks" shall mean all of the following now owned or hereafter
----------
acquired by any Grantor: (a) all trademarks, service marks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, trade dress, logos, other source or business identifiers, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all registration and
recording applications filed in connection therewith, including registrations
and registration applications in the United States Patent and Trademark Office,
any State of the United States or any similar offices in any other country or
any political subdivision thereof, and all extensions or renewals thereof,
including those listed on Schedule V, (b) all goodwill associated therewith or
symbolized thereby and (c) all other assets, rights and interests that uniquely
reflect or embody such goodwill.
SECTION 1.03. Rules of Interpretation. The rules of interpretation
-----------------------
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
<PAGE>
9
ARTICLE II
Security Interest
-----------------
SECTION 2.01. Security Interest. As security for the payment or
-----------------
performance, as the case may be, in full of the Obligations, each Grantor hereby
bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates
and transfers to the Collateral Agent, its successors and assigns, for the
ratable benefit of the Secured Parties, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, a security interest in, all of such Grantor's right, title and interest
in, to and under the Collateral (the "Security Interest"). Without limiting the
-----------------
foregoing, the Collateral Agent is hereby authorized to file one or more
financing statements, continuation statements, filings with the United States
Patent and Trademark Office or United States Copyright Office (or any successor
office or any similar office in any other country) or other documents for the
purpose of perfecting, confirming, continuing, enforcing or protecting the
Security Interest granted by each Grantor, without the signature of any Grantor,
and naming any Grantor or the Grantors as debtors and the Collateral Agent as
secured party.
SECTION 2.02. No Assumption of Liability. The Security Interest is
--------------------------
granted as security only and shall not subject the Collateral Agent or any other
Secured Party to, or in any way alter or modify, any obligation or liability of
any Grantor with respect to or arising out of the Collateral.
ARTICLE III
Representations and Warranties
------------------------------
The Grantors jointly and severally represent and warrant to the
Collateral Agent and the Secured Parties that:
SECTION 3.01. Title and Authority. Each Grantor has good and valid
-------------------
rights in and title to the Collateral with respect to which it has purported to
grant a Security Interest hereunder and has full power and authority to grant to
the Collateral Agent the Security Interest in such Collateral pursuant hereto
and to execute, deliver and perform its obligations in accordance with the terms
of this Agreement, without the consent or approval of any other
<PAGE>
10
Person other than any consent or approval which has been obtained.
SECTION 3.02. Filings. (a) The Perfection Certificate has been duly
-------
prepared, completed and executed and the information set forth therein is
correct and complete (to the knowledge of the Grantors in the case of
information with respect to Acquired Entities (as defined in the Perfection
Certificate)) in all material respects. Fully executed Uniform Commercial Code
financing statements, as applicable, or other appropriate filings, recordings or
registrations containing a description of the Collateral have been delivered to
the Collateral Agent for filing in each governmental, municipal or other office
specified in Schedule 6 to the Perfection Certificate, which are all the
filings, recordings and registrations (other than filings, recordings and
registrations required to be made in the United States Patent and Trademark
Office and the United States Copyright Office in order to perfect the Security
Interest in Collateral consisting of United States Patents, United States
Trademarks and United States Copyrights) that are necessary to publish notice of
and protect the validity of and to establish a legal, valid and perfected
security interest in favor of the Collateral Agent (for the ratable benefit of
the Secured Parties) in respect of all Collateral in which the Security Interest
may be perfected by filing, recording or registration in the United States (or
any political subdivision thereof), and no further or subsequent filing,
refiling, recording, rerecording, registration or reregistration is necessary in
any such jurisdiction, except as provided under applicable law with respect to
the filing of continuation statements.
(b) Each Grantor represents and warrants that fully executed security
agreements in the form hereof and containing a description of all Collateral
consisting of Intellectual Property shall have been received and recorded within
three months after the execution of this Agreement with respect to United States
Patents and United States registered Trademarks (and Trademarks for which United
States registration applications are pending) and within one month after the
execution of this Agreement with respect to United States registered Copyrights
by the United States Patent and Trademark Office and the United States Copyright
Office pursuant to 35 U.S.C. (S) 261, 15 U.S.C. (S) 1060 or 17 U.S.C. (S) 205
and the regulations thereunder, as applicable, to protect the validity of and to
establish a legal, valid and perfected security interest in favor of the
Collateral Agent (for the ratable benefit of the Secured Parties) in respect of
all Collateral consisting of Patents, Trademarks and Copyrights in which a
security interest may
<PAGE>
11
be perfected by filing, recording or registration in the United States (or any
political subdivision thereof), or in any other necessary jurisdiction, and no
further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary (other than such actions as are necessary to perfect
the Security Interest with respect to any Collateral consisting of Patents,
Trademarks and Copyrights (or registration or application for registration
thereof) acquired or developed after the date hereof).
SECTION 3.03. Validity of Security Interest. The Security Interest
-----------------------------
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations, (b) subject to the
filings described in Section 3.02 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording or
registering a financing statement or analogous document in the United States (or
any political subdivision thereof) pursuant to the Uniform Commercial Code or
other applicable law in such jurisdictions and (c) a security interest that
shall be perfected in all Collateral in which a security interest may be
perfected in the United States Patent and Trademark Office and the United States
Copyright Office upon the receipt and recording of this Agreement with the
United States Patent and Trademark Office and the United States Copyright
Office, as applicable, within the three month period (commencing as of the date
hereof) pursuant to 35 U.S.C. (S) 261 or 15 U.S.C. (S) 1060 or the one-month
period (commencing as of the date hereof) pursuant to 17 U.S.C. (S) 205 and
otherwise as may be required pursuant to the laws of any other necessary
jurisdiction. The Security Interest is and shall be prior to any other Lien on
any of the Collateral, other than Liens expressly permitted to be prior to the
Security Interest pursuant to Section 6.02 of the Credit Agreement.
SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
----------------------
Grantors free and clear of any Lien, except for Liens expressly permitted with
respect to such Collateral pursuant to Section 6.02 of the Credit Agreement. No
Grantor has filed or consented to the filing of (a) any financing statement or
analogous document under the Uniform Commercial Code or any other applicable
laws covering any Collateral, (b) any assignment in which any Grantor assigns
any Collateral or any security agreement or similar instrument covering any
Collateral in the United States Patent and Trademark Office or the United States
Copyright Office or (c) any assignment in which any Grantor assigns any
Collateral or any security agreement or similar instrument covering any
Collateral with any foreign governmental, municipal or other office, which
<PAGE>
12
financing statement or analogous document is still in effect, except, in each
case, for Liens expressly permitted with respect to the applicable Collateral
pursuant to Section 6.02 of the Credit Agreement.
ARTICLE IV
Covenants
---------
SECTION 4.01. Records. Each Grantor agrees to maintain, at its own
-------
cost and expense, such complete and accurate records with respect to the
Collateral owned by it as is consistent with its current practices and in
accordance with such prudent and standard practices used in industries that are
the same as or similar to those in which such Grantor is engaged, but in any
event to include complete accounting records indicating all payments and
proceeds received with respect to any part of the Collateral, and, at such time
or times as the Collateral Agent may reasonably request, promptly to prepare and
deliver to the Collateral Agent a duly certified schedule or schedules in form
and detail reasonably satisfactory to the Collateral Agent showing the identity,
amount and location of any and all Collateral.
SECTION 4.02. Protection of Security. Each Grantor shall, at its own
----------------------
cost and expense, take any and all actions necessary to defend title to the
Collateral against all Persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien not
expressly permitted with respect to the applicable Collateral pursuant to
Section 6.02 of the Credit Agreement.
SECTION 4.03. Further Assurances. Each Grantor agrees, at its own
------------------
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Collateral
Agent may from time to time request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements or other documents in connection
herewith or therewith. If any amount payable under or in connection with any of
the Collateral shall be or become evidenced by any promissory note or other
instrument, such note or instrument shall be immediately pledged and delivered
to the Collateral Agent,
<PAGE>
13
duly endorsed in a manner satisfactory to the Collateral Agent.
Without limiting the generality of the foregoing, each Grantor hereby
authorizes the Collateral Agent, with prompt notice thereof to the Grantors, to
supplement this Agreement by supplementing Schedule II, III, IV or V hereto or
adding additional schedules hereto to specifically identify any asset or item
that may constitute Copyrights, Licenses, Patents or Trademarks; provided,
--------
however, that any Grantor shall have the right, exercisable within 30 days after
- -------
it has been notified by the Collateral Agent of the specific identification of
such Collateral, to advise the Collateral Agent in writing of any inaccuracy of
the representations and warranties made by such Grantor hereunder with respect
to such Collateral. Each Grantor agrees that it will use its best efforts to
take such action as shall be necessary in order that all representations and
warranties hereunder shall be true and correct with respect to such Collateral
within 30 days after the date it has been notified by the Collateral Agent of
the specific identification of such Collateral.
SECTION 4.04. Inspection and Verification. The Collateral Agent and
---------------------------
such Persons as the Collateral Agent may reasonably designate shall have the
right, at the Grantors' own cost and expense, to inspect the Collateral, all
records related thereto (and to make extracts and copies from such records) and
the premises upon which any of the Collateral is located, to discuss the
Grantors' affairs with the officers of the Grantors and their independent
accountants and to verify under reasonable procedures the validity, amount,
quality, quantity, value, condition and status of, or any other matter relating
to, the Collateral, including, in the case of Accounts or Collateral in the
possession of any third party, by contacting Account Debtors or the third person
possessing such Collateral for the purpose of making such a verification. The
Collateral Agent shall have the absolute right to share any information it gains
from such inspection or verification with any Secured Party.
SECTION 4.05. Taxes; Encumbrances. At its option, the Collateral
-------------------
Agent may discharge past due taxes, assessments, charges, fees, Liens, security
interests or other encumbrances at any time levied or placed on the Collateral
and not expressly permitted pursuant to Section 6.02 of the Credit Agreement,
and may pay for the maintenance and preservation of the Collateral to the extent
any Grantor fails to do so as required by the Credit Agreement or this
Agreement, and each Grantor jointly and
<PAGE>
14
severally agrees to reimburse the Collateral Agent on demand for any payment
made or any expense incurred by the Collateral Agent pursuant to the foregoing
authorization; provided, however, that nothing in this Section 4.05 shall be
-------- -------
interpreted as excusing any Grantor from the performance of, or imposing any
obligation on the Collateral Agent or any Secured Party to cure or perform, any
covenants or other promises of any Grantor with respect to taxes, assessments,
charges, fees, liens, security interests or other encumbrances and maintenance
as set forth herein or in the other Loan Documents.
SECTION 4.06. Assignment of Security Interest. If at any time any
-------------------------------
Grantor shall take a security interest in any property of an Account Debtor or
any other Person to secure payment and performance of an Account, such Grantor
shall promptly assign such security interest to the Collateral Agent. Such
assignment need not be filed of public record unless necessary to continue the
perfected status of the security interest against creditors of and transferees
from the Account Debtor or other Person granting the security interest.
SECTION 4.07. Continuing Obligations of the Grantors. Each Grantor
--------------------------------------
shall remain liable to observe and perform all the conditions and obligations to
be observed and performed by it under each contract, agreement or instrument
relating to the Collateral, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to indemnify and hold
harmless the Collateral Agent and the Secured Parties from and against any and
all liability for such performance.
SECTION 4.08. Use and Disposition of Collateral. None of the Grantors
---------------------------------
shall make or permit to be made an assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral, except as
expressly permitted with respect to such Collateral by Section 6.02 of the
Credit Agreement. Unless and until the Collateral Agent shall notify the
Grantors that (i) an Event of Default shall have occurred and be continuing and
(ii) during the continuance thereof the Grantors shall not sell, convey, lease,
assign, transfer or otherwise dispose of any Collateral (which notice may be
given by telephone if promptly confirmed in writing), the Grantors may use and
dispose of the Collateral in any lawful manner not inconsistent with the
provisions of this Agreement, the Credit Agreement or any other Loan Document.
Without limiting the generality of the foregoing, each Grantor agrees that it
shall not permit any Inventory to be in the possession or control of any
warehouseman, bailee,
<PAGE>
15
agent or processor at any time, unless such warehouseman, bailee, agent or
processor shall have been notified of the Security Interest and shall have
agreed in writing to hold the Inventory subject to the Security Interest and the
instructions of the Collateral Agent and to waive and release any Lien held by
it with respect to such Inventory, whether arising by operation of law or
otherwise.
SECTION 4.09. Limitation on Modification of Accounts. None of the
--------------------------------------
Grantors will, without the Collateral Agent's prior written consent, grant any
extension of the time of payment of any of the Accounts Receivable, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partly, any Person liable for the payment thereof or allow any credit
or discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business
and consistent with its current practices and in accordance with such prudent
and standard practices used in industries that are the same as or similar to
those in which such Grantor is engaged.
SECTION 4.10. Insurance. (a) Each of the Grantors will maintain with
---------
financially sound and reputable insurance companies:
(i) fire and extended coverage insurance, on a replacement cost
basis, with respect to all Collateral constituting personal property and
improvements to real property, in such amounts as are customarily
maintained by companies in the same or similar business operating in the
same or similar locations;
(ii) commercial general liability insurance against claims for bodily
injury, death or property damage occurring upon, about or in connection
with the use of any properties owned, occupied or controlled by it,
providing coverage on an occurrence basis with a combined single limit of
not less than $25,000 and including the broad form CGL endorsement;
(iii) business interruption insurance, insuring against loss of gross
earnings for a period of not less than 12 months arising from any risks or
occurrences required to be covered by insurance pursuant to clause (i)
above; and
(iv) such other insurance as may be required by law.
<PAGE>
16
Deductibles or self-insured retention shall not exceed $1,000 for fire and
extended coverage policies, $25,000 for commercial general liability policies or
one day for business interruption policies.
(b) Fire and extended coverage policies maintained with respect to
any Collateral shall be endorsed or otherwise amended to include (i) a non-
contributing mortgage clause (regarding improvements to real property) and
lenders' loss payable clause (regarding personal property), in each case in
favor of the Collateral Agent and providing for losses thereunder to be payable
to the Collateral Agent or its designee, (ii) a provision to the effect that
none of the Grantors, the Collateral Agent or any other party shall be a
coinsurer and (iii) such other provisions as the Collateral Agent may reasonably
require from time to time to protect the interests of the Secured Parties.
Commercial general liability policies shall be endorsed to name the Collateral
Agent as an additional insured. Business interruption policies shall name the
Collateral Agent as loss payee. Each such policy referred to in this paragraph
also shall provide that it shall not be canceled, modified or not renewed (i) by
reason of nonpayment of premium except upon not less than 10 days' prior written
notice thereof by the insurer to the Collateral Agent (giving the Collateral
Agent the right to cure defaults in the payment of premiums) or (ii) for any
other reason except upon not less than 30 days' prior written notice thereof by
the insurer to the Collateral Agent. The Grantors shall deliver to the
Collateral Agent, prior to the cancelation, modification or nonrenewal of any
such policy of insurance, a copy of a renewal or replacement policy (or other
evidence of renewal of a policy previously delivered to the Collateral Agent)
together with evidence satisfactory to the Collateral Agent of payment of the
premium therefor.
(c) Each Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent (and attorney-in-fact)
for the purpose, during the continuance of an Event of Default, of making,
settling and adjusting claims in respect of Collateral under policies of
insurance, endorsing the name of such Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that
any Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or part
relating thereto, the Collateral Agent may, without waiving or releasing any
obligation or liability of
<PAGE>
17
the Grantors hereunder or any Event of Default, in its sole discretion, obtain
and maintain such policies of insurance and pay such premium and take any other
actions with respect thereto as the Collateral Agent deems advisable. All sums
disbursed by the Collateral Agent in connection with this Section 4.10,
including reasonable attorneys' fees, court costs, expenses and other charges
relating thereto, shall be payable, upon demand, by the Grantors to the
Collateral Agent and shall be additional Obligations secured hereby.
SECTION 4.11. Legend. Each Grantor shall legend, in form and manner
------
satisfactory to the Collateral Agent, its Accounts Receivable and its books,
records and documents evidencing or pertaining thereto with an appropriate
reference to the fact that such Accounts Receivable have been assigned to the
Collateral Agent for the benefit of the Secured Parties and that the Collateral
Agent has a security interest therein.
SECTION 4.12. Covenants Regarding Patent, Trademark and Copyright
---------------------------------------------------
Collateral. (a) Each Grantor agrees that it will not, nor will it permit any
- ----------
of its licensees to, do any act, or omit to do any act, whereby any Patent which
is material to the conduct of such Grantor's business may become invalidated or
dedicated to the public, and agrees that it shall continue to mark any products
covered by a Patent with the relevant patent number as necessary and sufficient
to establish and preserve its maximum rights under applicable patent laws.
(b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality of products and
services offered under such Trademark, (iii) display such Trademark with notice
of Federal or foreign registration to the extent necessary and sufficient to
establish and preserve its maximum rights under applicable law and (iv) not
knowingly use or knowingly permit the use of such Trademark in violation of any
third party rights.
(c) Each Grantor (either itself or through licensees) will, for each
work covered by a material Copyright, continue to publish, reproduce, display,
adopt and distribute the work with appropriate copyright notice as necessary and
sufficient to establish and preserve its maximum rights under applicable
copyright laws.
<PAGE>
18
(d) Each Grantor shall notify the Collateral Agent promptly if it
knows or has reason to know that any Patent, Trademark or Copyright material to
the conduct of its business may become abandoned, lost or dedicated to the
public, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office or United States Copyright Office
or any court or similar office of any country) regarding such Grantor's
ownership of any Patent, Trademark or Copyright, its right to register the same,
or to keep and maintain the same.
(e) In no event shall any Grantor, either itself or through any
agent, employee, licensee or designee, file an application for any Patent,
Trademark or Copyright (or for the registration of any Trademark or Copyright)
with the United States Patent and Trademark Office, United States Copyright
Office or any office or agency in any political subdivision of the United States
or in any other country or any political subdivision thereof, unless it promptly
informs the Collateral Agent, and, upon request of the Collateral Agent,
executes and delivers any and all agreements, instruments, documents and papers
as the Collateral Agent may request to evidence the Collateral Agent's security
interest in such Patent, Trademark or Copyright, and each Grantor hereby
appoints the Collateral Agent as its attorney-in-fact to execute and file such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed; such power, being coupled with an interest, is
irrevocable.
(f) Each Grantor will take all necessary steps that are consistent
with the practice in any proceeding before the United States Patent and
Trademark Office, United States Copyright Office or any office or agency in any
political subdivision of the United States or in any other country or any
political subdivision thereof, to maintain and pursue each material application
relating to the Patents, Trademarks and/or Copyrights (and to obtain the
relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to the conduct of
any Grantor's business, including timely filings of applications for renewal,
affidavits of use, affidavits of incontestability and payment of maintenance
fees, and, if consistent with good business judgment, to initiate opposition,
interference and cancelation proceedings against third parties.
<PAGE>
19
(g) In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantor's business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor promptly shall notify
the Collateral Agent and shall, if consistent with good business judgment,
promptly sue for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as are appropriate under the circumstances to protect such
Collateral.
(h) Upon and during the continuance of an Event of Default, each
Grantor shall use its best efforts to obtain all requisite consents or approvals
by the licensor of each Copyright License, Patent License or Trademark License
to effect the assignment of all of such Grantor's right, title and interest
thereunder to the Collateral Agent or its designee.
ARTICLE V
Bank Accounts
-------------
The Borrower will establish and maintain a cash concentration account
(the "Chase Account") with the Collateral Agent within three Business Days
--------------
following the Effective Date. The Borrower will, and the Borrower will cause
each of its Subsidiaries (other than the CFN Subsidiaries) to, transfer to the
Chase Account on a weekly basis all its cash other than prudent reserves to
satisfy the weekly cash needs of such Subsidiary, but in no event will the
aggregate weekly cash needs of the Subsidiaries (other than the CFN
Subsidiaries) exceed $2,000,000; provided that (i) the Borrower will cause each
--------
of the banks (other than Chase) holding accounts of the Borrower or its
Subsidiaries in the ten locations in the United States which generate the
greatest percentage of revenues for the Borrower and its Subsidiaries, taken as
a whole, to enter into a depositary agreement, in a form to be mutually agreed
upon between the Administrative Agent and the Borrower, no later than the date
60 days following the Effective Date and (ii) if an Event of Default has
occurred and is continuing, the Collateral Agent may, in its sole discretion,
review the cash management system of the Borrowers and its Subsidiaries and
require the Borrower to institute a new cash management system (including,
without limitation, the use of a lockbox system).
<PAGE>
20
ARTICLES VI
Power of Attorney
-----------------
Each Grantor irrevocably makes, constitutes and appoints the
Collateral Agent (and all officers, employees or agents designated by the
Collateral Agent) as such Grantor's true and lawful agent and attorney-in-fact,
and in such capacity the Collateral Agent shall have the right, with power of
substitution for each Grantor and in each Grantor's name or otherwise, for the
use and benefit of the Collateral Agent and the Secured Parties, upon the
occurrence and during the continuance of an Event of Default (a) to receive,
endorse, assign and/or deliver any and all notes, acceptances, checks, drafts,
money orders or other evidences of payment relating to the Collateral or any
part thereof; (b) to demand, collect, receive payment of, give receipt for and
give discharges and releases of all or any of the Collateral; (c) to sign the
name of any Grantor on any invoice or bill of lading relating to any of the
Collateral; (d) to send verifications of Accounts Receivable to any Account
Debtor; (e) to commence and prosecute any and all suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect or
otherwise realize on all or any of the Collateral or to enforce any rights in
respect of any Collateral; (f) to settle, compromise, compound, adjust or defend
any actions, suits or proceedings relating to all or any of the Collateral; (g)
to notify, or to require any Grantor to notify, Account Debtors to make payment
directly to the Collateral Agent; and (h) to use, sell, assign, transfer,
pledge, make any agreement with respect to or otherwise deal with all or any of
the Collateral, and to do all other acts and things necessary to carry out the
purposes of this Agreement, as fully and completely as though the Collateral
Agent were the absolute owner of the Collateral for all purposes; provided,
--------
however, that nothing herein contained shall be construed as requiring or
- -------
obligating the Collateral Agent or any Secured Party to make any commitment or
to make any inquiry as to the nature or sufficiency of any payment received by
the Collateral Agent or any Secured Party, or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part thereof
or the moneys due or to become due in respect thereof or any property covered
thereby, and no action taken or omitted to be taken by the Collateral Agent or
any Secured Party with respect to the Collateral or any part thereof shall give
rise to any defense, counterclaim or offset in favor of any Grantor or to any
claim or action against the Collateral Agent or any Secured Party. It is
understood and agreed that the appointment of the Collateral Agent as the agent
and
<PAGE>
21
attorney-in-fact of the Grantors for the purposes set forth above is coupled
with an interest and is irrevocable. The provisions of this Section shall in no
event relieve any Grantor of any of its obligations hereunder or under any other
Loan Document with respect to the Collateral or any part thereof or impose any
obligation on the Collateral Agent or any Secured Party to proceed in any
particular manner with respect to the Collateral or any part thereof, or in any
way limit the exercise by the Collateral Agent or any Secured Party of any other
or further right which it may have on the date of this Agreement or hereafter,
whether hereunder, under any other Loan Document, by law or otherwise.
ARTICLE VII
Remedies
--------
SECTION 7.01. Remedies upon Default. Upon the occurrence and during
---------------------
the continuance of an Event of Default, each Grantor agrees to deliver each item
of Collateral to the Collateral Agent on demand, and it is agreed that the
Collateral Agent shall have the right to take any of or all the following
actions at the same or different times: (a) with respect to any Collateral
consisting of Intellectual Property, on demand, to cause the Security Interest
to become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Collateral Agent, or to license or
sublicense, whether general, special or otherwise, and whether on an exclusive
or non-exclusive basis, any such Collateral throughout the world on such terms
and conditions and in such manner as the Collateral Agent shall determine, and
(b) with or without legal process and with or without prior notice or demand for
performance, to take possession of the Collateral and without liability for
trespass to enter any premises where the Collateral may be located for the
purpose of taking possession of or removing the Collateral and, generally, to
exercise any and all rights afforded to a secured party under the Uniform
Commercial Code or other applicable law. Without limiting the generality of the
foregoing, each Grantor agrees that the Collateral Agent shall have the right,
subject to the mandatory requirements of applicable law, to sell or otherwise
dispose of all or any part of the Collateral, at public or private sale or at
any broker's board or on any securities exchange, for cash, upon credit or for
future delivery as the Collateral Agent shall deem appropriate. The Collateral
Agent shall be authorized at any such sale (if it deems it advisable to do so)
to restrict the
<PAGE>
22
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each
such purchaser at any such sale shall hold the property sold absolutely, free
from any claim or right on the part of any Grantor, and each Grantor hereby
waives (to the extent permitted by law) all rights of redemption, stay and
appraisal which such Grantor now has or may at any time in the future have under
any rule of law or statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantors 10 days' prior written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Collateral Agent's
intention to make any sale of Collateral. Such notice, in the case of a public
sale, shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Collateral Agent may fix and state in the
notice (if any) of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Collateral Agent
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Collateral Agent until the sale price is paid by
the purchaser or purchasers thereof, but the Collateral Agent shall not incur
any liability in case any such purchaser or purchasers shall fail to take up and
pay for the Collateral so sold and, in case of any such failure, such Collateral
may be sold again upon like notice. At any public (or, to the extent permitted
by law, private) sale made pursuant to
<PAGE>
23
this Section, any Secured Party may bid for or purchase, free (to the extent
permitted by law) from any right of redemption, stay, valuation or appraisal on
the part of any Grantor (all said rights being also hereby waived and released
to the extent permitted by law), the Collateral or any part thereof offered for
sale and may make payment on account thereof by using any claim then due and
payable to such Secured Party from any Grantor as a credit against the purchase
price, and such Secured Party may, upon compliance with the terms of sale, hold,
retain and dispose of such property without further accountability to any
Grantor therefor. For purposes hereof, a written agreement to purchase the
Collateral or any portion thereof shall be treated as a sale thereof; the
Collateral Agent shall be free to carry out such sale pursuant to such agreement
and no Grantor shall be entitled to the return of the Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the Collateral
Agent shall have entered into such an agreement all Events of Default shall have
been remedied and the Obligations paid in full. As an alternative to exercising
the power of sale herein conferred upon it, the Collateral Agent may proceed by
a suit or suits at law or in equity to foreclose this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a court-
appointed receiver.
SECTION 7.02. Application of Proceeds. The Collateral Agent shall
-----------------------
apply the proceeds of any collection or sale of the Collateral, as well as any
Collateral consisting of cash, as follows:
FIRST, to the payment of all costs and expenses incurred by the
Administrative Agent or the Collateral Agent (in its capacity as such
hereunder or under any other Loan Document) in connection with such
collection or sale or otherwise in connection with this Agreement or any of
the Obligations, including all court costs and the fees and expenses of its
agents and legal counsel, the repayment of all advances made by the
Collateral Agent hereunder or under any other Loan Document on behalf of
any Grantor and any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder or under any other Loan Document;
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in accordance
with the amounts of the Obligations owed to them on the date of any such
distribution); and
<PAGE>
24
THIRD, to the Grantors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
SECTION 7.03. Grant of License to Use Intellectual Property. For the
---------------------------------------------
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sub-license
any of the Collateral consisting of Intellectual Property now owned or hereafter
acquired by such Grantor, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof and sufficient rights of quality control in
favor of such Grantor to avoid the invalidation of the Trademarks subject to the
license. The use of such license by the Collateral Agent shall be exercised, at
the option of the Collateral Agent, upon the occurrence and during the
continuation of an Event of Default; provided that any license, sub-license or
--------
other transaction entered into by the Collateral Agent in accordance herewith
shall be binding upon the Grantors notwithstanding any subsequent cure of an
Event of Default.
ARTICLE VIII
Miscellaneous
-------------
SECTION 8.01. Notices. All communications and notices hereunder
-------
shall (except as otherwise expressly permitted herein) be in writing and given
as provided in
<PAGE>
25
Section 9.01 of the Credit Agreement. All communications and notices hereunder
to any Loan Party Guarantor shall be given to it in care of the Borrower.
SECTION 8.02. Security Interest Absolute. All rights of the
--------------------------
Collateral Agent hereunder, the Security Interest and all obligations of the
Grantors hereunder shall be absolute and unconditional irrespective of (a) any
lack of validity or enforceability of the Credit Agreement, any other Loan
Document, any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Credit Agreement, any other Loan Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on other
collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the
Obligations, or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Grantor in respect of the
Obligations or this Agreement.
SECTION 8.03. Survival of Agreement. All covenants, agreements,
---------------------
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the making by the Lenders of the Loans, and
the execution and delivery to the Lenders of any notes evidencing such Loans,
regardless of any investigation made by the Lenders or on their behalf, and
shall continue in full force and effect until this Agreement shall terminate.
SECTION 8.04. Binding Effect; Several Agreement. This Agreement shall
---------------------------------
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Grantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign or
transfer its rights or obligations hereunder or any interest herein or in the
Collateral (and any such assignment or transfer shall be void) except as
expressly contemplated by this Agreement or the Credit Agreement. This
Agreement shall be
<PAGE>
26
construed as a separate agreement with respect to each Grantor and may be
amended, modified, supplemented, waived or released with respect to any Grantor
without the approval of any other Grantor and without affecting the obligations
of any other Grantor hereunder.
SECTION 8.05. Successors and Assigns. Whenever in this Agreement any
----------------------
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of any Grantor or the Collateral Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
SECTION 8.06. Collateral Agent's Expenses; Indemnification. (a)
--------------------------------------------
Each Grantor jointly and severally agrees to pay upon demand to the Collateral
Agent the amount of any and all expenses, including the reasonable fees,
disbursements and other charges of its counsel and of any experts or agents,
which the Collateral Agent may incur in connection with (i) the administration
of this Agreement, (ii) the custody or preservation of, or the sale of,
collection from or other realization upon any of the Collateral, (iii) the
exercise, enforcement or protection of any of the rights of the Collateral Agent
hereunder or (iv) the failure of any Grantor to perform or observe any of the
provisions hereof.
(b) Without limitation of their indemnification obligations under the
other Loan Documents, the Grantors jointly and severally agree to indemnify the
Collateral Agent and the other Indemnitees against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable fees, disbursements and other charges of counsel,
incurred by or asserted against any of them arising out of, in any way connected
with, or as a result of, the execution, delivery or performance of this
Agreement or any claim, litigation, investigation or proceeding relating hereto
or to the Collateral, whether or not any Indemnitee is a party thereto; provided
--------
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.
(c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this
<PAGE>
27
Section 7.06 shall remain operative and in full force and effect regardless of
the termination of this Agreement or any other Loan Document, the consummation
of the transactions contemplated hereby, the repayment of any of the Loans, the
invalidity or unenforceability of any term or provision of this Agreement or any
other Loan Document, or any investigation made by or on behalf of the Collateral
Agent or any Lender. All amounts due under this Section 7.06 shall be payable
on written demand therefor.
SECTION 8.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 8.08. Waivers; Amendment. (a) No failure or delay of the
------------------
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent, the Issuing Bank, the Administrative Agent and the
Lenders under the other Loan Documents are cumulative and are not exclusive of
any rights or remedies that they would otherwise have. No waiver of any
provisions of this Agreement or any other Loan Document or consent to any
departure by any Grantor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any Grantor in any case shall entitle such
Grantor or any other Grantor to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Collateral Agent and the Grantor or Grantors with respect to
which such waiver, amendment or modification is to apply, subject to any consent
required in accordance with Section 9.02 of the Credit Agreement.
SECTION 8.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
--------------------
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY
<PAGE>
28
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.09.
SECTION 8.10. Severability. In the event any one or more of the
------------
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 8.11 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract (subject to Section 8.04),
and shall become effective as provided in Section 8.04. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.
SECTION 8.12. Headings. Article and Section headings used herein are
--------
for the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 8.13. Jurisdiction; Consent to Service of Process. (a) Each
-------------------------------------------
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement or the
other Loan Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that,
to the extent permitted by applicable law, all claims in respect of any such
action or proceeding may be heard and determined in
<PAGE>
29
such New York State or, to the extent permitted by law, in such Federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that the Collateral Agent or any other Secured
Party may otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against any Grantor or its properties in
the courts of any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any court referred to in paragraph (a) of this Section. Each of
the parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 8.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 8.14. Termination. This Agreement and the Security Interest
-----------
shall terminate when all the Obligations have been indefeasibly paid in full,
the Lenders have no further commitment to lend, the LC Exposure has been reduced
to zero and the Issuing Bank has no further commitment to issue Letters of
Credit under the Credit Agreement, at which time the Collateral Agent shall
execute and deliver to the Grantors, at the Grantors' expense, all Uniform
Commercial Code termination statements and similar documents which the Grantors
shall reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this Section 8.14
shall be without recourse to or warranty by the Collateral Agent. A Loan Party
Guarantor shall automatically be released from its obligations hereunder and the
Security Interest in the Collateral of such Loan Party Guarantor shall be
automatically released in the event that all the capital stock of such Loan
Party Guarantor shall be sold, transferred or otherwise disposed of to a Person
that is not an Affiliate of the Borrower in accordance with the terms of the
Credit Agreement; provided that the Required Lenders shall have consented to
--------
such sale, transfer or other disposition (to
<PAGE>
30
the extent required by the Credit Agreement) and the terms of such consent did
not provide otherwise.
<PAGE>
31
SECTION 8.15. Additional Grantors. Upon execution and delivery by
-------------------
the Collateral Agent and a Subsidiary of the Borrower of an instrument in the
form of Annex 3 hereto, such Subsidiary shall become a Grantor hereunder with
the same force and effect as if originally named as a Grantor herein. The
execution and delivery of any such instrument shall not require the consent of
any Grantor hereunder. The rights and obligations of each Grantor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Grantor as a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
IXL HOLDINGS, INC.,
by
/s/ James V. Sandry
----------------------------------------
Name:
Title:
EACH OF THE LOAN PARTY
GUARANTORS LISTED ON
SCHEDULE I HERETO,
by
/s/ James V. Sandry
----------------------------------------
Name:
Title: Authorized Officer
THE CHASE MANHATTAN BANK, as
Collateral Agent,
by
/s/ Neil R. Boylan
----------------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
TO THE SECURITY AGREEMENT
SUBSIDIARY GUARANTORS
iXL, Inc.
Boxtop Interactive, Inc.
Creative Video Library, Inc.
Entrepreneur Television, Inc.
iXL-Boston, Inc.
IXL-Charlotte, Inc.
iXL-Chicago, Inc.
iXL-DC, Inc.
iXL-Denver, Inc.
iXL-Los Angeles, Inc.
IXL-Memphis, Inc.
iXL-New York, Inc.
iXL-Richmond, Inc.
iXL-San Diego, Inc.
iXL-San Francisco, Inc.
iVisit, Inc.
32
<PAGE>
SCHEDULE II
TO THE SECURITY AGREEMENT
COPYRIGHTS
SCHEDULE III
TO THE SECURITY AGREEMENT
LICENSES
SCHEDULE IV
TO THE SECURITY AGREEMENT
PATENTS
SCHEDULE V
TO THE SECURITY AGREEMENT
TRADEMARKS
33
<PAGE>
Annex 1 to the Security Agreement--Perfection Certificate
Annex 2 to the Security Agreement--Form of Supplement
34
<PAGE>
EXHIBIT 10.22
PROMISSORY NOTE
$900,000.00 September 18, 1998
FOR VALUE RECEIVED, the undersigned, DAVID CLAUSON (the "Maker"), promises
to pay to the order of IXL HOLDINGS, INC., a Delaware corporation ("Holder"), on
September 18, 2001 (the "Maturity Date"), the principal sum of NINE HUNDRED
THOUSAND AND NO/100 DOLLARS ($900,000.00), or, if less, so much thereof as has
been advanced and is then outstanding hereunder, with interest on the
outstanding principal balance of this Note from the date hereof until fully paid
at a simple interest rate of five and 48/100 percent (5.48%) per annum. The
entire principal amount hereof, together with all accrued and unpaid interest
hereon, shall be due and payable on the earlier of the Maturity Date or the date
(the "Transfer Date") on which Maker transfers any Pledged Stock (as hereinafter
defined).
This Note is secured by the Stock Pledge Agreement between Maker and Holder
of even date herewith (the "Pledge Agreement") granting to the Holder a security
interest in certain capital stock of Holder owned by the Maker. Notwithstanding
any other provision of this Note, Maker shall have no obligation or liability
for the payment of the principal amount owing hereunder beyond Maker's interest
in the Pledged Stock (as defined in the Pledge Agreement) pledged to Holder as
collateral security for payment of the principal amount owing hereunder. By the
acceptance of this Note and the Pledge Agreement, Holder agrees that in the
event of a default hereunder, it will rely solely on the Pledged Stock (as
defined in the Pledge Agreement) securing this Note for the payment of the
principal amount owing hereunder and will not sue or otherwise seek recourse
against Maker for any principal deficiency remaining after a disposition of the
Pledged Stock pursuant to the Pledge Agreement. The proceeds of any disposition
of the Pledged Stock by Holder pursuant to the Pledge Agreement shall be applied
in accordance with Section 4 of the Pledge Agreement. The foregoing provisions
concern the liability of Maker and do not in any manner, and shall not be
interpreted or construed to affect or impair the rights of Holder to pursue any
remedy which it may have under the Pledge Agreement. The foregoing provisions
shall not affect Maker's liability for the payment of all interest accruing
hereunder or other amounts due hereunder.
Interest, to the extent accrued, shall be paid by Maker upon the earlier of
the Maturity Date or the Transfer Date. All interest accrued but unpaid
hereunder shall be forgiven (a) if Maker is still employed by Holder on the
Maturity Date, (b) upon the death of Maker, or (c) in the event Maker's
employment with Holder is terminated due to a Resignation for Good Reason based
on clause (a) or (b) of such definition, and as such term is defined in the
Employment Agreement dated August 17, 1998 between Maker and iXL, Inc. (the
"Employment Agreement").
Maker shall be in default hereunder if (i) Maker fails timely to make any
payment due hereunder; (ii) Maker files or has filed against it any proceeding
under any insolvency or bankruptcy statute; (iii) any of the other conditions
hereinafter set out are violated or breached by Maker; or (iv) a Default occurs
pursuant to the Pledge Agreement. If a default occurs, all amounts due
hereunder shall, at the option of the Holder, become immediately due and
payable, and the Holder shall be entitled to exercise all rights available to it
under the Pledge Agreement.
-1-
<PAGE>
The principal hereof and interest hereon shall be payable in lawful money
of the United States of America, at the Holder's principal office in Atlanta,
Georgia or at such other place as the Holder hereof may designate in writing to
the Maker. All payments hereunder received from the Maker by the Holder shall be
applied first to interest to the extent then accrued and then to principal.
Maker agrees to pay the Holder hereof reasonable attorneys' fees for the
services of counsel employed to collect this Note, whether or not suit be
brought, and whether incurred in connection with collection, trial, appeal, or
otherwise, and to indemnify and hold the Holder harmless against liability for
the payment of state intangible, documentary and recording taxes, and other
taxes (including interest and penalties, if any) which may be determined to be
payable with respect to this transaction.
In no event shall the amount of interest due or payable hereunder exceed
the maximum rate of interest allowed by applicable law, and in the event any
such payment is inadvertently paid by the Maker or inadvertently received by the
Holder, then such excess sum shall be credited as a payment of principal, unless
the Maker shall notify the Holder, in writing, that the Maker elects to have
such excess sum returned to it forthwith. It is the express intent hereof that
the Maker not pay and the Holder not receive, directly or indirectly, in any
manner whatsoever, interest in excess of that which may be lawfully paid by the
Maker under applicable law.
The remedies of the Holder as provided herein and in the Pledge Agreement
shall be cumulative and concurrent and may be pursued singly, successively, or
together, at the sole discretion of the Holder, and may be exercised as often as
occasion therefor shall arise.
No act of omission or commission of the Holder, including specifically (but
without limitation) any failure to exercise any right, remedy, or recourse,
shall be effective unless set forth in a written document executed by the
Holder, and then only to the extent specifically recited therein. A waiver or
release with reference to one event shall not be construed as continuing, as a
bar to, or as a waiver or release of any subsequent right, remedy, or recourse
as to any subsequent event.
The Maker and all sureties, endorsers, and guarantors of this Note hereby
(a) waive demand, presentment of payment, notice of nonpayment, protest, notice
of protest and all other notice, filing of suit, and diligence in collecting
this Note, or in enforcing any of its rights under any guaranties securing the
repayment hereof; (b) agree to any substitution, addition, or release of any
collateral or any party or person primarily or secondarily liable hereon; (c)
agree that the Holder shall not be required first to institute any suit, or to
exhaust his, their, or its remedies against the Maker or any other person or
party to become liable hereunder, or against any collateral in order to enforce
payment of this Note; (d) consent to any extension, rearrangement, renewal, or
postponement of time of payment of this Note and to any other indulgence with
respect hereto without notice, consent, or consideration to any of them; and (e)
agree that, notwithstanding the occurrence of any of the foregoing (except with
the express written release by the Holder or any such person), they shall be and
remain jointly and severally, directly and primarily, liable for all sums due
under this Note.
-2-
<PAGE>
Time is of the essence of this Note.
The unpaid principal evidenced by this Note and unpaid accrued interest
thereon may be prepaid, in whole or in part, from time to time and at any time,
without premium or penalty.
All rights, privileges and obligations hereof, shall inure to the benefit
of and bind the respective successors and assigns of the parties hereto.
In case, and as often as, this Note is collected by an attorney at law, all
costs of collection, including reasonable attorney's fees, actually incurred,
shall be paid by Maker.
This Note is to be construed in accordance with, and governed by, the
internal laws of the State of Georgia, without regard to its principles of
conflict of laws.
IN WITNESS WHEREOF, Maker has set its hand and seal, as of the date first
above written.
/s/ David Clauson
---------------------------------
DAVID CLAUSON
-3-
<PAGE>
STOCK PLEDGE AGREEMENT
----------------------
THIS STOCK PLEDGE AGREEMENT (the "Agreement"), dated as of September 18,
1998, by and between DAVID CLAUSON (the "Pledgor"), and IXL HOLDINGS, INC., a
Delaware corporation ("Pledgee").
WHEREAS, as partial payment for the purchase of 1,000 shares (the "Pledged
Stock") of Class A Convertible Preferred Stock of of IXL Holdings, Inc., par
value $.01 per share, Pledgor has executed a Promissory Note of even date
herewith in favor of Pledgee in the principal amount of $900,000.00 (the "Loan"
or "Note"); and
WHEREAS, Pledgee has required, as a condition precedent to making the Loan,
that Pledgor execute this Stock Pledge Agreement; and
WHEREAS, to secure the payment and performance of all obligations of
Pledgor under the Note, Pledgor wishes to pledge to Pledgee all of its right,
title and interest in and to all of the Pledged Stock;
NOW, THEREFORE, in order to induce Pledgor to make the Loan and other good
and valuable consideration, receipt of which is acknowledged by each of the
parties, the parties hereto agree as follows:
1. PLEDGE AND SECURITY INTEREST. Pledgor hereby unconditionally grants
----------------------------
and assigns to the Pledgee, its successors and assigns, a continuing security
interest in and security title to the Pledged Stock. The Pledgor has delivered
to and deposited with the Pledgee herewith all of its right, title and interest
in and to the Pledged Stock, together with certificates representing the Pledged
Stock and stock powers endorsed in blank by Pledgor, as security for (i) all
obligations of Pledgor to Pledgee hereunder; and (ii) payment and performance of
all obligations of Pledgor to Pledgee under the Note, or any extension, renewal,
amendment or modification thereof, however created, acquired, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due. Beneficial ownership of the Pledged Stock,
including, without limitation, all voting, consensual and dividend rights, shall
remain in the Pledgor until the occurrence of a default under the terms hereof
(as defined in Section 4, below).
2. WARRANTY. Pledgor hereby represents and warrants to the Pledgee that
--------
except for the security interest created hereby, the Pledgor owns the Pledged
Stock free and clear of all liens, charges and encumbrances, that the Pledged
Stock is duly issued, fully paid and nonassessable, and that Pledgor has the
unencumbered right to pledge its Pledged Stock.
3. ADDITIONAL SHARES. In the event that, during the term of this
-----------------
Agreement:
a. any stock dividend, stock split, reclassification, readjustment,
or other change is declared or made in the capital structure of IXL Holdings,
Inc., all new, substituted, and additional shares, or other securities, issued
by reason of any such change and received by Pledgor or to which Pledgor shall
be entitled shall be immediately delivered to the Pledgee,
-4-
<PAGE>
together with stock powers endorsed in blank by Pledgor, and shall thereupon
constitute Pledged Stock to be held by the Pledgee under the terms of this
Agreement; and
b. subscriptions, warrants or any other rights or options shall be
issued in connection with the Pledged Stock, all new stock or other securities
acquired through such subscriptions, warrants, rights or options by Pledgor
shall be immediately delivered to the Pledgee and shall thereupon constitute
Pledged Stock to be held by the Pledgee under the terms of this Agreement.
4. DEFAULT. In the event of a demand for payment by the Pledgee under
-------
the terms of the Note, or a default under the terms of this Agreement (any of
such occurrences being hereinafter referred to as a "Default"), the Pledgee may
sell or otherwise dispose of the Pledged Stock at a public or private sale or
make other commercially reasonable disposition of the Pledged Stock or any
portion thereof after ten (10) days' notice to Pledgor and the Pledgee may
purchase the Pledged Stock or any portion thereof at any public sale. The
proceeds of the public or private sale or other disposition shall be applied in
the following order: (i) to any unpaid principal amount owing under the Note;
(ii) to the costs incurred in connection with the sale, expressly including,
without limitation, any costs under Section 7(a) hereof; (iii) to damages
incurred by the Pledgee or any of them by reason of any breach secured against
hereby, and (iv) to any unpaid interest which may have accrued on any
obligations secured hereby, and any remaining proceeds shall be paid over to the
Pledgor or others as by law provided. In the event the proceeds of the sale or
other disposition of the Pledged Stock are insufficient to pay such expenses,
interest, principal, obligations and damages, Pledgor shall remain liable to the
Pledgee for any accrued but unpaid interest owing under the Note.
5. ADDITIONAL RIGHTS OF PLEDGEE. In addition to its rights and
----------------------------
privileges under this Agreement, Pledgee shall have all the rights, powers and
privileges of a secured party under the Uniform Commercial Code.
6. RETURN OF PLEDGED STOCK TO PLEDGOR. Upon payment in full of all
----------------------------------
principal and interest on the Note, the Pledgee shall return to the Pledgor all
of the then remaining Pledged Stock and all rights received by the Pledgee as
agent for the Pledgor as a result of its possessory interest in the Pledged
Stock.
7. DISPOSITION OF PLEDGED STOCK BY PLEDGEE. The Pledged Stock is not
---------------------------------------
registered under the various Federal or State Securities Acts and disposition
thereof after default may be restricted to one or more private (instead of
public) sales in view of the lack of such registration. The Pledgor understands
that upon such disposition, the Pledgee may approach only a restricted number of
potential purchasers and further understands that a sale under such
circumstances may yield a lower price for the Pledged Stock than if the Pledged
Stock were registered pursuant to Federal and state securities legislation and
sold on the open market. Pledgor, therefore, agrees that:
a. if the Pledgee shall, pursuant to the terms of this Agreement,
sell or cause the Pledged Stock or any portion thereof to be sold at a private
sale, the Pledgee shall have the right to rely upon the advice and opinion of
any national brokerage or investment firm having
-5-
<PAGE>
recognized expertise and experience in connection with shares of companies in
IXL Holdings, Inc.'s industry (but shall not be obligated to seek such advice
and the failure to do so shall not be considered in determining the commercial
reasonableness of the Pledgee's action) as to the best manner in which to expose
the Pledged Stock for sale and as to the best price reasonably obtainable at the
private sale thereof; and
b. that such reliance shall be conclusive evidence that the Pledgee
has handled such disposition in a commercially reasonable manner.
8. PLEDGOR'S OBLIGATIONS ABSOLUTE. The obligations of the Pledgor under
------------------------------
this Agreement shall be direct and immediate and not conditional or contingent
upon the pursuit of any remedies against any other person, nor against other
security or liens available to the Pledgee or its successors, assigns or agents.
The Pledgor hereby waives any right to require that an action be brought against
any other person or to require that resort be had to any security or to any
balance of any deposit account or credit on the books of the Pledgee in favor of
any other Person prior to any exercise of rights or remedies hereunder, or to
require resort to rights or remedies of the Pledgee in connection with the Loan.
9. NOTICES. All notices and other communications required or permitted
-------
hereunder shall be in writing and, if mailed by prepaid certified mail, at any
time other than during a general discontinuance of postal service due to strike,
lockout or otherwise, shall be deemed to have been received on the earlier of
the date shown on the receipt or three (3) Business Days after the postmarked
date thereof and, if sent by facsimile, shall be followed forthwith by letter
and shall be deemed to have been received on the next Business Day following
dispatch. In addition, notices hereunder may be delivered by hand in which event
such notice shall be deemed effective when delivered. Notice of change of
address for notice shall also be governed by this Section. Notices shall be
addressed as follows:
If to the Pledgor: David Clauson
2862 Sacramento St.
San Francisco, CA 94115
If to the Pledgee: William C. Nussey
IXL Holdings, Inc.
1888 Emery Street
Atlanta, Georgia 30318
10. BINDING AGREEMENT. The provisions of this Agreement shall be
-----------------
construed and interpreted, and all rights and obligations of the parties hereto
determined, in accordance with the laws of the State of Georgia. This
Agreement, together with all documents referred to herein, constitutes the
entire Agreement between the Pledgor and the Pledgee with respect to the matters
addressed herein and may not be modified except by a writing executed by the
Pledgee and delivered by the Pledgee to the Pledgor. This Agreement may be
executed in multiple counterparts, each of which shall be deemed an original but
all of which, taken together, shall constitute one and the same instrument.
-6-
<PAGE>
11. SEVERABILITY. If any paragraph or part thereof shall for any reason
------------
be held or adjudged to be invalid, illegal or unenforceable by any court of
competent jurisdiction, such paragraph or part thereof so adjudicated invalid,
illegal or unenforceable shall be deemed separate, distinct and independent, and
the remainder of this Agreement shall remain in full force and effect and shall
not be affected by such holding or adjudication.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
affixed their seals, by and through their duly authorized officers, as of the
day and year first above written.
PLEDGOR:
/s/ David Clauson
----------------------------------
DAVID CLAUSON
PLEDGEE:
IXL HOLDINGS, INC.
/s/ James V. Sandry
----------------------------------
By: James V. Sandry
Title: EVP
-7-
<PAGE>
EXHIBIT 10.23
SUBSCRIPTION AGREEMENT
To the Board of Directors of IXL HOLDINGS, INC.:
The undersigned ("Purchaser") intends to purchase one share [1] (the
"Shares") of the $.01 par value Class B Common Stock of IXL Holdings, Inc. (the
"Company") at a price of $100.00 per share. Purchaser represents and warrants
Purchaser is acquiring the Shares for Purchaser's own account, to hold for
investment, with no present intention of dividing Purchaser's participation with
others or reselling or otherwise participating, directly or indirectly, in a
distribution of the Shares. Purchaser shall not make any sale, transfer or other
disposition of the Shares in violation of the Georgia Securities Act of 1973, as
amended (the "Georgia Act"), any other state securities act or the Rules and
Regulations promulgated thereunder or in violation of the Securities Act of
1933, as amended (the "1933 Act") or the General Rules and Regulations
promulgated thereunder by the Securities and Exchange Commission (the "SEC").
This subscription shall expire three (3) months from the date hereof
unless accepted by the Company prior to that time.
Purchaser understands and agrees Purchaser shall not be entitled to
certificates for nor be entitled to vote the Shares hereby subscribed until the
Shares are fully paid.
Purchaser has been advised the Shares are not being registered under
the Georgia Act on the ground this transaction is exempt from registration under
Subsection (13) of code Section 10-5-9 of the Georgia Act, are not being
registered under any other state act where an exemption from registration is
available, and are not being registered under the 1933 Act on the ground this
transaction is exempt from registration under Section 4(2) of the 1933 Act as
not involving any public offering, and reliance by the Company on such
exemptions is predicated in part on Purchaser's representations set forth in
this letter.
Purchaser agrees the Company may refuse to permit Purchaser to sell,
transfer or dispose of the Shares unless there is in effect a registration
statement under the Georgia Act, and any other applicable state act covering
such transfer or Purchaser furnishes an opinion of counsel, satisfactory to
counsel for the Company, to the effect such registration is not required.
Purchaser further agrees the Company may refuse to permit me to sell, transfer
or dispose of the Shares unless there is in effect a registration statement
under the 1933 Act covering such transfer or Purchaser furnishes an opinion of
counsel, satisfactory to counsel for the Company, to the effect such
registration is not
<PAGE>
required, or a "no-action" letter from the Staff of the SEC stating the SEC's
Staff will not recommend any action be taken by the SEC if the proposed transfer
or disposition is effected without registration under the 1933 Act.
Purchaser also understands and agrees stop transfer instructions will
be given to the Company's transfer agent (or noted on the appropriate records of
the Company) and there will be placed on the certificates for the Shares, or any
substitutions therefor, a legend stating in substance:
"The shares evidenced by this certificate have been acquired for
investment and have not been registered under the Georgia Securities
Act of 1973 (the "Georgia Act") in reliance on the exemption contained
in Subsection (13) of Code Section 10-5-9 of the Georgia Act, or under
the securities act of any other state where an exemption from
registration is available, or under the Securities Act of 1933 (the
"1933 Act") in reliance on the exemption contained in Section 4(2) of
the 1933 Act. These shares may not be sold or transferred except in
transactions (a) registered under the 1933 Act or exempt from
registration thereunder, (b) registered under or otherwise in
compliance with the Georgia Act and any other applicable state act.
Purchaser represents and warrants to the Company:
1. Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Shares with Purchaser's counsel (or has been given the opportunity to do so)
and, to the extent Purchaser feels necessary, counsel for the Company.
2. Purchaser has been informed by the Company the Shares have not
been registered under the Georgia Act, any other applicable state act or the
1933 Act and (a) under the Georgia Act, the Shares must be held for at least one
year unless they are sold or transferred in a transaction which is exempt under
the Georgia Act or pursuant to an effective registration statement under the
Georgia Act and (b) under the 1933 Act, the Shares must be held indefinitely
---
unless they are subsequently registered under the 1933 Act or unless an
exemption from such registration is available with respect to any proposed
transfer or disposition by Purchaser of the Shares.
3. Purchaser understands the Company is not required to file
periodic reports with the SEC and does not comply with the "Current Public
Information" requirements of Rule 144 promulgated by the SEC under the 1933 Act
and any sale by Purchaser of the
2
<PAGE>
Shares may not be made in reliance on Rule 144 until the Company does comply
with said requirements, which is not contemplated. Purchaser understands,
consequently, Purchaser may not make any sale of the Shares without registration
under the 1933 Act except upon compliance with Regulation A or some other
exemption from such registration.
4. Purchaser understands the Company is under no obligation to
register the Shares or take any other action necessary to make compliance with
an exemption from registration available.
5. Purchaser has met personally with an officer or other
representative of the Company and has had an opportunity to ask additional
information for verification purposes.
6. Purchaser acknowledges prior to the purchase of the Purchaser
Shares received adequate information concerning the true financial condition of
the Company, its business operations and the use of the proceeds from the sale
of the shares. Purchaser acknowledges the Shares were not offered for sale by
means of publicly disseminated advertisements or sales literature.
7. Purchaser understands the business of the Company is subject to
high risk and no representations can be or have been made with respect to the
future success of the business.
Very truly yours,
/s/ U. Bertram Ellis Jr.
----------------------------------------
U. Bertram Ellis Jr.
Accepted this 12 day
of April, 1996.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
------------------------------------
James V. Sandry, Vice President
3
<PAGE>
EXHIBIT 10.24
SUBSCRIPTION AGREEMENT
To the Board of Directors of IXL HOLDINGS, INC.:
The undersigned ("Purchaser") intends to purchase one share [1] (the
"Shares") of the $.01 par value Class B Common Stock of IXL Holdings, Inc. (the
"Company") at a price of $100.00 per share. Purchaser represents and warrants
Purchaser is acquiring the Shares for Purchaser's own account, to hold for
investment, with no present intention of dividing Purchaser's participation with
others or reselling or otherwise participating, directly or indirectly, in a
distribution of the Shares. Purchaser shall not make any sale, transfer or other
disposition of the Shares in violation of the Georgia Securities Act of 1973, as
amended (the "Georgia Act"), any other state securities act or the Rules and
Regulations promulgated thereunder or in violation of the Securities Act of
1933, as amended (the "1933 Act") or the General Rules and Regulations
promulgated thereunder by the Securities and Exchange Commission (the "SEC").
This subscription shall expire three (3) months from the date hereof
unless accepted by the Company prior to that time.
Purchaser understands and agrees Purchaser shall not be entitled to
certificates for nor be entitled to vote the Shares hereby subscribed until the
Shares are fully paid.
Purchaser has been advised the Shares are not being registered under
the Georgia Act on the ground this transaction is exempt from registration under
Subsection (13) of code Section 10-5-9 of the Georgia Act, are not being
registered under any other state act where an exemption from registration is
available, and are not being registered under the 1933 Act on the ground this
transaction is exempt from registration under Section 4(2) of the 1933 Act as
not involving any public offering, and reliance by the Company on such
exemptions is predicated in part on Purchaser's representations set forth in
this letter.
Purchaser agrees the Company may refuse to permit Purchaser to sell,
transfer or dispose of the Shares unless there is in effect a registration
statement under the Georgia Act, and any other applicable state act covering
such transfer or Purchaser furnishes an opinion of counsel, satisfactory to
counsel for the Company, to the effect such registration is not required.
Purchaser further agrees the Company may refuse to permit me to sell, transfer
or dispose of the Shares unless there is in effect a registration statement
under the 1933 Act covering such transfer or Purchaser furnishes an opinion of
counsel, satisfactory to counsel for the Company, to the effect such
registration is not
<PAGE>
required, or a "no-action" letter from the Staff of the SEC stating the SEC's
Staff will not recommend any action be taken by the SEC if the proposed transfer
or disposition is effected without registration under the 1933 Act.
Purchaser also understands and agrees stop transfer instructions will
be given to the Company's transfer agent (or noted on the appropriate records of
the Company) and there will be placed on the certificates for the Shares, or any
substitutions therefor, a legend stating in substance:
"The shares evidenced by this certificate have been
acquired for investment and have not been registered under
the Georgia Securities Act of 1973 (the "Georgia Act") in
reliance on the exemption contained in Subsection (13) of
Code Section 10-5-9 of the Georgia Act, or under the
securities act of any other state where an exemption from
registration is available, or under the Securities Act of
1933 (the "1933 Act") in reliance on the exemption
contained in Section 4(2) of the 1933 Act. These shares
may not be sold or transferred except in transactions (a)
registered under the 1933 Act or exempt from registration
thereunder, (b) registered under or otherwise in compliance
with the Georgia Act and any other applicable state act.
Purchaser represents and warrants to the Company:
1. Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Shares with Purchaser's counsel (or has been given the opportunity to do so)
and, to the extent Purchaser feels necessary, counsel for the Company.
2. Purchaser has been informed by the Company the Shares have not
been registered under the Georgia Act, any other applicable state act or the
1933 Act and (a) under the Georgia Act, the Shares must be held for at least one
year unless they are sold or transferred in a transaction which is exempt under
the Georgia Act or pursuant to an effective registration statement under the
Georgia Act and (b) under the 1933 Act, the Shares must be held indefinitely
---
unless they are subsequently registered under the 1933 Act or unless an
exemption from such registration is available with respect to any proposed
transfer or disposition by Purchaser of the Shares.
3. Purchaser understands the Company is not required to file
periodic reports with the SEC and does not comply with the "Current Public
Information" requirements of Rule 144 promulgated by the SEC under the 1933 Act
and any sale by Purchaser of the
2
<PAGE>
Shares may not be made in reliance on Rule 144 until the Company does comply
with said requirements, which is not contemplated. Purchaser understands,
consequently, Purchaser may not make any sale of the Shares without registration
under the 1933 Act except upon compliance with Regulation A or some other
exemption from such registration.
4. Purchaser understands the Company is under no obligation to
register the Shares or take any other action necessary to make compliance with
an exemption from registration available.
5. Purchaser has met personally with an officer or other
representative of the Company and has had an opportunity to ask additional
information for verification purposes.
6. Purchaser acknowledges prior to the purchase of the Shares
Purchaser received adequate information concerning the true financial condition
of the Company, its business operations and the use of the proceeds from the
sale of the shares. Purchaser acknowledges the Shares were not offered for
sale by means of publicly disseminated advertisements or sales literature.
7. Purchaser understands the business of the Company is subject to
high risk and no representations can be or have been made with respect to the
future success of the business.
Very truly yours,
/s/ James S. Altenbach
-----------------------------
James S. Altenbach
Accepted this 12 day of April, 1996.
IXL HOLDINGS, INC.
By: /s/ U. Bertram Ellis
--------------------------------
U. Bertram Ellis Jr., President
3
<PAGE>
EXHIBIT 10.25
================================================================================
SUBSCRIPTION AGREEMENT
IXL HOLDINGS, INC.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT As PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
Dated as of April 30, 1996
================================================================================
<PAGE>
SUBSCRIPTION AGREEMENT
----------------------
Subscription Agreement, dated as of April 30, 1996, between IXL
Holdings Inc., a Delaware corporation (the "Company"), and U. Bertram Ellis, Jr.
(the "Purchaser").
WHEREAS, the Purchaser desires to subscribe for, and the Company
desires to make available for purchase, 9,000 shares of the Company's Class A
Convertible Preferred Stock, par value $.01 per share (the "Shares"), on the
terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth in this Agreement, the parties hereto agree as follows:
1. Purchase and Sale of the Shares. (a) General. Subject to all
------------------------------- -------
of the terms and conditions of this Agreement, and in reliance upon the
representations and warranties contained herein, the Purchaser hereby subscribes
for and agrees to purchase, and the Company hereby agrees to sell to the
Purchaser for his own account, on the Closing Date (as defined in Section 2(a)
hereof), the Shares.
(b) Purchase Price. The purchase price per Share shall be $100.00.
--------------
(c) Consideration. At the Closing, the Purchaser shall purchase the
-------------
Shares for $900,000 (the "Consideration"). The Consideration shall be paid by
the Purchaser at the Closing in cash payable by wire transfer of immediately
available funds to an account designated by the Company or by bank check if
acceptable to the Company.
2. Closing. (a) Time and Place. The Closing of the transactions
------- --------------
contemplated by this Agreement (the "Closing") shall take place on a business
day that is no more than ten business days after the closing of the sale of
Ellis Communications, Inc., whether structured as a sale of stock, assets,
merger, spin-off or otherwise, or on such other date as the parties may agree
(the "Closing Date"), provided, however, that the Purchaser may waive the
--------- -------
condition that such sale shall have occurred and proceed with the Closing. The
Purchaser shall designate the date of Closing in accordance with the terms of
the preceding sentence by giving the Company at least five business days prior
written notice of such Closing. The Closing shall be held at 10:00 a.m. in the
offices of Minkin & Snyder, 3060
<PAGE>
Peachtree Road, Suite 1100, Atlanta, Georgia, or at such other time or place as
the parties may agree.
(b) Delivery by the Company. At the Closing, against delivery of the
-----------------------
Consideration by the Purchaser, the Company will deliver to the Purchaser a
stock certificate registered in the Purchaser's name and representing the
Shares, which certificates shall bear the legends set forth in the Stockholders
Agreement, dated as of the date hereof, as the same shall be amended from time
to time (the "Stockholders Agreement"), among the Company, Kelso Investment
Associates V, L.P. ("KIA V"), Kelso Equity Partners V, L.P. ("KEP V"), the
Purchaser and each of the other persons who will become stockholders of the
Company on the date hereof.
(c) Delivery by the Purchaser. At the Closing, the Purchaser will
-------------------------
deliver the Consideration as provided in Section 1(c).
3. Purchaser's Representations, Warranties and Covenants. (a)
-----------------------------------------------------
Investment Intention and Restrictions on Disposition. The Purchaser represents
- ----------------------------------------------------
and warrants that he is acquiring the Shares solely for his own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof in any transaction or series of transactions that would be
in violation of the securities laws of the United States or any state thereof.
The Purchaser agrees that he will not, directly or indirectly, offer, transfer,
sell, pledge, hypothecate or otherwise dispose of any of the Shares (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of any of the
Shares) or any interest therein or any rights relating thereto, except in
compliance with (1) the Securities Act of 1933, as amended (the "Act"), and the
-
rules and regulations of the Securities and Exchange Commission thereunder, (2)
-
all applicable state securities or "blue sky" laws and (3) the Stockholders
-
Agreement. The Purchaser further understands, acknowledges and agrees that none
of the Shares or any interest therein or any rights relating thereto may be
transferred, sold, pledged, hypothecated or otherwise disposed of (x) unless the
-
provisions of such Stockholders Agreement shall have been complied with and (y)
-
unless such disposition is exempt from the provisions of Section 5 of the Act or
is pursuant to an effective registration statement under the Act and is exempt
from (or in compliance with) applicable state securities or "blue sky" laws. Any
attempt by the Purchaser, directly or indirectly, to offer, transfer, sell,
pledge, hypothecate or otherwise dispose of
2
<PAGE>
any of the Shares without complying with the provisions of this Agreement and
the Stockholders Agreement shall be void and of no effect.
(b) Securities Law Matters. The Purchaser acknowledges receipt of
----------------------
advice from the Company that (i) the Shares have not been registered under the
-
Act or qualified under any state securities or "blue sky" laws, (ii) it is not
--
anticipated that there will be any public market for the Shares, (iii) the
---
Shares must be held indefinitely and the Purchaser must continue to bear the
economic risk of the investment in the Shares unless the Shares are subsequently
registered under the Act and such state laws or an exemption from registration
is available, (iv) Rule 144 promulgated under the Act ("Rule 144") is not
--
presently available with respect to sales of any securities of the Company and
the Company has made no covenant to make Rule 144 available and Rule 144 is not
anticipated to be available in the foreseeable future, (v) when and if the
-
Shares may be disposed of without registration in reliance upon Rule 144, such
disposition can be made only in limited amounts and in accordance with the terms
and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not
--
available, public sale of the Shares without registration will require the
availability of an exemption under the Act and (vii) a notation shall be made in
---
the appropriate records of the Company indicating that the Shares are subject to
restrictions on transfer set forth in this Agreement and the Stockholders
Agreement and, if the Company should in the future engage the services of a
stock transfer agent, appropriate stop-transfer instructions will be issued to
such transfer agent with respect to the Shares.
(c) Ability to Bear Risk. The Purchaser represents and warrants that
--------------------
(i) his financial situation is such that he can afford to bear the economic risk
-
of holding the Shares for an indefinite period and (ii) he can afford to suffer
--
the complete loss of his investment in the Shares.
(d) Access to Information; Sophistication. The Purchaser represents
-------------------------------------
and warrants that (i) he is familiar with the business and financial condition,
-
properties, operations and prospects of the Company and that he has had, during
the course of the transactions contemplated hereby, the opportunity to ask
questions of, and receive answers from, representatives of the Company
concerning the Company and the terms and conditions of the purchase of the
Shares and to obtain any additional information that he deems necessary, (ii)
--
his knowledge and experience in financial
3
<PAGE>
and business matters is such that he is capable of evaluating the merits and
risk of the investment in the Shares and (iii) he has carefully reviewed the
---
terms and provisions of the Stockholders Agreement and has evaluated the
restrictions and obligations contained therein. In furtherance of the
foregoing, the Purchaser represents and warrants that (i) no representation or
-
warranty, express or implied, whether written or oral, as to the financial
condition, results of operations, prospects, properties or business of the
Company or as to the desirability or value of an investment in the Company has
been made to him by or on behalf of the Company, except for those
representations and warranties contained in Section 4 and the Stockholders
Agreement, (ii) he has relied upon his own independent appraisal and
--
investigation, and the advice of his own counsel, tax advisors and other
advisors, regarding the risks of an investment in the Company and (iii) he will
---
continue to bear sole responsibility for making his own independent evaluation
and monitoring of the risks of his investment in the Company. For purposes of
this Section 3 (d), the Company includes each of the businesses to be acquired
by the Company on the date hereof.
(e) Accredited Investor. The Purchaser represents and warrants that
-------------------
he is an "accredited investor" as such term is defined in Rule 501(a)
promulgated under the Act and that:
(i) he has an individual net worth, or joint net worth with his
spouse, of at least $1,000,000; or
(ii) he has had an individual income in excess of $200,000 in each of
1994 and 1995 or joint income with his spouse in excess of $300,000 in each
of 1994 and 1995, and he has a reasonable expectation of reaching the same
income level in 1996; or
(iii) he is an executive officer of the Company.
(f) Due Execution and Delivery. The Purchaser represents and
--------------------------
warrants that (i) he has duly executed and delivered this Agreement, (ii) this
- --
Agreement constitutes and, upon execution thereof, the Stockholders Agreement
and the Registration Rights Agreement, dated as of the date hereof, as the same
shall be amended from time to time (the "Registration Rights Agreement"), among
the Company, KIA V, KEP V, the Purchaser and each of the other persons who will
become stockholders of the Company on the date hereof will constitute the
Purchaser's legal, valid and binding obli-
4
<PAGE>
gations, enforceable against him in accordance with their respective terms,
(iii) no consent, approval, authorization, order, filing, registration or
---
qualification of or with any court, governmental authority or third person is
required to be obtained by him in connection with the execution and delivery of
this Agreement or the Stockholders Agreement or the performance of his
obligations hereunder or thereunder and (iv) he is a resident of the state set
--
forth below his name on the signature page hereof.
4. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to the Purchaser that (i) the Company is a corporation
-
duly organized, validly existing and in good standing under the laws of the
State of Delaware, (ii) the execution and delivery of this Agreement, the
--
Stockholders Agreement and the Registration Rights Agreement, the performance of
the Company's obligations hereunder and thereunder and the consummation by it of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all requisite corporate action on the part of the Company, (iii)
---
this Agreement, the Stockholders Agreement and the Registration Rights Agreement
have been duly and validly executed and delivered by the Company and constitute
the legal, valid and binding obligations of the Company enforceable against it
in accordance with their respective terms, except as the same may be affected by
bankruptcy, insolvency, moratorium or similar laws, or by legal or equitable
principles relating to or limiting the rights of contracting parties generally,
and (iv) the Shares, when issued and delivered in accordance with the terms
--
hereof, will be duly authorized, validly issued, fully paid and nonassessable,
and free and clear of any liens or encumbrances other than those created
pursuant to this Agreement and the Stockholders Agreement or otherwise in
connection with the transactions contemplated hereby and thereby.
5. State Securities Laws. Notwithstanding anything in this Agreement
---------------------
to the contrary, the Company shall not have any obligation to sell any Shares to
the Purchaser who is a resident of a jurisdiction in which the sale of such
shares to the Purchaser would constitute a violation of the securities, "blue
sky" or other similar laws of such jurisdiction.
6. Stock Certificate Legends. The certificates representing the
-------------------------
Shares shall bear the following legends:
5
<PAGE>
(i) "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
UNLESS SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER
OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT, SUCH LAWS AND THE STOCKHOLDERS' AGREEMENT OF
THE COMPANY, DATED AS OF APRIL 30, 1996, AS THE SAME SHALL BE AMENDED
FROM TIME TO TIME (THE "STOCKHOLDERS AGREEMENT").
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER, A VOTING AGREEMENT AND OTHER CONDITIONS AND
RESTRICTIONS, AS SPECIFIED IN THE STOCKHOLDERS AGREEMENT, COPIES OF
WHICH ARE ON FILE AT THE OFFICE OF THE COMPANY AND WILL BE FURNISHED
WITHOUT CHARGE TO THE STOCKHOLDER OF SUCH SHARES UPON WRITTEN
REQUEST.
(iii) THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OTHER SPECIAL RIGHTS OF EACH CLASS OR SERIES
OF SHARES AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS OF SUCH PREFERENCES AND OR RIGHTS.
In addition, certificates representing Shares owned by residents of certain
states shall bear any legends required by the laws of such states.
7. Miscellaneous. (a) Termination. This Agreement may be
------------- -----------
terminated by either the Company or the Purchaser upon written notice to the
other if the Closing has not occurred by December 31, 1996.
(b) Notices. All notices and other communications required or
-------
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or by fax or sent by certified
mail, return receipt requested, postage prepaid, or by Federal Express or other
similar courier service to the parties to this Agreement at the following
addresses or to such other address as the party to this Agreement whose address
it is shall specify by notice to the other: if to
6
<PAGE>
the Purchaser, to the Purchaser at the address set forth under the Purchaser's
name on the signature page of this Agreement; and if to the Company, to it at
IXL Holdings, Inc., 1465 Northside Drive, Atlanta, Georgia 30318, Attention: U.
Bertram Ellis, Jr., with a copy to Kelso & Company, 320 Park Avenue, 24th Floor,
New York, New York 10022, Attention: James J. Connors, II, Esq.
(c) Binding Effect; Benefits. This Agreement shall be binding upon
------------------------
and inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to this
Agreement and their respective successors or permitted assigns any legal or
equitable right, remedy or claim under or in respect of any agreement or any
provision contained herein.
(d) Waiver, Amendment. (i) Waiver. No action taken pursuant to this
----------------- ------
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by such party taking such
action of compliance by any other party with any representations, warranties,
covenants or agreements contained herein. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any preceding or succeeding breach and no failure by any party to
exercise any right or privilege hereunder shall be deemed a waiver of such
party's rights or privileges hereunder or shall be deemed a waiver of such
party's rights to exercise the same at any subsequent time or times hereunder.
(ii) Amendments. Neither this Agreement nor any term or provision
----------
hereof may be amended, modified, waived or supplemented orally, but only by a
written instrument executed by the Company and the Purchaser.
(e) Assignability. Neither this Agreement nor any right, remedy,
-------------
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company without the prior written consent of the Purchaser or
by the Purchaser without the prior written consent of the Company.
7
<PAGE>
(f) Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the law of the State of New York, regardless of the
law that might be applied under principles of conflicts of law.
(g) Section and Other Headings. The section and other headings
--------------------------
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
(h) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original and both of which together shall
be deemed to be one and the same instrument.
(i) Pronouns. Any use of masculine pronouns herein shall be deemed to
--------
include the feminine and neuter cases, as applicable.
(j) Entire Agreement. The Stockholders Agreement and this Agreement
----------------
shall constitute the entire agreement of the parties hereto with respect to the
subject hereof and shall supersede all prior agreements, arrangements,
understandings, documents, instruments and communications, whether written or
oral, with respect to the subject matter hereof and thereof.
(k) Severability. In case any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, the validity and enforceability of
the remaining provisions shall not in any way be affected thereby.
[Rest of the page intentionally left blank.]
8
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Agreement as of the date first set forth above.
IXL HOLDINGS, INC.
By: /s/ U. Bertram Ellis Jr.
---------------------------
Name:
Title:
PURCHASER:
/s/ U. Bertram Ellis Jr.
------------------------------
U. BERTRAM ELLIS, JR.
1180 Northmoor Court
Atlanta, Georgia 30327
9
<PAGE>
EXHIBIT 10.26
================================================================================
SUBSCRIPTION AGREEMENT
IXL HOLDINGS, INC.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFER-ABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED. TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
Dated as of April 30, 1996
================================================================================
<PAGE>
SUBSCRIPTION AGREEMENT
----------------------
Subscription Agreement, dated as of April 30, 1996, between IXL
Holdings Inc., a Delaware corporation (the "Company"), U. Bertram Ellis, Jr.,
James V. Sandry and James S. Altenbach (individually, a "Purchaser" and
collectively, the "Purchasers").
WHEREAS, each of the Purchasers desires to subscribe for, and the
Company desires to make available for purchase, those shares of the Company's
Class A Convertible Preferred Stock, par value $.01 per share (the "Shares"),
indicated as being subscribed for by each such Purchaser on Schedule 1 hereto on
the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth in this Agreement, the parties hereto agree as follows:
1. Purchase and Sale of the Shares.
-------------------------------
(a) General. Subject to all of the terms and conditions of this Agreement, and
-------
in reliance upon the representations and warranties contained herein, each
Purchaser hereby subscribes for and agrees to purchase, and the Company hereby
agrees to sell to each such Purchaser for such Purchaser's own account, on the
Closing Date (as defined in Section 2(a) hereof), the number of Shares set forth
opposite such Purchaser's name on Schedule 1 hereto.
(b) Purchase Price. The purchase price per Share shall be $100.00.
--------------
(c) Consideration. At the Closing, each Purchaser shall purchase
-------------
such Shares for the amount set forth on Schedule 1 opposite such Purchaser's
name (the "Consideration"). The Consideration shall be paid by the Purchaser at
the Closing in cash payable by wire transfer of immediately available funds to
an account designated by the Company or by bank check if acceptable to the
Company.
2. Closing. (a) Time and Place. The Closing of the transactions
------- --------------
contemplated by this Agreement (the "Closing") shall take place at the offices
of Minkin & Snyder, 3060 Peachtree Road, Suite 1100, Atlanta, Georgia, at 10:00
am on April 30, 1996 or at such other time and date as the parties may agree to
(the "Closing Date").
<PAGE>
(b) Delivery by the Company. At the Closing, against delivery of the
-----------------------
Consideration by each Purchaser, the Company will deliver to each such Purchaser
a stock certificate registered in such Purchaser's name and representing the
number of Shares purchased by such Purchaser, which certificates shall bear the
legends set forth in the Stockholders Agreement, dated as of the Closing Date
(the "Stockholders Agreement"), among the Company, Kelso Investment Associates
V, L.P. ("KIA V"), Kelso Equity Partners V, L.P. ("KEP V"), the Purchasers and
each of the other persons who will become stockholders of the Company on the
Closing Date.
(c) Delivery by the Purchasers. At the Closing, each of the
--------------------------
Purchasers will deliver the Consideration as provided in Section 1(c).
3. Purchaser's Representations, Warranties and Covenants. (a)
-----------------------------------------------------
Investment Intention and Restrictions on Disposition. Each Purchaser represents
- ----------------------------------------------------
and warrants that such Purchaser is acquiring the Shares solely for its own
account for investment and not with a view to, or for sale in connection with,
any distribution thereof in any transaction or series of transactions that would
be in violation of the securities laws of the United States or any state
thereof. Each Purchaser agrees that such Purchaser will not, directly or
indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of
any of the Shares (or solicit any offers to buy, purchase or otherwise acquire
or take a pledge of any of the Shares) or any interest therein or any rights
relating thereto, except in compliance with (1) the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations of the Securities and
Exchange Commission thereunder, (2) all applicable state securities or "blue
sky" laws and (3) the Stockholders Agreement, as the same shall be amended from
time to time. Each Purchaser further understands, acknowledges and agrees that
none of the Shares or any interest therein or any rights relating thereto may be
transferred, sold, pledged, hypothecated or otherwise disposed of (x) unless the
provisions of such Stockholders Agreement shall have been complied with and (y)
unless such disposition is exempt from the provisions of Section 5 of the Act or
is pursuant to an effective registration statement under the Act and is exempt
from (or in compliance with) applicable state securities or "blue sky" laws.
Any attempt by a Purchaser, directly or indirectly, to offer, transfer, sell,
pledge, hypothecate or otherwise dispose of any of such Purchaser's Shares
without complying with the provisions of this Agreement and the
2
<PAGE>
Stockholders Agreement, as the same shall be amended from time to time, shall be
void and of no effect.
(b) Securities Law Matters. Each Purchaser acknowledges receipt of
----------------------
advice from the Company that (i) the Shares have not been registered under the
-
Act or qualified under any state securities or "blue sky" laws, (ii) it is not
--
anticipated that there will be any public market for the Shares, (iii) the
---
Shares must be held indefinitely and such Purchaser must continue to bear the
economic risk of the investment in the Shares unless the Shares are subsequently
registered under the Act and such state laws or an exemption from registration
is available, (iv) Rule 144 promulgated under the Act ("Rule 144") is not
--
presently available with respect to sales of any securities of the Company and
the Company has made no covenant to make Rule 144 available and Rule 144 is not
anticipated to be available in the foreseeable future, (v) when and if the
-
Shares may be disposed of without registration in reliance upon Rule 144, such
disposition can be made only in limited amounts and in accordance with the terms
and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not
--
available, public sale of the Shares without registration will require the
availability of an exemption under the Act and (vii) a notation shall be made in
---
the appropriate records of the Company indicating that the Shares are subject to
restrictions on transfer set forth in this Agreement and the Stockholders
Agreement, as the same shall be amended from time to time, and, if the Company
should in the future engage the services of a stock transfer agent, appropriate
stop-transfer instructions will be issued to such transfer agent with respect to
the Shares.
(c) Ability to Bear Risk. Each Purchaser represents and warrants
--------------------
that (i) such Purchaser's financial situation is such that such Purchaser can
afford to bear the economic risk of holding the Shares for an indefinite period
and (ii) such Purchaser can afford to suffer the complete loss of its investment
in the Shares.
(d) Access to Information; Sophistication. Each Purchaser represents
-------------------------------------
and warrants that (i) such Purchaser is familiar with the business and financial
condition, properties, operations and prospects of the Company and that it has
had, during the course of the transactions contemplated hereby, the opportunity
to ask questions of, and receive answers from, representatives of the Company
concerning the Company and the terms and conditions of the purchase of the
Shares and to obtain any additional
3
<PAGE>
information that such Purchaser deems necessary, (ii) such Purchaser's knowledge
--
and experience in financial and business matters is such that such Purchaser is
capable of evaluating the merits and risk of the investment in the Shares and
(iii) such Purchaser has carefully reviewed the terms and provisions of the
---
Stockholders Agreement and has evaluated the restrictions and obligations
contained therein. In furtherance of the foregoing, each Purchaser represents
and warrants that (i) no representation or warranty, express or implied, whether
-
written or oral, as to the financial condition, results of operations,
prospects, properties or business of the Company or as to the desirability or
value of an investment in the Company has been made to such Purchaser by or on
behalf of the Company, except for those representations and warranties contained
in Section 4 and the Stockholders Agreement, (ii) such Purchaser has relied upon
--
such Purchaser's own independent appraisal and investigation, and the advice of
such Purchaser's own counsel, tax advisors and other advisors, regarding the
risks of an investment in the Company and (iii) such Purchaser will continue to
---
bear sole responsibility for making its own independent evaluation and
monitoring of the risks of its investment in the Company. For purposes of this
Section 3 (d), the Company includes each of the businesses to be acquired by the
Company on the Closing Date.
(e) Accredited Investor. Each Purchaser represents and warrants that
-------------------
such Purchaser is an "accredited investor" as such term is defined in Rule
501(a) promulgated under the Act and, if such Purchaser is a natural person,
that:
(i) such Purchaser has an individual net worth, or joint net worth
with such Purchaser's spouse, of at least $1,000,000; or
(ii) such Purchaser has had an individual income in excess of $200,000
in each of 1994 and 1995 or joint income with such Purchaser's spouse in
excess of $300,000 in each of 1994 and 1995, and such Purchaser has a
reasonable expectation of reaching the same income level in 1996; or
(iii) such Purchaser is an executive officer of the Company.
(f) Due Execution and Delivery. Each Purchaser represents and
--------------------------
warrants that (i) such Purchaser has duly
-
4
<PAGE>
executed and delivered this Agreement, (ii) this Agreement constitutes and, upon
--
execution thereof, the Stockholders Agreement and the Registration Rights
Agreement, dated as of the Closing Date (the "Registration Rights Agreement"),
among the Company, KIA V, KEP V and each of the other persons who will become
stockholders of the Company on the Closing Date will constitute such Purchaser's
legal, valid and binding obligations, enforceable against such Purchaser in
accordance with their respective terms, (iii) no consent, approval,
---
authorization, order, filing, registration or qualification of or with any
court, governmental authority or third person is required to be obtained by such
Purchaser in connection with the execution and delivery of this Agreement or the
Stockholders Agreement or the performance of his obligations hereunder or
thereunder and, (iv) such Purchaser is a resident of the state set forth below
--
such Purchaser's name on the signature page hereof.
4. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to each Purchaser that (i) the Company is a corporation
-
duly organized, validly existing and in good standing under the laws of the
State of Delaware, (ii) the execution and delivery of this Agreement, the
--
Stockholders Agreement and the Registration Rights Agreement, the performance of
the Company's obligations hereunder and thereunder and the consummation by it of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all requisite corporate action on the part of the Company, (iii)
---
this Agreement, the Stockholders Agreement and the Registration Rights Agreement
have been duly and validly executed and delivered by the Company and constitute
the legal, valid and binding obligations of the Company enforceable against it
in accordance with their respective terms, except as the same may be affected by
bankruptcy, insolvency, moratorium or similar laws, or by legal or equitable
principles relating to or limiting the rights of contracting parties generally,
and (iv) the Shares, when issued and delivered in accordance with the terms
--
hereof, will be duly authorized, validly issued, fully paid and nonassessable,
and free and clear of any liens or encumbrances other than those created
pursuant to this Agreement and the Stockholders Agreement or otherwise in
connection with the transactions contemplated hereby and thereby.
5. State Securities Laws. Notwithstanding anything in this
---------------------
Agreement to the contrary, the Company shall not have any obligation to sell any
Shares to any Purchaser who is a resident of a jurisdiction in which the sale of
5
<PAGE>
such shares to such Purchaser would constitute a violation of the securities,
"blue sky" or other similar laws of such jurisdiction.
6. Stock Certificate Legends. The certificates representing the
-------------------------
Shares shall bear the following legends:
(i) "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
UNLESS SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER
OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT, SUCH LAWS AND THE STOCKHOLDERS' AGREEMENT OF
THE COMPANY, DATED AS OF APRIL 30, 1996, AS THE SAME SHALL BE AMENDED
FROM TIME TO TIME (THE "STOCKHOLDERS AGREEMENT").
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON TRANSFER, A VOTING AGREEMENT AND OTHER CONDITIONS AND RESTRICTIONS,
AS SPECIFIED IN THE STOCKHOLDERS AGREEMENT, COPIES OF WHICH ARE ON
FILE AT THE OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE
TO THE STOCKHOLDER OF SUCH SHARES UPON WRITTEN REQUEST.
(iii) THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OTHER SPECIAL RIGHTS OF EACH CLASS OR SERIES
OF SHARES AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS OF SUCH PREFERENCES AND OR RIGHTS.
In addition, certificates representing Shares owned by residents of certain
states shall bear any legends required by the laws of such states.
7. Miscellaneous. (a) Notices. All notices and other
------------- -------
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been given if delivered personally or by
fax or sent by certified mail, return receipt requested, postage prepaid, or by
Federal Express or other similar courier service to the parties to this
Agreement at the following addresses or
6
<PAGE>
to such other address as the party to this Agreement whose address it is shall
specify by notice to the other: if to a Purchaser, to such Purchaser at the
address set forth under such Purchaser's name on the signature page of this
Agreement; and if to the Company, to it at IXL Holdings, Inc., 1465 Northside
Drive, Atlanta, Georgia 30318, Attention: U. Bertram Ellis, Jr., with a copy to
Kelso & Company, 320 Park Avenue, 24th Floor, New York, New York 10022,
Attention: James J. Connors, II, Esq.
(b) Binding Effect; Benefits. This Agreement shall be binding upon
------------------------
and inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to this
Agreement and their respective successors or permitted assigns any legal or
equitable right, remedy or claim under or in respect of any agreement or any
provision contained herein.
(c) Waiver, Amendment. (i) Waiver. No action taken pursuant to
----------------- ------
this Agreement, including, without limitation, any investigation by or on behalf
of any party, shall be deemed to constitute a waiver by such party taking such
action of compliance by any other party with any representations, warranties,
covenants or agreements contained herein. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any preceding or succeeding breach and no failure by any party to
exercise any right or privilege hereunder shall be deemed a waiver of such
party's rights or privileges hereunder or shall be deemed a waiver of such
party's rights to exercise the same at any subsequent time or times hereunder.
(ii) Amendments. Neither this Agreement nor any term or provision
----------
hereof may be amended, modified, waived or supplemented orally, but only by a
written instrument executed by the Company and a majority of the Purchasers.
(d) Assignability. Neither this Agreement nor any right, remedy,
-------------
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company without the prior written consent of a majority of the
Purchasers or by any Purchaser without the prior written consent of the Company.
7
<PAGE>
(e) Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the law of the State of New York, regardless of the
law that might be applied under principles of conflicts of law.
(f) Section and Other Headings. The section and other headings
--------------------------
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
(h) Pronouns. Any use of masculine pronouns herein shall be deemed
--------
to include the feminine and neuter cases, as applicable.
(i) Entire Agreement. The Stockholders Agreement and this Agreement
----------------
shall constitute the entire agreement of the parties hereto with respect to the
subject hereof and shall supersede all prior agreements, arrangements,
understandings, documents, instruments and communications, whether written or
oral, with respect to the subject matter hereof and thereof.
(j) Severability. In case any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, the validity and enforceability of
the remaining provisions shall not in any way be affected thereby.
[Rest of the page intentionally left blank.]
8
<PAGE>
IN WITNESS WHEREOF, the Company and each of the Purchasers have
executed this Agreement as of the date first set forth above.
IXL HOLDINGS, INC.
By:/s/ U. Bertram Ellis, Jr.
-----------------------------------------
Name:
Title:
PURCHASERS:
/s/ U. Bertram Ellis, Jr.
---------------------------------------------
U. BERTRAM ELLIS, Jr.
1180 Northmoor Court
Atlanta, Georgia 30327
/s/ James V. Sandry
---------------------------------------------
JAMES V. SANDRY
873 Countryside Court
Marietta, Georgia 30067
/s/ James S. Altenbach
---------------------------------------------
JAMES S. ALTENBACH
4173 Glen Meadow Drive
Norcross, Georgia 30092
<PAGE>
Schedule
--------
CLASS A CONVERTIBLE PREFERRED STOCK
<TABLE>
<CAPTION>
Aggregate
Name of Purchaser Number of Shares Purchase Price Purchase Price
----------------- ---------------- -------------- --------------
<S> <C> <C> <C>
U. Bertram Ellis, Jr. 1,000 $100.00 $100,000.00
James V. Sandry 250 $100.00 $ 25,000.00
James S. Altenbach 250 $100.00 $ 25,000.00
</TABLE>
10
<PAGE>
EXHIBIT 10.27
================================================================================
SUBSCRIPTION AGREEMENT
IXL HOLDINGS, INC.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
Dated as of June 3, 1996
================================================================================
<PAGE>
SUBSCRIPTION AGREEMENT
----------------------
Subscription Agreement, dated as of June 3, 1996, between IXL Holdings
Inc., a Delaware corporation (the "Company"), and James S. Altenbach (the
"Purchaser").
WHEREAS, the Purchaser desires to subscribe for, and the Company
desires to make available for purchase, 500 shares of the Company's Class A
Convertible Preferred Stock, par value $.0l per share (the "Shares"), on the
terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth in this Agreement, the parties hereto agree as follows:
1. Purchase and Sale of the Shares. (a) General. Subject to all of
------------------------------- -------
the terms and conditions of this Agreement, and in reliance upon the
representations and warranties contained herein, the Purchaser hereby subscribes
for and agrees to purchase, and the Company hereby agrees to sell to the
Purchaser for his own account, on the Closing Date (as defined in Section 2(a)
hereof), the Shares.
(b) Purchase Price. The purchase price per Share shall be $100.00.
--------------
(c) Consideration. At the Closing, the Purchaser shall purchase the
-------------
Shares for $50,000 (the "Consideration"). The Consideration shall be paid by the
Purchaser at the Closing in cash payable by wire transfer of immediately
available funds to an account designated by the Company or by bank check if
acceptable to the Company.
2. Closing. (a) Time and Place. The Closing of the transactions
------- --------------
contemplated by this Agreement (the "Closing") shall take place on a business
day that is no more than ten business days after the closing of the sale of
Ellis Communications, Inc., whether structured as a sale of stock, assets,
merger, spin-off or otherwise, or on such other date as the parties may agree
(the "Closing Date"), provided, however, that the Purchaser may waive the
-------- -------
condition that such sale shall have occurred and proceed with the Closing. The
Purchaser shall designate the date of Closing in accordance with the terms of
the preceding sentence by giving the Company at least five business days prior
written notice of such Closing. The Closing shall be held at 10:00 a.m. in the
offices of Minkin & Snyder, 3060
<PAGE>
Peachtree Road, Suite 1100, Atlanta, Georgia, or at such other time or place as
the parties may agree.
(b) Delivery by the Company. At the Closing, against delivery of the
-----------------------
Consideration by the Purchaser, the Company will deliver to the Purchaser a
stock certificate registered in the Purchaser's name and representing the
Shares, which certificates shall bear the legends set forth in the Stockholders
Agreement, dated as of April 30, 1996, as the same shall be amended from time to
time (the "Stockholders Agreement"), among the Company, Kelso Investment
Associates V, L.P., Kelso Equity Partners V, L.P., the Purchaser and the other
stockholders of the Company party thereto.
(c) Delivery by the Purchaser. At the Closing, the Purchaser will
-------------------------
deliver the Consideration as provided in Section 1(c).
3. Purchaser's Representations, Warranties and Covenants. (a)
-----------------------------------------------------
Investment Intention and Restrictions on Disposition. The Purchaser represents
- ----------------------------------------------------
and warrants that he is acquiring the Shares solely for his own account for
investment and not with a view to, or for sale in connection with, any
distribution thereof in any transaction or series of transactions that would be
in violation of the securities laws of the United States or any state thereof.
The Purchaser agrees that he will not, directly or indirectly, offer, transfer,
sell, pledge, hypothecate or otherwise dispose of any of the Shares (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of any of the
Shares) or any interest therein or any rights relating thereto, except in
compliance with (1) the Securities Act of 1933, as amended (the "Act"), and the
-
rules and regulations of the Securities and Exchange Commission thereunder, (2)
-
all applicable state securities or "blue sky" laws and (3) the Stockholders
-
Agreement. The Purchaser further understands, acknowledges and agrees that none
of the Shares or any interest therein or any rights relating thereto may be
transferred, sold, pledged, hypothecated or otherwise disposed of (x) unless the
-
provisions of such Stockholders Agreement shall have been complied with and (y)
-
unless such disposition is exempt from the provisions of Section 5 of the Act or
is pursuant to an effective registration statement under the Act and is exempt
from (or in compliance with) applicable state securities or "blue sky" laws. Any
attempt by the Purchaser, directly or indirectly, to offer, transfer, sell,
pledge, hypothecate or otherwise dispose of any of the Shares without complying
with the provisions of
2
<PAGE>
this Agreement and the Stockholders Agreement shall be void and of no effect.
(b) Securities Law Matters. The Purchaser acknowledges receipt of
----------------------
advice from the Company that (i) the Shares have not been registered under the
-
Act or qualified under any state securities or "blue sky" laws, (ii) it is not
--
anticipated that there will be any public market for the Shares, (iii) the
---
Shares must be held indefinitely and the Purchaser must continue to bear the
economic risk of the investment in the Shares unless the Shares are subsequently
registered under the Act and such state laws or an exemption from registration
is available, (iv) Rule 144 promulgated under the Act ("Rule 144") is not
--
presently available with respect to sales of any securities of the Company and
the Company has made no covenant to make Rule 144 available and Rule 144 is not
anticipated to be available in the foreseeable future, (v) when and if the
-
Shares may be disposed of without registration in reliance upon Rule 144, such
disposition can be made only in limited amounts and in accordance with the terms
and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not
--
available, public sale of the Shares without registration will require the
availability of an exemption under the Act and (vii) a notation shall be made in
---
the appropriate records of the Company indicating that the Shares are subject to
restrictions on transfer set forth in this Agreement and the Stockholders
Agreement and, if the Company should in the future engage the services of a
stock transfer agent, appropriate stop-transfer instructions will be issued to
such transfer agent with respect to the Shares.
(c) Ability to Bear Risk. The Purchaser represents and warrants that
--------------------
(i) his financial situation is such that he can afford to bear the economic risk
-
of holding the Shares for an indefinite period and (ii) he can afford to suffer
--
the complete loss of his investment in the Shares.
(d) Access to Information; Sophistication. The Purchaser represents
-------------------------------------
and warrants that (i) he is familiar with the business and financial condition,
-
properties, operations and prospects of the Company and that he has had, during
the course of the transactions contemplated hereby, the opportunity to ask
questions of, and receive answers from, representatives of the Company
concerning the Company and the terms and conditions of the purchase of the
Shares and to obtain any additional information that he deems necessary, (ii)
--
his knowledge and experience in financial and business matters is such that he
is capable of evaluat-
3
<PAGE>
ing the merits and risk of the investment in the Shares and (iii) he has
---
carefully reviewed the terms and provisions of the Stockholders Agreement and
has evaluated the restrictions and obligations contained therein. In furtherance
of the foregoing, the Purchaser represents and warrants that (i) no
-
representation or warranty, express or implied, whether written or oral, as to
the financial condition, results of operations, prospects, properties or
business of the Company or as to the desirability or value of an investment in
the Company has been made to him by or on behalf of the Company, except for
those representations and warranties contained in Section 4 and the Stockholders
Agreement, (ii) he has relied upon his own independent appraisal and
--
investigation, and the advice of his own counsel, tax advisors and other
advisors, regarding the risks of an investment in the Company and (iii) he will
---
continue to bear sole responsibility for making his own independent evaluation
and monitoring of the risks of his investment in the Company.
(e) Accredited Investor. The Purchaser represents and warrants that
-------------------
he is an "accredited investor" as such term is defined in Rule 501 (a)
promulgated under the Act and that:
(i) he has an individual net worth, or joint net worth with his
spouse, of at least $1,000,000; or
(ii) he has had an individual income in excess of $200,000 in each of
1994 and 1995 or joint income with his spouse in excess of $300,000 in each
of 1994 and 1995, and he has a reasonable expectation of reaching the same
income level in 1996; or
(iii) he is an executive officer of the Company.
(f) Due Execution and Delivery. The Purchaser represents and
--------------------------
warrants that (i) he has duly executed and delivered this Agreement, (ii) this
- --
Agreement constitutes the Purchaser's legal, valid and binding obligations,
enforceable against him in accordance with its terms, (iii) no consent,
---
approval, authorization, order, filing, registration or qualification of or with
any court, governmental authority or third person is required to be obtained by
him in connection with the execution and delivery of this Agreement or the
performance of his obligations hereunder and (iv) he is a resident of the state
--
set forth below his name on the signature page hereof.
4
<PAGE>
4. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to the Purchaser that (i) the Company is a corporation
-
duly organized, validly existing and in good standing under the laws of the
State of Delaware, (ii) the execution and delivery of this Agreement, the
--
performance of the Company's obligations hereunder and the consummation by it of
the transactions contemplated hereby have been duly and validly authorized by
all requisite corporate action on the part of the Company, (iii) this Agreement
---
has been duly and validly executed and delivered by the Company and constitutes
the legal, valid and binding obligations of the Company enforceable against it
in accordance with its terms, except as the same may be affected by bankruptcy,
insolvency, moratorium or similar laws, or by legal or equitable principles
relating to or limiting the rights of contracting parties generally, and (iv)
--
the Shares, when issued and delivered in accordance with the terms hereof, will
be duly authorized, validly issued, fully paid and nonassessable, and free and
clear of any liens or encumbrances other than those created pursuant to this
Agreement and the Stockholders Agreement or otherwise in connection with the
transactions contemplated hereby and thereby.
5. State Securities Laws. Notwithstanding anything in this Agreement
---------------------
to the contrary, the Company shall not have any obligation to sell any Shares to
the Purchaser who is a resident of a jurisdiction in which the sale of such
shares to the Purchaser would constitute a violation of the securities, "blue
sky" or other similar laws of such jurisdiction.
6. Stock Certificate Legends. The certificates representing the
-------------------------
Shares shall bear the following legends:
(i) "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
UNLESS SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER
OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT, SUCH LAWS AND THE STOCKHOLDERS' AGREEMENT OF
THE COMPANY, DATED AS OF APRIL 30, 1996, AS THE SAME SHALL BE AMENDED
FROM TIME TO TIME (THE "STOCKHOLDERS AGREEMENT").
5
<PAGE>
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER, A VOTING AGREEMENT AND OTHER CONDITIONS AND
RESTRICTIONS, AS SPECIFIED IN THE STOCKHOLDERS AGREEMENT, COPIES OF
WHICH ARE ON FILE AT THE OFFICE OF THE COMPANY AND WILL BE FURNISHED
WITHOUT CHARGE TO THE STOCKHOLDER OF SUCH SHARES UPON WRITTEN
REQUEST.
(iii) THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OTHER SPECIAL RIGHTS OF EACH CLASS OR SERIES
OF SHARES AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS OF SUCH PREFERENCES AND OR RIGHTS.
In addition, certificates representing Shares owned by residents of certain
states shall bear any legends required by the laws of such states.
7. Miscellaneous. (a) Termination. This Agreement may be
------------- -----------
terminated by either the Company or the Purchaser upon written notice to the
other if the Closing has not occurred by December 31, 1996.
(b) Notices. All notices and other communications required or
-------
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or by fax or sent by certified
mail, return receipt requested, postage prepaid, or by Federal Express or other
similar courier service to the parties to this Agreement at the following
addresses or to such other address as the party to this Agreement whose address
it is shall specify by notice to the other: if to the Purchaser, to the
Purchaser at the address set forth under the Purchaser's name on the signature
page of this Agreement; and if to the Company, to it at IXL Holdings, Inc., 1465
Northside Drive, Atlanta, Georgia 30318, Attention:. U. Bertram Ellis, Jr.,
with a copy to Kelso & Company, 320 Park Avenue, 24th Floor, New York, New York
10022, Attention: James J. Connors, II, Esq.
(c) Binding Effect; Benefits. This Agreement shall be binding upon
------------------------
and inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to this
Agreement and their respective successors or permitted assigns any legal or
equitable right,
6
<PAGE>
remedy or claim under or in respect of any agreement or any provision contained
herein.
(d) Waiver, Amendment. (i) Waiver. No action taken pursuant to this
----------------- ------
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by such party taking such
action of compliance by any other party with any representations, warranties,
covenants or agreements contained herein. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any preceding or succeeding breach and no failure by any party to
exercise any right or privilege hereunder shall be deemed a waiver of such
party's rights or privileges hereunder or shall be deemed a waiver of such
party's rights to exercise the same at any subsequent time or times hereunder.
(ii) Amendments. Neither this Agreement nor any term or provision
----------
hereof may be amended, modified, waived or supplemented orally, but only by a
written instrument executed by the Company and the Purchaser.
(e) Assignability. Neither this Agreement nor any right, remedy,
-------------
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company without the prior written consent of the Purchaser or
by the Purchaser without the prior written consent of the Company.
(f) Applicable Law. This Agreement shall be governed by and construed
--------------
in accordance with the law of the State of New York, regardless of the law that
might be applied under principles of conflicts of law.
(g) Section and Other Headings. The section and other headings
--------------------------
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
(h) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original and both of which together shall
be deemed to be one and the same instrument.
(i) Pronouns. Any use of masculine pronouns herein shall be deemed
--------
to include the feminine and neuter cases, as applicable.
7
<PAGE>
(j) Entire Agreement. The Stockholders Agreement and this Agreement
----------------
shall constitute the entire agreement of the parties hereto with respect to the
subject hereof and shall supersede all prior agreements, arrangements,
understandings, documents, instruments and communications, whether written or
oral, with respect to the subject matter hereof and thereof.
(k) Severability. In case any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, the validity and enforceability of
the remaining provisions shall not in any way be affected thereby.
[Rest of the page intentionally left blank.]
8
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Agreement as of the date first set forth above.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
-------------------------------
Name: James V. Sandry
Title: Executive Vice President
PURCHASER:
/s/ James S. Altenbach
----------------------------------
JAMES S. ALTENBACH
873 Countryside Court
Marietta, Georgia 30067
9
<PAGE>
EXHIBIT 10.28
================================================================================
SUBSCRIPTION AGREEMENT
IXL HOLDINGS, INC.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
DATED AS OF APRIL 4, 1997
================================================================================
<PAGE>
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT, dated as of April 4, 1997, between IXL HOLDINGS
INC., a Delaware corporation (the "Company"), and KELSO INVESTMENT ASSOCIATES V,
L.P. (the "Purchaser").
WHEREAS, the Purchaser desires to subscribe for, and the Company desires to
make available for purchase, 35,818 shares of the Company's Class A Convertible
Preferred Stock, par value $.01 per share (the "Shares"), on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth in this Agreement, the parties hereto agree as follows:
1. Purchase and Sale of the Shares.
-------------------------------
(a) General. Subject to all of the terms and conditions of this
-------
Agreement, and in reliance upon the representations and warranties contained
herein, the Purchaser hereby subscribes for and agrees to purchase, and the
Company hereby agrees to sell to the Purchaser for its own account, on the
Closing Date (as defined in Section 2(a) hereof), the Shares.
(b) Purchase Price. The purchase price per Share shall be $250.00.
--------------
(c) Consideration. At the Closing, the Purchaser shall purchase the
-------------
Shares for $8,954,500 (the "Consideration"). The Consideration shall be paid by
the Purchaser at the Closing in cash payable by wire transfer of immediately
available funds to an account designated by the Company or by bank check if
acceptable to the Company.
2. Closing.
-------
(a) Time and Place. The date of the closing of the transactions
--------------
contemplated by this Agreement (the "Closing Date") shall be held on April 4,
1997, unless the Company and the Purchaser have agreed to extend such date.
(b) Delivery by the Company. At the Closing, against delivery of the
-----------------------
Consideration by the Purchaser, the Company will deliver to the Purchaser a
stock certificate
<PAGE>
registered in the Purchaser's name and representing the Shares
purchased by the Purchaser, which certificates shall bear the legends set forth
in the First Amended and Restated Stockholders Agreement (the "Stockholders
Agreement") to be entered into on the Closing Date.
(c) Delivery by the Purchaser. At the Closing, the Purchaser will
-------------------------
deliver (i) the Consideration as provided in Section 1(c); and (ii) executed
- --
signature pages to the Stockholders' Agreement.
3. Purchaser's Representations, Warranties and Covenants.
-----------------------------------------------------
(a) Investment Intention and Restrictions on Disposition. The
----------------------------------------------------
Purchaser represents and warrants that Purchaser is acquiring the Shares solely
for the Purchaser's own account for investment and not with a view to, or for
sale in connection with, any distribution thereof in any transaction or series
of transactions that would be in violation of the securities laws of the United
States or any state thereof. The Purchaser agrees that the Purchaser will not,
directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise
dispose of any of the Shares (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of any of the Shares) or any interest therein
or any rights relating thereto, except in compliance with (i) the Securities Act
-
of 1933, as amended (the "Act"), and the rules and regulations of the Securities
and Exchange Commission thereunder, (ii) all applicable state securities or
--
"blue sky" laws and (iii) the Stockholders Agreement. The Purchaser further
---
understands, acknowledges and agrees that none of the Shares or any interest
therein or any rights relating thereto may be transferred, sold, pledged,
hypothecated or otherwise disposed of (x) unless the provisions of the
-
Stockholders Agreement shall have been complied with and (y) unless such
-
disposition is exempt from the provisions of Section 5 of the Act or is pursuant
to an effective registration statement under the Act and is exempt from (or in
compliance with) applicable state securities or "blue sky" laws. Any attempt by
the Purchaser, directly or indirectly, to offer, transfer, sell, pledge,
hypothecate or otherwise dispose of any of the Shares, or any interest therein
or any rights relating thereto, without complying with the provisions of this
Agreement and the Stockholders Agreement shall be void and of no effect.
(b) Securities Law Matters. The Purchaser acknowledges receipt of
----------------------
advice from the Company that (i) the Shares have not been registered under the
-
Act or qualified under any state securities or "blue sky" laws, (ii) it is not
--
anticipated that there will be any public market for the Shares, (iii) the
---
Shares must be held indefinitely and the Purchaser must continue to bear the
economic risk of the investment in the Shares unless the Shares are subsequently
registered under the Act and such state laws or an exemption from registration
is available, (iv) Rule 144 promulgated under the Act ("Rule 144") is not
--
presently available with respect to sales of any securities of the Company and
the Company has made no covenant to make Rule 144 available and Rule 144 is not
anticipated to be available in the foreseeable future, (v) when and if the
-
2
<PAGE>
Shares may be disposed of without registration in reliance upon Rule 144, such
disposition can be made only in limited amounts and in accordance with the terms
and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not
--
available, public sale of the Shares without registration will require the
availability of an exemption under the Act, and (vii) a notation shall be made
---
in the appropriate records of the Company indicating that the Shares are subject
to restrictions on transfer set forth in this Agreement and the Stockholders
Agreement and, if the Company should in the future engage the services of a
stock transfer agent, appropriate stop-transfer instructions will be issued to
such transfer agent with respect to the Shares.
(c) Ability to Bear Risk. The Purchaser represents and warrants that
--------------------
(i) the financial situation of the Purchaser is such that it can afford to bear
-
the economic risk of holding the Shares for an indefinite period and (ii)
--
Purchaser can afford to suffer the complete loss of its investment in the
Shares.
(d) Access to Information; Sophistication. The Purchaser represents
-------------------------------------
and warrants that (i) Purchaser is familiar with the business and financial
-
condition, properties, operations and prospects of the Company and that, it has
had, during the course of the transactions contemplated hereby, the opportunity
to ask questions of, and receive answers from, representatives of the Company
concerning the Company and the terms and conditions of the purchase of the
Shares and to obtain any additional information that Purchaser deems necessary,
(ii) Purchaser's knowledge and experience in financial and business matters is
--
such that Purchaser is capable of evaluating the merits and risk of the
investment in the Shares and (iii) Purchaser has carefully reviewed the terms
---
and provisions of the Stockholders Agreement and has evaluated the restrictions
and obligations contained therein. In furtherance of the foregoing, the
Purchaser represents and warrants that (i) no representation or warranty,
-
express or implied, whether written or oral, as to the financial condition,
results of operations, prospects, properties or business of the Company or as to
the desirability or value of an investment in the Company has been made to it by
or on behalf of the Company, except for those representations and warranties
contained in Section 4 and the Stockholders Agreement, (ii) Purchaser has relied
--
upon Purchaser's own independent appraisal and investigation, and the advice of
Purchaser's own counsel, tax advisors and other advisors, regarding the risks of
an investment in the Company and (iii) Purchaser will continue to bear sole
---
responsibility for making its own independent evaluation and monitoring of the
risks of Purchaser's investment in the Company.
(e) Accredited Investor. The Purchaser represents and warrants that
-------------------
it is an "accredited investor" as such term is defined in Rule 501(a)
promulgated under the Act.
(f) Due Execution and Delivery. The Purchaser represents and
--------------------------
warrants that (i) Purchaser has duly executed and delivered this Agreement, (ii)
- --
this Agreement constitutes and, upon execution thereof, the Stockholders
Agreement will constitute, the Purchaser's legal, valid
3
<PAGE>
and binding obligation, enforceable against it in accordance with its terms; and
(iii) no consent, approval, authorization, order, filing, registration or
---
qualification of or with any court, governmental authority or third person is
required to be obtained by Purchaser in connection with the execution and
delivery of this Agreement or the performance of Purchaser's obligations
hereunder.
4. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Purchaser that (i) the Company is a corporation duly
-
organized, validly existing and in good standing under the laws of the State of
Delaware, (ii) the execution and delivery of this Agreement, the performance of
--
the Company's obligations hereunder and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action on the part of the Company, (iii) this Agreement has
---
been duly and validly executed and delivered by the Company and constitutes the
legal, valid and binding obligations of the Company enforceable against it in
accordance with its terms, except as the same may be affected by bankruptcy,
insolvency, moratorium or similar laws, or by legal or equitable principles
relating to or limiting the rights of contracting parties generally, and (iv)
--
the Shares, when issued and delivered in accordance with the terms hereof, will
be duly authorized, validly issued, fully paid and nonassessable, and free and
clear of any liens or encumbrances other than those created pursuant to this
Agreement and the Stockholders Agreement or otherwise in connection with the
transactions contemplated hereby and thereby.
5. State Securities Laws. Notwithstanding anything in this Agreement to
---------------------
the contrary, the Company shall not have any obligation to sell any Shares to
the Purchaser, if the Purchaser is a resident of a jurisdiction in which the
sale of such Shares to the Purchaser would constitute a violation of the
securities, "blue sky" or other similar laws of such jurisdiction.
6. Stock Certificate Legends. The certificates representing the Shares
-------------------------
being purchased by the Purchaser hereunder shall bear the following legends:
(i) "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
UNLESS SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER
OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT, SUCH LAWS AND THE FIRST AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT OF THE COMPANY, DATED
4
<PAGE>
AS OF APRIL 4, 1997, AS THE SAME SHALL BE AMENDED FROM TIME TO TIME
(THE "STOCKHOLDERS AGREEMENT").
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER, A VOTING AGREEMENT AND OTHER CONDITIONS
AND RESTRICTIONS, AS SPECIFIED IN THE STOCKHOLDERS AGREEMENT, COPIES
OF WHICH ARE ON FILE AT THE OFFICE OF THE COMPANY AND WILL BE
FURNISHED WITHOUT CHARGE TO THE STOCKHOLDER OF SUCH SHARES UPON
WRITTEN REQUEST.
(iii) THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OTHER SPECIAL RIGHTS OF EACH CLASS OR SERIES
OF SHARES AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND OR RIGHTS.
In addition, certificates representing Shares owned by residents of certain
states shall bear any legends required by the laws of such states.
7. Miscellaneous.
-------------
(a) Termination. This Agreement may be terminated by either the
-----------
Company or the Purchaser upon written notice to the other if the Closing has not
occurred by April 15, 1997.
(b) Notices. All notices and other communications required or
-------
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or by fax or sent by certified
mail, return receipt requested, postage prepaid, or by Federal Express or other
similar courier service to the parties to this Agreement at the following
addresses or to such other address as the party to this Agreement whose address
it is shall specify by notice to the other: if to the Purchaser, to the
Purchaser at the address set forth under the Purchaser's name on the signature
page of this Agreement; and if to the Company, to it at IXL Holdings, Inc., Two
Park Place, 1888 Emery Street, 3rd Floor, Atlanta, Georgia, 30318, Attention:
U. Bertram Ellis, Jr., with copies to Kelso & Company, 320 Park Avenue, 24th
Floor, New York, New York 10022, Attention: James J. Connors, II, Esq. and
Minkin & Snyder, 3060 Peachtree Road, Suite 1100, Atlanta, Georgia 30305,
Attention: James S. Altenbach, Esq.
5
<PAGE>
(c) Binding Effect; Benefits. This Agreement shall be binding upon
------------------------
and inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to this
Agreement and their respective successors or permitted assigns any legal or
equitable right, remedy or claim under or in respect of any agreement or any
provision contained herein.
(d) Waiver; Amendment.
-----------------
(i) Waiver. No action taken pursuant to this Agreement,
------
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by such party taking such action of
compliance by any other party with any representations, warranties, covenants or
agreements contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach and no failure by any party to exercise any right
or privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
(ii) Amendments. Neither this Agreement nor any term or provision
----------
hereof may be amended, modified, waived or supplemented orally, but only by a
written instrument executed by the Company and the Purchaser.
(e) Assignability. Neither this Agreement nor any right, remedy,
-------------
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company without the prior written consent of the Purchaser or
by the Purchaser without the prior written consent of the Company.
(f) Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the law of the State of New York, regardless of the
law that might be applied under principles of conflicts of law.
(g) Section and Other Headings. The section and other headings
--------------------------
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
6
<PAGE>
(h) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original and both of which together shall
be deemed to be one and the same instrument.
(i) Pronouns. Any use of masculine pronouns herein shall be deemed
--------
to include the feminine and neuter cases, as applicable.
(j) Entire Agreement. The Stockholders Agreement and this Agreement
----------------
shall constitute the entire agreement of the parties hereto with respect to the
subject hereof and shall supersede all prior agreements, arrangements,
understandings, documents, instruments and communications, whether written or
oral, with respect to the subject matter hereof and thereof.
(k) Severability. In case any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, the validity and enforceability of
the remaining provisions shall not in any way be affected thereby.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
7
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Agreement as of the date first set forth above.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
-----------------------------------------------
James V. Sandry, Executive Vice President
PURCHASER:
KELSO INVESTMENT ASSOCIATES V, L.P.
By: /s/ Thomas R. Wall, IV
-----------------------------------------------
Name: Thomas R. Wall, IV
Title: General Partner
8
<PAGE>
EXHIBIT 10.29
================================================================================
SUBSCRIPTION AGREEMENT
IXL HOLDINGS, INC.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
DATED AS OF APRIL 4, 1997
================================================================================
<PAGE>
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT, dated as of April 4, 1997, between IXL HOLDINGS
INC., a Delaware corporation (the "Company"), and KELSO EQUITY PARTNERS V, L.P.
(the "Purchaser").
WHEREAS, the Purchaser desires to subscribe for, and the Company desires to
make available for purchase, 3,302 shares of the Company's Class A Convertible
Preferred Stock, par value $.01 per share (the "Shares"), on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth in this Agreement, the parties hereto agree as follows:
1. Purchase and Sale of the Shares.
-------------------------------
(a) General. Subject to all of the terms and conditions of this
-------
Agreement, and in reliance upon the representations and warranties contained
herein, the Purchaser hereby subscribes for and agrees to purchase, and the
Company hereby agrees to sell to the Purchaser for its own account, on the
Closing Date (as defined in Section 2(a) hereof), the Shares.
(b) Purchase Price. The purchase price per Share shall be $250.00.
--------------
(c) Consideration. At the Closing, the Purchaser shall purchase the
-------------
Shares for $825,500.00 (the "Consideration"). The Consideration shall be paid
by the Purchaser at the Closing in cash payable by wire transfer of immediately
available funds to an account designated by the Company or by bank check if
acceptable to the Company.
2. Closing.
-------
(a) Time and Place. The date of the closing of the transactions
--------------
contemplated by this Agreement (the "Closing Date") shall be held on April 4,
1997, unless the Company and the Purchaser have agreed to extend such date.
(b) Delivery by the Company. At the Closing, against delivery of the
-----------------------
Consideration by the Purchaser, the Company will deliver to the Purchaser a
stock certificate
1
<PAGE>
registered in the Purchaser's name and representing the Shares purchased by the
Purchaser, which certificates shall bear the legends set forth in the First
Amended and Restated Stockholders Agreement (the "Stockholders Agreement") to be
entered into on the Closing Date.
(c) Delivery by the Purchaser. At the Closing, the Purchaser will
-------------------------
deliver (i) the Consideration as provided in Section 1(c); and (ii) executed
--- ----
signature pages to the Stockholders' Agreement.
3. Purchaser's Representations, Warranties and Covenants.
-----------------------------------------------------
(a) Investment Intention and Restrictions on Disposition. The
----------------------------------------------------
Purchaser represents and warrants that Purchaser is acquiring the Shares solely
for the Purchaser's own account for investment and not with a view to, or for
sale in connection with, any distribution thereof in any transaction or series
of transactions that would be in violation of the securities laws of the United
States or any state thereof. The Purchaser agrees that the Purchaser will not,
directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise
dispose of any of the Shares (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of any of the Shares) or any interest therein
or any rights relating thereto, except in compliance with (i) the Securities Act
---
of 1933, as amended (the "Act"), and the rules and regulations of the Securities
and Exchange Commission thereunder, (ii) all applicable state securities or
----
"blue sky" laws and (iii) the Stockholders Agreement. The Purchaser further
----
understands, acknowledges and agrees that none of the Shares or any interest
therein or any rights relating thereto may be transferred, sold, pledged,
hypothecated or otherwise disposed of (x) unless the provisions of the
---
Stockholders Agreement shall have been complied with and (y) unless such
---
disposition is exempt from the provisions of Section 5 of the Act or is pursuant
to an effective registration statement under the Act and is exempt from (or in
compliance with) applicable state securities or "blue sky" laws. Any attempt by
the Purchaser, directly or indirectly, to offer, transfer, sell, pledge,
hypothecate or otherwise dispose of any of the Shares, or any interest therein
or any rights relating thereto, without complying with the provisions of this
Agreement and the Stockholders Agreement shall be void and of no effect.
(b) Securities Law Matters. The Purchaser acknowledges receipt of
----------------------
advice from the Company that (i) the Shares have not been registered under the
---
Act or qualified under any state securities or "blue sky" laws, (ii) it is not
----
anticipated that there will be any public market for the Shares, (iii) the
-----
Shares must be held indefinitely and the Purchaser must continue to bear the
economic risk of the investment in the Shares unless the Shares are subsequently
registered under the Act and such state laws or an exemption from registration
is available, (iv) Rule 144 promulgated under the Act ("Rule 144") is not
----
presently available with respect to sales of any securities of the Company and
the Company has made no covenant to make Rule 144 available and Rule 144 is not
anticipated to be available in the foreseeable future, (v) when and if the
---
2
<PAGE>
Shares may be disposed of without registration in reliance upon Rule 144, such
disposition can be made only in limited amounts and in accordance with the terms
and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not
----
available, public sale of the Shares without registration will require the
availability of an exemption under the Act, and (vii) a notation shall be made
-----
in the appropriate records of the Company indicating that the Shares are subject
to restrictions on transfer set forth in this Agreement and the Stockholders
Agreement and, if the Company should in the future engage the services of a
stock transfer agent, appropriate stop-transfer instructions will be issued to
such transfer agent with respect to the Shares.
(c) Ability to Bear Risk. The Purchaser represents and warrants that
--------------------
(i) the financial situation of the Purchaser is such that it can afford to bear
- ---
the economic risk of holding the Shares for an indefinite period and (ii)
----
Purchaser can afford to suffer the complete loss of its investment in the
Shares.
(d) Access to Information; Sophistication. The Purchaser represents
-------------------------------------
and warrants that (i) Purchaser is familiar with the business and financial
---
condition, properties, operations and prospects of the Company and that, it has
had, during the course of the transactions contemplated hereby, the opportunity
to ask questions of, and receive answers from, representatives of the Company
concerning the Company and the terms and conditions of the purchase of the
Shares and to obtain any additional information that Purchaser deems necessary,
(ii) Purchaser's knowledge and experience in financial and business matters is
- ----
such that Purchaser is capable of evaluating the merits and risk of the
investment in the Shares and (iii) Purchaser has carefully reviewed the terms
-----
and provisions of the Stockholders Agreement and has evaluated the restrictions
and obligations contained therein. In furtherance of the foregoing, the
Purchaser represents and warrants that (i) no representation or warranty,
---
express or implied, whether written or oral, as to the financial condition,
results of operations, prospects, properties or business of the Company or as to
the desirability or value of an investment in the Company has been made to it by
or on behalf of the Company, except for those representations and warranties
contained in Section 4 and the Stockholders Agreement, (ii) Purchaser has relied
----
upon Purchaser's own independent appraisal and investigation, and the advice of
Purchaser's own counsel, tax advisors and other advisors, regarding the risks of
an investment in the Company and (iii) Purchaser will continue to bear sole
-----
responsibility for making its own independent evaluation and monitoring of the
risks of Purchaser's investment in the Company.
(e) Accredited Investor. The Purchaser represents and warrants that
-------------------
it is an "accredited investor" as such term is defined in Rule 501(a)
promulgated under the Act.
(f) Due Execution and Delivery. The Purchaser represents and
--------------------------
warrants that (i) Purchaser has duly executed and delivered this Agreement, (ii)
--- ----
this Agreement constitutes and, upon execution thereof, the Stockholders
Agreement will constitute, the Purchaser's legal, valid
3
<PAGE>
and binding obligation, enforceable against it in accordance with its terms; and
(iii) no consent, approval, authorization, order, filing, registration or
- -----
qualification of or with any court, governmental authority or third person is
required to be obtained by Purchaser in connection with the execution and
delivery of this Agreement or the performance of Purchaser's obligations
hereunder.
4. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Purchaser that (i) the Company is a corporation duly
---
organized, validly existing and in good standing under the laws of the State of
Delaware, (ii) the execution and delivery of this Agreement, the performance of
----
the Company's obligations hereunder and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action on the part of the Company, (iii) this Agreement has
-----
been duly and validly executed and delivered by the Company and constitutes the
legal, valid and binding obligations of the Company enforceable against it in
accordance with its terms, except as the same may be affected by bankruptcy,
insolvency, moratorium or similar laws, or by legal or equitable principles
relating to or limiting the rights of contracting parties generally, and (iv)
----
the Shares, when issued and delivered in accordance with the terms hereof, will
be duly authorized, validly issued, fully paid and nonassessable, and free and
clear of any liens or encumbrances other than those created pursuant to this
Agreement and the Stockholders Agreement or otherwise in connection with the
transactions contemplated hereby and thereby.
5. State Securities Laws. Notwithstanding anything in this Agreement to
---------------------
the contrary, the Company shall not have any obligation to sell any Shares to
the Purchaser, if the Purchaser is a resident of a jurisdiction in which the
sale of such Shares to the Purchaser would constitute a violation of the
securities, "blue sky" or other similar laws of such jurisdiction.
6. Stock Certificate Legends. The certificates representing the Shares
-------------------------
being purchased by the Purchaser hereunder shall bear the following legends:
(i) "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
UNLESS SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER
OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT, SUCH LAWS AND THE FIRST AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT OF THE COMPANY, DATED
4
<PAGE>
AS OF APRIL 4, 1997, AS THE SAME SHALL BE AMENDED FROM TIME TO TIME
(THE "STOCKHOLDERS AGREEMENT").
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER, A VOTING AGREEMENT AND OTHER CONDITIONS
AND RESTRICTIONS, AS SPECIFIED IN THE STOCKHOLDERS AGREEMENT, COPIES
OF WHICH ARE ON FILE AT THE OFFICE OF THE COMPANY AND WILL BE
FURNISHED WITHOUT CHARGE TO THE STOCKHOLDER OF SUCH SHARES UPON
WRITTEN REQUEST.
(iii) THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OTHER SPECIAL RIGHTS OF EACH CLASS OR SERIES
OF SHARES AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND OR RIGHTS.
In addition, certificates representing Shares owned by residents of certain
states shall bear any legends required by the laws of such states.
7. Miscellaneous.
-------------
(a) Termination. This Agreement may be terminated by either the
-----------
Company or the Purchaser upon written notice to the other if the Closing has not
occurred by April 15, 1997.
(b) Notices. All notices and other communications required or
-------
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or by fax or sent by certified
mail, return receipt requested, postage prepaid, or by Federal Express or other
similar courier service to the parties to this Agreement at the following
addresses or to such other address as the party to this Agreement whose address
it is shall specify by notice to the other: if to the Purchaser, to the
Purchaser at the address set forth under the Purchaser's name on the signature
page of this Agreement; and if to the Company, to it at IXL Holdings, Inc., Two
Park Place, 1888 Emery Street, 3rd Floor, Atlanta, Georgia, 30318, Attention:
U. Bertram Ellis, Jr., with copies to Kelso & Company, 320 Park Avenue, 24th
Floor, New York, New York 10022, Attention: James J. Connors, II, Esq. and
Minkin & Snyder, 3060 Peachtree Road, Suite 1100, Atlanta, Georgia 30305,
Attention: James S. Altenbach, Esq.
5
<PAGE>
(c) Binding Effect; Benefits. This Agreement shall be binding upon
------------------------
and inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to this
Agreement and their respective successors or permitted assigns any legal or
equitable right, remedy or claim under or in respect of any agreement or any
provision contained herein.
(d) Waiver; Amendment.
-----------------
(i) Waiver. No action taken pursuant to this Agreement,
------
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by such party taking such action of
compliance by any other party with any representations, warranties, covenants or
agreements contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach and no failure by any party to exercise any right
or privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
(ii) Amendments. Neither this Agreement nor any term or provision
----------
hereof may be amended, modified, waived or supplemented orally, but only by a
written instrument executed by the Company and the Purchaser.
(e) Assignability. Neither this Agreement nor any right, remedy,
-------------
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company without the prior written consent of the Purchaser or
by the Purchaser without the prior written consent of the Company.
(f) Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the law of the State of New York, regardless of the
law that might be applied under principles of conflicts of law.
(g) Section and Other Headings. The section and other headings
--------------------------
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
6
<PAGE>
(h) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original and both of which together shall
be deemed to be one and the same instrument.
(i) Pronouns. Any use of masculine pronouns herein shall be deemed
--------
to include the feminine and neuter cases, as applicable.
(j) Entire Agreement. The Stockholders Agreement and this Agreement
----------------
shall constitute the entire agreement of the parties hereto with respect to the
subject hereof and shall supersede all prior agreements, arrangements,
understandings, documents, instruments and communications, whether written or
oral, with respect to the subject matter hereof and thereof.
(k) Severability. In case any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, the validity and enforceability of
the remaining provisions shall not in any way be affected thereby.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
7
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Agreement as of the date first set forth above.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
----------------------------------------------
James V. Sandry, Executive Vice President
PURCHASER:
KELSO EQUITY PARTNERS V, L.P.
By: /s/ Thomas R. Wall, IV
----------------------------------------------
Name: Thomas R. Wall, IV
Title: General Partner
8
<PAGE>
EXHIBIT 10.30
================================================================================
SUBSCRIPTION AGREEMENT
IXL HOLDINGS, INC.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
DATED AS OF APRIL 4, 1997
================================================================================
<PAGE>
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT, dated as of April 4, 1997, between IXL HOLDINGS
INC., a Delaware corporation (the "Company"), and U. BERTRAM ELLIS, JR. (the
"Purchaser").
WHEREAS, the Purchaser desires to subscribe for, and the Company desires to
make available for purchase, 4,000 shares of the Company's Class A Convertible
Preferred Stock, par value $.01 per share (the "Shares"), on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth in this Agreement, the parties hereto agree as follows:
1. Purchase and Sale of the Shares.
-------------------------------
(a) General. Subject to all of the terms and conditions of this
-------
Agreement, and in reliance upon the representations and warranties contained
herein, the Purchaser hereby subscribes for and agrees to purchase, and the
Company hereby agrees to sell to the Purchaser for his own account, on the
Closing Date (as defined in Section 2(a) hereof), the Shares.
(b) Purchase Price. The purchase price per Share shall be $250.00.
--------------
(c) Consideration. At the Closing, the Purchaser shall purchase the
-------------
Shares in exchange for the cancellation of that certain Demand Promissory Note
(the "Note") in the aggregate principal amount of $1,200,000.00 in favor of U.
Bertram Ellis, Jr. (the "Consideration"). In addition to the foregoing, as
additional consideration for cancellation of the Note, Purchaser shall receive
from the Company the sum of Two Hundred Thousand Dollars ($200,000) in cash,
together with interest computed at the rate of Twelve Percent (12%) per annum
(the "Repayment Amount").
2. Closing.
-------
(a) Time and Place. The date of the closing of the transactions
--------------
contemplated by this Agreement (the "Closing Date") shall be held on April 4,
1997, unless the Company and the Purchaser have agreed to extend such date.
1
<PAGE>
(b) Delivery by the Company. At the Closing, against delivery of the
-----------------------
Consideration by the Purchaser, the Company will deliver to the Purchaser (i) a
---
stock certificate registered in the Purchaser's name and representing the Shares
purchased by the Purchaser, which certificates shall bear the legends set forth
in the First Amended and Restated Stockholders Agreement, dated of even date
herewith, as the same shall be amended from time to time (the "Stockholders
Agreement), among the Company, Kelso Investment Associates V, L.P., Kelso Equity
Partners V, L.P., the Purchaser and the other stockholders of the Company party
thereto; and (ii) the Repayment Amount, in cash, payable by wire transfer of
----
immediately available funds to an account designated by the Purchaser or by bank
check if acceptable to the Purchaser.
(c) Delivery by the Purchaser. At the Closing, the Purchaser will
-------------------------
deliver (i) the cancelled Note; and (ii) executed signature pages to the
--- ----
Stockholders Agreement.
3. Purchaser's Representations, Warranties and Covenants.
-----------------------------------------------------
(a) Investment Intention and Restrictions on Disposition. The
----------------------------------------------------
Purchaser represents and warrants that he is acquiring the Shares solely for his
own account for investment and not with a view to, or for sale in connection
with, any distribution thereof in any transaction or series of transactions that
would be in violation of the securities laws of the United States or any state
thereof. The Purchaser agrees that he will not, directly or indirectly, offer,
transfer, sell, pledge, hypothecate or otherwise dispose of any of the Shares
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge of
any of the Shares) or any interest therein or any rights relating thereto,
except in compliance with (i) the Securities Act of 1933, as amended (the
---
"Act"), and the rules and regulations of the Securities and Exchange Commission
thereunder, (ii) all applicable state securities or "blue sky" laws and (iii)
---- ----
the Stockholders Agreement. The Purchaser further understands, acknowledges and
agrees that none of the Shares or any interest therein or any rights relating
thereto may be transferred, sold, pledged, hypothecated or otherwise disposed of
(x) unless the provisions of the Stockholders Agreement shall have been complied
- ---
with and (y) unless such disposition is exempt from the provisions of Section 5
---
of the Act or is pursuant to an effective registration statement under the Act
and is exempt from (or in compliance with) applicable state securities or "blue
sky" laws. Any attempt by the Purchaser, directly or indirectly, to offer,
transfer, sell, pledge, hypothecate or otherwise dispose of any of the Shares,
or any interest therein or any rights relating thereto, without complying with
the provisions of this Agreement and the Stockholders Agreement shall be void
and of no effect.
(b) Securities Law Matters. The Purchaser acknowledges receipt of
----------------------
advice from the Company that (i) the Shares have not been registered under the
---
Act or qualified under any state securities or "blue sky" laws, (ii) it is not
----
anticipated that there will be any public market for the Shares, (iii) the
-----
Shares must be held indefinitely and the Purchaser must continue to bear the
economic risk of the investment in the Shares unless the Shares are subsequently
registered under
2
<PAGE>
the Act and such state laws or an exemption from registration is available, (iv)
---
Rule 144 promulgated under the Act ("Rule 144") is not presently available with
respect to sales of any securities of the Company and the Company has made no
covenant to make Rule 144 available and Rule 144 is not anticipated to be
available in the foreseeable future, (v) when and if the Shares may be
-
disposed of without registration in reliance upon Rule 144, such disposition can
be made only in limited amounts and in accordance with the terms and conditions
of such Rule, (vi) if the exemption afforded by Rule 144 is not available,
--
public sale of the Shares without registration will require the availability
of an exemption under the Act and (vii) a notation shall be made in the
-----
appropriate records of the Company indicating that the Shares are subject to
restrictions on transfer set forth in this Agreement and the Stockholders
Agreement and, if the Company should in the future engage the services of a
stock transfer agent, appropriate stop-transfer instructions will be issued to
such transfer agent with respect to the Shares.
(c) Ability to Bear Risk. The Purchaser represents and warrants that
--------------------
(i) his financial situation is such that he can afford to bear the economic
- ---
risk of holding the Shares for an indefinite period and (ii) he can afford to
----
suffer the complete loss of his investment in the Shares.
(d) Access to Information; Sophistication. The Purchaser represents
-------------------------------------
and warrants that (i) he is familiar with the business and financial condition,
---
properties, operations and prospects of the Company and that he has had, during
the course of the transactions contemplated hereby, the opportunity to ask
questions of, and receive answers from, representatives of the Company
concerning the Company and the terms and conditions of the purchase of the
Shares and to obtain any additional information that he deems necessary, (ii)
----
his knowledge and experience in financial and business matters is such that he
is capable of evaluating the merits and risk of the investment in the Shares and
(iii) he has carefully reviewed the terms and provisions of the Stockholders
- -----
Agreement and has evaluated the restrictions and obligations contained therein.
In furtherance of the foregoing, the Purchaser represents and warrants that (i)
---
no representation or warranty, express or implied, whether written or oral, as
to the financial condition, results of operations, prospects, properties or
business of the Company or as to the desirability or value of an investment in
the Company has been made to him by or on behalf of the Company, except for
those representations and warranties contained in Section 4 and the Stockholders
Agreement, (ii) he has relied upon his own independent appraisal and
----
investigation, and the advice of his own counsel, tax advisors and other
advisors, regarding the risks of an investment in the Company and (iii) he will
-----
continue to bear sole responsibility for making his own independent evaluation
and monitoring of the risks of his investment in the Company.
(e) Accredited Investor. The Purchaser represents and warrants that
-------------------
he is an "accredited investor" as such term is defined in Rule 501(a)
promulgated under the Act and that:
(i) he has an individual net worth, or joint net worth with his
spouse, of at least $1,000,000; or
3
<PAGE>
(ii) he has had an individual income in excess of $200,000 in
each of 1995 and 1996 or joint income with his spouse in excess of
$300,000 in each of 1995 and 1996, and he has a reasonable expectation
of reaching the same income level in 1997; or
(iii) he is an officer of the Company.
(f) Due Execution and Delivery. The Purchaser represents and
--------------------------
warrants that (i) he has duly executed and delivered this Agreement, (ii) this
--- ----
Agreement constitutes and, upon execution thereof, the Stockholders Agreement
will constitute, the Purchaser's legal, valid and binding obligation,
enforceable against him in accordance with its terms, (iii) no consent,
-----
approval, authorization, order, filing, registration or qualification of or with
any court, governmental authority or third person is required to be obtained by
him in connection with the execution and delivery of this Agreement or the
performance of his obligations hereunder and (iv) he is a resident of the state
----
set forth below his name on the signature page hereof.
4. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Purchaser that (i) the Company is a corporation duly
---
organized, validly existing and in good standing under the laws of the State of
Delaware, (ii) the execution and delivery of this Agreement, the performance of
----
the Company's obligations hereunder and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action on the part of the Company, (iii) this Agreement has
-----
been duly and validly executed and delivered by the Company and constitutes the
legal, valid and binding obligations of the Company enforceable against it in
accordance with its terms, except as the same may be affected by bankruptcy,
insolvency, moratorium or similar laws, or by legal or equitable principles
relating to or limiting the rights of contracting parties generally, and (iv)
----
the Shares, when issued and delivered in accordance with the terms hereof, will
be duly authorized, validly issued, fully paid and nonassessable, and free and
clear of any liens or encumbrances other than those created pursuant to this
Agreement and the Stockholders Agreement or otherwise in connection with the
transactions contemplated hereby and thereby.
5. State Securities Laws. Notwithstanding anything in this Agreement to
---------------------
the contrary, the Company shall not have any obligation to sell any Shares to
the Purchaser, if the Purchaser is a resident of a jurisdiction in which the
sale of such Shares to the Purchaser would constitute a violation of the
securities, "blue sky" or other similar laws of such jurisdiction.
6. Stock Certificate Legends. The certificates representing the Shares
-------------------------
being purchased by the Purchaser hereunder shall bear the following legends:
4
<PAGE>
(i) "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
UNLESS SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, TRANSFER
OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
COMPLIANCE WITH THE ACT, SUCH LAWS AND THE FIRST AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT OF THE COMPANY, DATED AS OF APRIL 4, 1997 AS
THE SAME SHALL BE AMENDED FROM TIME TO TIME (THE "STOCKHOLDERS
AGREEMENT").
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER, A VOTING AGREEMENT AND OTHER CONDITIONS AND
RESTRICTIONS, AS SPECIFIED IN THE STOCKHOLDERS AGREEMENT, COPIES OF
WHICH ARE ON FILE AT THE OFFICE OF THE COMPANY AND WILL BE FURNISHED
WITHOUT CHARGE TO THE STOCKHOLDER OF SUCH SHARES UPON WRITTEN
REQUEST.
(iii) THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OTHER SPECIAL RIGHTS OF EACH CLASS OR SERIES
OF SHARES AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS OF SUCH PREFERENCES AND OR RIGHTS.
In addition, certificates representing Shares owned by residents of certain
states shall bear any legends required by the laws of such states.
7. Miscellaneous.
-------------
(a) Termination. This Agreement may be terminated by either the
-----------
Company or the Purchaser upon written notice to the other if the Closing has not
occurred by April 15, 1997.
5
<PAGE>
(b) Notices. All notices and other communications required or
-------
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or by fax or sent by certified
mail, return receipt requested, postage prepaid, or by Federal Express or other
similar courier service to the parties to this Agreement at the following
addresses or to such other address as the party to this Agreement whose address
it is shall specify by notice to the other: if to the Purchaser, to the
Purchaser at the address set forth under the Purchaser's name on the signature
page of this Agreement; and if to the Company, to it at IXL Holdings, Inc., Two
Park Place, 1888 Emery Street, 3rd Floor, Atlanta, Georgia, 30318, Attention:
U. Bertram Ellis, Jr., with copies to Kelso & Company, 320 Park Avenue, 24th
Floor, New York, New York 10022, Attention: James J. Connors, II, Esq. and
Minkin & Snyder, 3060 Peachtree Road, Suite 1100, Atlanta, Georgia 30305,
Attention: James S. Altenbach, Esq.
(c) Binding Effect; Benefits. This Agreement shall be binding upon
------------------------
and inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to this
Agreement and their respective successors or permitted assigns any legal or
equitable right, remedy or claim under or in respect of any agreement or any
provision contained herein.
(d) Waiver; Amendment.
-----------------
(i) Waiver. No action taken pursuant to this Agreement,
------
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by such party taking such action of
compliance by any other party with any representations, warranties, covenants or
agreements contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach and no failure by any party to exercise any right
or privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
(ii) Amendments. Neither this Agreement nor any term or
----------
provision hereof may be amended, modified, waived or supplemented orally, but
only by a written instrument executed by the Company and the Purchaser.
(e) Assignability. Neither this Agreement nor any right, remedy,
-------------
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company without the prior written consent of the Purchaser or
by the Purchaser without the prior written consent of the
6
<PAGE>
Company.
(f) Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the law of the State of New York, regardless of the
law that might be applied under principles of conflicts of law.
(g) Section and Other Headings. The section and other headings
--------------------------
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
(h) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original and both of which together shall
be deemed to be one and the same instrument.
(i) Pronouns. Any use of masculine pronouns herein shall be deemed
--------
to include the feminine and neuter cases, as applicable.
(j) Entire Agreement. The Stockholders Agreement and this Agreement
----------------
shall constitute the entire agreement of the parties hereto with respect to the
subject hereof and shall supersede all prior agreements, arrangements,
understandings, documents, instruments and communications, whether written or
oral, with respect to the subject matter hereof and thereof.
(k) Severability. In case any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, the validity and enforceability of
the remaining provisions shall not in any way be affected thereby.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
7
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have executed this Agreement
as of the date first set forth above.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
----------------------------------------------
James V. Sandry, Executive Vice President
PURCHASER:
/s/ U. Bertram Ellis, Jr.
-------------------------------------------------
U. Bertram Ellis, Jr.
1180 Northmoor Court
Atlanta, Georgia 30327
8
<PAGE>
EXHIBIT 10.31
================================================================================
SUBSCRIPTION AGREEMENT
IXL HOLDINGS, INC.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
DATED AS OF APRIL 4, 1997
================================================================================
<PAGE>
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT, dated as of April 4, 1997, between IXL HOLDINGS
INC., a Delaware corporation (the "Company"), and JAMES S. ALTENBACH (the
"Purchaser").
WHEREAS, the Purchaser desires to subscribe for, and the Company desires to
make available for purchase, 250 shares of the Company's Class A Convertible
Preferred Stock, par value $.01 per share (the "Shares"), on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth in this Agreement, the parties hereto agree as follows:
1. Purchase and Sale of the Shares.
-------------------------------
(a) General. Subject to all of the terms and conditions of this
-------
Agreement, and in reliance upon the representations and warranties contained
herein, the Purchaser hereby subscribes for and agrees to purchase, and the
Company hereby agrees to sell to the Purchaser for his own account, on the
Closing Date (as defined in Section 2(a) hereof), the Shares.
(b) Purchase Price. The purchase price per Share shall be $250.00.
--------------
(c) Consideration. At the Closing, the Purchaser shall purchase the
-------------
Shares for $62,500 (the "Consideration"). The Consideration shall be paid by
the Purchaser at the Closing in cash payable by wire transfer of immediately
available funds to an account designated by the Company or by bank check if
acceptable to the Company.
2. Closing.
-------
(a) Time and Place. The date of the closing of the transactions
--------------
contemplated by this Agreement (the "Closing Date") shall be held on April 4,
1997, unless the Company and the Purchaser have agreed to extend such date.
(b) Delivery by the Company. At the Closing, against delivery of the
-----------------------
Consideration by the Purchaser, the Company will deliver to the Purchaser a
stock certificate registered in the Purchaser's name and representing the Shares
purchased by the Purchaser, which
<PAGE>
certificates shall bear the legends set forth in the First Amended and Restated
Stockholders Agreement, dated of even date herewith, as the same shall be
amended from time to time (the "Stockholders Agreement), among the Company,
Kelso Investment Associates V, L.P., Kelso Equity Partners V, L.P., the
Purchaser and the other stockholders of the Company party thereto.
(c) Delivery by the Purchaser. At the Closing, the Purchaser will
-------------------------
deliver (i) the Consideration as provided in Section 1(c); and (ii) executed
--- ----
signature pages to the Stockholders Agreement.
3. Purchaser's Representations, Warranties and Covenants.
-----------------------------------------------------
(a) Investment Intention and Restrictions on Disposition. The
----------------------------------------------------
Purchaser represents and warrants that he is acquiring the Shares solely for his
own account for investment and not with a view to, or for sale in connection
with, any distribution thereof in any transaction or series of transactions that
would be in violation of the securities laws of the United States or any state
thereof. The Purchaser agrees that he will not, directly or indirectly, offer,
transfer, sell, pledge, hypothecate or otherwise dispose of any of the Shares
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge of
any of the Shares) or any interest therein or any rights relating thereto,
except in compliance with (i) the Securities Act of 1933, as amended (the
---
"Act"), and the rules and regulations of the Securities and Exchange Commission
thereunder, (ii) all applicable state securities or "blue sky" laws and (iii)
---- ----
the Stockholders Agreement. The Purchaser further understands, acknowledges and
agrees that none of the Shares or any interest therein or any rights relating
thereto may be transferred, sold, pledged, hypothecated or otherwise disposed of
(x) unless the provisions of the Stockholders Agreement shall have been complied
- ---
with and (y) unless such disposition is exempt from the provisions of Section 5
---
of the Act or is pursuant to an effective registration statement under the Act
and is exempt from (or in compliance with) applicable state securities or "blue
sky" laws. Any attempt by the Purchaser, directly or indirectly, to offer,
transfer, sell, pledge, hypothecate or otherwise dispose of any of the Shares,
or any interest therein or any rights relating thereto, without complying with
the provisions of this Agreement and the Stockholders Agreement shall be void
and of no effect.
(b) Securities Law Matters. The Purchaser acknowledges receipt of
----------------------
advice from the Company that (i) the Shares have not been registered under the
---
Act or qualified under any state securities or "blue sky" laws, (ii) it is not
----
anticipated that there will be any public market for the Shares, (iii) the
-----
Shares must be held indefinitely and the Purchaser must continue to bear the
economic risk of the investment in the Shares unless the Shares are subsequently
registered under the Act and such state laws or an exemption from registration
is available, (iv) Rule 144 promulgated under the Act ("Rule 144") is not
----
presently available with respect to sales of any securities of the Company and
the Company has made no covenant to make Rule 144 available and Rule 144 is not
anticipated to be available in the foreseeable future, (v) when and if the
---
2
<PAGE>
Shares may be disposed of without registration in reliance upon Rule 144, such
disposition can be made only in limited amounts and in accordance with the terms
and conditions of such Rule, (vi) if the exemption afforded by Rule 144 is not
----
available, public sale of the Shares without registration will require the
availability of an exemption under the Act and (vii) a notation shall be made in
-----
the appropriate records of the Company indicating that the Shares are subject to
restrictions on transfer set forth in this Agreement and the Stockholders
Agreement and, if the Company should in the future engage the services of a
stock transfer agent, appropriate stop-transfer instructions will be issued to
such transfer agent with respect to the Shares.
(c) Ability to Bear Risk. The Purchaser represents and warrants that
--------------------
(i) his financial situation is such that he can afford to bear the economic
- ---
risk of holding the Shares for an indefinite period and (ii) he can afford to
----
suffer the complete loss of his investment in the Shares.
(d) Access to Information; Sophistication. The Purchaser represents
-------------------------------------
and warrants that (i) he is familiar with the business and financial condition,
---
properties, operations and prospects of the Company and that he has had, during
the course of the transactions contemplated hereby, the opportunity to ask
questions of, and receive answers from, representatives of the Company
concerning the Company and the terms and conditions of the purchase of the
Shares and to obtain any additional information that he deems necessary, (ii)
----
his knowledge and experience in financial and business matters is such that he
is capable of evaluating the merits and risk of the investment in the Shares and
(iii) he has carefully reviewed the terms and provisions of the Stockholders
- -----
Agreement and has evaluated the restrictions and obligations contained therein.
In furtherance of the foregoing, the Purchaser represents and warrants that (i)
---
no representation or warranty, express or implied, whether written or oral, as
to the financial condition, results of operations, prospects, properties or
business of the Company or as to the desirability or value of an investment in
the Company has been made to him by or on behalf of the Company, except for
those representations and warranties contained in Section 4 and the Stockholders
Agreement, (ii) he has relied upon his own independent appraisal and
----
investigation, and the advice of his own counsel, tax advisors and other
advisors, regarding the risks of an investment in the Company and (iii) he will
-----
continue to bear sole responsibility for making his own independent evaluation
and monitoring of the risks of his investment in the Company.
(e) Accredited Investor. The Purchaser represents and warrants that
-------------------
he is an "accredited investor" as such term is defined in Rule 501(a)
promulgated under the Act and that:
(i) he has an individual net worth, or joint net worth with his
spouse, of at least $1,000,000; or
(ii) he has had an individual income in excess of $200,000 in
each of 1995 and 1996 or joint income with his spouse in excess of
$300,000 in each of
3
<PAGE>
1995 and 1996, and he has a reasonable expectation
of reaching the same income level in 1997; or
(iii) he is an officer of the Company.
(f) Due Execution and Delivery. The Purchaser represents and
--------------------------
warrants that (i) he has duly executed and delivered this Agreement, (ii) this
--- ----
Agreement constitutes and, upon execution thereof, the Stockholders Agreement
will constitute, the Purchaser's legal, valid and binding obligation,
enforceable against him in accordance with its terms, (iii) no consent,
-----
approval, authorization, order, filing, registration or qualification of or with
any court, governmental authority or third person is required to be obtained by
him in connection with the execution and delivery of this Agreement or the
performance of his obligations hereunder and (iv) he is a resident of the state
----
set forth below his name on the signature page hereof.
4. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to the Purchaser that (i) the Company is a corporation duly
---
organized, validly existing and in good standing under the laws of the State of
Delaware, (ii) the execution and delivery of this Agreement, the performance of
----
the Company's obligations hereunder and the consummation by it of the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action on the part of the Company, (iii) this Agreement has
-----
been duly and validly executed and delivered by the Company and constitutes the
legal, valid and binding obligations of the Company enforceable against it in
accordance with its terms, except as the same may be affected by bankruptcy,
insolvency, moratorium or similar laws, or by legal or equitable principles
relating to or limiting the rights of contracting parties generally, and (iv)
----
the Shares, when issued and delivered in accordance with the terms hereof, will
be duly authorized, validly issued, fully paid and nonassessable, and free and
clear of any liens or encumbrances other than those created pursuant to this
Agreement and the Stockholders Agreement or otherwise in connection with the
transactions contemplated hereby and thereby.
5. State Securities Laws. Notwithstanding anything in this Agreement to
---------------------
the contrary, the Company shall not have any obligation to sell any Shares to
the Purchaser, if the Purchaser is a resident of a jurisdiction in which the
sale of such Shares to the Purchaser would constitute a violation of the
securities, "blue sky" or other similar laws of such jurisdiction.
6. Stock Certificate Legends. The certificates representing the Shares
-------------------------
being purchased by the Purchaser hereunder shall bear the following legends:
(i) "THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE BEEN
4
<PAGE>
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF UNLESS AND UNTIL REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR UNLESS SUCH OFFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM
REGISTRATION OR IS OTHERWISE IN COMPLIANCE WITH THE ACT, SUCH LAWS AND
THE FIRST AMENDED AND RESTATED STOCKHOLDERS AGREEMENT OF THE COMPANY,
DATED AS OF APRIL 4, 1997 AS THE SAME SHALL BE AMENDED FROM TIME TO
TIME (THE "STOCKHOLDERS AGREEMENT").
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON TRANSFER, A VOTING AGREEMENT AND OTHER CONDITIONS AND RESTRICTIONS,
AS SPECIFIED IN THE STOCKHOLDERS AGREEMENT, COPIES OF WHICH ARE ON
FILE AT THE OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE
TO THE STOCKHOLDER OF SUCH SHARES UPON WRITTEN REQUEST.
(iii) THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OTHER SPECIAL RIGHTS OF EACH CLASS OR SERIES
OF SHARES AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS OF SUCH PREFERENCES AND OR RIGHTS.
In addition, certificates representing Shares owned by residents of certain
states shall bear any legends required by the laws of such states.
7. Miscellaneous.
-------------
(a) Termination. This Agreement may be terminated by either the
-----------
Company or the Purchaser upon written notice to the other if the Closing has not
occurred by April 4, 1997.
(b) Notices. All notices and other communications required or
-------
permitted to be
5
<PAGE>
given under this Agreement shall be in writing and shall be deemed to have been
given if delivered personally or by fax or sent by certified mail, return
receipt requested, postage prepaid, or by Federal Express or other similar
courier service to the parties to this Agreement at the following addresses or
to such other address as the party to this Agreement whose address it is shall
specify by notice to the other: if to the Purchaser, to the Purchaser at the
address set forth under the Purchaser's name on the signature page of this
Agreement; and if to the Company, to it at IXL Holdings, Inc., Two Park Place,
1888 Emery Street, 3rd Floor, Atlanta, Georgia, 30318, Attention: U. Bertram
Ellis, Jr., with copies to Kelso & Company, 320 Park Avenue, 24th Floor, New
York, New York 10022, Attention: James J. Connors, II, Esq. and Minkin & Snyder,
3060 Peachtree Road, Suite 1100, Atlanta, Georgia 30305, Attention: James S.
Altenbach, Esq.
(c) Binding Effect; Benefits. This Agreement shall be binding upon
------------------------
and inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to this
Agreement and their respective successors or permitted assigns any legal or
equitable right, remedy or claim under or in respect of any agreement or any
provision contained herein.
(d) Waiver; Amendment.
-----------------
(i) Waiver. No action taken pursuant to this Agreement, including,
------
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by such party taking such action of compliance by
any other party with any representations, warranties, covenants or agreements
contained herein. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any preceding
or succeeding breach and no failure by any party to exercise any right or
privilege hereunder shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
(ii) Amendments. Neither this Agreement nor any term or provision
----------
hereof may be amended, modified, waived or supplemented orally, but only by a
written instrument executed by the Company and the Purchaser.
(e) Assignability. Neither this Agreement nor any right, remedy,
-------------
obligation or liability arising hereunder or by reason hereof shall be
assignable by the Company without the prior written consent of the Purchaser or
by the Purchaser without the prior written consent of the Company.
6
<PAGE>
(f) Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the law of the State of New York, regardless of the
law that might be applied under principles of conflicts of law.
(g) Section and Other Headings. The section and other headings
--------------------------
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
(h) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed to be an original and both of which together shall
be deemed to be one and the same instrument.
(i) Pronouns. Any use of masculine pronouns herein shall be deemed
--------
to include the feminine and neuter cases, as applicable.
(j) Entire Agreement. The Stockholders Agreement and this Agreement
----------------
shall constitute the entire agreement of the parties hereto with respect to the
subject hereof and shall supersede all prior agreements, arrangements,
understandings, documents, instruments and communications, whether written or
oral, with respect to the subject matter hereof and thereof.
(k) Severability. In case any provision of this Agreement shall be
------------
invalid or unenforceable in any jurisdiction, the validity and enforceability of
the remaining provisions shall not in any way be affected thereby.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
7
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Agreement as of the date first set forth above.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
-----------------------------------------------
James V. Sandry, Executive Vice President
PURCHASER:
/s/ James S. Altenbach
--------------------------------------------------
James S. Altenbach
512 Reston Mill Lane
Marietta, Georgia 30067
8
<PAGE>
EXHIBIT 10.33
IXL HOLDINGS, INC.
CLASS A CONVERTIBLE PREFERRED STOCK
SUBSCRIPTION AGREEMENT
THE INVESTOR IS REQUIRED TO MARK BOXES TO INDICATE WHICH
REPRESENTATIONS AND WARRANTIES IT IS MAKING UNDER PART I HEREOF.
IXL Holdings, Inc.
Two Park Place
1888 Emery Street
Atlanta, Georgia 30318
Gentlemen:
By executing this Subscription Agreement, William C. Nussey (the
"Investor") hereby irrevocably subscribes for 100 shares (the "Securities") of
Class A Convertible Preferred Stock, $.01 par value ("Class A Preferred Stock"),
of IXL Holdings, Inc. (the "Company"), for a total purchase price of $100,000.00
(the "Total Purchase Price"). The Investor has delivered herewith to the
Company payment of the Total Purchase Price.
This Subscription Agreement shall not be valid and binding on the Company
unless and until this Subscription Agreement is accepted, executed, and
delivered by the Company. If this Subscription Agreement is not accepted by the
Company, the purchase price paid by the Investor to the Company shall be
refunded to the Investor.
The Investor understands that the Securities may be acquired hereunder only
by investors who are able to make all required representations and warranties
under Part I and Part II below.
-1-
<PAGE>
REPRESENTATIONS AND WARRANTIES
The Investor makes representations and warranties in this Subscription
Agreement in order to permit the Company to determine the suitability of the
Securities as an investment for the Investor and to determine the availability
of the exemptions relied upon by the Company from registration under Section 5
of the United States Securities Act of 1933, as amended, and the regulations
promulgated thereunder (the "Securities Act").
PART I: REPRESENTATIONS AS TO ACCREDITED INVESTOR STATUS
TO ESTABLISH THAT THE INVESTOR IS AN "ACCREDITED INVESTOR" AS DEFINED
IN RULE 501(a) PROMULGATED UNDER THE SECURITIES ACT, THE INVESTOR MUST
MARK AT LEAST ONE BOX BELOW, THEREBY MAKING THE REPRESENTATION SET
FORTH BESIDE THE MARKED BOX.
[_] The Investor is a natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of the Investor's
purchase exceeds $1,000,000.
[_] The Investor is a natural person who had an individual income in
excess of $200,000 in each of the two most recent years or joint
income with that person's spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the same
income level in the current year.
[_] The Investor is a bank as defined in Section 3(a)(2) of the Securities
Act or a savings and loan association or any other institution as
defined in Section 3(a)(5)(A) of the Securities Act.
[_] The Investor is a broker dealer registered pursuant to Section 15 of
the United States Securities Exchange Act of 1934, as amended.
[_] The Investor is an insurance company as defined in Section (2)(13) of
the Securities Act.
[_] The Investor is an investment company registered under the Investment
Company Act or a business development company as defined in Section
2(a)(48) of that Act.
[_] The Investor is a Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of the
U.S. Small Business Investment Act of 1958, as amended.
[_] The Investor is a plan established and maintained by a state within
the United States, one or more political subdivisions of such a state,
or any agency or
-2-
<PAGE>
instrumentality of such a state or its political subdivisions, for the
benefit of its employees, with total assets in excess of $5,000,000.
[_] The Investor is an employee benefit plan within the meaning of the
U.S. Employee Retirement Income Security Act of 1974, as amended
("ERISA"), (i) the investment decision for which is made by a plan
fiduciary, as defined in Section 3(21) of ERISA, which is either a
bank, savings and loan association, insurance company, or registered
investment advisor or (ii) which has total assets in excess of
$5,000,000 or (iii) which is a self-directed plan with investment
decisions made solely by persons that are Accredited Investors.
[_] The Investor is a private business development company as defined in
Section 202(a)(22) of the U.S. Investment Advisers Act of 1940.
[_] The Investor is an organization that is described in Section 501(c)(3)
of the U.S. Internal Revenue Code of 1986, as amended, a corporation,
a Massachusetts or similar business trust, or a partnership, in any
case that was not formed for the specific purpose of acquiring the
Securities, with total assets in excess of $5,000,000.
[X] The Investor is a director or executive officer (as defined in Rule
501(f) promulgated under the Securities Act) of the Company.
[_] The Investor is a trust with total assets of $5,000,000, not formed
for the specific purpose of acquiring the Securities, whose purchase
is directed by a sophisticated person as described in Rule
506(b)(2)(ii) promulgated under the Securities Act.
[_] The Investor is an entity in which all of the equity owners are
Accredited Investors.
PART II: ADDITIONAL REPRESENTATIONS
THE INVESTOR, BY SIGNING THIS SUBSCRIPTION AGREEMENT, WILL BE DEEMED
TO HAVE MADE ALL REPRESENTATIONS AND WARRANTIES CONTAINED IN
PARAGRAPHS 1 THROUGH 11 BELOW.
1. The Investor acknowledges that the Investor has received a copy of (a)
the Registration Rights Agreement dated as of April 30, 1996 of the
Company (as amended, the "Registration Rights Agreement"), and (b) the
Second Amended and Restated Stockholders' Agreement dated December 17,
1997 of the Company (as amended, the "Stockholders' Agreement").
2. The Investor acknowledges that: (a) the Investor has been provided
with information concerning the Company and has had an opportunity to
ask questions and to obtain such additional information concerning the
Company as the Investor
-3-
<PAGE>
deems necessary in connection with the Investor's acquisition of
interests in the Company; (b) information with respect to existing
business and historical operating results of the Company and estimates
and projections as to future operations involve significant subjective
judgment and analysis, which may or may not be correct; (c) the
Company cannot, and does not, make any representation or warranty as
to the accuracy of the information concerning the past or future
results of the Company.
3. The Investor has sought such accounting, legal and tax advice as the
Investor considered necessary to make an informed investment decision.
The Investor is experienced in investment and business matters (or has
been advised by an investment advisor who is so experienced), and is
aware of and can afford the risks of making such an investment,
including the risk of losing the Investor's entire investment.
4. The Securities subscribed for herein will be acquired solely by and
for the account of the Investor for investment and are not being
purchased for resale or distribution. The Investor has no contract,
undertaking, agreement or arrangement with any person to sell,
transfer or pledge to such person or anyone else any of the Securities
(or any portion thereof or interest therein) for which the Investor
hereby subscribes, and the Investor has no present plans or intentions
to enter into any such contract, undertaking, agreement or
arrangement. The financial condition of the Investor is such that the
Investor has no need for liquidity with respect to the Investor's
investment in the Securities and no need to dispose of any portion of
the Securities to satisfy any existing or contemplated undertaking or
indebtedness; and the overall commitment by the Investor to
investments which are not readily marketable is not disproportionate
to the Investor's net worth and will not become excessive as a result
of investment in the Securities.
5. The Investor understands that, except as described in the Registration
Rights Agreement, the Company has no obligation or intention to
register the Securities under any U.S. federal or state securities act
or law or the securities act or law of any other jurisdiction.
6. The Investor understands, represents, warrants and agrees that, except
as described in the Stockholders' Agreement, the Investor's Securities
are not transferable, that the Investor will not, directly or
indirectly, sell, assign, convey, hypothecate or otherwise transfer
the Investor's Securities (or any portion thereof or interest therein)
except in accordance with the terms of the Stockholders' Agreement and
that violation of the foregoing will cause such transfer to be void
and need not be recognized by the Company.
7. The Investor warrants that the Investor has knowledge and experience
in financial, investment and business matters and that the Investor is
capable of evaluating the merits and risks of an investment in the
Securities.
-4-
<PAGE>
8. The Investor has relied solely upon the Registration Rights Agreement,
the Stockholders' Agreement and independent investigations made by the
Investor in making the decision to purchase the Securities subscribed
for herein, and acknowledges that no representations or agreements
have been made to the Investor with respect thereto.
9. The Investor expressly acknowledges that:
(a) No federal, state or other governmental agency has passed upon
the adequacy or accuracy or the information concerning the
Company or made any finding or determination as to the fairness
of the investment, or any recommendation or endorsement of the
Securities as an investment.
(b) The Investor is not dependent upon a current cash return with
respect to the Investor's investment in the Securities, and the
Investor understands that distributions are not required to be
made and that returns on an investment in the Securities may not
be realized for years.
(c) The Securities are being offered and sold to prospective
purchasers directly, and neither the Company nor any person
acting on behalf of the Company has offered to sell the
Securities to the Investor by means of any form of general
solicitation or advertising, such as media advertising or public
seminars.
10. The Investor (i) if an individual, is at least 21 years of age; (ii)
if a partnership, is comprised of partners all of whom are at least 21
years of age; and (iii) if a corporation, partnership, trust or other
like entity, is authorized and otherwise duly qualified to purchase
and hold the Securities. The Investor has duly authorized, executed
and delivered this Subscription Agreement and understands that the
Company is not obligated to accept this Subscription Agreement and
that this Subscription shall be valid and binding on the Company only
upon acceptance by the Company. The Investor understands that if this
Subscription Agreement is accepted and executed by the Company, the
Investor will constitute a valid and legally binding obligation of the
Investor and the Company.
11. The Investor certifies under penalties of perjury that (i) the
Investor's taxpayer identification number (social security number for
an individual Investor) as set forth on the signature page hereof is
correct; (ii) the Investor's home address (in the case of an
individual) or office address (in the case of an entity) as set forth
on the signature page hereof is correct; and (iii) the Investor is not
subject to backup withholding either because the Investor has not been
notified by the Internal Revenue Service ("IRS") that the Investor is
subject to backup withholding as a result of a failure to report all
interest or dividends, or because the Investor has been notified by
the IRS that the Investor is no longer subject to backup
-5-
<PAGE>
withholding. If the Investor is subject to backup withholding,
Investor should cross through clause (iii) and check the following
box: [_]
MISCELLANEOUS
1. Successors and Assigns. Upon acceptance by the Company, this
----------------------
Subscription Agreement, and all of the obligations of the Investor hereunder,
and all of the representations and warranties by the Investor herein, shall be
binding upon the heirs, executors, administrators, personal representatives,
successors and assigns of the Investor.
2. Governing Law. This Subscription Agreement shall be construed in
-------------
accordance with, and governed in all respects by, the laws of the State of
Delaware.
3. Indemnification. The Investor agrees to indemnify the Company, its
---------------
officers and managers for any and all claims or losses (including attorneys'
fees) incurred by them as a result of the incorrectness of the Investor's
representations and warranties contained herein, including but not limited to,
claims arising under federal and state securities laws and common law claims.
-6-
<PAGE>
SIGNATURE PAGE TO
SUBSCRIPTION AGREEMENT FOR
CLASS A CONVERTIBLE PREFERRED STOCK OF
IXL HOLDINGS, INC.
Executed at Atlanta , GA this 1st day of September, 1998.
---------------- ----------------
CITY STATE
WILLIAM C. NUSSEY
/s/ William C. Nussey
---------------------------------------------
Social Security Number: ###-##-####
Address: 4177 Gateswalk Drive
Smyrna, Georgia 30080
Telephone: 770-463-8796 (h)
Facsimile: 404-267-3801
Accepted this 25th day of August, 1998
IXL Holdings, Inc.
By: U. Bertram Ellis, Jr.
Title: Chairman and CEO
_______________________________________________________________________________
* If the Investor is a corporation, partnership, or an entity, please attach
a copy of the resolutions, trust instrument, partnership agreement or
similar document (or in lieu thereof, an opinion of counsel) showing the
corporation, trust, partnership or other entity has authority to purchase
the Shares and showing that the signatoty above may act on its behalf in
making this investment.
-7-
<PAGE>
EXHIBIT 10.34
IXL HOLDINGS, INC
CLASS A CONVERTIBLE PREFERRED STOCK
SUBSCRIPTION AGREEMENT
THE INVESTOR IS REQUIRED TO MARK BOXES TO
INDICATE WHICH REPRESENTATIONS AND
WARRANTIES IT IS MAKING UNDER PART I HEREOF.
IXL Holdings, Inc.
Two Park Place
1888 Emery Street
Atlanta, Georgia 30318
Gentlemen:
By executing this Subscription Agreement, David Clauson (the "Investor")
hereby irrevocably subscribes for 1,000 shares (the "Securities") of Class A
Convertible Preferred Stock, $.01 par value ("Class A Preferred Stock"), of IXL
Holdings, Inc. (the "Company"), for a total purchase price of $1,000,000.00 (the
"Total Purchase Price"). The Investor has delivered herewith to the Company
payment of the Total Purchase Price.
This Subscription Agreement shall not be valid and binding on the Company
unless and until this Subscription Agreement is accepted, executed, and
delivered by the Company. If this Subscription Agreement is not accepted by the
Company, the purchase price paid by the Investor to the Company shall be
refunded to the Investor.
The Investor understands that the Securities may be acquired hereunder only
by investors who are able to make all required representations and warranties
under Part I and Part II below.
-1-
<PAGE>
REPRESENTATIONS AND WARRANTIES
The Investor makes representations and warranties in this Subscription
Agreement in order to permit the Company to determine the suitability of the
Securities as an investment for the Investor and to determine the availability
of the exemptions relied upon by the Company from registration under Section 5
of the United States Securities Act of 1933, as amended, and the regulations
promulgated thereunder (the "Securities Act").
PART I: REPRESENTATIONS AS TO ACCREDITED INVESTOR STATUS
TO ESTABLISH THAT THE INVESTOR IS AN "ACCREDITED INVESTOR" AS DEFINED
IN RULE 501(a) PROMULGATED UNDER THE SECURITIES ACT, THE INVESTOR MUST
MARK AT LEAST ONE BOX BELOW, THEREBY MAKING THE REPRESENTATION SET
FORTH BESIDE THE MARKED BOX.
[X] The Investor is a natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of the Investor's
purchase exceeds $1,000,000.
[_] The Investor is a natural person who had an individual income in
excess of $200,000 in each of the two most recent years or joint
income with that person's spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the same
income level in the current year.
[_] The Investor is a bank as defined in Section 3(a)(2) of the Securities
Act or a savings and loan association or any other institution as
defined in Section 3(a)(5)(A) of the Securities Act.
[_] The Investor is a broker dealer registered pursuant to Section 15 of
the United States Securities Exchange Act of 1934, as amended.
[_] The Investor is an insurance company as defined in Section (2)(13) of
the Securities Act.
[_] The Investor is an investment company registered under the Investment
Company Act or a business development company as defined in Section
2(a)(48) of that Act.
[_] The Investor is a Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of the
U.S. Small Business Investment Act of 1958, as amended.
[_] The Investor is a plan established and maintained by a state within
the United States, one or more political subdivisions of such a state,
or any agency or
-2-
<PAGE>
instrumentality of such a state or its political subdivisions, for the
benefit of its employees, with total assets in excess of $5,000,000.
[_] The Investor is an employee benefit plan within the meaning of the
U.S. Employee Retirement Income Security Act of 1974, as amended
("ERISA"), (i) the investment decision for which is made by a plan
fiduciary, as defined in Section 3(21) of ERISA, which is either a
bank, savings and loan association, insurance company, or registered
investment advisor or (ii) which has total assets in excess of
$5,000,000 or (iii) which is a self-directed plan with investment
decisions made solely by persons that are Accredited Investors.
[_] The Investor is a private business development company as defined in
Section 202(a)(22) of the U.S. Investment Advisers Act of 1940.
[_] The Investor is an organization that is described in Section 501(c)(3)
of the U.S. Internal Revenue Code of 1986, as amended, a corporation,
a Massachusetts or similar business trust, or a partnership, in any
case that was not formed for the specific purpose of acquiring the
Securities, with total assets in excess of $5,000,000.
[_] The Investor is a director or executive officer (as defined in Rule
501(f) promulgated under the Securities Act) of the Company.
[_] The Investor is a trust with total assets of $5,000,000, not formed
for the specific purpose of acquiring the Securities, whose purchase
is directed by a sophisticated person as described in Rule
506(b)(2)(ii) promulgated under the Securities Act.
[_] The Investor is an entity in which all of the equity owners are
Accredited Investors.
PART II: ADDITIONAL REPRESENTATIONS
THE INVESTOR, BY SIGNING THIS SUBSCRIPTION AGREEMENT, WILL BE DEEMED
TO HAVE MADE ALL REPRESENTATIONS AND WARRANTIES CONTAINED IN
PARAGRAPHS 1 THROUGH 11 BELOW.
1. The Investor acknowledges that the Investor has received a copy of (a)
the Registration Rights Agreement dated as of April 30, 1996 of the
Company (as amended, the "Registration Rights Agreement"), and (b) the
Second Amended and Restated Stockholders' Agreement dated December 17,
1997 of the Company (as amended, the "Stockholders' Agreement").
2. The Investor acknowledges that: (a) the Investor has been provided
with information concerning the Company and has had an opportunity to
ask questions and to obtain such additional information concerning the
Company as the Investor
-3-
<PAGE>
deems necessary in connection with the Investor's acquisition of
interests in the Company; (b) information with respect to existing
business and historical operating results of the Company and estimates
and projections as to future operations involve significant subjective
judgment and analysis, which may or may not be correct; (c) the
Company cannot, and does not, make any representation or warranty as
to the accuracy of the information concerning the past or future
results of the Company.
3. The Investor has sought such accounting, legal and tax advice as the
Investor considered necessary to make an informed investment decision.
The Investor is experienced in investment and business matters (or has
been advised by an investment advisor who is so experienced), and is
aware of and can afford the risks of making such an investment,
including the risk of losing the Investor's entire investment.
4. The Securities subscribed for herein will be acquired solely by and
for the account of the Investor for investment and are not being
purchased for resale or distribution. The Investor has no contract,
undertaking, agreement or arrangement with any person to sell,
transfer or pledge to such person or anyone else any of the Securities
(or any portion thereof or interest therein) for which the Investor
hereby subscribes, and the Investor has no present plans or intentions
to enter into any such contract, undertaking, agreement or
arrangement. The financial condition of the Investor is such that the
Investor has no need for liquidity with respect to the Investor's
investment in the Securities and no need to dispose of any portion of
the Securities to satisfy any existing or contemplated undertaking or
indebtedness; and the overall commitment by the Investor to
investments which are not readily marketable is not disproportionate
to the Investor's net worth and will not become excessive as a result
of investment in the Securities.
5. The Investor understands that, except as described in the Registration
Rights Agreement, the Company has no obligation or intention to
register the Securities under any U.S. federal or state securities act
or law or the securities act or law of any other jurisdiction.
6. The Investor understands, represents, warrants and agrees that, except
as described in the Stockholders' Agreement, the Investor's Securities
are not transferable, that the Investor will not, directly or
indirectly, sell, assign, convey, hypothecate or otherwise transfer
the Investor's Securities (or any portion thereof or interest therein)
except in accordance with the terms of the Stockholders' Agreement and
that violation of the foregoing will cause such transfer to be void
and need not be recognized by the Company.
7. The Investor warrants that the Investor has knowledge and experience
in financial, investment and business matters and that the Investor is
capable of evaluating the merits and risks of an investment in the
Securities.
-4-
<PAGE>
8. The Investor has relied solely upon the Registration Rights Agreement,
the Stockholders' Agreement and independent investigations made by the
Investor in making the decision to purchase the Securities subscribed
for herein, and acknowledges that no representations or agreements
have been made to the Investor with respect thereto.
9. The Investor expressly acknowledges that:
(a) No federal, state or other governmental agency has passed upon
the adequacy or accuracy or the information concerning the
Company or made any finding or determination as to the fairness
of the investment, or any recommendation or endorsement of the
Securities as an investment.
(b) The Investor is not dependent upon a current cash return with
respect to the Investor's investment in the Securities, and the
Investor understands that distributions are not required to be
made and that returns on an investment in the Securities may not
be realized for years.
(c) The Securities are being offered and sold to prospective
purchasers directly, and neither the Company nor any person
acting on behalf of the Company has offered to sell the
Securities to the Investor by means of any form of general
solicitation or advertising, such as media advertising or public
seminars.
10. The Investor (i) if an individual, is at least 21 years of age; (ii)
if a partnership, is comprised of partners all of whom are at least 21
years of age; and (iii) if a corporation, partnership, trust or other
like entity, is authorized and otherwise duly qualified to purchase
and hold the Securities. The Investor has duly authorized, executed
and delivered this Subscription Agreement and understands that the
Company is not obligated to accept this Subscription Agreement and
that this Subscription shall be valid and binding on the Company only
upon acceptance by the Company. The Investor understands that if this
Subscription Agreement is accepted and executed by the Company, the
Investor will constitute a valid and legally binding obligation of the
Investor and the Company.
11. The Investor certifies under penalties of perjury that (i) the
Investor's taxpayer identification number (social security number for
an individual Investor) as set forth on the signature page hereof is
correct; (ii) the Investor's home address (in the case of an
individual) or office address (in the case of an entity) as set forth
on the signature page hereof is correct; and (iii) the Investor is not
subject to backup withholding either because the Investor has not been
notified by the Internal Revenue Service ("IRS") that the Investor is
subject to backup
-5-
<PAGE>
withholding as a result of a failure to report all interest or
dividends, or because the Investor has been notified by the IRS that
the Investor is no longer subject to backup withholding. If the
Investor is subject to backup withholding, Investor should cross
through clause (iii) and check the following box: [_]
MISCELLANEOUS
1. Successors and Assigns. Upon acceptance by the Company, this
----------------------
Subscription Agreement, and all of the obligations of the Investor hereunder,
and all of the representations and warranties by the Investor herein, shall be
binding upon the heirs, executors, administrators, personal representatives,
successors and assigns of the Investor.
2. Governing Law. This Subscription Agreement shall be construed in
-------------
accordance with, and governed in all respects by, the laws of the State of
Delaware.
3. Indemnification. The Investor agrees to indemnify the Company, its
---------------
officers and managers for any and all claims or losses (including attorneys'
fees) incurred by them as a result of the incorrectness of the Investor's
representations and warranties contained herein, including but not limited to,
claims arising under federal and state securities laws and common law claims.
-6-
<PAGE>
SIGNATURE PAGE TO
SUBSCRIPTION AGREEMENT FOR
CLASS A CONVERTIBLE PREFERRED STOCK OF
IXL HOLDINGS, INC.
Executed at Atlanta , GA this 18th day of September, 1998.
------------------ ---------------
CITY STATE
DAVID CLAUSON
/s/ David Clauson
------------------------------------
Social Security Number: ###-##-####
Address: 2682 Sacramento Street
San Francisco, California 94115
Telephone: 415-931-1971
Facsimile:________________________________
Accepted this 18th day of September, 1998
IXL Holdings, Inc.
By: /s/ James V. Sandry
------------------------------------
Title: Executive Vice President
---------------------------------
-7-
<PAGE>
EXHIBIT 10.39
- --------------------------------------------------------------------------------
SECURITIES PURCHASE AGREEMENT
among
IXL HOLDINGS, INC.
and
THE INVESTORS NAMED HEREIN
67,691 Shares of Class B Convertible Preferred Stock,
9,232 Shares of Class C Convertible Preferred Stock
and
Warrants to Purchase 8,875 Shares of Class B Convertible Preferred Stock
Dated as of December 17, 1997
- --------------------------------------------------------------------------------
<PAGE>
SECURITIES PURCHASE AGREEMENT
THE SECURITIES PURCHASE AGREEMENT (the "Agreement") is dated as of December
---------
17, 1997, and entered into by and among IXL Holdings, Inc., a Delaware
corporation (the "Company"), and the investors listed on the signature pages
-------
hereto (each an "Investor" and collectively, the "Investors").
-------- ---------
In consideration of the mutual covenants and agreements set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
Company agrees, and each of the Investors agrees, severally but not jointly, as
follows:
ARTICLE I
DEFINITONS
Section 1.1 Definitions
As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate," as applied to any specified Person, shall mean any
---------
other Person that, directly or indirectly, controls, is controlled by or is
under common control with such specified Person. For purposes of the foregoing,
"control," when used with respect to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of Voting Securities,
by contract or otherwise, and the terms "controlled" and "controlling" shall
have meanings correlative to the foregoing. In the case of a Person who is an
individual, the term "Affiliate" shall include, with respect to such specified
Person (i) members of such specified Person's immediate family (as defined in
Instruction 2 of Item 404(a) of Regulation S-K under the Securities Act) and
(ii) trusts, the trustee or the beneficiaries of which are such specified Person
or members of such Person's immediate family as determined in accordance with
the foregoing clause (i). Notwithstanding the foregoing, the Investors and their
respective Affiliates shall not be deemed Affiliates of the Company for purposes
of this Agreement.
"Audit" shall mean any audit, assessment of Taxes, other
-----
examination by any Tax Authority, proceeding or appeal of such proceeding
relating to Taxes.
"Board of Directors" means, as to any Person, the board of
------------------
directors of such Person or any duly authorized committee thereof.
2
<PAGE>
"Business Day" shall mean each day other than Saturdays, Sundays
------------
and days when commercial banks are required or authorized by law or executive
order to be closed for business in New York, New York.
"Capital Stock" means any and all shares, interests,
-------------
participations or other equivalents (however designated) of corporate stock,
including, without limitation, all common stock and preferred stock.
"Certificate of Incorporation" has the meaning ascribed thereto
----------------------------
in Section 2.1.
-----------
"Charter Documents" means the Articles of Organization, Articles
-----------------
of Incorporation or Certificate of Incorporation, Bylaws and any other
organizational document, as amended or restated (or both) to date, of the
Company, or any of its Subsidiaries, as applicable.
"Class A Common Stock" has the meaning ascribed thereto in
--------------------
Section 4.2.
- -----------
"Class A Preferred Stock" has the meaning ascribed thereto in
-----------------------
Section 4.2.
- -----------
"Class B Common Stock" has the meaning ascribed thereto in
--------------------
Section 4.2.
- -----------
"Class B Preferred Stock" has the meaning ascribed thereto in
-----------------------
Section 2.1.
- -----------
"Class C Preferred Stock" has the meaning ascribed thereto in
-----------------------
Section 2.1.
- -----------
"Closing" has the meaning ascribed thereto in Section 2.2(b).
------- --------------
"Closing Date" has the meaning ascribed thereto in Section
----------- -------
2.2(b).
- ------
"Code" means the Internal Revenue Code of 1986, as amended from
----
time to time, and any successor statute or law thereto.
"Consolidated" or "consolidated" when used with reference to any
------------ ------------
accounting term, means the amount described by such accounting term, determined
on a consolidated basis in accordance with GAAP, after elimination of
intercompany items.
"Contracts" has the meaning ascribed thereto in Section
--------- -------
4.9(a)(3).
- ---------
"Documents" means this Agreement, the Warrant Agreement, the
---------
Securities, the Registration Rights Agreements and the Stockholder Agreement,
collectively, or each of such documents singularly, and any documents or
instruments contemplated by or executed in connection with any of them or any of
the transactions contemplated hereby or thereby.
3
<PAGE>
"Employee Benefit Plan" has the meaning ascribed thereto in
---------------------
Section 4.19.
- -------------
"Environmental Claim" means any claim, action, cause of action,
-------------------
investigation of which the Company or any of its Subsidiaries, including any of
their management employees, are aware, or written notice by any Person alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries or penalties) arising out
of, based on or resulting from (a) the presence, or release into the
environment, of any Material of Environmental Concern at any location owned,
leased, used or operated by the Company or any of its Subsidiaries, or (b)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law.
"Environmental Laws" means all Federal, state, local and foreign
------------------
laws and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata and natural resources), including,
without limitation, laws and regulations relating to emissions, discharges,
releases or threatened releases of Materials of Environmental Concern, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Materials of Environmental Concern.
"Equity Interest" means (i) with respect to a corporation, any
---------------
and all issued and outstanding Capital Stock and warrants, options or other
rights to acquire Capital Stock and (ii) with respect to a partnership, limited
liability company or similar Person, any and all units, interests, or other
equivalents of, or other ownership interests in any such Person and warrants,
options or other rights to acquire any such units or interests.
"ERISA" means The Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and any successor statute or law thereto.
"ERISA Affiliate" has the meaning ascribed thereto in Section
--------------- -------
4.19.
- ----
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations of the SEC thereunder, and any successor
statute or law thereto.
"GAAP" means those generally accepted accounting principles and
----
practices which are recognized as such from time to time by the American
Institute of Certified Public Accountants acting through its Accounting
Principles Board or by the Financial Accounting Standards Board or through other
appropriate boards or committees thereof and which are consistently applied for
all periods after the date hereof.
4
<PAGE>
"Governmental Body" shall mean any Federal, state, local or
-----------------
foreign governmental authority or regulatory body, any subdivision, agency,
commission or authority thereof or any quasi-governmental or private body
exercising any governmental regulatory authority thereunder and any Person
directly or indirectly owned by and subject to the control of any of the
foregoing, or any court, arbitrator or other judicial or quasi-judicial
tribunal.
"Holder" or "Holders" means each Investor and any Affiliate or
------ -------
Related Person of any Investor that is or becomes a holder of any of the
Securities, in each case, so long as such Person holds any Securities.
"Inspectors" has the meaning ascribed thereto in Section 6.2.
---------- ------------
"Investors" means the investors signatory to this Agreement.
---------
"Kelso" means collectively Kelso Investment Associates V, L.P., a
-----
Delaware limited partnership, and Kelso Equity Partners V, L.P., a Delaware
limited partnership.
"Laws" has the meaning ascribed thereto in Section 4.9.
---- -----------
"Lien" means any mortgage, pledge, lien, encumbrance, charge or
----
adverse claim affecting title or resulting in a charge against real or personal
property, or security interest of any kind (including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell and any filing of any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Material Adverse Effect" means (a) a material adverse effect
-----------------------
upon the business, operations, prospects, properties, assets or condition
(financial or otherwise) of the Company and its Subsidiaries, taken as a whole,
or (b) a material adverse effect on the ability of the Company to perform its
obligations under this Agreement or any of the other Documents.
"Materials of Environmental Concern" means chemicals, pollutants,
----------------------------------
contaminants, industrial, toxic or hazardous wastes, substances or constituents,
petroleum and petroleum products (or any by-product or constituent thereof),
asbestos or asbestos-containing materials, or PCBs.
"Notices" has the meaning ascribed thereto in Section 7.1.
------- -----------
"Permitted Lien" shall mean the following Liens: (a) Liens
--------------
existing on the Closing Date as listed on Schedule 1.1; (b) Liens for taxes,
------------
assessments or other governmental charges or levies not yet due; (c) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen and other
Liens imposed by law created in the ordinary course of business of the
5
<PAGE>
Company consistent with past practices for amounts not yet due; (d) Liens (other
than any Lien imposed by ERISA) incurred or deposits made in the ordinary course
of business of the Company consistent with past practices in connection with
worker's compensation, unemployment insurance or other types of social security;
and (e) with respect to interests in real property, minor defects of title,
easements, rights-of-way, restrictions and other similar charges or encumbrances
not materially detracting from the value or materially interfering with the use
of such real property.
"Person" means an individual, partnership, corporation, trust or
------
unincorporated organization or a government or agency or political subdivision
thereof.
"Preferred Shares" has the meaning ascribed thereto in Section
---------------- -------
2.1.
- ---
"Proceedings" has the meaning ascribed thereto in Section 4.15.
----------- ------------
"Property" or "property' means any assets or property of any kind
-------- --------
or nature whatsoever, real, personal or mixed (including fixtures), whether
tangible or intangible, provided that the terms "Property" or "property," when
used with respect to any Person, shall not include securities issued by such
Person.
"QPO" shall mean a firm commitment public offering of the
---
Company's Class B Common Stock by a major bracket underwriter resulting in net
proceeds to the Company of $30,000,000 or more and at a price per share of Class
B Common Stock (as constituted on the date hereof) of $700 or higher.
"Registration Rights Agreement" has the meaning ascribed thereto
-----------------------------
in Section 2.1.
"Related Person" means, with respect to any Investor, (i) any
--------------
officer, director or partner of, or Person controlling, such Investor or (ii)
any other Person that is (x) an Affiliate of an Investor, (y) an Affiliate of
the general partner(s), investment manager(s) or investment advisor(s) of an
Investor or (z) an investment fund, investment account or investment entity
whose investment manager, investment advisor or general partner thereof is an
Investor or an Affiliate of an Investor.
"Rule 144A" means Rule 144A as promulgated by the SEC under the
---------
Securities Act, as amended from time to time, and any successor rule or
regulation thereto.
"SEC" means the Securities and Exchange Commission and any
---
successor thereto.
"Securities Act" means the Securities Act of 1933, as amended,
--------------
and the rules and regulations of the SEC thereunder, and any successor statute
or law thereto.
6
<PAGE>
"Security" or "Securities" has the meaning ascribed thereto in
-------- ----------
Section 2.1.
- -----------
"Stockholders Agreement" has the meaning ascribed thereto in
----------------------
Section 2.1.
- -----------
"Subsidiary" of any person means (a) a corporation in which such
----------
Person, a subsidiary of such Person, or such Person and one or more subsidiaries
of such Person, directly or indirectly, at the date of determination, has either
(i) a majority ownership interest or (ii) the power, under ordinary
circumstances, to elect, or to direct the election of, a majority of the board
of directors of such corporation, or (b) a partnership in which such Person, a
subsidiary of such Person, or such Person and one or more subsidiaries of such
Person (i) is, at the date of determination, a general partner of such
partnership, or (ii) has a majority ownership interest in such partnership or
the right to elect, or to direct the election of, a majority of the governing
body of such partnership, or (c) any other Person (other than a corporation or a
partnership) in which such Person, a subsidiary of such Person, or such Person
and one or more subsidiaries of such Person has either (i) at least a majority
ownership interest or (ii) the power to elect, or to direct the election of, a
majority of the directors or other governing body of such Person.
"Taxes" shall mean all Federal, state, local and foreign taxes,
-----
and other assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.
"Tax Authority" means the Internal Revenue Service and any other
-------------
domestic or foreign governmental authority responsible for the administration of
any Taxes.
"Tax Returns" shall mean all Federal, state, local and foreign
-----------
tax returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax Return relating to Taxes.
"Transactions" has the meaning ascribed thereto in Section 4.4.
------------ -----------
"Voting Securities" means any class of Equity Interests of a
-----------------
Person pursuant to which the holders thereof have, at the time of determination,
the general power under ordinary circumstances to vote for the election of
directors, managers, trustees or general partners of such Person (irrespective
of whether or not at the time any other class or classes will have or might have
the general power under ordinary circumstances to vote for the election of
directors, managers, trustees or general partners by reason of the happening of
any contingency).
"Warrant Agreement" means the Warrant Agreement, to be dated as
-----------------
of the Closing Date, by and among the Company and the Investors, in the form
attached hereto as Exhibit B.
7
<PAGE>
"Warrants" has the meaning ascribed thereto in Section 2.1.
-------- -----------
"Warrant Shares" has the meaning ascribed thereto in Section 2.1.
-------------- -----------
Section 1.2 Rules of Construction
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) words in the singular include the plural, and words in the
plural include the singular;
(d) provisions apply to successive events and transactions; and
(e) "herein," "hereof," "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any
particular section or other subdivision.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
Section 2.1 Issue and Sale of Securities
The Company has authorized the issuance and sale to the Investors, in
the respective amounts set forth below such Investor's name on the signature
page hereto, of (i) an aggregate of 67,691 shares of Class B Convertible
Preferred Stock, par value $.01 (the "Class B Preferred Stock"), having the
-----------------------
rights set forth in the Amended and Restated Certificate of Designation of the
Company and the Amended and Restated Certificate of Incorporation of the Company
in the form attached as Exhibit A (collectively, the "Certificate of
--------------
Incorporation"), to be issued to the Investors, (ii) an aggregate of 9,232
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shares of Class C Convertible Preferred Stock, par value $.01 (the "Class C
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Preferred Stock"), having the rights set forth in the Certificate of
- ---------------
Incorporation, to be issued to the Investors, and (iii) warrants (the
"Warrants") to purchase, an aggregate of 8,875 shares of Class B Preferred
--------
Stock, subject to adjustment as set forth in the Warrant Agreement. The shares
of Class B Preferred Stock and Class C Preferred Stock issued on the Closing
Date pursuant to this Agreement (the "Preferred Shares") and the Warrants are
----------------
referred to herein as a "Security" and collectively as the "Securities" and the
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shares of Class B Preferred Stock issuable upon exercise of
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the Warrants are referred to herein as the "Warrant Shares." Each Holder of
--------------
Securities will have certain registration rights with respect to the Class B
Common Stock, $.01 par value of the Company, underlying the Preferred Shares and
the Warrant Shares as set forth in the Registration Rights Agreement dated as of
April 30, 1996, as amended, by and among the Company, Kelso and each of the
other Persons listed on the signature pages thereto, a copy of which is attached
hereto as Exhibit C (the "Registration Rights Agreement"). Each Investor shall
-----------------------------
also become a party to the Second Amended and Restated Stockholder Agreement, to
be dated as of the Closing Date, by and among the Company, the Investors, Kelso
and the other Persons who are parties thereto, a copy of which is attached
hereto as Exhibit D (the "Stockholders Agreement").
----------------------
Each Warrant shall be substantially in the form attached as Exhibit A
to the Warrant Agreement. Each Warrant shall be dated the date of its issuance.
The Warrants will be exercisable, in the manner provided in the Warrant
Agreement and the Warrants, for a number of Warrant Shares as provided in the
Warrant Agreement and the Warrants. The terms and provisions contained in the
Warrant Agreement and in the Warrants shall constitute, and are hereby expressly
made, a part of this Agreement and, to the extent applicable, the Company and
the Holders, by their execution and delivery of this Agreement, expressly agree
to such terms and provisions and to be bound thereby.
Section 2.2 Purchase and Sale of Securities
(a) Purchase and Sale. Subject to the terms and conditions set forth
herein and in reliance on the respective representations and warranties of
the Company, on the one hand, and the Investors, on the other hand,
contained herein, the Company agrees to sell to each Investor, and each of
the Investors agrees, severally but not jointly, to purchase from the
Company, the Securities indicated on Schedule 1 attached hereto for an
aggregate purchase price of $24,999,975 for all of the Securities.
(b) Closing. The purchase and sale of the Securities shall take place
at a closing (the "Closing") at the offices of Debevoise & Plimpton, 375
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Third Avenue, New York, New York, 10022, at 10:00 a.m., New York time, on
the date hereof, or such other Business Day as may be agreed upon by the
Investors and the Company (the "Closing Date"). At the Closing, the Company
------------
will deliver to each of the Investors the Securities to be purchased by
such Investor (registered in such Investor's name or the name of such
nominee or nominees as such Investor may request), dated the Closing Date,
against payment of the purchase price therefor by intra-bank or Federal
funds bank wire transfer of same day funds to such bank account within the
United States as the Company shall designate at least two Business Days
prior to the Closing.
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(c) Fees and Expenses. Provided that the Closing occurs, the Company
agrees to pay or reimburse all expenses relating to this Agreement,
including but not limited to:
(1) each Investor's expenses incurred in connection with the
transactions contemplated by this Agreement, the Warrant
Agreement, the Stockholder Agreement, the Registration Rights
Agreements and the other Documents including, without limitation,
costs incurred in connection with such Investor's review of the
Company's business and operations, including the reasonable fees
and other charges and expenses of the Investor's counsel incurred
in connection herewith or with the other Documents and reasonable
fees and other charges and expenses of Investor's consultants,
provided such fees and expenses of Investor's consultants have
been approved by the Company in advance;
(2) any reasonable fees and other charges and expenses
(including the reasonable fees and other charges and expenses of
counsel) incurred in connection with any registration or
qualification of the Securities required in connection with the
offer and sale of the Securities pursuant to this Agreement under
the securities or "blue sky" laws of any jurisdiction requiring
such registration or qualification or in connection with
obtaining any exemptions from such requirements; and
(3) each Investors or Holder's expenses (including the
reasonable fees and other charges and expenses of their counsel)
relating to any amendment to, or modification of, or any waiver
or consent or preservation of rights under, this Agreement, the
Securities or any of the other Documents.
Reimbursement of the expenses to which such Investor is entitled
pursuant to this Section 2.2(c), including, without limitation, the
--------------
reasonable fees and other charges and expenses of such Investor's counsel,
shall be made concurrently with the Closing by intrabank or Federal funds
bank wire transfer of same day funds, or at such other time and in such
other manner as the Company and the Investors may agree.
(d) Other Investors. Each Investor's obligations hereunder are
subject to the execution and delivery of this Agreement by the other
Investors listed on the signature pages hereof. The obligations of each
Investor shall be several and not joint, and no Investor shall be liable or
responsible for the acts of any other Investor under this Agreement.
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Section 2.3 Issue Taxes
The Company agrees to pay all Taxes (other than Taxes in the nature of
income, franchise or gift taxes) and governmental fees arising in connection
with the issuance, sale, delivery or transfer by the Company to each Holder of
the Preferred Shares, the Warrants and the Warrant Shares, as the case may be,
and the execution and delivery of the other Documents and any modification of
any of such Securities and Documents and will hold such Holder harmless without
limitation as to time against any and all liabilities with respect to all such
Taxes and fees.
ARTICLE III
CLOSING CONDITIONS
Section 3.1 Conditions to Obligations of the Investors
The obligations of each Investor to purchase and pay for the
Securities to be delivered to such Investor at the Closing shall be subject to
the satisfaction or waiver of each of the following conditions on or before the
Closing Date:
(a) Delivery of Documents. The Company shall have delivered to
each Investor, in form and substance satisfactory to such Investor, the
following:
(i) The Preferred Shares and Warrants being purchased by such
Investor, duly executed by the Company, in the aggregate number set forth
below such Investor's name on the signature pages hereto.
(ii) An opinion, dated the Closing Date and addressed to each
Investor, from Minkin & Snyder, PC, counsel for the Company, as to the
matters set forth in Exhibit E.
(iii) Resolutions of the Board of Directors of the Company,
certified by the Secretary of the Company to be duly adopted and in full
force and effect on such date, authorizing the execution, delivery and
performance of this Agreement, the Warrant Agreement and the other
Documents to which the Company is a party and the consummation of the
transactions contemplated hereby and thereby, including the issuance of the
Preferred Shares and Warrants pursuant to this Agreement.
(iv) Copies of the certificate of incorporation of the Company
together with good standing certificates from the state of its
incorporation, from the state in which its principal place of business is
located, and from all states in which the laws thereof require the Company
to be qualified and/or licensed to do business, except where the failure to
be
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<PAGE>
so qualified would not result in a Material Adverse Effect, each to be
dated a recent date prior to the Closing Date and certified by the
applicable Secretary of State or other authorized governmental entity.
(v) Certificate of the Secretary of the Company dated the
Closing Date certifying (A) a copy of the bylaws of the Company, (B)
resolutions of the Board of Directors of the Company, authorizing the
execution, delivery and performance of this Agreement, the Warrant
Agreement and the other Documents to which the Company is a party and the
consummation of the transactions contemplated hereby and thereby, including
the issuance of the Preferred Shares and Warrants pursuant to this
Agreement, (C) written consent resolutions of the stockholders of the
Company authorizing the execution and filing of the Certificate of
Incorporation, (D) the notice delivered to nonconsenting stockholders of
the Company regarding such written consent resolutions of the stockholders
of the Company, and (E) as to the incumbency and genuineness of the
signatures of the officers of the Company.
(vi) Such additional information and materials as any Investor
may reasonably request.
(b) Compliance with Agreements. The Company shall have
performed and complied with all agreements, covenants and conditions contained
herein, in each of the other Documents and in any other document contemplated
hereby or thereby which are required to be performed or complied with by the
Company on or before the Closing Date.
(c) Completion of Other Transactions. Simultaneously with or
prior to the sale to each Investor of the Securities to be purchased by such
Investor:
(i) The Company shall have executed and delivered the Warrant
Agreement.
(ii) The Company, Kelso and each Investor shall have executed
and delivered an Agreement to be Bound to the Registration Rights
Agreements.
(iii) The Company, Kelso, each Investor and the required
percentage of the stockholders of the Company shall have executed and
delivered the Stockholder Agreement.
(iv) All of the other Investors listed in the signature pages
hereof shall have consummated their purchase of Securities pursuant to this
Agreement.
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<PAGE>
(v) The designees of the Investors shall have been elected to
the Board of Directors of the Company pursuant to Section 9.1 of the
Stockholders Agreement.
(d) Representations and Warranties. All of the representations
and warranties of the Company contained herein shall be true and correct in all
material respects on and as of the Closing Date, both before and after giving
effect to the transactions contemplated hereby and by the other Documents.
(e) Proceedings Satisfactory. All proceedings taken in
connection with the sale of the Securities, the transactions contemplated
hereby, and all documents and papers relating thereto, shall be reasonably
satisfactory to such Investor. Such Investor and its counsel shall have received
copies of such documents and papers as they may reasonably request in connection
therewith, or as a basis for the opinions to be delivered pursuant to Section
-------
3.1 (a)(ii), all in form and substance satisfactory to such Investor.
- -----------
(f) Consents and Permits. The Company shall have received all
consents, permits, approvals and authorizations and sent or made all notices,
filings, registrations and qualifications as may be required pursuant to any
law, statute, regulation or rule (Federal, state, local or foreign) or pursuant
to any other agreement, order or decree to which any of them is a party or to
which any of them is subject, in connection with the transactions to be
consummated on or prior to the Closing Date as contemplated by this Agreement or
any of the other Documents, except for any such consents, approvals or
authorizations the failure of which to obtain would not reasonably be expected
to have a Material Adverse Effect.
(g) No Material Adverse Change. There shall not have been any
material adverse change in the properties, business, operations, assets,
prospects, condition (financial or otherwise) of the Company and its
Subsidiaries.
(h) No Material Judgment or Order. There shall not be on the
Closing Date any judgment or order of a court of competent jurisdiction or any
ruling of any agency of the Federal, state or local government that, in the
reasonable judgment of any Investor or its counsel, would prohibit the sale or
issuance of the Securities hereunder or subject the Company to any material
penalty if the Securities were to be issued and sold hereunder.
Section 3.2 Conditions to Obligations of the Company
The obligations of the Company to sell and issue the Securities to be
delivered to each Investor at the Closing shall be subject to the satisfaction
or waiver of each of the following conditions on or before the Closing Date:
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<PAGE>
(a) Completion of Other Transactions. Simultaneously with or
prior to the sale to each Investor of the Securities to be purchased by such
Investor:
(1) all of the other Investors listed in the signature pages hereof
shall have consummated their purchase of Securities pursuant to this Agreement;
and
(2) each of the Investors shall have executed and delivered the
Stockholder Agreement.
(b) Representations and Warranties. All of the representations
and warranties of the Investors contained herein or in any of the other
Documents shall be true and correct on and as of the Closing Date, both before
and after giving effect to the transactions contemplated hereby and by the other
Documents.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors on the date
hereof and as of the Closing as follows:
Section 4.1 Due Incorporation and Good Standing
The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware with
corporate power and authority to own, lease and operate its properties, to
conduct its business as currently conducted and as proposed to be conducted and
to enter into and perform its obligations under this Agreement and the other
Documents to which it is a party. The Company is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which such qualification is required.
Section 4.2 Capitalization
(a) The authorized capital stock of the Company consists of (a)
50,000,000 shares of Class A Common Stock, par value $.01 per share (the "Class
-----
A Common Stock"), (b) 100,000,000 shares of Class B Common Stock, par value $.01
- --------------
per share (the "Class B Common Stock"), (c) 500,000 shares of blank check
--------------------
preferred stock, 250,000 shares of which have been designated as Class A
Convertible Preferred Stock, par value $.0l per share (the "Class A Preferred
Stock"), 100,000 shares of which have been designated as Class B Preferred
Stock, and 15,000 shares of which have been designated as Class C Preferred
Stock. As of the Closing Date, after giving effect to the transactions
contemplated by this Agreement and the other Documents, (i) there will be issued
and outstanding (A) no shares of Class A Common Stock, (B) 82,298 shares of
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<PAGE>
Class B Common Stock, all of which will be validly issued and fully paid and
nonassessable, (C) 169,260 shares of Class A Preferred Stock, all of which will
be validly issued and fully paid and nonassessable, (D) 67,692 shares of Class B
Preferred Stock, all of which will be validly issued and fully paid and
nonassessable, and (E) 9,231 shares of Class C Preferred Stock, all of which
will be validly issued and fully paid and nonassessable; (ii) there will be
reserved for issuance (A) 350,000 shares of Class A Common Stock to be issued
upon conversion of the Class A Preferred Stock, the Class B Preferred Stock and
Class C Preferred Stock, (B) 58,201 shares of Class B Common Stock to be issued
upon the exercise of outstanding options and warrants (other than the Warrants);
(C) 94,108 shares of Class B Common Stock to be issued upon the exercise of
unissued options pursuant to the Company's 1996 Stock Option Plan, as amended,
(D) 8,875 shares of Class B Preferred Stock to be issued upon exercise of the
Warrants and (E) 350,000 shares of Class B Common Stock to be issued upon
conversion of the Class A Common Stock. Except as set forth above and on
Schedule 4.2 hereto, at the Closing Date, after giving effect to the
transactions contemplated by this Agreement and the other Documents, no Equity
Interests of the Company will be issued or outstanding and there are not, and at
the Closing Date there will not be, any options, agreements, instruments or
securities relating to the issued or unissued Equity Interests of the Company or
any Subsidiary of the Company, or obligating the Company or any Subsidiary of
the Company to issue, transfer, grant or sell any Equity Interests in the
Company or any Subsidiary.
(b) The Company has complied with all Federal and state
securities laws in connection with the issuance of all outstanding Equity
Interests, except where such failure would not have a Material Adverse Effect.
(c) Except as listed on Schedule 4.2, and except as
contemplated by the Documents, there are no preemptive rights, voting
agreements, transfer restrictions (except those imposed by applicable federal
and state securities laws), or registration rights (except as set forth in the
Registration Rights Agreement) affecting the Equity Interests in the Company.
Section 4.3 Subsidiaries
Schedule 4.3 hereto sets forth a list of all Subsidiaries of the
Company and the respective state or jurisdiction of incorporation or
organization. All of the issued or outstanding Equity Interests of such
Subsidiaries have been duly and validly issued and are fully paid and
nonassessable and are owned, directly or indirectly, by the Company. Each
Subsidiary of the Company is duly incorporated and is in good standing in its
respective state or jurisdiction of incorporation and has the corporate
authority to own, lease or operate its properties and to conduct its business as
currently conducted and as proposed to be conducted. Each Subsidiary of the
Company is duly qualified to transact business and is in good standing as a
foreign corporation in each state or jurisdiction in which such qualification is
required, except where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect.
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Section 4.4 Authority
The Company has all necessary corporate power and authority to execute
and deliver this Agreement and each of the other Documents to which it is a
party, and to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby (the
"Transactions"). The execution and delivery of this Agreement and the other
------------
Documents to which it is a party has been authorized by all necessary corporate
action on the part of the Company and no other corporate proceedings or
approvals are required on the part of the Company to authorize this Agreement or
the other Documents to which it is a party or to consummate the Transactions.
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery thereof by the
Investors, constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Section 4.5 Authorization, Etc. of Preferred Shares
The issuance and sale of the Preferred Shares has been duly authorized
and the Preferred Shares when issued to the Investors for the consideration set
forth herein will be fully paid and non-assessable, with no personal liability
attached to the ownership thereof.
Section 4.6 Authorization, Etc. of Warrant Agreement and Warrant
Shares
The Warrant Agreement has been duly authorized and, at the Closing,
will be validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery thereof by the Investors, will constitute
a legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to or affecting creditors' rights generally and
by general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The Company has duly authorized
and reserved a sufficient number of shares of Class B Preferred Stock for
issuance upon exercise of the Warrants and the Warrant Shares, when issued upon
exercise of the Warrants in accordance with the terms of the Warrant Agreement
and the Warrants, will be validly issued and fully paid and nonassessable, with
no personal liability attached to the ownership thereof.
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Section 4.7 Authorization, Etc. of Registration Rights Agreement
The Registration Rights Agreement has been duly authorized, validly
executed and delivered by the Company and constitutes the legal, valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except (a) as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and (b) rights to indemnification thereunder
may be limited by Federal or state securities laws or the policies underlying
such laws.
Section 4.8 Authorization, Etc. of Stockholder Agreement
The Stockholder Agreement has been duly authorized and, at the
Closing, will be validly executed and delivered by the Company, Kelso and the
required stockholders of the Company and will constitute a legal, valid and
binding agreement of the Company, enforceable against the Company, in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
Section 4.9 No Violation or Conflict; No Default
(a) Neither the nature of the business of the Company or any of
its Subsidiaries, the execution, delivery or performance of this Agreement, the
Securities, the Registration Rights Agreement, the Warrant Agreement, the
Stockholder Agreement or any of the other Documents by the Company, nor the
compliance with its obligations hereunder or thereunder, nor the consummation of
the transactions contemplated hereby and thereby, nor the issuance, sale or
delivery of the Securities will:
(1) violate or conflict with any provision of the Charter
Documents of the Company or any of its Subsidiaries;
(2) violate or conflict with any statute, law, rule or
regulation or any judgment, decree, order, regulation or rule of any
court or governmental authority or body (collectively, "Laws")
----
applicable to the Company or any of its Subsidiaries or by which any
of their respective properties or assets may be subject, except where
such violation would not reasonably be expected to have, singly or in
the aggregate, a Material Adverse Effect; or
17
<PAGE>
(3) violate, be in conflict with, or constitute a breach or
default (or any event which, with the passage of time or notice or
both, would become a default) under, or permit the termination of, or
require the consent of any Person under, result in the creation or
imposition of any Lien upon any property of the Company or its
Subsidiaries under, result in the loss (by the Company or any
Subsidiary) or modification in any manner adverse to the Company and
its Subsidiaries of any right or benefit under, or give to any other
Person any right of termination, amendment, acceleration, repurchase
or repayment, increased payments or cancellation under, any mortgage,
indenture, note, debenture, agreement, lease, license, permit,
franchise or other instrument or obligation, whether written or oral
(collectively, "Contracts") to which the Company or any of its
---------
Subsidiaries is a party or by which their properties may be bound or
affected except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect
(b) The Company is not in default (without giving effect to any
grace or cure period or notice requirement) under any Contract, any of the
Charter Documents, or any applicable judgments or orders, except where such
default would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(c) The execution and delivery of this Agreement and the other
Documents to which the Company is a party do not, and the performance of its
obligations under this Agreement and the other Documents and the consummation of
the Transactions will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Body under any
Laws, except for (i) required filings under the Securities Act or state "blue
sky" laws as a result of the exercise of rights under the Registration Rights
Agreement, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits or to make such filings or notifications, would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or prevent or delay in any material respect consummation of the
Transactions, or otherwise prevent the Company from performing their obligations
under this Agreement or the other Documents.
Section 4.10 Use of Proceeds
The proceeds from the sale of the Securities will be used for general
corporate purposes and for the repayment of indebtedness owed to certain
stockholders of the Company, which indebtedness is listed on Schedule 4.10
hereto.
Section 4.11 No Material Adverse Change; Financial Statements
(a) Except as set forth on Schedule 4.11 hereto, subsequent to
October 31, 1997, there has not been (i) any material adverse change in the
properties, business, prospects,
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<PAGE>
operations, assets or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole, (ii) any asset or property of the Company made
subject to a Lien of any kind, other than a Permitted Lien, (iii) any waiver of
any valuable right of the Company or any Subsidiary, or the cancellation of any
material debt or material claim held by the Company or any Subsidiary, (iv) any
payment of dividends on, or other distributions with respect to, or any direct
or indirect redemption or acquisition of, any shares of the capital stock of the
Company, or any agreement or commitment therefor, (v) any mortgage, pledge,
sale, assignment or transfer of any material tangible or intangible assets of
the Company, except in the ordinary course of business, (vi) any loan by the
Company or any Subsidiary to any officer, director, employee, consultant or
stockholder or any agreement or commitment therefor, other than travel expense
advances made by the Corporation to its officers, directors, employees,
consultants or stockholders in the ordinary course of business, (vii) any
material damage, destruction or loss (whether or not covered by insurance)
affecting the assets of the Company or any Subsidiary or (viii) any increase,
direct or indirect, in the compensation paid or payable to any officer,
director, employee, or consultant of the Company or any Subsidiary other than in
the ordinary course of business.
(b) The Company has heretofore furnished the Investors with a
true and complete copy of (i) the audited financial statements of iXL
Interactive Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31,
1993, 1994 and 1995, and for the four-month period ending April 30, 1996; (ii)
audited combined financial statements for Creative Video, Inc. (n/k/a iXL,
Inc.), Creative Video Library, Inc. and Entrepreneur Television, Inc. for the
years ending December 31, 1993, 1994 and 1995, and for the four-month period
ending April 30, 1996; (iii) the audited consolidated financial statements for
the Company and its Subsidiaries for the eight months ended December 31, 1996;
and (iv) the unaudited consolidated financial statements for the Company and its
Subsidiaries, dated October 31, 1997. Such financial statements present fairly
in all material respects the consolidated financial position, results of
operations, shareholders' equity and cash flows of the Company at the respective
dates or for the respective periods to which they apply. Except as disclosed
therein, such statements and related notes have been prepared each in accordance
with GAAP consistently applied throughout the periods involved (except, in the
case of the unaudited financial statements, for the exclusion of footnotes and
normal year end adjustments). Except as set forth on Schedule 4.11, since
October 31, 1997, neither the Company nor any of its Subsidiaries has incurred
any liabilities or obligations (whether absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due) of any
nature, except for liabilities, obligations or contingencies (a) which are
reflected in the unaudited balance sheet of the Company at October 31, 1997, (b)
which were incurred in the ordinary course of business after October 31, 1997
and consistent with past practices, (c) which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, or (d)
which arise as a result of this Agreement or the other Documents. Since December
31, 1996, there has been no change in any significant accounting (including tax
accounting) policies, practices or procedures of the Company or its
Subsidiaries. All financial statements concerning the Company and its
Subsidiaries that will hereafter be furnished by the Company and its
Subsidiaries to the Investors or any Holder pursuant
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to this Agreement will be prepared in accordance with GAAP consistently applied
(except as disclosed therein) and will present fairly in all material respects
the financial condition of the entities covered thereby as at the dates thereof
and the results of their operations for the periods then ended.
(c) Except as set forth on Schedule 4.11, the Company has good
and marketable title to all properties, interests in properties and assets,
real, personal and mixed, tangible or intangible, used in the conduct of its
business, free and clear of all Liens other than Permitted Liens.
Section 4.12 Full Disclosure
Neither this Agreement, the financial statements referred to in
Section 4.11 nor any Document contains any untrue statement of a material fact
- ------------
or omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made.
Section 4.13 Private Offering
Assuming the correctness of the representations and warranties set
forth in Sections 5.1 and 5.2 hereof, the offer and sale of the Securities to
--------------------
the Investors hereunder is exempt from the registration and prospectus delivery
requirements of the Securities Act. In the case of each offer or sale of the
Securities, no form of general solicitation or general advertising was used by
the Company and its representatives, including, but not limited to,
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
Section 4.14 No Brokers
The Company has not engaged any broker, finder, commission agent or
other such intermediary in connection with the sale of the Securities and the
transactions contemplated by this Agreement and the other Documents, and the
Company is under no obligation to pay any broker's or finder's fee or commission
or similar payment in connection with such transactions.
Section 4.15 Litigation
(a) Except as set forth on Schedule 4.15, there is no action
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced, or to the knowledge of the Company, threatened
("Proceedings") against or affecting the Company or any of its Subsidiaries or
-----------
any of their respective properties or assets, except for such Proceedings that
would not reasonably be expected to have, singly or in the aggregate, a Material
Adverse Effect,
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and there is no Proceeding seeking to restrain, enjoin, prevent the consummation
of or otherwise challenge this Agreement or any of the other Documents or the
transactions contemplated hereby or thereby.
(b) Neither the Company nor any of its Subsidiaries is subject
to (i) any judgment, order or decree of any Governmental Body, or (ii) any rule
or regulation of any Governmental Body that has had a Material Adverse Effect
or that would reasonably be expected to have, singly or in the aggregate, a
Material Adverse Effect.
Section 4.16 Labor Relations
Neither the Company nor any of its Subsidiaries, nor any Person for
whom the Company or any of its Subsidiaries is or may be responsible by law or
contract, is engaged in any unfair labor practice that would reasonably be
expected to have, singly or in the aggregate, a Material Adverse Effect. There
is (a) no unfair labor practice charge or complaint pending or, to the knowledge
of the Company, threatened against the Company or any of its Subsidiaries, or
any Person for whom the Company or any of its Subsidiaries is or may be
responsible by law or contract, before the National Labor Relations Board or any
corresponding state, local or foreign agency, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending or threatened, (b) no strike, labor dispute, slowdown or stoppage
pending or threatened against the Company or any of its Subsidiaries, or any
Person for whom either the Company or any of its Subsidiaries is or may be
responsible by law or contract, and (c) no union representation claim or
question existing with respect to the employees of the Company or any of its
Subsidiaries, or any Person for whom either the Company or any of its
Subsidiaries is or may be responsible by law or contract, and no union
organizing activities taking place. Neither the Company nor any of its
Subsidiaries, nor any Person for whom the Company or any of its Subsidiaries is
or may be responsible by law or contract, is a party to any collective
bargaining agreement.
Except as disclosed on Schedule 4.16 or such as would not reasonably
be expected to result in a Material Adverse Effect, neither the Company nor any
of its Subsidiaries has violated any applicable Federal, state, provincial or
foreign law relating to employment or employment practices or the terms and
conditions of employment, including, without limitation, discrimination in the
hiring, promotion or pay of employees, wages, hours of work, plant closings and
layoffs, collective bargaining, immigration and occupational safety and health.
To the knowledge of the Company or any of its Subsidiaries, no charges with
respect to or relating to the Company or any of its Subsidiaries are pending
before the Equal Employment Opportunity Commission or any other corresponding
state agency, and the Company and each of its Subsidiaries have at all times
been in material compliance with all Federal and state laws and regulations
prohibiting discrimination in the workplace including, without limitation, laws
and regulations that prohibit discrimination and/or harassment on account of
race, national origin, religion, gender, disability, age, immigration status,
workers compensation status or otherwise.
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Section 4.17 Taxes
Except as otherwise disclosed in Schedule 4.17:
(a) The Company and its Subsidiaries have timely filed or will
timely file or cause to be timely filed, all Tax Returns (or extensions)
required by applicable law to be filed by any of it prior to or as of the
Closing Date. All such Tax Returns and amendments thereto are or will be true,
complete and correct in all material respects.
(b) The Company and its Subsidiaries have paid or where payment
is not yet due, have established, or will establish or cause to be established
on or before the Closing Date, an adequate accrual for the payment of all Taxes
due with respect to any period ending prior to or as of the Closing Date.
(c) No Audit by a Tax Authority is pending or threatened with
respect to any Tax Returns filed by, or Taxes due from, the Company or its
Subsidiaries. No issue has been raised by any Tax Authority in any Audit of the
Company or its Subsidiaries that if raised with respect to any other period not
so audited would reasonably be expected to result in a material proposed
deficiency for any period not so audited. No deficiency or adjustment for any
Taxes has been threatened, proposed, asserted or assessed against the Company or
its Subsidiaries. There are no liens for Taxes upon the assets of the Company or
its Subsidiaries, except liens for current Taxes not yet due.
(d) Neither Company nor its Subsidiaries have given or been
requested to give any waiver of statutes of limitations relating to the payment
of Taxes or has executed powers of attorney with respect to Tax matters, which
will be outstanding as of the Closing Date.
(e) Neither the Company nor its Subsidiaries are a party to, or
are bound by any tax sharing, cost sharing, or similar agreement or policy
relating to Taxes.
(f) Neither the Company nor its Subsidiaries have entered into
agreements that would result in the disallowance of any tax deductions pursuant
to Section 280G of the Code. No "consent" within the meaning of Section 341(f)
------------ --------------
of the Code has been filed with respect to the Company or its Subsidiaries.
Section 4.18 Environmental Matters
(a) Each of the Company and its Subsidiaries is in compliance
with all Environmental Laws, except where such non-compliance would not
reasonably be expected to have a Material Adverse Effect, and neither the
Company nor any of its Subsidiaries has received any
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written communication that alleges that the Company or its Subsidiaries is not
in compliance with any Environmental Laws, and there are no circumstances that
may prevent or interfere with such compliance in the future.
(b) There is no Environmental Claim pending or to the knowledge
of the Company threatened against the Company or any of its Subsidiaries with
respect to the operations or business of the Company or its Subsidiaries, or
against any person or entity whose liability for any Environmental Claim the
Company or its Subsidiaries has retained or assumed either contractually or by
operation of law.
(c) To the Company's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge, presence or disposal of
any Material of Environmental Concern, that could form the basis of any
Environmental Claim against the Company or its Subsidiaries, or against any
person or entity whose liability for any Environmental Claim the Company or its
Subsidiaries has retained or assumed either contractually or by operation of
law, which would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
(d) Without in any way limiting the generality of the
foregoing, Schedule 4.18(d) sets forth (i) all permits, licenses and other
governmental authorizations held by the Company and its Subsidiaries, or
required for any of their operations or business, under any Environmental Law,
including the current status of each such permit, license and authorization,
(ii) all on-site and to the knowledge of the Company off-site locations where
the Company or any of its Subsidiaries has stored, disposed or arranged for the
disposal of Materials of Environmental Concern, (iii) to the knowledge of the
Company, all underground storage tanks, and the capacity and contents of such
tanks, located on property owned, leased or controlled by the Company or its
Subsidiaries, (iv) to the knowledge of the Company, the location and condition
of any asbestos or lead (including furnishings or lead-based paints) contained
in or forming part of any building, building component, structure or office
space owned, leased or controlled by the Company or its Subsidiaries, and (v) to
the knowledge of the Company, all PCBs or PCB-containing items that are used or
stored at any property owned, leased or controlled by the Company or its
Subsidiaries.
Section 4.19 ERISA
Except as set forth on Schedule 4.19, neither the Company nor its
Subsidiaries, or any other trade or business, whether or not incorporated that
together with the Company or its Subsidiaries would be deemed a "single
employer" (within the meaning of Section 4001 of ERISA (an "ERISA Affiliate") is
---------------
a "party in interest" (as defined in Section 3(14) of ERISA) or a "disqualified
person" (within the meaning of Section 4975 of the Code), with respect to any
profit-sharing, pension or retirement plan, program, arrangement or agreement,
or any other "employee benefit plan" (within the meaning of Section 3(3) of
ERISA) or any "plan" (within the meaning of Section
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4975 of the Code) (collectively, each such plan, program, arrangement or
agreement an "Employee Benefit Plan").
---------------------
With respect to each Employee Benefit Plan: (i) each Employee Benefit
Plan has been administered in compliance in all material respects, with its
terms including, but not limited to, any provisions relating to contributions
thereunder, and is in compliance in all material respects with the applicable
provisions of ERISA, the Code and all other Federal, state and other applicable
laws, rules and regulations, as they relate to such Employee Benefit Plans; (ii)
no "employee pension benefit plan" (as defined in Section 3(2) of ERISA) has
been the subject of a "reportable event" (as defined in Section 4043 of ERISA)
and there have been no "prohibited transactions" (as described in Section 4975
of the Code or Title I of ERISA) effected by the Company or its Subsidiaries
with respect to any Employee Benefit Plan and, to the knowledge of the Company
and its Subsidiaries, there have been no "prohibited transactions" (as described
in Section 4975 of the Code or Title I of ERISA) effected by any Person other
than the Company or its Subsidiaries with respect to any Employee Benefit Plan;
(iii) there are no proceedings, suits or material claims (other than routine
claims for benefits) pending or to the knowledge of the Company or its
Subsidiaries threatened with respect to any Employee Benefit Plan, the assets of
any trust thereunder or the Employee Benefit Plan sponsor with respect to the
design or operation of any Employee Benefit Plan; (iv) no condition exists or
event or transaction has occurred in connection with any Employee Benefit Plan
that has resulted or is reasonably likely to result in the Company or its
Subsidiaries or any such ERISA Affiliate incurring any liability, fine or
penalty except as would not reasonably be expected to have, singly or in the
aggregate, a Material Adverse Effect; (v) no Employee Benefit Plan is or ever
has been subject to Title IV of ERISA and neither the Company nor its
Subsidiaries has any liability under Title IV of ERISA, whether actual or
contingent; and (vi) no amounts payable pursuant to any Employee Benefit Plan
will, in connection with the transactions contemplated under this Agreement, the
other Documents, fail for any reason to be deductible for Federal income tax
purposes.
Section 4.20 Intellectual Property
Each of the Company and its Subsidiaries owns or possesses adequate
licenses or other rights to use all material intellectual property, including
but not limited to trademarks, service marks, trade names, copyrights, computer
software, and know-how, necessary to conduct its business as currently conducted
and as proposed to be conducted, and neither the Company nor any of its
Subsidiaries has received any written notice of infringement of or conflict with
asserted rights of others with respect to the use of intellectual property,
including but not limited to trademarks, service marks, trade names, copyrights,
computer software or know-how which would reasonably be expected to result in
any Material Adverse Effect. To the knowledge of the Company, all intellectual
property material to its business as currently conducted and as proposed to be
conducted is valid and enforceable and the Company has performed all acts and
has paid all required fees and taxes to maintain all registrations and
applications of such intellectual property in full force and effect. Neither the
Company nor any of its Subsidiaries, in the conduct of their business as now
conducted
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or as proposed to be conducted, infringes or conflicts with any right of any
third party, known to the Company, where such infringement or conflict would
reasonably be expected to result in any Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is, nor will it be as a result of the
execution and delivery of this Agreement and the other Documents or the
performance of any obligations hereunder and thereunder, in breach of any
license or other agreement relating to any intellectual property, except as
would not reasonably be expected to have a Material Adverse Effect. To the
knowledge of the Company, no third party is infringing or has infringed any
intellectual property of the Company or its Subsidiaries. Schedule 4.20 hereto
lists all material intellectual property owned or licensed by the Company or its
Subsidiaries. For the purposes of Schedule 4.20, "material intellectual
property" shall not include any retail shrinkwrap software licensed by the
Company.
Section 4.21 Compliance with Laws
Each of the Company and its Subsidiaries has obtained and has
maintained in good standing any licenses, permits, consents and authorizations
required to be obtained by it under all Laws relating to its business, the
absence of which would reasonably be expected to have, singly or in the
aggregate, a Material Adverse Effect, and any such licenses, permits, consents
and authorizations remain in full force and effect, except as to any of the
foregoing the absence of which would not reasonably be expected to have, singly
or in the aggregate, a Material Adverse Effect. Each of the Company and its
Subsidiaries is in compliance, in all material respects, with all Laws and there
is no pending or, to the Company's knowledge, threatened, Proceedings against
either the Company or its Subsidiaries under any Laws, other than any such
Proceedings which, if adversely determined, would not reasonably be expected to
have, singly or in the aggregate, a Material Adverse Effect.
Section 4.22 Agreements
Except as set forth on Schedule 4.22 hereto, the Corporation is not a
party to any written or oral (a) Contract with any labor union; (b) Contract for
the future purchase of fixed assets or for the future purchase of materials,
supplies or equipment in excess of normal operating requirements; (c) Contract
for the employment of any officer, individual employee or other person on a
full-time basis or any contract with any Person on a consulting basis; (d)
agreement or indenture relating to the borrowing of money or to the mortgaging,
pledging or otherwise placing a Lien on any assets of the Company; (e) guaranty
of any obligation for borrowed money; (f) material lease or agreement under
which the Company is lessee of or holds or operates any property, real or
personal, owned by any other party; (g) material lease or agreement under which
the Company is lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by the Company; (h) agreement or
other commitment for capital expenditures in excess of $100,000; (i) Contract,
agreement or commitment under which the Company is obligated to pay any broker's
fees, finder's fees or any such similar fees, to any third party in connection
with the
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transactions contemplated herein; or (j) any other Contract, agreement,
arrangement or understanding which is material to the business of the Company.
All such Contracts constitute the valid and binding obligations of the Company
and, to the best knowledge of the Company, the other parties thereto,
enforceable in accordance with their terms, except as enforcement may be limited
by general principles of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally. For the purposes of this
Section 4.22, "material" shall mean any Contract involving more than
$100,000.00.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR
Each Investor (as to itself only) represents and warrants to the
Company that:
Section 5.1 Purchase for Own Account
Such Investor is purchasing the Securities to be purchased by it
solely for its own account and not as nominee or agent for any other person and
not with a view to, or for offer or sale in connection with, any current
distribution thereof (within the meaning of the Securities Act) that would cause
the original purchase of the Securities to be in violation of the securities
laws of the United States of America or any state thereof, without prejudice,
however, to its right at all times to sell or otherwise dispose of all or any
part of such Securities pursuant to a registration statement under the
Securities Act or pursuant to an exemption from the registration requirements of
the Securities Act, and subject, nevertheless, to the disposition of its
property being at all times within its control.
Section 5.2 Accredited Investor
Such Investor is knowledgeable, sophisticated and experienced in
business and financial matters and in investing in privately held business
enterprises; it has previously invested in securities similar to the Securities
and it acknowledges that the Securities have not been registered under the
Securities Act and understands that the Securities must be held indefinitely
unless they are subsequently registered under the Securities Act or such sale is
permitted pursuant to an available exemption from such registration requirement;
it is able to bear the economic risk of its investment in the Securities and is
presently able to afford the complete loss of such investment; and it is an
"accredited investor" as defined in Regulation D promulgated under the
Securities Act.
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Section 5.3 Authorization
Each Investor has taken all actions necessary to authorize it (i) to
execute, deliver and perform all of its obligations under this Agreement, (ii)
to perform all of its obligations under the Documents and (iii) to consummate
the transactions contemplated hereby and thereby. This Agreement is a legally
valid and binding obligation of each Investor enforceable against it in
accordance with its terms, except for (a) the effect thereon of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting the rights of creditors generally and (b) limitations imposed by
Federal or state law or equitable principles upon the specific enforceability of
any of the remedies, covenants or other provisions thereof and upon the
availability of injunctive relief or other equitable remedies.
Section 5.4 ERISA
Each such Investor represents that either:
(a) it is not acquiring the Securities for or on behalf of any
Employee Benefit Plan;
(b) the assets used to acquire the Securities are assets of an
insurance company general account and the purchase of the Securities would be
exempt under the provisions of Prohibited Transaction Class Exemption 95-60;
(c) the assets used to acquire the Securities are assets of a
"venture capital operating company" or "real estate operating company" (as
defined in 29 C.F.R ' 25 10.3-101; or
(d) if it is otherwise acquiring the Securities on behalf of an
employee pension benefit plan, an employee welfare benefit plan or a "Plan,"
either directly or through an investment fund (such as a bank collective
investment fund or insurance company pooled separate account), then, assuming
that the plans identified to such Investor by the Company in writing are the
only employee benefit plans (as defined in Section 3 of ERISA) or Plans with
respect to which the Company is a "party in interest" or "disqualified person"
(as such terms are defined in section 3 of ERISA and section 4975 of the Code,
respectively), either
(i) no part of the funds to be used to purchase the
Securities constitutes assets allocable to any trust that contains assets
of any of such employee benefit plans, or
(ii) exemption from the prohibited transaction rules applies
such that the use of such funds does not constitute a non-exempt
prohibited transaction in violation of section 406 of ERISA or section 4975
of the Code, which could be subject to a
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civil penalty assessed pursuant to section 502 of ERISA or a tax imposed
under section 4975 of the Code.
ARTICLE VI
COVENANTS
The Company covenants to the Holders of outstanding Securities as
follows:
Section 6.1 Compliance with Laws; Maintenance of licenses
The Company shall, and shall cause each of its Subsidiaries to, comply
with all statutes, ordinances, governmental rules and regulations, judgments,
orders and decrees (including all Environmental Laws) to which any of them is
subject, and maintain, obtain and keep in effect all licenses, permits,
franchises and other governmental authorizations necessary to the ownership or
operation of its properties or the conduct of its businesses, except to the
extent that the failure to so comply or maintain, obtain and keep in effect
would not reasonably be expected to have, singly or in the aggregate, a Material
Adverse Effect.
Section 6.2 Inspection of Properties and Records
Until the closing of a QPO, the Company agrees to allow, and to cause
each of its Subsidiaries to allow, each Investor or subsequent Holder who
continues to hold Preferred Shares with an original cost of at least $1,000,000
(or, such Persons as any of them may designate) (individually and collectively,
"Inspectors"), subject to appropriate agreements as to confidentiality, (i) to
----------
visit and inspect any of the properties of the Company or any of its
Subsidiaries, (ii) to examine all their books of account, records, reports and
other papers and to make copies and extracts therefrom, (iii) to discuss its
affairs, finances and accounts with its officers and employees, and (iv) to
discuss the financial condition of the Company and its Subsidiaries with their
independent accountants upon reasonable notice to the Company of its intention
to do so and so long as the Company shall be given the reasonable opportunity to
participate in such discussions (and by this provision the Company authorizes
such accountants to have such discussions with the Inspectors). All such visits,
examinations and discussions set forth in the preceding sentence shall be at
such reasonable times and as often as may be reasonably requested.
Section 6.3 Information to Prospective Investors
Until the closing of a QPO, the Company shall, upon the request of any
Investor or subsequent Holder, deliver to such Investor or such Holder and any
prospective purchaser designated by such Investor or such Holder promptly
following the request of such Investor or such Holder or such prospective
purchaser such information which such Investor or such Holder or such
prospective
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purchaser may reasonably request in order to comply with the information
requirements of Rule 144A.
Section 6.4 Financial Statements
Until the closing of a QPO, the Company will deliver to each Investor
or subsequent Holder who continues to hold Preferred Shares with an original
cost of at least $1,000,000:
(a) Beginning with January 1998, not more than 30 days after the
end of each month, a consolidated balance sheet of the Company as at the end of
such month and the related consolidated statements of income of the Company for
such month and (in the case of all months other than the first month of such
fiscal year) for the period from the beginning of the current fiscal year to the
end of such month, and setting forth, in each case in comparative form, figures
for the corresponding month and each previous month and period in the Company's
budget for the current fiscal year, certified by the chief financial officer of
the Company as fairly presenting in all material respects the financial
condition of the Company as at the dates indicated and the results of their
operations for the periods indicated, prepared in accordance with generally
accepted accounting principles consistency applied except for the absence of
footnotes and subject to changes resulting from periodic adjustments;
(b) Not more than 90 days after the end of each fiscal year of
the Company, a consolidated balance sheet of the Company as of such year and the
related consolidated statements of income and cash flows of the Company for such
year, corresponding figures from the preceding fiscal year, and in the case of
such consolidated financial statements, accompanied by a report thereon of Price
Waterhouse or such other independent public accountants of recognized national
standing selected by the Company, which report shall state that such
consolidated financial statements were prepared in accordance with generally
accepted accounting principles consistently applied and present fairly in all
material respects the consolidated financial condition of the Company as of the
dates indicated; and
(c) Not later than January 15, 1998, monthly and annual
management projections and budgets for fiscal year 1998, and not later than 30
days prior to the start of each fiscal year beginning with the fiscal year
beginning January 1, 1999, monthly and annual management projections and budgets
for such fiscal year.
Section 6.5 Employee Agreements
The Company will use its commercially reasonable best efforts to cause
its key employees to enter into confidentiality/non-competition/no-hire
agreements within six months of the Closing Date, in a form reasonably
acceptable to the Company and the Investors.
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Section 6.6 Key Man Insurance
The Company will use its commercially reasonable best efforts to
purchase within six months of the Closing Date a life insurance policy on the
life of U. Bertram Ellis, Jr. in the principal amount of $5 million the proceeds
of which shall be paid to the Company.
Section 6.7 Indemnification for Finder's Fees
The Company hereby agrees to indemnify each Investor, each Affiliate
of an Investor, and each director, officer, partner, employee, counsel, agent or
representative against and hold them harmless from all losses, claims, damages
or other liabilities arising from any finder's or other brokers or investment
banker fees payable by the Company with respect to the transactions contemplated
hereunder.
Section 6.8 Securities Act Registration Statements
Except for securities of the Company registered on Form S-4 or Form S-
8 promulgated under the Securities Act or any successor forms thereto, the
Company shall not file any registration statement under the Securities Act
covering any securities unless it shall first have given the Investors written
notice thereof. In connection with any registration statement referred to in
this Section 7.4, the Company will indemnify, to the extent permitted by law,
each Investor, its partners, officers and directors and each person, if any, who
controls such Investor within the meaning of Section 15 of the Securities Act,
against all losses, claims, damages, liabilities and expenses caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus or any preliminary prospectus or any
amendment thereof or supplement thereto or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses are caused by any untrue
statement or alleged untrue statement or omission or alleged omission contained
in written information furnished to the Company by such Investor for use in such
registration statement. If, in connection with any such registration statement,
an Investor shall furnish written information to the Company for use in the
registration statement, such Investor will indemnify, to the extent permitted by
law, the Company, its directors, each of its officers who sign such registration
statement and each person, if any, who controls the Company within the meaning
of the Securities Act against all losses, claims, damages, liabilities and
expenses caused by any untrue statement or alleged untrue statement of a
material fact or any omission or alleged omission of a material fact required to
be stated in the registration statement or prospectus or any preliminary
prospectus or any amendment thereof or supplement thereto or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or alleged untrue statement or such omission or alleged omission is
contained in information so furnished in writing by such Investor for use
therein.
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ARTICLE VII
MISCELLANEOUS
Section 7.1 Notices
All notices, demands, requests, consents or approvals (collectively,
"Notices") required or permitted to be given hereunder or which are given with
respect to this Agreement shall be in writing and shall be personally delivered
or mailed, registered or certified, return receipt requested, postage prepaid
(or by a substantially similar method), or delivered by a reputable overnight
courier service with charges prepaid, or transmitted by hand delivery, telegram,
telex or facsimile, addressed as set forth below, or such other address (and
with such other copy) as such party shall have specified most recently by
written notice. Notice shall be deemed given or delivered on the date of service
or transmission if personally served or transmitted by telegram, telex or
facsimile. Notice otherwise sent as provided herein shall be deemed given or
delivered on the third Business Day following the date mailed or on the next
Business Day following delivery of such notice to a reputable overnight courier
service.
To the Company:
IXL Holdings, Inc.
Two Park Place
1888 Emery Street, 2nd Floor
Atlanta, Georgia, 30318
Attention: U. Bertram Ellis, Jr.
Telecopy No.: (404)267-3801
with a copy (which shall not constitute Notice) to:
Minkin & Snyder, PC
One Buckhead Plaza
3060 Peachtree Street, N.E., Suite 1100
Atlanta, Georgia 30305
Attn: James S. Altenbach, Esq.
Telecopy No.: (404)261-5064
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with an additional copy (which shall not constitute Notice) to:
Kelso & Company, Inc.
320 Park Avenue
24th Floor
New York, New York 10022
Attn: James J. Connors II, Esq.
Telecopy No.: (212) 223-2379
To the Investors:
To the address specified on the signature page executed by each such
Investor.
with a copy (which shall not constitute Notice) to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attn: Harvey M. Eisenberg, Esq.
Telecopy No.: (212) 408-2420
Section 7.2 Successors and Assigns
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto, and their respective successors and permitted assigns;
provided that (i) neither this Agreement nor any rights or obligations hereunder
may be transferred or assigned by the Company (except by operation of law in any
merger) and (ii) neither this Agreement nor any rights or obligations hereunder
may be transferred or assigned by any Investor except to any Person to whom such
Investor has transferred Securities.
Section 7.3 No Waivers; Amendments.
(a) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
(b) This Agreement may not be amended or modified, nor may any
provision hereof be waived, other than by a written instrument signed by (x) the
Company and (y) each Investor to which any such amendment pertains.
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Section 7.4 Counterparts
This Agreement may be signed in counterparts, each of which shall
constitute an original and which together shall constitute one and the same
agreement.
Section 7.5 Section Headings
The section headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
Section 7.6 GOVERNING LAW; SUBMISSION TO JURISDICTION
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED
WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY ACTION ARISING OUT OF OR RELATING TO THIS
AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY
AGREES THAT IT WILL NOT COMMENCE ANY SUCH ACTION IN ANY OTHER JURISDICTION. EACH
OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH ACTION BROUGHT IN ANY SUCH
COURT AND ANY CLAIM THAT ANY SUCH ACTION BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. NOTWITHSTANDING THE FOREGOING, NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE INVESTORS TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION.
33
<PAGE>
Section 7.7 Entire Agreement
This Agreement, together with the other Documents, constitutes the
entire agreement and understanding among the parties hereto with respect to the
subject matter hereof and thereof and supersedes any and all prior agreements
and understandings, written or oral, relating to the subject matter hereof.
Section 7.8 Severability
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdictions, it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest extent
permitted by law.
Section 7.9 Further Assurances
The Company shall, and shall cause each of its Subsidiaries to, at its
cost and expense, upon request of any Investor or Holder, duly execute and
deliver, or cause to be duly executed and delivered, to such Investor or Holder
such further instruments and do or cause to be done such further acts as may be
necessary or proper in the reasonable opinion of such Investor or Holder to
carry out more effectually the provisions and purposes of this Agreement and the
other Documents.
Section 7.10 Survival of Representations, Warranties and Agreements;
No Recourse. The representations, warranties and agreements in this Agreement
shall survive the Closing until June 30, 1998, except that the agreements
contained in Article VI and VII shall survive the Closing indefinitely (except
to the extent a shorter period of time is explicitly specified therein). In no
event shall the Investors have any recourse against the present or former
directors, officers or stockholders of the Company or any of its Affiliates with
respect to any representation, warranty or agreement made by the Company in this
Agreement.
Section 7.11 Disclosure of Financial Information
Each Holder is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business, operations or
financial condition of the Company or each of its Subsidiaries which may be
furnished to it hereunder or otherwise, to any other Holder, any court,
Governmental Body claiming to have jurisdiction over such Holder, to the
National Association of Insurance Commissioners or similar organizations, as may
be required or appropriate in response to any summons or subpoena in connection
with any litigation, to the extent necessary
34
<PAGE>
to comply with any law, order, regulation or ruling applicable to such Holder,
to any rating agency, in order to protect its investment hereunder, or to any
Person which shall, or shall have any right or obligation to, succeed to all or
any part of such Holder's interest in any of the Securities and this Agreement
or to any actual or prospective purchaser or assignee thereof. Prior to
disclosing any such information, such Holder shall provide the Company with
prompt written notice so that the Company may seek a protective order or other
appropriate remedy if the Company reasonably determines that such information
must be kept confidential.
[Signature pages follow]
35
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
set forth below as of the date first written above.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
-----------------------------------
Title:
--------------------------------
Address:
- -------
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
380 Madison Avenue
New York, NY 10017 By: CHASE CAPITAL PARTNERS,
Attention: Robert Greene its General Partner
Telecopy No.212/622-3101
By: /s/ Mitchell J. Blutt
-------------------------------
A Partner
FLATIRON PARTNERS, LLC
257 Park Avenue South
12th Floor By: /s/ Jerome D. Colonna
New York, NY 10010 -----------------------------------
Attention: Jerry Colonna A Managing Partner
Telecopy No.212/228-0552
GREYLOCK IX LIMITED PARTNERSHIP
One Federal Street
Boston, MA 02110-2065 By: Greylock IX GP Limited Partnership
Attention: Bill Helman Its General Partner
Telecopy No.617/482-0059
By: /s/ William S. Kaiser
-------------------------------
General Partner
36
<PAGE>
Schedule 1
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Name of Investor Securities Purchased
---------------- --------------------
- -------------------------------------------------------------------------------------
<S> <C>
Chase Venture Capital Associates, L.P. 46,153 shares of Class B Preferred Stock
9,232 shares of Class C Preferred Stock
6,390 Warrants
- -------------------------------------------------------------------------------------
Flatiron Partners, LLC 6,154 shares of Class B Preferred Stock
710 Warrants
- -------------------------------------------------------------------------------------
Greylock IX Limited Partnership 15,384 shares of Class B Preferred Stock
1,775 Warrants
- -------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
List of Exhibits to Exhibit 10.39
---------------------------------
Exhibit A Amended and Restated Certificate of Designation
and the Amended and Restated Certificate of
Incorporation
Exhibit B Warrant Agreement
Exhibit C Registration Rights Agreement
Exhibit D Stockholders Agreement
Exhibit E Opinion of Counsel to the Company
<PAGE>
List of Schedules to Exhibit 10.39
----------------------------------
Schedule 1 Names of Individuals receiving stock
Schedule 1.1 Permitted Liens
Schedule 4.2 Equity Interests of the Company
Schedule 4.3 Subsidiaries of the Company
Schedule 4.10 Indebtedness
Schedule 4.11 Exceptions to Absence of Charges and
Accuracy of Financial Statements
Schedule 4.15 Litigation
Schedule 4.16 Violations of Labor Relations laws
Schedule 4.17 Exceptions to Taxes being timely filed
and paid
Schedule 4.18(d) Permits of the Company under
Environmental Laws
Schedule 4.19 Erisa issues of the Company
Schedule 4.20 Intellectual Property
Schedule 4.22 Contracts
<PAGE>
PURCHASE AGREEMENT
PURCHASE AGREEMENT (the "Agreement") dated as of July 15, 1998, among
CHASE CAPITAL PARTNERS, a New York general partnership ("CCP"), CHASE VENTURE
CAPITAL ASSOCIATES, L.P., a California limited partnership ("CVCA" or the
"Seller") and CB CAPITAL INVESTORS, L.P., a Delaware limited partnership ("CB
Capital" or the "Buyer").
WHEREAS, CVCA owns the following securities (collectively, the
"Securities") of iXL Holdings, Inc., a Delaware corporation (the "Company"):
. 46,153 shares of Class B Preferred Stock (certificate B-1);
. 6,390 Warrants to purchase Class B Preferred Stock;
. 9,232 shares of Class C Preferred Stock (certificate C-1); and
. Right to acquire additional Warrants to purchase Class B Preferred
Stock of the Company pursuant to Warrant Award Agreement dated as
of March 12, 1998.
WHEREAS, the parties hereto deem it desirable and in their respective
best interests to enter into this Agreement to transfer the Securities from CVCA
to CB Capital.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Purchase and Sale.
-----------------
(a) CVCA hereby sells the Securities to CB Capital, and CB Capital
hereby purchases the Securities from CVCA, for a purchase price of
$17,917,812.44, which purchase price equals the fair market value of the
Securities, as determined by the parties hereto.
(b) CCP hereby consents to the sale of the Securities to CB Capital.
(c) This Agreement shall constitute a stock power authorizing the
Company to record on its books and records the transfer of the Securities from
CVCA to CB Capital.
(d) All transfers of Securities contemplated herein shall be deemed to
occur on the date hereof. All necessary bookkeeping entries shall be made
accordingly.
2. Buyers Representations.
----------------------
The Buyer represents and warrants that it is purchasing the Securities
for its own account, for investment purposes and not with a view to the
distribution thereof. The Buyer agrees that it will not, directly or indirectly,
offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of any
of the Securities (or solicit any offers to buy, purchase, or otherwise acquire
or take a pledge of any of its Securities, except in compliance with the
Securities Exchange Act of 1933, as amended (the "Securities Act") and the
Securities Exchange Act of
<PAGE>
1934, as amended (the "Exchange Act"), and the rules and regulations under the
Securities Act and the Exchange Act. The Buyer represents and warrants that it
has acquired such information about the Company, and has had an opportunity to
ask such questions of the Company's officers, as it has deemed necessary in
order to make an informal investment decision concerning the Securities. The
Buyer further represents and warrants that it is an "accredited investor" (as
such term is defined by Rule 501 of the Securities Act) and it has such
knowledge and sophistication necessary to use such knowledge to make an informed
investment decision and that it has the ability to bear the economic risks of
any such investment.
3. The Sellers Representations.
---------------------------
The Seller represents and warrants as follows:
(a) It owns (and upon completion of the transactions contemplated
herein, the Purchaser will acquire), beneficially and of record, the Securities
free and clear of all encumbrances (other than transfer restrictions pursuant to
the Securities Act and encumbrances pursuant to the Second Amended and Restarted
Stockholders Agreement dated as of December 17, l977, as amended, among the
Company and the stockholders party thereto (the "Stockholders Agreement");
(b) The transfer of Securities to the Buyer is (i) exempt from the
registration requirements of the Securities Act and (ii) permitted by the
Stockholders Agreement, and
(c) No consents are necessary for CVCA to sell the Securities.
4. Miscellaneous.
-------------
(a) This Agreement may be executed in two or more counterparts, any
one of which need not contain the signatures of more than one party, but all
such counterparts taken together when delivered shall constitute one and the
same agreement.
(b) This Agreement contains the complete agreement among the parties
and supersedes any prior understandings, agreements or representations by or
between the parties, written or oral which may have related to the subject
matter hereof in any way.
(c) This Agreement shall be governed by and construed in accordance
with the domestic laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York.
(d) This Agreement may only be amended in a writing executed by all
parties hereto.
* * *
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their authorized
representatives to execute this Agreement on the date first written above.
CHASE CAPITAL PARTNERS
By: /s/ George Kelts
-------------------------
Name: George Kelts
Title: Managing Director/
Chief Administrative Officer
CHASE VENTURE CAPITAL
ASSOCIATES ,L.P.
By: CHASE CAPITAL PARTNERS,
its General Partner
By: /s/ George Kelts
-------------------------
Name: George Kelts
Title: Managing Director/
Chief Administrative Officer
CB CAPITAL INVESTORS, L.P.
By: CB CAPITAL INVESTORS, INC.
its General Partner
By: /s/ George Kelts
-------------------------
Name: George Kelts
Title: Vice President
3
<PAGE>
The Company, in reliance upon the representations set forth in
Sections II and III above, hereby waives compliance with the requirements set
forth in the Stockholders Agreement.
iXL HOLDINGS, INC.
By: /s/ James V. Sandry
-----------------------------
Name: James V. Sandry
Title:
4
<PAGE>
__________________________________________________
EXHIBIT 10.40
WARRANT AGREEMENT
among
IXL HOLDINGS, INC.
and the other
PARTIES NAMED HEREIN
____________________
Dated as of
December 17, 1997
____________________
__________________________________________________
<PAGE>
WARRANT AGREEMENT
-----------------
This WARRANT AGREEMENT is dated as of December 17, 1997 (the "Agreement")
----------
and entered into by and among IXL Holdings, Inc., a Delaware corporation (the
"Company"), and the purchasers party hereto (each, an "Investor" and
-------
collectively, the "Investors"). All capitalized terms used but not defined
---------
herein shall have the meanings ascribed to them in the Purchase Agreement (as
hereinafter defined).
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of December
17, 1997 (the "Purchase Agreement") by and among the Company and the Investors,
------------------
the Company is issuing to the Investors certain Warrants, as hereinafter
described (the "Warrants"), to purchase an aggregate of 8,875 shares (subject to
adjustment as provided herein) of Class B Convertible Preferred Stock, par value
$.O1 per share (the "Class B Preferred Stock"), of the Company (the shares of
-----------------------
Class B Preferred Stock issuable upon exercise of the Warrants being referred to
herein as the "Warrant Shares");
--------------
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
SECTION 1. Warrant Certificates. The Company will issue and deliver a
certificate or certificates evidencing the Warrants (the "Warrant Certificates")
--------------------
pursuant to the terms of the Purchase Agreement. Such certificate or
certificates shall be substantially in the form set forth as Exhibit A attached
hereto. Warrant Certificates shall be dated the date of issuance by the Company.
SECTION 2. Execution of Warrant Certificates. Warrant Certificates shall be
signed on behalf of the Company by its Chairman of the Board or its Chief
Executive Officer, President or any Vice President. Each Warrant Certificate
shall also be signed on behalf of the Company by its Secretary or an Assistant
Secretary.
SECTION 3. Restrictions on Transfer; Registration of Transfers and
Exchanges. Prior to any proposed transfer of the Warrants or the Warrant Shares,
unless such transfer is made pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the
--------------
transferring Holder will deliver to the Company an opinion of counsel,
reasonably satisfactory in form and substance to the Company, to the effect that
the Warrants or Warrant Shares, as applicable, may be sold or otherwise
transferred without registration under the Securities Act; provided, however,
that, with respect to transfers by the Investors or their Affiliates and Related
Persons, no such opinion shall be required in connection with any transfer to
the Company or to a Permitted Transferee. Upon original issuance thereof, and
until such time as the same shall have been registered under the Securities Act
or sold pursuant to Rule 144
2
<PAGE>
promulgated thereunder (or any similar rule or regulation) each Warrant
Certificate shall bear the legend included on the first page of Exhibit A,
UNLESS in such opinion of counsel, such legend is no longer required by the Act.
Subject to the conditions to transfer contained in the Second Amended and
Restated Stockholders Agreement of the Company, as such agreement may be amended
from time to time (the "Stockholders Agreement") which shall apply to the
Holders of the Warrants as if such Holders were "Chase Investors," as defined in
the Stockholders Agreement, the Company shall from time to time register the
transfer of any outstanding Warrant Certificates in the Warrant Register to be
maintained by the Company upon surrender thereof accompanied by a written
instrument or instruments of transfer in form reasonably satisfactory to the
Company, duly executed by the registered Holder or Holders thereof or by the
duly appointed legal representative thereof or by a duly authorized attorney.
Upon any such registration of transfer, a new Warrant Certificate shall be
issued to the transferee Holder(s) and the surrendered Warrant Certificate shall
be canceled and disposed of by the Company. Any attempted transfer in violation
of the Stockholders Agreement shall be null and void.
SECTION 4. Warrants; Exercise of Warrants. Subject to the terms of this
Agreement, each Holder shall have the right, which may be exercised at any time
during the period commencing on the date hereof and ending at 5:00 p.m., New
York City time, on December 17, 2007 (the "Expiration Date"), to receive from
-----------------
the Company the number of fully paid and nonassessable Warrant Shares (and such
other consideration) which the Holder may at the time be entitled to receive on
exercise of such Warrants and payment of the Exercise Price for such Warrant
Shares. Each Warrant not exercised prior to 5:00 p.m., New York time, on the
Expiration Date shall become void and all rights thereunder and all rights in
respect thereof under this Agreement shall cease as of such time. No adjustments
as to dividends will be made upon exercise of the Warrants, except as otherwise
expressly provided herein.
The price at which each Warrant shall be exercisable (the "Exercise Price")
---------------
shall be equal to $458.00 per share of Class B Preferred Stock.
A Warrant may be exercised upon surrender to the Company at its office
designated for such purpose of the Warrant Certificate or Certificates to be
exercised with the form of election to purchase attached thereto duly filled IN
and signed, and upon payment to the Company of the Exercise Price for the number
of Warrant Shares in respect of which such Warrants are then exercised. Payment
of the aggregate Exercise Price shall be made, at the election of the Holder,
(i) in cash, by certified or official bank check payable to the order of the
Company, (ii) by delivering for surrender and cancellation to the Company
Warrants with an aggregate Surrender Value, as of the date of such exercise,
equal to the Exercise Price for the Warrants being exercised, or (iii) any
combination thereof. For the purposes of this paragraph, the "Surrender Value"
of any Warrant is equal to the Fair Market Value (as defined in the
Stockholders' Agreement), as of the date of such surrender, of the Warrant
Shares issuable upon the exercise of such Warrant, minus
3
<PAGE>
the Exercise Price of such Warrant.
Subject to the provisions of Section 5 hereof, upon such surrender of
Warrant Certificates and payment of the Exercise Price, the Company shall issue
and cause to be delivered, as promptly as practicable, to or upon the written
order of the Holder and in such name or names as such Holder may designate a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants (and such other consideration as may be
deliverable upon exercise of such Warrants) together with cash for fractional
Warrant Shares as provided in Section 10. The certificate or certificates for
such Warrant Shares shall be deemed to have been issued and the person so named
therein shall be deemed to have become a holder of record of such Warrant Shares
as of the date of the surrender of such Warrants and payment of the Exercise
Price, irrespective of the date of delivery of such certificate or certificates
for Warrant Shares.
Each Warrant shall be exercisable, at the election of the Holder thereof,
either in full or from time to time in part and, in the event that a Warrant
Certificate is exercised in respect of fewer than all of the Warrant Shares
issuable on such exercise at any time prior to the date of expiration of the
Warrants, a new certificate evidencing the remaining Warrant or Warrants will be
issued and delivered pursuant to the provisions of this Section and of Section 2
hereof.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled and disposed of by the Company. The Company shall keep copies of this
Agreement and any notices given or received hereunder available for inspection
by the Holders during normal business hours at its office.
SECTION 5. Payment of Taxes. The Company will pay all documentary stamp
taxes and other governmental charges (excluding all foreign, federal or state
income, franchise, property, estate, inheritance, gift or similar taxes) in
connection with the issuance or delivery of the Warrants hereunder, as well as
all such taxes attributable to the initial issuance or delivery of Warrant
Shares upon the exercise of Warrants and payment of the Exercise Price. The
Company shall not, however, be required to pay any tax that may be payable in
respect of any subsequent transfer of the Warrants or any transfer involved in
the issuance and delivery of Warrant Shares in a name other than that in which
the Warrants to which such issuance relates were registered, and, if any such
tax would otherwise be payable by the Company, no such issuance or delivery
shall be made unless and until the person requesting such issuance has paid to
the Company the amount of any such tax, or it is established to the reasonable
satisfaction of the Company that any such tax has been paid.
SECTION 6. Dividends. At any time and from time to time that the Fair
Market Value (as defined in the Stockholders' Agreement) of a Warrant Share
exceeds the Exercise Price per share, the Company shall not make any
distributions on the Common Stock or the Preferred Stock (as such terms are
defined in the Stockholders' Agreement) unless there is
4
<PAGE>
contemporaneously declared and paid a dividend on each Warrant equal to the
distribution paid per share of Class B Preferred Stock.
SECTION 7. Mutilated or Missing Warrant Certificates. If a mutilated
Warrant Certificate is surrendered to the Company, or if the Holder of a Warrant
Certificate claims and submits an affidavit or other evidence satisfactory to
the Company to the effect that the Warrant Certificate has been lost, destroyed
or wrongfully taken, the Company shall issue a replacement Warrant Certificate.
If reasonably required by the Company, such Holder must provide an indemnity
bond, or other form of indemnity, sufficient in the reasonable judgment of the
Company to protect the Company from any loss which it may suffer if a Warrant
Certificate is replaced. If any Investor or any other institutional Holder (or
nominee thereof) is the owner of any such lost, stolen or destroyed Warrant
Certificate, then the affidavit of an authorized officer of such owner, setting
forth the fact of loss, theft or destruction and of its ownership of the Warrant
Certificate at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as a
condition to the execution and delivery of a new Warrant Certificate other than
the unsecured written agreement of such owner to indemnify the Company.
SECTION 8. Reservation of Warrant Shares. The Company shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Class B Preferred Stock or its authorized and issued
Class B Preferred Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Class B Preferred Stock which may then be
deliverable upon the exercise of all outstanding Warrants.
The Company or, if appointed, any transfer agent for the Preferred Stock
and each transfer agent for any shares of the Company's capital stock issuable
upon the exercise of any of the Warrants (collectively, the "Transfer Agent")
---------------
will be irrevocably authorized and directed at all times to reserve such number
of authorized shares as shall be required for such purpose. The Company shall
keep a copy of this Agreement on file with any such Transfer Agent. The Company
will supply any such Transfer Agent with duly executed certificates for such
purposes and will provide or otherwise make available all other consideration
that may be deliverable upon exercise of the Warrants. The Company will furnish
any such Transfer Agent a copy of all notices of adjustments and certificates
related thereto, transmitted to each Holder pursuant to Section 11 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 9 hereof to reduce the Exercise Price below the then par value of the
Warrant Shares, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares at the Exercise Price
as so adjusted.
5
<PAGE>
The Company covenants that all Warrant Shares and other capital stock
issued upon exercise of Warrants will, upon payment of the Exercise Price
therefor and issue thereof, be validly authorized and issued, fully paid,
nonassessable, free of preemptive rights and free, subject to Section 5 hereof,
from all taxes, liens, charges and security interests with respect to the issue
thereof, but such Warrant Shares shall be subject to the applicable terms and
conditions of the Stockholders Agreement.
SECTION 9. Adjustment of Exercise Price and Warrant Number. The number of
shares of Class B Preferred Stock issuable upon the exercise of each Warrant
(the "Warrant Number") is initially one. The Warrant Number is subject to
------- -------
adjustment from time to time upon the occurrence of the events enumerated in, or
as otherwise provided in, this Section 9.
(a) Adjustment for Change in Capital Stock
If the Company:
(1) pays a dividend or makes a distribution on its Class B
Preferred Stock in shares of its Class B Preferred Stock;
(2) subdivides or reclassifies its outstanding shares of Class B
Preferred Stock into a greater number of shares;
(3) combines or reclassifies its outstanding shares of Class B
Preferred Stock into a smaller number of shares; or
(4) issues by reclassification of its Class B Preferred Stock any
shares of its capital stock (other than reclassification arising solely as
a result of a change in the par value or no par value of the Class B
Preferred Stock);
then the Warrant Number and the Exercise Price in effect immediately prior to
such action shall be proportionately adjusted so that the holder of any Warrant
thereafter exercised shall receive the aggregate number and kind of shares of
capital stock of the Company which it would have received immediately following
such action if such Warrant had been exercised immediately prior to such action
for the same aggregate consideration that such holder would have paid if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event
listed above shall occur.
6
<PAGE>
The Company shall not issue shares of Class B Preferred Stock as
a dividend or distribution on any class of capital stock other than Class B
Preferred Stock unless the Warrant Holders also receive such dividend or
distribution on a ratable basis or the appropriate adjustment to the Warrant
Number and Exercise Price is made under this Section 9.
(b) Notice of Adjustment
--------------------
Whenever the Warrant Number is adjusted, the Company shall
provide the notices required by Section 11 hereof.
(c) Voluntary Increase
------------------
The Company from time to time may increase the Warrant Number by
any amount for any period of time (including, without limitation, permanently)
if the period is at least 20 Business Days and if the increase is irrevocable
during the period. Whenever the Warrant Number is increased, the Company shall
mail to the Holders a notice of the increase. The Company shall mail the notice
at least 15 days before the date the increased Warrant Number takes effect. The
notice shall state the increased Warrant Number and the period it will be in
effect.
An increase of the Warrant Number under this Subsection (c)
(other than a permanent increase) does not change or adjust the Warrant Number
otherwise in effect for purposes of subsection (a) of this Section 9.
(d) Reorganizations
---------------
In case of any capital reorganization, other than in the cases
referred to in Section 9(a) hereof, or the consolidation or merger of the
Company with or into another corporation (other than a merger or consolidation
in which the Company is the continuing corporation and which does not result in
any reclassification of the outstanding shares of Preferred Stock or Common
Stock into shares of other stock or other securities or property), or the sale
of the property of the Company as an entirety or substantially as an entirety
(collectively, such actions being hereinafter referred to as "Reorganizations"),
-----------------
there shall thereafter be deliverable upon exercise of any Warrant (in lieu of
the number of shares of Class B Preferred Stock theretofore deliverable) the
number of shares of stock or other securities or property to which a holder of
the number of shares of Class B Preferred Stock that would otherwise have been
deliverable upon the exercise of such Warrant would have been entitled upon such
Reorganization if such Warrant had been exercised in full immediately prior to
such Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a duly adopted resolution certified by the
Company's Secretary or Assistant Secretary, shall be made in the application of
7
<PAGE>
the provisions herein set forth with respect to the rights and interests of
Holders so that the provisions set forth herein shall thereafter be applicable,
as nearly as possible, in relation to any shares or other property thereafter
deliverable upon exercise of Warrants.
The Company shall not effect any such Reorganization unless prior
to or simultaneously with the consummation thereof, (i) notice of such
Reorganization shall be given to each of the Holders of the Warrants, and (ii)
the successor corporation (if other than the Company) resulting from such
Reorganization or the corporation purchasing or leasing such assets or other
appropriate corporation or entity shall expressly assume, by a supplemental
Warrant Agreement or other acknowledgement executed and delivered to the
Holder(s), the obligation to deliver to each such Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase, and all other obligations and liabilities
under this Agreement.
(e) Form of Warrants
----------------
Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement but shall nevertheless be exercisable for the
adjusted number of Warrant Shares at the adjusted Exercise Price.
SECTION 10. Fractional Interests. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 10,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall, pay an amount in cash equal to the fair market value (as
determined in good faith by the Board of Directors) of the Warrant Share so
issuable, multiplied by such fraction.
SECTION 11. Notices to Warrant Holders. Upon any adjustment pursuant to
Section 9 hereof, the Company shall promptly thereafter (i) cause to be filed
with the Company a certificate of an officer of the Company setting forth the
Warrant Number and Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based, and (ii) cause to be given to each of the Holders at its
address appearing on the Warrant Register written notice of such adjustments.
Where appropriate, such notice may be given in advance and included as a part of
the notice required to be mailed under the other provisions of this Section 11.
In case:
8
<PAGE>
(a) The Company shall authorize the issuance to all holders of shares
of Class B Preferred Stock of rights, options or warrants to subscribe for or
purchase shares of Class B Preferred Stock or of any other subscription rights
or warrants;
(b) The Company shall authorize the distribution to all holders of
shares of Class B Preferred Stock of assets, including cash, evidences of its
indebtedness, or other securities;
(c) of any consolidation or merger to which the Company is a party and
for which approval of any shareholders of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any reclassification or change of Class B Preferred Stock
issuable upon exercise of the Warrants (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange offer for
shares of Class B Preferred Stock;
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company proposes to take any action that would require an
adjustment to the Warrant Number pursuant to Section 9 hereof;
then the Company shall cause to be given to each of the Holders at its address
appearing on the Warrant Register, at least 20 days prior to the applicable
record date hereinafter specified, or the date of the event in the case of
events for which there is no record date, in accordance with the provisions of
Section 12 hereof, a written notice stating (i) the date as of which the holders
of record of shares of Preferred Stock or Common Stock to be entitled to receive
any such rights, options, warrants or distribution are to be determined, or (ii)
the initial expiration date set forth in any tender offer or exchange offer for
shares of Preferred Stock or Common Stock, or (iii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Preferred Stock or Common Stock
shall be entitled to exchange such shares for securities or other property, if
any, deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the notice
required by this Section 11 or any defect therein shall not affect the legality
or validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
Nothing contained in this Agreement or in any Warrant Certificate
shall be construed as conferring upon the Holders (prior to the exercise of such
Warrants) the right to vote or to consent or to receive notice as shareholder in
respect of the meetings of shareholders or the election of Directors of the
Company or any other matter, or any rights whatsoever as share-
9
<PAGE>
holders of the Company; provided, however, that nothing in the foregoing
provision is intended to detract from any rights explicitly granted to any
Holder hereunder.
SECTION 12. Notices to the Company and Warrant Holders. All notices and
other communications provided for or permitted hereunder shall be made by hand-
delivery, first-class mail, telex, telecopier, or overnight air courier
guaranteeing next day delivery:
(a) if to Investors, to the address specified on the signature page
executed by each such Investor, with a copy to O'Sullivan Graev & Karabell, LLP,
30 Rockefeller Plaza, New York, New York 10112, Attention: Harvey M. Eisenberg,
Esq.; and
(b) if to the Company, IXL Holdings, Inc., 1888 Emery Street, Suite
200, Atlanta, Georgia, 30318, Telecopy no. (404) 267-3801, Attention: James V.
Sandry, with a copy to Minkin & Snyder PC, One Buckhead Plaza, 3060 Peachtree
Road, N.E., Suite 1100, Atlanta, Georgia 30305, Telecopy No. (404) 233-5064,
Attention: James S. Altenbach, Esq., and with an additional copy to Kelso &
Company, 320 Park Avenue, Suite 2400, New York, New York 10022, Attention: James
J. Connors II, Esq.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed (so
long as a fax copy is sent and receipt acknowledged within two business days
after mailing); when answered back if telexed; when receipt acknowledged, if
telecopied; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery. The parties may
change the addresses to which notices are to be given by giving five days' prior
written notice of such change in accordance herewith.
SECTION 13. Certain Supplements and Amendments. The Company may from time
to time supplement or amend this Agreement without the approval of any Holders
in order to cure any ambiguity or to correct or supplement any provision
contained herein which may be defective or inconsistent with any other provision
herein; provided that any such supplement or amendment shall not in any way
adversely affect the interests of the Holders.
SECTION 14. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company shall bind and inure to the benefit of its
respective successors and assigns hereunder.
SECTION 15. Termination. This Agreement shall terminate if all Warrants
have been exercised or shall have expired or been canceled pursuant to this
Agreement.
SECTION 16. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
10
<PAGE>
THE INTERNAL LAWS OF THE STATE OF NEW YORK (PROVIDED THAT DETERMI- NATIONS
RELATING TO CORPORATE LAW SHALL BE CONSTRUED IN ACCORDANCE WITH THE DELAWARE
GENERAL CORPORATION LAW). THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE WARRANTS, AND IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY AGREES THAT
IT WILL NOT COMMENCE ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY OTHER
JURISDICTION. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTWITHSTANDING THE FOREGOING,
NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER OF A WARRANT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
SECTION 17. Benefits of This Agreement. Nothing in this Agreement share be
construed to give to any person or corporation other than the Company and the
Holders any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company and
the Holders.
SECTION 18. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 19. Amendments and Waivers. Subject to Section 13, the Company
agrees it will not solicit, request or negotiate for or with respect to any
proposed waiver or amendment of any of the provisions of this Agreement or any
Warrant unless each Holder (irrespective of the amount of Warrants then owned by
it) shall substantially concurrently be informed thereof by the Company and
shall be afforded the opportunity of considering the same and shall be supplied
by the Company with sufficient information (including any offer of remuneration)
to enable it to make an informed decision with respect thereto which information
share be the same as that supplied to each other Holder. The Company will not,
directly or indirectly, pay or cause to be paid any remuneration whether by way
of supplement or additional interest fee or otherwise, to any Holder as
consideration for or as an inducement to the entering into by any Holder of any
waiver or amendment of any of the terms and provisions of this Agreement or any
Warrant
11
<PAGE>
unless such remunerations is concurrently paid on the same terms, ratably to
each Holder whether or not such Holder signs such waiver or consent, provided
that the foregoing is not intended to preclude the adoption of any amendment or
the giving of any waiver by the Holders of a majority of the Warrants to the
extent permitted by the other provisions of this Section 19.
[Signature pages follow]
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be duly executed as of the day and year first above written.
IXL HOLDINGS, INC.
By: James V. Sandry
------------------------------------
Title: Executive Vice President
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS,
its General Partner
By: Mitchell J. Blutt
----------------------------------
A Partner
FLATIRON PARTNERS, LLC
By: Jerome D. Colonna
--------------------------------------
A Managing Partner
GREYLOCK IX LIMITED PARTNERSHIP
By: Greylock IX GP Limited Partnership
Its General Partner
By: William Kaiser
---------------------------------
General Partner
13
<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON DECEMBER 17, 1997, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED EXCEPT IN CON3UNCTION WITH AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE ACT, OR IN COMPLIANCE WITH RULE 144 OR
PURSUANT TO ANOTHER EXEMPTION THEREFROM. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO A WARRANT AGREEMENT AND A SECURITIES PURCHASE
AGREEMENT, DATED AS OF DECEMBER 17, 1997, AMONG THE ISSUER OF SUCH SECURITIES
(THE "COMPANY"), THE INVESTORS REFERRED TO THEREIN AND THE OTHER PARTIES
THERETO. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED
IN SUCH AGREEMENTS AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF
THIS CERTIFICATE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH
TRANSFER. A COPY OF SUCH AGREEMENTS WILL BE FURNISHED WITHOUT CHARGE BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
THE SHARES ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE PREFERENCES, POWERS, QUALIFICATIONS AND RIGHTS OF
EACH CLASS AND SERIES AS SET FORTH IN THE COMPANY'S CERTIFICATE OF
INCORPORATION. THE COMPANY WILL FURNISH A COPY OF THE CERTIFICATE OF
INCORPORATION TO THE HOLDER OF THIS CERTIFICATE UPON WRITTEN REQUEST.
No. ____Warrants
Warrant Certificate
IXL HOLDINGS, INC.
This Warrant Certificate certifies that ______________ or registered
assigns, is the registered holder of the number of Warrants (the "Warrants") set
--------
forth above to purchase Class B Preferred Stock, par value $.01 per share (the
"Class B Preferred Stock"), of IXL Holdings, Inc., a Delaware corporation (the
-----------------------
"Company"). Each Warrant entitles the Holder upon exercise to receive from the
-------
Company one fully paid and nonassessable share of Class B Preferred Stock (a
"Warrant Share"), at an exercise price (the "Exercise Price") of $458.00 payable
------------- ---------------
in lawful money of the United States of America, upon surrender of this Warrant
Certificate and payment of the Exercise
14
<PAGE>
Price at the office of the Company designated for such purpose, but only subject
to the conditions set forth herein and in the Warrant Agreement referred to
hereinafter. The number of Warrant Shares issuable upon exercise of the Warrants
is subject to adjustment upon the occurrence of certain events, as set forth in
the Warrant Agreement. Each Warrant is exercisable at any time during the period
commencing and ending at 5:00 p.m., New York City time, on December 17, 2007.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, and are issued or to be issued pursuant to a
Warrant Agreement dated as of December 17, 2007 (the "Warrant Agreement"), duly
------------------
executed and delivered by the Company, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders or holder" meaning the registered holders or registered holder) of the
------- ------
Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof
upon written request to the Company. Capitalized terms used and not defined
herein shall have the meaning ascribed thereto in the Warrant Agreement.
The holder of Warrants evidenced by this Warrant Certificate may exercise
such Warrants under and pursuant to the terms and conditions of the Warrant
Agreement by surrendering this Warrant Certificate, with the form of election to
purchase set forth hereon (and by this reference made a part hereof) properly
completed and executed, together with payment of the Exercise Price made, at the
election of the Holder, (i) in cash, by certified or official bank check payable
to the order of the Company, (ii) by delivering for surrender and cancellation
to the Company Warrants with an aggregate Surrender Value (as defined in Section
4 of the Warrant Agreement), as of the date of such exercise, equal to the
Exercise Price for the Warrants being exercised, or (iii) any combination
thereof. In the event that upon any exercise of Warrants evidenced hereby the
number of Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued by the Company to the holder hereof or
its registered assignee a new Warrant Certificate evidencing the number of
Warrants not exercised.
Warrant Certificates, when surrendered at the office of the Company by the
registered holder thereof in person or by legal representative or attorney duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Subject to the terms and conditions of the Warrant Agreement, upon due
presentation for registration of transfer of this Warrant Certificate at the
office of the Company a new Warrant Certificate or Warrant Certificates of like
tenor and evidencing in the aggregate a like number of Warrants shall be issued
to the transferee(s) in exchange for this Warrant Certificate, subject to the
limitations provided in the Warrant Agreement, without charge except for any tax
or other governmental charge imposed in connection therewith.
15
<PAGE>
The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.
IN WITNESS WHEREOF, IXL Holdings, Inc. has caused this Warrant Certificate
to be signed by its Chairman of the Board, President or Vice President and by
its Secretary or Assistant Secretary.
Dated: [ ], 1997
IXL HOLDINGS, INC.
By________________________________________
Name:
Title:
By________________________________________
Name:
Title:
16
<PAGE>
FORM OF ELECTION TO PURCHASE
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _________ shares of Class B
Preferred Stock and herewith tenders payment for such shares to the Company in
the form of [a certified or official bank check payable to the order of the
Company in the amount of $ ____, [and] Warrants to purchase _________ Warrant
Shares with an aggregate Surrender Value (as defined in Section 4 of the Warrant
Agreement) of
$_______].
The undersigned requests that a certificate for such shares be registered
in the name of _____________________, whose address is
_________________________________ and that such shares be delivered to
________________ whose address is_______________________
If said number of shares is less than all of the shares of Class B
Preferred Stock purchasable hereunder, the undersigned requests that a new
Warrant Certificate representing the remaining balance of such shares be
registered in the name of _____________________ whose address is
_______________________ and that such Warrant Certificate be delivered to
_________________________, whose address is _____________________________.
Signature(s): __________________________________________
NOTE: The above signature(s) must correspond with the name
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement or
any change whatever. If this Warrant is held of record
by two or more joint owners, all such owners must
sign.
Date: ___________
17
<PAGE>
FORM OF ASSIGNMENT
(To be signed only upon assignment of Warrant Certificate)
FOR VALUE RECEIVED, hereby sells, assigns and transfers unto _____________
whose address is ___________________, and whose social security number or other
identifying number is _______________________, the within Warrant Certificate,
together with all right, title and interest therein and to the Warrants
represented thereby, and does hereby irrevocably constitute and appoint
_________________, attorney, to transfer, said Warrant Certificate on the books
of the within-named Company, with full power of substitution in the premises.
Signature(s): __________________________________________
NOTE: The above signature(s) must correspond with
the name written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever. If this Warrant is held of
record by two or more joint owners, all such
owners must sign.
Date: ____________
18
<PAGE>
EXHIBIT 10.42
WARRANT AWARD AGREEMENT
This Warrant Award Agreement dated as of December 23, 1997 by and between
IXL Holdings, Inc. (tile "Company") and General Electric Capital Corporation
("GECC").
WHEREAS, pursuant to that certain Securities Purchase Agreement dated as of
December 23, 1997 between tile Company and GECC (tile "Securities Purchase
Agreement"), tile Company has issued and sold to GECC tile Securities described
therein;
WHEREAS, in connection with tile Securities Purchase Agreement, tile
Company and GECC have entered into that certain Warrant Agreement dated as of
December 23, 1997 (tile "Primary Warrant Agreement"), pursuant to which tile
Company issued and sold to GECC warrants (tile "Primary Warrants") to purchase
1,775 shares of tile Class B Convertible Preferred Stock, par value $.O1, of
tile Company (tile "Class B Preferred Stock");
WHEREAS, tile Company wishes to award GECC additional warrants to purchase
3,500 shares of Class B Preferred Stock at an exercise price of $500 per share
in tile event certain conditions precedent are satisfied;
In consideration of tile parties entering into tile Securities Purchase
Agreement and tile Warrant Agreement, and for other good and valuable
consideration, tile parties agree as follows:
1. In the event that:
(a) General Electric Company or any of its subsidiaries
(collectively "GE") or any of GE's portfolio companies delivers to
tile Company or its subsidiaries, upon terms and conditions acceptable
to tile Company, business which generates $10,000,000 recognizable in
accordance with generally accepted accounting principles as revenue by
tile Company in calendar year 1998,
AND
(b) (i) GE makes Consumer Financial Network, Inc.'s ("CFN")
services available to tile lesser of 50% or 100,000 of GE's domestic
United States employees by September 30, 1998, and (ii) GE actively
communicates to such employees, using traditional methods of
communication utilized by GE to communicate with its employees at all
levels of operational management that CFN's services are available to
such employees,
the Company shall execute a Warrant Agreement substantially in the form of
Exhibit A hereto (tile "Secondary Warrant Agreement") pursuant to which, subject
to the terms and conditions thereof, tile Company will issue to GECC warrants to
purchase 3,500 shares of Class B Preferred Stock at an exercise price of $500
per share.
1
<PAGE>
2. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK (PROVIDED THAT DETERMINATIONS RELATING TO CORPORATE LAW SHALL BE
CONSTRUED IN ACCORDANCE WITH THE DELAWARE GENERAL CORPORATION LAW). THE COMPANY
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND
THE WARRANTS, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY
AGREES THAT IT WILL NOT COMMENCE ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY
OTHER JURISDICTION. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT RAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTWITHSTANDING THE FOREGOING,
NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER OF A WARRANT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
3. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
tile same instrument.
4. AMENDMENTS. This Agreement shall not be amended without the prior
written consent of all parties hereto.
[Signatures on Following Page]
2
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
set forth below as of the date first written above.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
---------------------------
Title: Executive Vice President
---------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Tony J. Pantuso
---------------------------
Title: Department Operations Manager
------------------------------
3
<PAGE>
EXHIBIT A
---------
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
among
IXL HOLDINGS, INC.
and the other
PARTIES NAMED HEREIN
Dated as of
_____________,______
- --------------------------------------------------------------------------------
<PAGE>
WARRANT AGREEMENT
-----------------
This WARRANT AGREEMENT is dated as of ____, ____ (the "Agreement") and
---------
entered into by and among IXL Holdings, Inc., a Delaware corporation (the
"Company"), and the purchasers party hereto (each, an "Investor" and
-------
collectively, the "Investors"). All capitalized terms used but not defined
---------
herein shall have the meanings ascribed to them in the Purchase Agreement (as
hereinafter defined).
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of December
17, ____ (the "Purchase Agreement") by and among the Company and the Investors,
------------------
the Company is issuing to the Investors certain Warrants, as hereinafter
described (the "Warrants"), to purchase an aggregate of 3,500 shares (subject to
adjustment as provided herein) of Class B Convertible Preferred Stock, par value
$.0l per share (the "Class B Preferred Stock"), of the Company (the shares of
-----------------------
Class B Preferred Stock issuable upon exercise of the Warrants being referred to
herein as the "Warrant Shares");
--------------
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
SECTION 1. Warrant Certificates. The Company will issue and deliver a
certificate or certificates evidencing the Warrants (the "Warrant Certificates")
--------------------
pursuant to the terms of the Purchase Agreement. Such certificate or
certificates shall be substantially in the form set forth as Exhibit A attached
hereto. Warrant Certificates shall be dated the date of issuance by the Company.
SECTION 2. Execution of Warrant Certificates. Warrant Certificates shall be
signed on behalf of the Company by its Chairman of the Board or its Chief
Executive Officer, President or any Vice President. Each Warrant Certificate
shall also be signed on behalf of the Company by its Secretary or an Assistant
Secretary.
SECTION 3. Restrictions on Transfer; Registration of Transfers and
Exchanges. Prior to any proposed transfer of the Warrants or the Warrant Shares,
unless such transfer is made pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the
--------------
transferring Holder will deliver to the Company an opinion of counsel,
reasonably satisfactory in form and substance to the Company, to the effect that
the Warrants or Warrant Shares, as applicable, may be sold or otherwise
transferred without registration under the Securities Act; provided, however,
that, with respect to transfers by the Investors or their Affiliates and Related
Persons, no such opinion shall be required in connection with any transfer to
the Company or to a Permitted Transferee. Upon original issuance thereof, and
until such time as the same shall have been registered under the Securities Act
or sold pursuant to Rule 144
1
<PAGE>
promulgated thereunder (or any similar rule or regulation) each Warrant
Certificate shall bear the legend included on the first page of Exhibit A,
unless in such opinion of counsel, such legend is no longer required by the Act.
Subject to the conditions to transfer contained in the Second Amended and
Restated Stockholders Agreement of the Company, as such agreement may be amended
from time to time (the "Stockholders Agreement") which shall apply to the
Holders of the Warrants as if such Holders were "Chase Investors," as defined in
the Stockholders Agreement, the Company shall from time to time register the
transfer of any outstanding Warrant Certificates in the Warrant Register to be
maintained by the Company upon surrender thereof accompanied by a written
instrument or instruments of transfer in form reasonably satisfactory to the
Company, duly executed by the registered Holder or Holders thereof or by the
duly appointed legal representative thereof or by a duly authorized attorney.
Upon any such registration of transfer, a new Warrant Certificate shall be
issued to the transferee Holder(s) and the surrendered Warrant Certificate shall
be canceled and disposed of by the Company. Any attempted transfer in violation
of the Stockholders Agreement shall be null and void.
SECTION 4. Warrants; Exercise of Warrants. Subject to the terms of this
Agreement, each Holder shall have the right, which may be exercised at any time
during the period commencing on the date hereof and ending at 5:00 p.m., New
York City time, on December 23, 2007 (the "Expiration Date"), to receive from
---------------
the Company the number of fully paid and nonassessable Warrant Shares (and such
other consideration) which the Holder may at the time be entitled to receive on
exercise of such Warrants and payment of the Exercise Price for such Warrant
Shares. Each Warrant not exercised prior to 5:00 p.m., New York time, on the
Expiration Date shall become void and all rights thereunder and all rights in
respect thereof under this Agreement shall cease as of such time. No adjustments
as to dividends will be made upon exercise of the Warrants, except as otherwise
expressly provided herein.
The price at which each Warrant shall be exercisable (the "Exercise Price")
--------------
shall be equal to $500.00 per share of Class B Preferred Stock.
A Warrant may be exercised upon surrender to the Company at its office
designated for such purpose of the Warrant Certificate or Certificates to be
exercised with the form of election to purchase attached thereto duly filled in
and signed, and upon payment to the Company of the Exercise Price for the number
of Warrant Shares in respect of which such Warrants are then exercised. Payment
of the aggregate Exercise Price share be made, at the election of the Holder,
(i) in cash, by certified or official bank check payable to the order of the
Company, (ii) by delivering for surrender and cancellation to the Company
Warrants with an aggregate Surrender Value, as of the date of such exercise,
equal to the Exercise Price for the Warrants being exercised, or (iii) any
combination thereof. For the purposes of this paragraph, the "Surrender Value"
of any Warrant is equal to the Fair Market Value (as defined in the
Stockholders'
2
<PAGE>
Agreement), as of the date of such surrender, of the Warrant Shares issuable
upon the exercise of such Warrant, minus the Exercise Price of such Warrant.
Subject to the provisions of Section 5 hereof, upon such surrender of
Warrant Certificates and payment of the Exercise Price, the Company shall issue
and cause to be delivered, as promptly as practicable, to or upon the written
order of the Holder and in such name or names as such Holder may designate a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants (and such other consideration as may be
deliverable upon exercise of such Warrants) together with cash for fractional
Warrant Shares as provided in Section 10. The certificate or certificates for
such Warrant Shares shall be deemed to have been issued and the person so named
therein shall be deemed to have become a holder of record of such Warrant Shares
as of the date of the surrender of such Warrants and payment of the Exercise
Price, irrespective of the date of delivery of such certificate or certificates
for Warrant Shares.
Each Warrant shall be exercisable, at the election of the Holder thereof,
either in fill or from time to time in part and, in the event that a Warrant
Certificate is exercised in respect of fewer than all of the Warrant Shares
issuable on such exercise at any time prior to the date of expiration of the
Warrants, a new certificate evidencing the remaining Warrant or Warrants will be
issued and delivered pursuant to the provisions of this Section and of Section 2
hereof.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled and disposed of by the Company. The Company shall keep copies of this
Agreement and any notices given or received hereunder available for inspection
by the Holders during normal business hours at its office.
SECTION 5. Payment of Taxes. The Company will pay all documentary stamp
taxes and other governmental charges (excluding all foreign, federal or state
income, franchise, property, estate, inheritance, gift or similar taxes) in
connection with the issuance or delivery of the Warrants hereunder, as well as
all such taxes attributable to the initial issuance or delivery of Warrant
Shares upon the exercise of Warrants and payment of the Exercise Price. The
Company shall not, however, be required to pay any tax that may be payable in
respect of any subsequent transfer of the Warrants or any transfer involved in
the issuance and delivery of Warrant Shares in a name other than that in which
the Warrants to which such issuance relates were registered, and, if any such
tax would otherwise be payable by the Company, no such issuance or delivery
shall be made unless and until the person requesting such issuance has paid to
the Company the amount of any such tax, or it is established to the reasonable
satisfaction of the Company that any such tax has been paid.
SECTION 6. Dividends. At any time and from time to time that the Fair
Market Value (as defined in the Stockholders' Agreement) of a Warrant Share
exceeds the Exercise Price per share, the Company shall not make any
distributions on the Common Stock or the Preferred
3
<PAGE>
Stock (as such terms are defined in the Stockholders' Agreement) unless there is
contemporaneously declared and paid a dividend on each Warrant equal to the
distribution paid per share of Class B Preferred Stock.
SECTION 7. Mutilated or Missing Warrant Certificates. If a mutilated
Warrant Certificate is surrendered to the Company, or if the Holder of a Warrant
Certificate claims and submits an affidavit or other evidence satisfactory to
the Company to the effect that the Warrant Certificate has been lost, destroyed
or wrongfully taken, the Company shall issue a replacement Warrant Certificate.
If reasonably required by the Company, such Holder must provide an indemnity
bond, or other form of indemnity, sufficient in the reasonable judgment of the
Company to protect the Company from any loss which it may suffer if a Warrant
Certificate is replaced. If any Investor or any other institutional Holder (or
nominee thereof) is the owner of any such lost, stolen or destroyed Warrant
Certificate, then the affidavit of an authorized officer of such owner, setting
forth the fact of loss, theft or destruction and of its ownership of the Warrant
Certificate at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as a
condition to the execution and delivery of a new Warrant Certificate other than
the unsecured written agreement of such owner to indemnify the Company.
SECTION 8. Reservation of Warrant Shares. The Company shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Class B Preferred Stock or its authorized and issued
Class B Preferred Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Class B Preferred Stock which may then be
deliverable upon the exercise of all outstanding Warrants.
The Company or, if appointed, any transfer agent for the Preferred Stock
and each transfer agent for any shares of the Company's capital stock issuable
upon the exercise of any of the Warrants (collectively, the "Transfer Agent")
--------------
will be irrevocably authorized and directed at all times to reserve such number
of authorized shares as shall be required for such purpose. The Company shall
keep a copy of this Agreement on file with any such Transfer Agent. The Company
will supply any such Transfer Agent with duly executed certificates for such
purposes and will provide. or otherwise make available all other consideration
that may be deliverable upon exercise of the Warrants. The Company will furnish
any such Transfer Agent a copy of all notices of adjustments and certificates
related thereto, transmitted to each Holder pursuant to Section 11 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 9 hereof to reduce the Exercise Price below the then par value of the
Warrant Shares, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares at the Exercise Price
as so adjusted
4
<PAGE>
The Company covenants that all Warrant Shares and other capital stock
issued upon exercise of Warrants will, upon payment of the Exercise Price
therefor and issue thereof, be validly authorized and issued, fully paid,
nonassessable, free of preemptive rights and free, subject to Section 5 hereof,
from all taxes, liens, charges and security interests with respect to the issue
thereof, but such Warrant Shares shall be subject to the applicable terms and
conditions of the Stockholders Agreement.
SECTION 9. Adjustment of Exercise Price and Warrant Number. The number of
shares of Class B Preferred Stock issuable upon the exercise of each Warrant
(the "Warrant Number") is initially one. The Warrant Number is subject to
--------------
adjustment from time to time upon the occurrence of the events enumerated in, or
as otherwise provided in, this Section 9.
(a) Adjustment for Change in Capital Stock
If the Company:
(1) pays a dividend or makes a distribution on its Class B
Preferred Stock in shares of its Class B Preferred Stock;
(2) subdivides or reclassifies its outstanding shares of Class B
Preferred Stock into a greater number of shares;
(3) combines or reclassifies its outstanding shares of Class B
Preferred Stock into a smaller number of shares; or
(4) issues by reclassification of its Class B Preferred Stock any
shares of its capital stock (other than reclassification arising
solely as a result of a change in the par value or no par value of the
Class B Preferred Stock);
then the Warrant Number and the Exercise Price in effect immediately prior to
such action shall be proportionately adjusted so that the holder of any Warrant
thereafter exercised shall receive the aggregate number and kind of shares of
capital stock of the Company which it would have received immediately following
such action if such Warrant had been exercised immediately prior to such action
for the same aggregate consideration that such bolder would have paid if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
5
<PAGE>
Such adjustment shall be made successively whenever any event
listed above shall occur.
The Company shall not issue shares of Class B Preferred Stock as
a dividend or distribution on any class of capital stock other than Class B
Preferred Stock unless the Warrant Holders also receive such dividend or
distribution on a ratable basis or the appropriate adjustment to the Warrant
Number and Exercise Price is made under this Section 9.
(b) Notice of Adjustment
--------------------
Whenever the Warrant Number is adjusted, the Company shall
provide the notices required by Section 11 hereof.
(c) Voluntary Increase
------------------
The Company from time to time may increase the Warrant Number by
any amount for any period of time (including, without limitation, permanently)
if the period is at least 20 Business Days and if the increase is irrevocable
during the period. Whenever the Warrant Number is increased, the Company shall
mail to the Holders a notice of the increase. The Company shall mail the notice
at least 15 days before the date the increased Warrant Number takes effect. The
notice shall state the increased Warrant Number and the period it will be in
effect.
An increase of the Warrant Number under this Subsection (c)
(other than a permanent increase) does not change or adjust the Warrant Number
otherwise in effect for purposes of subsection (a) of this Section 9.
(d) Reorganizations
---------------
In case of any capital reorganization, other than in the cases
referred to in Section 9(a) hereof, or the consolidation or merger of the
Company with or into another corporation (other than a merger or consolidation
in which the Company is the continuing corporation and which does not result in
any reclassification of the outstanding shares of Preferred Stock or Common
Stock into shares of other stock or other securities or property), or the sale
of the property of the Company as an entirety or substantially as an entirety
(collectively, such actions being hereinafter referred to as "Reorganizations"),
---------------
there shall thereafter be deliverable upon exercise of any Warrant (in lieu of
the number of shares of Class B Preferred Stock theretofore deliverable) the
number of shares of stock or other securities or property to which a holder of
the number of shares of Class B Preferred Stock that would otherwise have been
deliverable upon the exercise of such Warrant would have been entitled upon such
Reorganization if such Warrant had been exercised in fill immediately prior to
such Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good
6
<PAGE>
faith by the Board of Directors of the Company, whose determination shall be
described in a duly adopted resolution certified by the Company's Secretary or
Assistant Secretary, shall be made in the application of the provisions herein
set forth with respect to the rights and interests of Holders so that the
provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise of Warrants.
The Company shall not effect any such Reorganization unless prior
to or simultaneously with the consummation thereof, (i) notice of such
Reorganization shall be given to each of the Holders of the Warrants, and (ii)
the successor corporation (if other than the Company) resulting from such
Reorganization or the corporation purchasing or leasing such assets or other
appropriate corporation or entity shall expressly assume, by a supplemental
Warrant Agreement or other acknowledgement executed and delivered to the
Holder(s), the obligation to deliver to each such Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase, and all other obligations and liabilities
under this Agreement.
(e) Form of Warrants
----------------
Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement but shall nevertheless be exercisable for the
adjusted number of Warrant Shares at the adjusted Exercise Price.
SECTION 10. Fractional Interests. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 10,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall, pay an amount in cash equal to the fair market value (as
determined in good faith by the Board of Directors) of the Warrant Share so
issuable, multiplied by such fraction.
SECTION 11. Notices to Warrant Holders. Upon any adjustment pursuant to
Section 9 hereof, the Company shall promptly thereafter (i) cause to be filed
with the Company a certificate of an officer of the Company setting forth the
Warrant Number and Exercise Price after such adjustment and setting forth in
reasonable. detail the method of calculation and the facts upon which such
calculations are based, and (ii) cause to be given to each of the Holders at its
address appearing on the Warrant Register written notice of such adjustments.
Where appropriate, such notice may be given in advance and included as a part of
the notice required to be mailed under the other provisions of this Section 11.
7
<PAGE>
In case:
(a) The Company shall authorize the issuance to all holders of shares
of Class B Preferred Stock of rights, options or warrants to subscribe for or
purchase shares of Class B Preferred Stock or of any other subscription rights
or warrants;
(b) The Company shall authorize the distribution to all holders of
shares of Class B Preferred Stock of assets, including cash, evidences of its
indebtedness, or other securities;
(c) of any consolidation or merger to which the Company is a party and
for which approval of any shareholders of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any reclassification or change of Class B Preferred Stock
issuable upon exercise of the Warrants (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange offer for
shares of Class B Preferred Stock;
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company proposes to take any action that would require an
adjustment to the Warrant Number pursuant to Section 9 hereof;
then the Company Shall cause to be given to each of the Holders at its address
appearing on the Warrant Register, at least 20 days prior to the applicable
record date hereinafter specified, or the date of the event in the case of
events for which there is no record date, in accordance with the provisions of
Section 12 hereof, a written notice stating (i) the date as of which the holders
of record of shares of Preferred Stock or Common Stock to be entitled to receive
any such rights, options, warrants or distribution are to be determined, or (ii)
the initial expiration date set forth in any tender offer or exchange offer for
shares of Preferred Stock or Common Stock, or (iii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Preferred Stock or Common Stock
shall be entitled to exchange such shares for securities or other property, if
any, deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the notice
required by this Section 11 or any defect therein shall not affect the legality
or validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
Nothing contained in this Agreement or in any Warrant Certificate
shall be construed as conferring upon the Holders (prior to the exercise of such
Warrants) the right to
8
<PAGE>
vote or to consent or to receive notice as shareholder in respect of the
meetings of shareholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company; provided,
however, that nothing in the foregoing provision is intended to detract from any
rights explicitly granted to any Holder hereunder.
SECTION 12. Notices to the Company and Warrant Holders. All notices and
other communications provided for or permitted hereunder shall be made by hand
delivery, first-class mail, telex, telecopier, or overnight air courier
guaranteeing next day delivery:
(a) if to Investors, to the address specified on the signature page
executed by each such Investor, with a copy to Paul, Hastings, Janofsky & Walker
LLP, 399 Park Avenue, New York, New York 10022, telecopy No.: (212)3194090,
Attention: William Schwitter, Esq.; and
(b) if to the Company, IXL Holdings, Inc., 1888 Emery Street, Suite
200, Atlanta, Georgia, 30318, Telecopy no. (404) 267-380l, Attention: James V.
Sandry, with a copy to Minkin & Snyder PC, One Buckhead Plaza, 3060 Peachtree
Road, N.E., Suite 1100, Atlanta, Georgia 30305, Telecopy No.(404)233-5064,
Attention: James S. Altenbach, Esq., and with an additional copy to Kelso &
Company, 320 Park Avenue, Suite 2400, New York, New York 10022, Attention: James
J. Connors II, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed (so long as a
fax copy is sent and receipt acknowledged within two business days after
mailing); when answered back if telexed; when receipt acknowledged, if
telecopied; and the next business day after timely delivery to the courier, if
sent by overnight by courier guaranteeing next day delivery. The parties may
change the addresses to which notices are to be given by giving five days' prior
written notice of such change in accordance herewith.
SECTION 13. Certain Supplements and Amendments. The Company may from time
to time supplement or amend this Agreement without the approval of any Holders
in order to cure any ambiguity or to correct or supplement any provision
contained herein which may be defective or inconsistent with any other provision
herein; provided that any such supplement or amendment shall not in any way
adversely affect the interests of the Holders.
SECTION 14. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company shall bind and inure to the benefit of its
respective successors and assigns hereunder.
SECTION 15. Termination. This Agreement shall terminate if all Warrants
have been exercised or shall have expired or been canceled pursuant to this
Agreement.
9
<PAGE>
SECTION 16. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK (PROVIDED THAT DETERNINATIONS RELATING TO CORPORATE LAW SHALL BE
CONSTRUED IN ACCORDANCE WITH THE DELAWARE GENERAL CORPORATION LAW). THE COMPANY
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIRE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND
THE WARRANTS, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY
AGREES THAT IT WILL NOT COMMENCE ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY
OTHER JURISDICTION. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTWITHSTANDING THE FOREGOING,
NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER OF A WARRANT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
SECTION 17. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Holders any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company and
the Holders.
SECTION 18. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 19. Amendments and Waivers. Subject to Section 13, the Company
agrees it will not solicit, request or negotiate for or with respect to any
proposed waiver or amendment. of any of the provisions of this Agreement or any
Warrant unless each Holder (irrespective of the amount of Warrants then owned by
it) shall substantially concurrently be informed thereof by the Company and
shall be afforded the opportunity of considering the same and shall be supplied
by the Company with sufficient information (including any offer of remuneration)
to enable it to make an informed decision with respect thereto which information
shall be the same as that
10
<PAGE>
supplied to each other Holder. The Company will not, directly or indirectly, pay
or cause to be paid any remuneration whether by way of supplement or additional
interest fee or otherwise, to any Holder as consideration for or as an
inducement to the entering into by any Holder of any waiver or amendment of any
of the terms and provisions of this Agreement or any Warrant unless such
remunerations is concurrently paid on the same terms, ratably to each Holder
whether or not such Holder signs such waiver or consent, provided that the
foregoing is not intended to preclude the adoption of any amendment or the
giving of any waiver by the Holders of a majority of the Warrants to the extent
permitted by the other provisions of this Section 19.
[Signature pages follow]
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be duly executed as of the day and year first above written.
IXL HOLDINGS, INC.
By: _________________________________
Title: _________________________________
GENERAL ELECTRIC CAPITAL CORPORATION
By: _________________________________
Title: _________________________________
12
<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON _______
____, AND HTVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED
EXCEPT IN CONJUNCTION WITH AN EFFECTWE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE ACT, OR IN COMPLIANCE WITH RULE 144 OR PURSUANT TO ANOTHER EXEMPTION
THEREFROM. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
WARRANT AGREEMENT DATED AS OF _______ AMONG THE ISSUER OF SUCH SECURITIES (THE
"COMPANY"), THE INVESTORS REFERRED TO THEREIN AND THE OTHER PARTIES THERETO. THE
TRANSFER OF THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN SUCH
AGREEMENTS AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF THIS
CERTIFICATE UNTIL SUCH CONDITIONS FIEVE BEEN FULFILLED WITH RESPECT TO SUCH
TRANSFER. A COPY OF SUCH AGREEMENTS WILL BE FURNISHED WITHOUT CHARGE BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
THE SHARES ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE PREFERENCES, POWERS, QUALIFICATIONS AND RIGHTS OF
EACH CLASS AND SERIES AS SET FORTH IN THE COMPANY'S CERTIFICATE OF
INCORPORATION. THE COMPANY WILL FURNISH A COPY OF THE CERTIFICATE OF
INCORPORATION TO THE HOLDER OF THIS CERTIFICATE UPON WRITTEN REQUEST.
No.____ ____ Warrants
Warrant Certificate
IXL HOLDINGS, INC.
This Warrant Certificate certifies that ____________, or registered assigns, is
the registered holder of the number of Warrants (the "Warrants") set forth above
--------
to purchase Class B Preferred Stock, par value $.01 per share (the "Class B
-------
Preferred Stock"), of IXL Holdings, Inc., a Delaware corporation (the
- ---------------
"Company"). Each Warrant entitles the Holder upon exercise to receive from the
-------
Company one fully paid and nonassessable share of Class B Preferred Stock (a
"Warrant Share"), at an exercise price (the "Exercise Price") of $500.00 payable
------------- --------------
in lawful money of the United States of America, upon surrender of this Warrant
Certificate and payment of the Exercise. Price at the office of the Company
designated for such purpose, but only subject to the conditions
13
<PAGE>
set forth herein and in the Warrant Agreement referred to hereinafter. The
number of Warrant Shares issuable upon exercise of the Warrants is subject to
adjustment upon the occurrence of certain events, as set forth in the Warrant
Agreement. Each Warrant is exercisable at any time during the period commencing
and ending at 5:00 p.m., New York City time, on December 23, 2007.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, and are issued or to be issued pursuant to a
Warrant Agreement dated as of _______,
(the "Warrant Agreement"), duly executed and delivered by the Company, which
-----------------
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders or holder" meaning the registered holders or
------- ------
registered holder) of the Warrants. A copy of the Warrant Agreement may be
obtained by the holder hereof upon written request to the Company. Capitalized
terms used and not defined herein shall have the meaning ascribed thereto in the
Warrant Agreement.
The holder of Warrants evidenced by this Warrant Certificate may exercise
such Warrants under and pursuant to the terms and conditions of the Warrant
Agreement by surrendering this Warrant Certificate, with the form of election to
purchase set forth hereon (and by this reference made a part hereof) properly
completed and executed, together with payment of the Exercise Price made, at the
election of the Holder, (i) in cash, by certified or official bank check payable
to the order of the Company, (ii) by delivering for surrender and cancellation
to the Company Warrants with an aggregate Surrender Value (as defined in Section
4 of the Warrant Agreement), as of the date of such exercise, equal to the
Exercise Price for the Warrants being exercised, or (iii) any combination
thereof. In the event that upon any exercise of Warrants evidenced hereby the
number of Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued by the Company to the holder hereof or
its registered assignee a new Warrant Certificate evidencing the number of
Warrants not exercised.
Warrant Certificates, when surrendered at the office of the Company by the
registered holder thereof in person or by legal representative or attorney duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Subject to the terms and conditions of the Warrant Agreement, upon due
presentation for registration of transfer of this Warrant Certificate at the
office of the Company a new Warrant Certificate or Warrant Certificates of like
tenor and evidencing in the aggregate a like number of Warrants shall be issued
to the transferee(s) in exchange for this Warrant Certificate, subject to the
limitations provided in the Warrant Agreement, without charge except for any tax
or other governmental charge imposed in connection therewith.
14
<PAGE>
The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.
IN WITNESS WHEREOF, IXL Holdings, Inc. has caused this Warrant Certificate
to be signed by its Chairman of the Board, President or Vice President and by
its Secretary or Assistant Secretary.
Dated: [ ], _____
IXL HOLDINGS, INC.
By________________________________
Name:
Title:
By________________________________
Name:
Title:
15
<PAGE>
FORM OF ELECTION TO PURCHTSE
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _________ shares of Class B
Preferred Stock and herewith tenders payment for such shares to the Company in
the form of [a certified or official bank check payable to the order of the
Company in the amount of $____, [and] Warrants to purchase_______ Warrant Shares
with an aggregate Surrender Value (as defined in Section 4 of the Warrant
Agreement) of $_____].
The undersigned requests that a certificate for such shares be registered
in the name of _____________, whose address is ___________________________ and
that such shares be delivered to _________________ whose address is
________________________.
If said number of shares is less than all of the shares of Class B
Preferred Stock purchasable hereunder, the undersigned requests that a new
Warrant Certificate representing the remaining. balance of such shares be
registered in the name of_________________, whose address is
___________________________ and that such Warrant Certificate be delivered to
______________whose address is_____________________
Signature(s): _____________________________________________
NOTE: The above signature(s) must correspond with
the name written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever. If this Warrant is held of
record by two or more joint owners, all such
owners must sign.
Date:________
16
<PAGE>
FORM OF ASSIGNMENT
(To be signed only upon assignment of Warrant Certificate)
FOR VALUE RECEIVED, hereby sells, assigns and transfers unto ____________
whose address is_______________ and whose social security number or other
identifying number is _____________________, the within Warrant Certificate,
together with all right, title and interest therein and to the Warrants
represented thereby, and does hereby irrevocably constitute and appoint
attorney, to transfer said Warrant Certificate on the books of the within-named
Company, with full power of substitution in the premises.
Signature(s): _____________________________________________
NOTE: The above signature(s) must correspond with
the name written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever. If this Warrant is held of
record by two or more joint owners, all such
owners must sign.
Date: ____________
17
<PAGE>
EXHIBIT 10.43
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
among
IXL HOLDINGS, INC.
and the other
PARTIES NAMED HEREIN
Dated as of
December 23, 1997
- -------------------------------------------------------------------------------
<PAGE>
WARRANT AGREEMENT
-----------------
This WARRANT AGREEMENT is dated as of December 23, 1997 (the "Agreement")
---------
and entered into by and among IXL Holdings, Inc., a Delaware corporation (the
"Company"), and the purchasers party hereto (each, an "Investor" and
-------
collectively, the "Investors"). All capitalized terms used but not defined
---------
herein shall have the meanings ascribed to them in the Purchase Agreement (as
hereinafter defined).
WHEREAS, pursuant to a Securities Purchase Agreement, dated as of December
17, 1997 (the "Purchase Agreement") by and among the Company and the Investors,
------------------
the Company is issuing to the Investors certain Warrants, as hereinafter
described (the "Warrants"), to purchase an aggregate of 1,775 shares (subject to
--------
adjustment as provided herein) of Class B Convertible Preferred Stock, par value
$.01 per share (the "Class B Preferred Stock"), of the Company (the shares of
-----------------------
Class B Preferred Stock issuable upon exercise of the Warrants being referred to
herein as the "Warrant Shares");
----------------
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
SECTION 1. Warrant Certificates. The Company will issue and deliver a
certificate or certificates evidencing the Warrants (the "Warrant Certificates")
--------------------
pursuant to the terms of the Purchase Agreement. Such certificate or
certificates shall be substantially in the form set forth as Exhibit A attached
hereto. Warrant Certificates shall be dated the date of issuance by the Company.
SECTION 2. Execution of Warrant Certificates. Warrant Certificates shall be
signed on behalf of the Company by its Chairman of the Board or its Chief
Executive Officer, President or any Vice President. Each Warrant Certificate
shall also be signed on behalf of the Company by its Secretary or an Assistant
Secretary.
SECTION 3. Restrictions on Transfer; Registration of Transfers and
Exchanges. Prior to any proposed transfer of the Warrants or the Warrant Shares,
unless such transfer is made pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the
---------- ---
transferring Holder will deliver to the Company an opinion of counsel,
reasonably satisfactory in form and substance to the Company, to the effect that
the Warrants or Warrant Shares, as applicable, may be sold or otherwise
transferred without registration under the Securities Act; provided, however,
that, with respect to transfers by the Investors or their Affiliates and Related
Persons, no such opinion shall be required in connection with any transfer to
the Company or to a Permitted Transferee. Upon original issuance thereof, and
until such time as the same shall have been registered under the Securities Act
or sold pursuant to Rule 144
1
<PAGE>
promulgated thereunder (or any similar rule or regulation) each Warrant
Certificate shall bear the legend included on the first page of Exhibit A,
unless in such opinion of counsel, such legend is no longer required by the Act.
Subject to the conditions to transfer contained in the Second Amended and
Restated Stockholders Agreement of the Company, as such agreement may be amended
from time to time (the "Stockholders Agreement") which shall apply to the
Holders of the Warrants as if such Holders were "Chase Investors," as defined in
the Stockholders Agreement, the Company shall from time to time register the
transfer of any outstanding Warrant Certificates in the Warrant Register to be
maintained by the Company upon surrender thereof accompanied by a written
instrument or instruments of transfer in form reasonably satisfactory to the
Company, duly executed by the registered Holder or Holders thereof or by the
duly appointed legal representative thereof or by a duly authorized attorney.
Upon any such registration of transfer, a new Warrant Certificate shall be
issued to the transferee Holder(s) and the surrendered Warrant Certificate shall
be canceled and disposed of by the Company. Any attempted transfer in violation
of the Stockholders Agreement shall be null and void.
SECTION 4. Warrants; Exercise of Warrants. Subject to the terms of this
Agreement, each Holder shall have the right, which may be exercised at any time
during the period commencing on the date hereof and ending at 5:00 p.m., New
York City time, on December 23, 2007 (the "Expiration Date"), to receive from
---------- ------
the Company the number of fully paid and nonassessable Warrant Shares (and such
other consideration) which the Holder may at the time be entitled to receive on
exercise of such Warrants and payment of the Exercise Price for such Warrant
Shares. Each Warrant not exercised prior to 5:00 p.m., New York time, on the
Expiration Date shall become void and all rights thereunder and all rights in
respect thereof under this Agreement shall cease as of such time. No adjustments
as to dividends will be made upon exercise of the Warrants, except as otherwise
expressly provided herein.
The price at which each Warrant shall be exercisable (the "Exercise Price")
---------------
shall be equal to $458.00 per share of Class B Preferred Stock.
A Warrant may be exercised upon surrender to the Company at its office
designated for such purpose of the Warrant Certificate or Certificates to be
exercised with the form of election to purchase attached thereto duly filled in
and signed, and upon payment to the Company of the Exercise Price for the number
of Warrant Shares in respect of which such Warrants are then exercised Payment
of the aggregate Exercise Price shall be made, at the election of the Holder,
(i) in cash, by certified or official bank check payable to the order of the
Company, (ii) by delivering for surrender and cancellation to the Company
Warrants with an aggregate Surrender Value, as of the date of such exercise,
equal to the Exercise Price for the Warrants being exercised, or (iii) any
combination thereof. For the purposes of this paragraph, the "Surrender Value"
of any Warrant is equal to the Fair Market Value (as defined in the
Stockholders'
2
<PAGE>
Agreement), as of the date of such surrender, of the Warrant Shares issuable
upon the exercise of such Warrant, minus the Exercise Price of such Warrant.
Subject to the provisions of Section 5 hereof, upon such surrender of
Warrant Certificates and payment of the Exercise Price, the Company shall issue
and cause to be delivered, as promptly as practicable, to or upon the written
order of the Holder and in such name or names as such Holder may designate a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants (and such other consideration as may be
deliverable upon exercise of such Warrants) together with cash for fractional
Warrant Shares as provided in Section 10. The certificate or certificates for
such Warrant Shares shall be deemed to have been issued and the person so named
therein shall be deemed to have become a holder of record of such Warrant Shares
as of the date of the surrender of such Warrants and payment of the Exercise
Price, irrespective of the date of delivery of such certificate or certificates
for Warrant Shares.
Each Warrant shall be exercisable, at the election of the Holder thereof,
either in full or from time to time in part and, in the event that a Warrant
Certificate is exercised in respect of fewer than all of the Warrant Shares
issuable on such exercise at any time prior to the date of expiration of the
Warrants, a new certificate evidencing the remaining Warrant or Warrants will be
issued and delivered pursuant to the provisions of this Section and of Section 2
hereof.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled and disposed of by the Company. The Company shall keep copies of this
Agreement and any notices given or received hereunder available for inspection
by the Holders during normal business hours at its office.
SECTION 5. Payment of Taxes. The Company will pay all documentary stamp
taxes and other governmental charges (excluding all foreign, federal or state
income, franchise, property, estate, inheritance, gift or similar taxes) in
connection with the issuance or delivery of the Warrants hereunder, as well as
all such taxes attributable to the initial issuance or delivery of Warrant
Shares upon the exercise of Warrants and payment of the Exercise Price. The
Company shall not, however, be required to pay any tax that may be payable in
respect of any subsequent transfer of the Warrants or any transfer involved in
the issuance and delivery of Warrant Shares in a name other than that in which
the Warrants to which such issuance relates were registered, and, if any such
tax would otherwise be payable by the Company, no such issuance or delivery
shall be made unless and until the person requesting such issuance has paid to
the Company the amount of any such tax, or it is established to the reasonable
satisfaction of the Company that any such tax has been paid
SECTION 6. Dividends. At any time and from time to time that the Fair
Market Value (as defined in the Stockholders' Agreement) of a Warrant Share
exceeds the Exercise Price per share, the Company shall not make any
distributions on the Common Stock or the Preferred
3
<PAGE>
Stock (as such terms are defined in the Stockholders' Agreement) unless there is
contemporaneously declared and paid a dividend on each Warrant equal to the
distribution paid per share of Class B Preferred Stock.
SECTION 7. Mutilated or Missing Warrant Certificates. If a mutilated
Warrant Certificate is surrendered to the Company, or if the Holder of a Warrant
Certificate claims and submits an affidavit or other evidence satisfactory to
the Company to the effect that the Warrant Certificate has been lost, destroyed
or wrongfully taken, the Company shall issue a replacement Warrant Certificate.
If reasonably required by the Company, such Holder must provide an indemnity
bond, or other form of indemnity, sufficient in the reasonable judgment of the
Company to protect the Company from any loss which it may suffer if a Warrant
Certificate is replaced. If any Investor or any other institutional Holder (or
nominee thereof) is the owner of any such lost, stolen or destroyed Warrant
Certificate, then the affidavit of an authorized officer of such owner, setting
forth the fact of loss, theft or destruction and of its ownership of the Warrant
Certificate at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as a
condition to the execution and delivery of a new Warrant Certificate other than
the unsecured written agreement of such owner to indemnify the Company.
SECTION 8. Reservation of Warrant Shares. The Company shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Class B Preferred Stock or its authorized and issued
Class B Preferred Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Class B Preferred Stock which may then be
deliverable upon the exercise of all outstanding Warrants.
The Company or, if appointed, any transfer agent for the Preferred Stock
and each transfer agent for any shares of the Company's capital stock issuable
upon the exercise of any of the Warrants (collectively, the "Transfer Agent")
-------- ------
will be irrevocably authorized and directed at all times to reserve such number
of authorized shares as shall be required for such purpose. The Company shall
keep a copy of this Agreement on file with any such Transfer Agent. The Company
will supply any such Transfer Agent with duly executed certificates for such
purposes and will provide or otherwise make available all other consideration
that may be deliverable upon exercise of the Warrants. The Company will furnish
any such Transfer Agent a copy of all notices of adjustments and certificates
related thereto, transmitted to each Holder pursuant to Section 11 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 9 hereof to reduce the Exercise Price below the then par value of the
Warrant Shares, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares at the Exercise Price
as so adjusted.
4
<PAGE>
The Company covenants that all Warrant Shares and other capital stock
issued upon exercise of Warrants will, upon payment of the Exercise Price
therefor and issue thereof, be validly authorized and issued, fully paid,
nonassessable, free of preemptive rights and free, subject to Section 5 hereof,
from all taxes, liens, charges and security interests with respect to the issue
thereof, but such Warrant Shares shall be subject to the applicable terms and
conditions of the Stockholders Agreement.
SECTION 9. Adjustment of Exercise Price and Warrant Number. The number of
shares of Class B Preferred Stock issuable upon the exercise of each Warrant
(the "Warrant Number") is initially one. The Warrant Number is subject to
------- -------
adjustment from time to time upon the occurrence of the events enumerated in, or
as otherwise provided in, this Section 9.
(a) Adjustment for Change in Capital Stock
If the Company:
(1) pays a dividend or makes a distribution on its Class B
Preferred Stock in shares of its Class B Preferred Stock;
(2) subdivides or reclassifies its outstanding shares of Class B
Preferred Stock into a greater number of shares;
(3) combines or reclassifies its outstanding shares of Class B
Preferred Stock into a smaller number of shares; or
(4) issues by reclassification of its Class B Preferred Stock any
shares of its capital stock (other than reclassification arising
solely as a result of a change in the par value or no par value of the
Class B Preferred Stock);
then the Warrant Number and the Exercise Price in effect immediately prior to
such action shall be proportionately adjusted so that the holder of any Warrant
thereafter exercised shall receive the aggregate number and kind of shares of
capital stock of the Company which it would have received immediately following
such action if such Warrant had been exercised immediately prior to such action
for the same aggregate consideration that such holder would have paid if such
Warrant had been exercised immediately prior to such action.
The adjustment share become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification
5
<PAGE>
Such adjustment shall be made successively whenever any event
listed above shall occur.
The Company shall not issue shares of Class B Preferred Stock as
a dividend or distribution on any class of capital stock other than Class B
Preferred Stock unless the Warrant Holders also receive such dividend or
distribution on a ratable basis or the appropriate adjustment to the Warrant
Number and Exercise Price is made under this Section 9.
(b) Notice of Adjustment
--------------------
Whenever the Warrant Number is adjusted, the Company shall
provide the notices required by Section 11 hereof.
(c) Voluntary Increase
------------------
The Company from time to time may increase the Warrant Number by
any amount for any period of time (including, without limitation, permanently)
if the period is at least 20 Business Days and if the increase is irrevocable
during the period. Whenever the Warrant Number is increased, the Company shall
mail to the Holders a notice of the increase. The Company shall mail the notice
at least 15 days before the date the increased Warrant Number takes effect. The
notice shall state the increased Warrant Number and the period it will be in
effect.
An increase of the Warrant Number under this Subsection (c)
(other than a permanent increase) does not change or adjust the Warrant Number
otherwise in effect for purposes of subsection (a) of this Section 9.
(d) Reorganizations
---------------
In case of any capital reorganization, other than in the cases
referred to in Section 9(a) hereof, or the consolidation or merger of the
Company with or into another corporation (other than a merger or consolidation
in which the Company is the continuing corporation and which docs not result in
any reclassification of the outstanding shares of Preferred Stock or Common
Stock into shares of other stock or other securities or property), or the sale
of the property of the Company as an entirety or substantially as an entirety
(collectively, such actions being hereinafter referred to as "Reorganizations"),
-----------------
there shall thereafter be deliverable upon exercise of any Warrant (in lieu of
the number of shares of Class B Preferred Stock theretofore deliverable) the
number of shares of stock or other securities or property to which a holder of
the number of shares of Class B Preferred Stock that would otherwise have been
deliverable upon the exercise of such Warrant would have been entitled upon such
Reorganization if such Warrant had been exercised in full immediately prior to
such Reorganization In case of any Reorganization, appropriate adjustment, as
determined in good
6
<PAGE>
faith by the Board of Directors of the Company, whose determination shall be
described in a duly adopted resolution certified by the Company's Secretary or
Assistant Secretary, shall be made in the application of the provisions herein
set forth with respect to the rights and interests of Holders so that the
provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise of Warrants.
The Company shall not effect any such Reorganization unless prior
to or simultaneously with the consummation thereof, (i) notice of such
Reorganization shall be given to each of the Holders of the Warrants, and (ii)
the successor corporation (if other than the Company) resulting from such
Reorganization or the corporation purchasing or leasing such assets or other
appropriate corporation or entity shall expressly assume, by a supplemental
Warrant Agreement or other acknowledgement executed and delivered to the
Holder(s), the obligation to deliver to each such Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase, and all other obligations and liabilities
under this Agreement.
(e) Form of Warrants
----------------
Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement but shall nevertheless be exercisable for the
adjusted number of Warrant Shares at the adjusted Exercise Price.
SECTION 10. Fractional Interests. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 10,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall, pay an amount in cash equal to the fair market value (as
determined in good faith by the Board of Directors) of the Warrant Share so
issuable, multiplied by such fraction
SECTION 11. Notices to Warrant Holders. Upon any adjustment pursuant to
Section 9 hereof, the Company shall promptly thereafter (i) cause to be filed
with the Company a certificate of an officer of the Company setting forth the
Warrant Number and Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based, and (ii) cause to be given to each of the Holders at its
address appearing on the Warrant Register written notice of such adjustments.
Where appropriate, such notice may be given in advance and included as a part of
the notice required to be mailed under the other provisions of this Section 11.
7
<PAGE>
In case:
(a) The Company shall authorize the issuance to all holders of shares
of Class B Preferred Stock of rights, options or warrants to subscribe for or
purchase shares of Class B Preferred Stock or of any other subscription rights
or warrants;
(b) The Company shall authorize the distribution to all holders of
shares of Class B Preferred Stock of assets, including cash, evidences of its
indebtedness, or other securities;
(c) of any consolidation or merger to which the Company is a party and
for which approval of any shareholders of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any reclassification or change of Class B Preferred Stock
issuable upon exercise of the Warrants (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange offer for
shares of Class B Preferred Stock;
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company proposes to take any action that would require an
adjustment to the Warrant Number pursuant to Section 9 hereof;
then the Company shall cause to be given to each of the Holders at its address
appearing on the Warrant Register, at least 20 days prior to the applicable
record date hereinafter specified, or the date of the event in the case of
events for which there is no record date, in accordance with the provisions of
Section 12 hereof, a written notice stating (i) the date as of which the holders
of record of shares of Preferred Stock or Common Stock to be entitled to receive
any such rights, options, warrants or distribution are to be determined, or (ii)
the initial expiration date set forth in any tender offer or exchange offer for
shares of Preferred Stock or Common Stock, or (iii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Preferred Stock or Common Stock
shall be entitled to exchange such shares for securities or other property, if
any, deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the notice
required by this Section 11 or any defect therein shall not affect the legality
or validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action
Nothing contained in this Agreement or in any Warrant Certificate
shall be construed as conferring upon the Holders (prior to the exercise of such
Warrants) the right to
8
<PAGE>
vote or to consent or to receive notice as shareholder in respect of the
meetings of shareholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company; provided,
however, that nothing in the foregoing provision is intended to detract from any
rights explicitly granted to any Holder hereunder.
SECTION 12. Notices to the Company and Warrant Holders. All notices and
other communications provided for or permitted hereunder shall be made by hand-
delivery, first-class mail, telex, telecopier, or overnight air courier
guaranteeing next day delivery:
(a) if to Investors, to the address specified on the signature page
executed by each such Investor, with a copy to Paul, Hastings, Janofsky & Walker
LLP, 399 Park Avenue, New York, New York 10022, telecopy No.: (212) 319-4090,
Attention: William Schwitter, Esq.; and
(b) if to the Company, IXL Holdings, Inc., 1888 Emery Street, Suite
200, Atlanta, Georgia, 30318, Telecopy no. (404) 267-380l, Attention: James V.
Sandry, with a copy to Minkin & Snyder PC, One Buckhead Plaza, 3060 Peachtree
Road, N.E., Suite 1100, Atlanta, Georgia 30305, Telecopy No.(404)233-5064,
Attention: James S. Altenbach, Esq., and with an additional copy to Kelso &
Company, 320 Park Avenue, Suite 2400, New York, New York 10022, Attention: James
J. Connors II, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed (so long as a
fax copy is sent and receipt acknowledged within two business days after
mailing); when answered back if telexed; when receipt acknowledged, if
telecopied; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery. The parties may
change the addresses to which notices are to be given by giving five days' prior
written notice of such change in accordance herewith.
SECTION 13. Certain Supplements and Amendments. The Company may from time
to time supplement or amend this Agreement without the approval of any Holders
in order to cure any ambiguity or to correct or supplement any provision
contained herein which may be defective or inconsistent with any other provision
herein; provided that any such supplement or amendment shall not in any way
adversely affect the interests of the Holders.
SECTION 14. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company shall bind and inure to the benefit of its
respective successors and assigns hereunder.
SECTION 15. Termination. This Agreement shall terminate if all Warrants
have been exercised or share have expired or been canceled pursuant to this
Agreement.
9
<PAGE>
SECTION 16. GOVERNING LAW; SUBMISSION TO JURISDICTION; Waiver of Jury
Trial. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITh THE
INTERNAL LAWS OF THE STATE OF NEW YORK (PROVIDED THAT DETERMINATIONS RELATING TO
CORPORATE LAW SHALL BE CONSTRUED IN ACCORDANCE WITH THE DELAWARE GENERAL
CORPORATION LAW). THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
3URISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT AND THE WARRANTS, ANY IRREVOCABLY ACCEPTS FOR
ITSELF ANY IN RESPECT OF ITS PROPERTY, GENERALLY ANY UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. THE COMPANY AGREES THAT IT WILL NOT
COMMENCE ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY OTHER JURISDICTION. THE
COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTWITHSTANDING THE FOREGOING, NOTHING HEREIN SHALL AFFECT
THE RIGHT OF ANY HOLDER OF A WARRANT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION.
EACH OF THE PARTIES HERETO HEREBY WAIVES THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE OTHER DOCUMENTS, OR ANY DEALINGS BETWEEN THEM REALTING
RELATING TO THE SUBJECT MATTER OF THE INVESTORS' INVESTMENT IN THE COMPANY
CONTEMPLATED HEREBY. THE SCOPE OF THIS JURY TRIAL WAIVER SHALL BE LIMITED TO
DISPUTES BETWEEN THE COMPANY AND THE INVESTORS AND SHALL NOT EXTEND TO DISPUTES
BETWEEN THE COMPANY AND ANY OTHER PERSON.
SECTION 17. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Holders any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company and
the Holders.
10
<PAGE>
SECTION 18. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 19. Amendments and Waivers. Subject to Section 13, the Company
agrees it will not solicit, request or negotiate for or with respect to any
proposed waiver or amendment of any of the provisions of this Agreement or any
Warrant unless each Holder (irrespective of the amount of Warrants then owned by
it) shall substantially concurrently be informed thereof by the Company and
shall be afforded the opportunity of considering the same and shall be supplied
by the Company with sufficient information (including any offer of remuneration)
to enable it to make an informed decision with respect thereto which information
shall be the same as that supplied to each other Holder. The Company will not,
directly or indirectly, pay or cause to be paid any remuneration whether by way
of supplement or additional interest fee or otherwise, to any Holder as
consideration for or as an inducement to the entering into by any Holder of any
waiver or amendment of any of the terms and provisions of this Agreement or any
Warrant unless such remunerations is concurrently paid on the same terms,
ratably to each Holder whether or not such Holder signs such waiver or consent,
provided that the foregoing is not intended to preclude the adoption of any
amendment or the giving of any waiver by the Holders of a majority of the
Warrants to the extent permitted by the other provisions of this Section 19.
[Signature pages follow]
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be duly executed as of the day and year first above written.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
-----------------------------
Title: Executive Vice President
-----------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Tony J. Pantuso
-----------------------------
Title: Department Operations Manager
-----------------------------
12
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EXHIBIT A
[Form of Warrant Certificate]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
DECEMBER 23, 1997, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED EXCEPT IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE ACT, OR IN COMPLIANCE WITH RULE 144 OR
PURSUANT TO ANOTHER EXEMPTION THEREFROM. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO A WARRANT AGREEMENT AND A SECURITIES PURCHASE
AGREEMENT, DATED AS OF DECEMBER 23, 1997, AMONG THE ISSUER OF SUCH SECURITIES
(THE "COMPANY"), THE INVESTORS REFERRED TO THEREIN AND THE OTHER PARTIES
THERETO. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED
IN SUCH AGREEMENTS AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF
THIS CERTIFICATE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH
TRANSFER. A COPY OF SUCH AGREEMENTS WILL BE FURNISHED WITHOUT CHARGE BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
THE SHARES ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE PREFERENCES, POWERS, QUALIFICATIONS AND RIGHTS OF
EACH CLASS AND SERIES AS SET FORTH IN THE COMPANY'S CERTIFICATE OF
INCORPORATION. THE COMPANY WILL FURNISH A COPY OF THE CERTIFICATE OF
INCORPORATION TO THE HOLDER OF THIS CERTIFICATE UPON WRITTEN REQUEST.
No.____ ______ Warrants
Warrant Certificate
IXL HOLDINGS, INC.
This Warrant Certificate certifies that _________________, or registered
assigns, is the registered holder of the number of Warrants (the "Warrants") set
---------
forth above to purchase Class B Preferred Stock, par value $.01 per share (tile
"Class B Preferred Stock"), of DCL Holdings, Inc., a Delaware corporation (the
----- - --------- -------
"Company"). Each Warrant entitles the Holder upon exercise to receive from the
Company one fully paid and nonassessable share of Class B Preferred Stock (a
"Warrant Share"), at an exercise price (the "Exercise Price") of $458.00 payable
- -------- ---------------
in lawful money of the United States of America, upon surrender of this Warrant
Certificate and payment of the Exercise
13
<PAGE>
Price at the office of the Company designated for such purpose, but only subject
to the conditions set forth herein and in the Warrant Agreement referred to
hereinafter. The number of Warrant Shares issuable upon exercise of the Warrants
is subject to adjustment upon the occurrence of certain events, as set forth in
the Warrant Agreement. Each Warrant is exercisable at any time during the period
commencing and ending at 5:00 p.m., New York City time, on December 23, 2007.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, and are issued or to be issued pursuant to a
Warrant Agreement dated as of December 23, 2007 (the "Warrant Agreement"), duly
-------------------
executed and delivered by the Company, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders or holder" meaning the registered holders or registered holder) of the
------- ------
Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof
upon written request to the Company. Capitalized terms used and not defined
herein shall have the meaning ascribed thereto in the Warrant Agreement.
The holder of Warrants evidenced by this Warrant Certificate may exercise
such Warrants under and pursuant to the terms and conditions of the Warrant
Agreement by surrendering this Warrant Certificate, with the form of election to
purchase set forth hereon (and by this reference made a part hereof) properly
completed and executed, together with payment of the Exercise Price made, at the
election of the Holder, (i) in cash, by certified or official bank check payable
to the order of the Company, (ii) by delivering for surrender and cancellation
to the Company Warrants with an aggregate Surrender Value (as defined in Section
4 of the Warrant Agreement), as of the date of such exercise, equal to the
Exercise Price for the Warrants being exercised, or (iii) any combination
thereof. In the event that upon any exercise of Warrants evidenced hereby the
number of Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued by the Company to the holder hereof or
its registered assignee a new Warrant Certificate evidencing the number of
Warrants not exercise.
Warrant Certificates, when surrendered at the office of the Company by the
registered holder thereof in person or by legal representative or attorney duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Subject to the terms and conditions of the Warrant Agreement, upon due
presentation for registration of transfer of this Warrant Certificate at the
office of the Company a new Warrant Certificate or Warrant Certificates of like
tenor and evidencing in the aggregate a like number of Warrants shall be issued
to the transferee(s) in exchange for this Warrant Certificate, subject to the
limitations provided in the Warrant Agreement, without charge except for any tax
or other governmental charge imposed in connection therewith.
14
<PAGE>
The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.
IN WITNESS WHEREOF, IXL Holdings, Inc. has caused this Warrant Certificate
to be signed by its Chairman of the Board, President or Vice President and by
its Secretary or Assistant Secretary.
Dated: [ ], 1997
IXL HOLDINGS, INC.
By _______________________________
Name:
Title:
By _______________________________
Name:
Title:
15
<PAGE>
FORM OF ELECTION TO PURCHASE
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive ________ shares of Class B
Preferred Stock and herewith tenders payment for such shares to the Company in
the form of [a certified or official bank check payable to the order of the
Company in the amount of $____, [and] Warrants to purchase_______ Warrant Shares
with an aggregate Surrender Value (as defined in Section 4 of the Warrant
Agreement) of $___________].
The undersigned requests that a certificate for such shares be registered
in the name of __________, whose address is ___________________ and that such
shares be delivered to ____________________, whose address is_________________.
If said number of shares is less than all of the shares of Class B
Preferred Stock purchasable hereunder, the undersigned requests that a new
Warrant Certificate representing the remaining balance of such shares be
registered in the name of ____________________, whose address is
_____________________________, and that such Warrant Certificate be delivered to
______________________,whose address is_____________________.
Signature(s): __________________________________________
NOTE: The above signature(s) must correspond with
the name written upon the face of this Warrant
Certificate in every particular, without
alteration or enlargement or any change
whatever. If this Warrant is held of record by
two or more joint owners, all such owners must
sign.
Date:________
16
<PAGE>
FORM OF ASSIGNMENT
(To be signed only upon assignment of Warrant Certificate)
FOR VALUE RECEIVED, hereby sells, assigns and transfers unto
____________________ whose address is _________________________ and whose social
security number or other identifying number is _____________, the within Warrant
Certificate, together with all right, title and interest therein and to the
Warrants represented thereby, and does hereby irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant Certificate on the
books of the within-named Company, with full power of substitution in the
premises.
Signature(s): __________________________________________
NOTE: The above signature(s) must correspond with
the name written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever. If this Warrant is held of
record by two or more joint owners, all such
owners must sign.
Date: ____________
17
<PAGE>
EXHIBIT 10.45
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement") is dated as of March
30, 1998, and entered into by and among IXL Holdings, Inc., a Delaware
corporation (the "Company"), and Kevin Wall ("Wall").
In consideration of the mutual covenants and agreements set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
Company and Wall agree as follows:
SECTION 1. PURCHASE AND SALE. Subject to the terms and conditions set
forth herein and in reliance on the representations and warranties of Wall
contained herein, the Company agrees to purchase from Wall, and Wall agrees to
sell to the Company, 184,616 shares (the "Purchase Shares") of Class B Common
Stock, par value $.0l per share, of the Company (the "Class B Common Stock")
held by Wall for an aggregate purchase price of $600,002.00 for all of the
Purchase Shares.
SECTION 2. CLOSING. The purchase and sale of the Purchase Shares shall
take place at a closing (the "Closing") at the offices of Minkin & Snyder, One
Buckhead Plaza, 3060 Peachtree Road, Suite 1100, Atlanta, Georgia 30305, at
10:00 a.m., Atlanta time, on the date hereof, or at such other place and/or on
such other Business Day as may be agreed upon by Wall and the Company (the
"Closing Date"). At the Closing, upon the surrender and delivery by Wall to the
Company of stock certificate(s) representing the Purchase Shares, together with
appropriate stock powers duly endorsed in blank, the Company will deliver to
Wall payment of the aggregate purchase price therefor by intra-bank or Federal
funds bank wire transfer of same day funds to such bank account within the
United States as Wall shall designate.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF WALL. Wall represents and
warrants to the Company (which representations and warranties shall survive the
Closing indefinitely) as follows:
(a) Wall owns good and marketable title to the Purchase Shares
free and clear of any and all Liens. "Lien" shall mean any pledge,
hypothecation, security interest, encumbrance, restriction, claim, lien, or
charge of any kind, whether voluntarily incurred or arising by operation of law
or otherwise, affecting any of the Purchase Shares, including any agreement to
give or grant any of the foregoing.
(b) The proceeds from the sale of the Purchase Shares will be
applied as follows:
FIRST: $268,753 of such proceeds shall be retained by the
Company in satisfaction and payment of the entire
outstanding principal amount of, plus all accrued
but unpaid interest on, all loans made by the
Company to Wall, including all loans made by the
Company to Wall pursuant to that certain Promissory
Note dated as of May 30, 1997
-1-
<PAGE>
made by Wall in favor of the Company in the
original principal amount of $50,000; and
Second: the remainder of such proceeds ($331,249) may be
used by Wall as he may so desire in his sole and
unfettered discretion.
SECTION 4. COUNTERPARTS; FACSIMILE SIGNATURES. This Securities Purchase
Agreement may be signed in counterparts, each of which shall constitute an
original and which together shall constitute one and the same agreement. This
Securities Purchase Agreement may be executed and delivered via facsimile
transmission, and any such counterpart delivered via facsimile transmission
shall be deemed an original for all intents and purposes.
SECTION 5. ENTIRE AGREEMENT. This Securities Purchase Agreement
constitutes the entire agreement and understanding among the parties hereto with
respect to the subject matter hereof and thereof and supersedes any and all
prior agreements and understandings, written or oral, relating to the subject
matter hereof.
IN WITNESS WHEREOF, this Securities Purchase Agreement has been duly
executed by the parties set forth below as of the date first written above.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
---------------------------------------------
James V. Sandry
Executive Vice President
/s/ Kevin Wall
-------------------------------------------------
KEVIN WALL
-2-
<PAGE>
EXHIBIT 10.46
================================================================================
SECURITIES PURCHASE AGREEMENT
dated as of August 14, 1998
among
IXL HOLDINGS, INC.
(the "Company"),
-------
and
THE PURCHASERS NAMED HEREIN
(the "Purchasers")
-----------
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINED TERMS; RULES OF CONSTRUCTION.......................................................... 1
1.1 Defined Terms................................................................................. 1
1.2 Rules of Construction......................................................................... 8
ARTICLE II PURCHASE AND SALE OF SHARES; CLOSINGS........................................................ 9
2.1 Certificate of Designation.................................................................... 9
2.2 Authorization of Issuance of Preferred Shares................................................. 9
2.3 Sale of Securities............................................................................ 9
2.4 Closings...................................................................................... 9
2.5 Closing Deliveries............................................................................ 10
2.6 Use of Proceeds............................................................................... 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................... 10
3.1 Due Incorporation and Good Standing........................................................... 10
3.2 Capitalization................................................................................ 10
3.3 Subsidiaries.................................................................................. 11
3.4 Authority..................................................................................... 12
3.5 Authorization, Etc. of Preferred Shares....................................................... 12
3.6 No Violation or Conflict; No Default.......................................................... 12
3.7 No Material Adverse Change; Financial Statements.............................................. 13
3.8 Full Disclosure............................................................................... 14
3.9 Private Offering.............................................................................. 14
3.10 No Brokers.................................................................................... 15
3.11 Litigation.................................................................................... 15
3.12 Labor Relations............................................................................... 15
3.13 Taxes......................................................................................... 16
3.14 Environmental Matters......................................................................... 17
3.15 ERISA......................................................................................... 17
3.16 Intellectual Property Rights.................................................................. 18
3.17 Compliance with Laws.......................................................................... 19
3.18 Agreements.................................................................................... 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS............................................. 20
4.1 Purchase for Own Account...................................................................... 20
4.2 Accredited Investor........................................................................... 20
4.3 Authorization................................................................................. 20
4.4 ERISA......................................................................................... 21
ARTICLE V CONDITIONS TO CLOSING......................................................................... 21
5.1 First Closing................................................................................. 21
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
5.2 Second Closing............................................................................. 24
ARTICLE VI TRANSFER OF SECURITIES.................................................................... 26
6.1 Restriction on Transfer.................................................................... 26
6.2 Restrictive Legends........................................................................ 26
6.3 Transfer Pursuant to Rule 144.............................................................. 26
ARTICLE VII INFORMATION RIGHTS....................................................................... 26
7.1 Inspection of Properties and Records....................................................... 26
7.2 Information to Prospective Purchasers...................................................... 27
7.3 Financial Statements....................................................................... 27
ARTICLE VIII ADDITIONAL AGREEMENTS OF THE COMPANY.................................................... 28
8.1 Compliance with Laws....................................................................... 28
8.2 Insurance.................................................................................. 28
8.3 Covenants.................................................................................. 28
8.4 Inconsistent Agreements.................................................................... 29
8.5 Securities Act Registration Statements..................................................... 30
8.6 Publicity; Press Releases.................................................................. 30
ARTICLE IX MISCELLANEOUS............................................................................. 30
9.1 Termination Events......................................................................... 30
9.2 Fees....................................................................................... 31
9.3 Further Assurances......................................................................... 31
9.4 Remedies................................................................................... 31
9.5 Successors and Assigns..................................................................... 32
9.6 Entire Agreement........................................................................... 32
9.7 Notices.................................................................................... 32
9.8 Amendments, Modifications and Waivers...................................................... 33
9.9 Governing Law; Waiver of Jury Trial........................................................ 33
9.10 No Third Party Reliance.................................................................... 34
9.11 Submission to Jurisdiction................................................................. 34
9.12 Extension; Waiver.......................................................................... 34
9.13 Severability............................................................................... 35
9.14 Independence of Agreements, Covenants, Representations and Warranties...................... 35
9.15 Counterparts; Facsimile Signatures......................................................... 35
9.16 Survival of Representations, Warranties and Agreements; No Recourse........................ 35
</TABLE>
(ii)
<PAGE>
SECURITIES PURCHASE AGREEMENT (the "Agreement") dated as of August 14,
---------
1998, among IXL HOLDINGS, INC., a Delaware corporation (the "Company"), and the
-------
Purchasers listed on Schedule I (collectively, the "Purchasers").
---------- ----------
The Company desires to raise up to $50,000,000 in equity financing,
and the Purchasers are willing to purchase certain shares of the Company's
preferred stock in connection therewith, all on the terms and subject to the
conditions set forth herein.
ACCORDINGLY, in consideration of the foregoing and the covenants,
agreements, representations and warranties contained in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties, the parties hereto hereby agree as follows:
ARTICLE I
DEFINED TERMS; RULES OF CONSTRUCTION
1.1 DEFINED TERMS.
-------------
Capitalized terms used and not otherwise defined in this Agreement have the
meanings ascribed to them below or in the other locations of this Agreement
specified below:
"Affiliate," as applied to any specified Person, shall mean any other
---------
Person that, directly or indirectly, controls, is controlled by or is under
common control with such specified Person. For purposes of the foregoing,
"control," when used with respect to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of Voting Securities,
by contract or otherwise, and the terms "controlled" and "controlling" shall
have meanings correlative to the foregoing. In the case of a Person who is an
individual, the term "Affiliate" shall include, with respect to such specified
Person (i) members of such specified Person's immediate family (as defined in
Instruction 2 of Item 404(a) of Regulation S-K under the Securities Act) and
(ii) trusts, the trustee or the beneficiaries of which are such specified Person
or members of such Person's immediate family as determined in accordance with
the foregoing clause (i). Notwithstanding the foregoing, the Purchasers and
their respective Affiliates shall not be deemed Affiliates of the Company for
purposes of this Agreement.
"Audit" shall mean any audit, assessment of Taxes, other examination
-----
by any Tax Authority, proceeding or appeal of such proceeding relating to Taxes.
"Agreement" shall have the meaning given to such term in the caption.
---------
"Applicable Law," with respect to any Person, means all provisions of
--------------
laws, statutes, ordinances, rules, regulations, permits, certificates or orders
of any Governmental Authority applicable to such Person or any of its assets or
property or to which such Person or any of its assets or property is subject,
and all judgments, injunctions, orders and decrees of all
<PAGE>
courts and arbitrators in proceedings or actions in which such Person is a party
or by which it or any of its assets or properties is or may be bound or subject.
"Board" means the Board of Directors of the Company.
-----
"Business Day" means any day that is not a Saturday, Sunday, legal
------------
holiday or other day on which banks are required to be closed in New York, New
York, or Atlanta, Georgia.
"By-Laws" means the by-laws of the Company, as amended and in effect
-------
at the time in question.
"CBI" shall mean CB Capital Investors, L.P.
---
"Certificate of Designation" means the Certificate of Designation of
--------------------------
Class D Preferred Stock of the Company, the form of which is attached as Exhibit
-------
A.
- -
"Certificate of Incorporation" means the Amended and Restated
----------------------------
Certificate of Incorporation of the Company, as amended and in effect at the
time in question.
"Claim" means any claim, demand, assessment, judgment, order, decree,
-----
action, cause of action, litigation, suit, investigation or other Proceeding.
"Class B Common Stock" means the Class B Common Stock, $.01 par
--------------------
value, of the Company.
"Class D Preferred Stock" means, the Class D Preferred Stock, $.01
-----------------------
par value, of the Company.
"Closings" means collectively, the First Closing and the Second
--------
Closing.
"Closing Certificate" has the meaning given to it in Section 6.1.
------------------- -----------
"Code" means the Internal Revenue Code of 1986, as amended, or any
----
similar Federal law then in force, and the rules and regulations promulgated
thereunder, all as the same may from time to time be in effect.
"Common Stock" means, collectively, all of the common stock, $.0 1 par
------------
value, of the Company of any class, and any other class of capital stock of the
Company hereafter authorized that is not limited to a fixed sum or percentage of
par or stated value in respect to the rights of the holders thereof to
participate in dividends or in the distribution of assets upon any liquidation,
dissolution or winding up of the Company.
"Common Stock Equivalent" means all shares of Common Stock outstanding
-----------------------
and all shares of Common Stock issuable (without regard to any present
restrictions on such issuance) upon the conversion, exchange or exercise of all
Securities of the Company that are convertible, exchangeable or exercisable for
Common Stock and all Common Stock appreciation rights, phantom Common Stock
rights and other rights to acquire, or to receive or be paid
-2-
<PAGE>
amounts based on the market price (less any exercise, conversion or purchase
price) of, the Common Stock.
"Company" has the meaning given to it in the caption to this
-------
Agreement.
"Consolidated" or "consolidated," when used with reference to any
------------ ------------
accounting term, means the amount described by such accounting term, determined
on a consolidated basis in accordance with GAAP, after elimination of
intercompany items.
"Credit Agreement" has the meaning given to it in Section 8.4 of this
---------------- -----------
Agreement.
"Documents" means this Agreement, the Certificate of Designation and
---------
the SBA Letter.
"Employee Benefit Plan" has the meaning ascribed thereto in Section
--------------------- -------
3.15.
- -----
"Environmental Claim" means any claim, action, cause of action,
-------------------
investigation of which the Company or any of its Subsidiaries, including any of
their management employees, are aware, or written notice by any Person alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries or penalties) arising out
of, based on or resulting from (a) the presence, or release into the
environment, of any Material of Environmental Concern at any location owned,
leased, used or operated by the Company or any of its Subsidiaries, or (b)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law.
"Environmental Laws" means all Legal Requirements relating to
------------------
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata and natural resources), including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened releases
of Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern.
"Equity Interest" means (i) with respect to a corporation, any and all
---------------
issued and outstanding capital stock and warrants, options or other rights to
acquire capital stock and (ii) with respect to a partnership, limited liability
company or similar Person, any and all units, interests, or other equivalents
of, or other ownership interests in any such Person and warrants, options or
other rights to acquire any such units or interests.
"ERISA" means The Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and any successor statute or law thereto.
"ERISA Affiliate" has the meaning ascribed thereto in Section 3.15.
--------------- ------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any similar Federal Statute then in force, and the rules and regulations
promulgated thereunder, all as the same may from time to time be in effect.
-3-
<PAGE>
"First Closing" shall have the meaning given to such term in Section
------------- -------
2.4(a).
- ------
"First Closing Date" shall have the meaning given to such term in
------------------
Section 2.4(a)
- --------------
"Fundamental Documents" means the documents by which any Person (other
---------------------
than an individual) establishes its legal existence or which govern its internal
affairs. The Fundamental Documents of the Company are the Certificate of
Incorporation and By-Laws and any other organizational document as amended or
restated (or both) to date.
"GAAP" means United States generally accepted accounting principles.
----
"Governmental Authority" means any domestic or foreign government or
----------------------
political subdivision thereof, whether on a federal, state or local level and
whether executive, legislative or judicial in nature, including any agency,
authority, board, bureau, commission, court, department or other instrumentality
thereof.
"Guaranty" means any obligation, contingent or otherwise, of any
--------
Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation of any other Person in any manner, whether
directly or indirectly, including any obligation of such Person, direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness or other obligation, (ii) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (iii) to purchase or otherwise pay for
merchandise, materials, supplies, services or other property under an
arrangement which provides that payment for such merchandise, materials,
supplies, services or other property shall be made regardless of whether
delivery of such merchandise, materials, supplies, services or other property is
ever made or tendered, or (iv) to maintain the working capital, equity capital
or other financial statement condition of any primary obligor, provided,
--------
however, that the term Guaranty shall not include endorsement of instruments for
- -------
deposit and collection in the ordinary course of business.
"Holder" means any Purchaser and any Permitted Transferee of such
------
Purchaser that is or becomes a holder of the Preferred Shares, in each case, so
long as the Person holds any Preferred Shares.
"Indebtedness" of any Person means, without duplication, (a) all
------------
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by (or which
customarily would be evidenced by) bonds, debentures, notes or similar
instruments, (c) all reimbursement obligations of such Person with respect to
letters of credit and similar instruments, (d) all obligations of such Person
under conditional sale or other title retention agreements relating to property
or assets purchased by such Person, (e) all obligations of such Person incurred,
issued or assumed as the deferred purchase price of property or services other
than accounts payable incurred and paid on terms customary in the business of
such Person (it being understood that the "deferred purchase price" in
connection with any purchase of property or assets shall include only that
portion of the purchase price which shall be deferred beyond the date on which
the purchase is actually
-4-
<PAGE>
consummated), (f) all obligations secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (g) all obligations of such
Person under forward sales, futures, options and other similar hedging
arrangements (including interest rate hedging or protection agreements), (h)
all obligations of such Person to purchase or otherwise pay for merchandise,
materials, supplies, services or other property under an arrangement which
provides that payment for such merchandise, materials, supplies, services or
other property shall be made regardless of whether delivery of such merchandise,
materials, supplies, services or other property is ever made or tendered, (i)
all Guarantees by such Person of obligations of others and (j) all capitalized
lease obligations of such Person.
"Intellectual Property Rights" means all industrial and intellectual
----------------------------
property rights, including, without limitation, patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service mark applications, copyrights, copyright applications, know-how, trade
secrets, proprietary processes and formulae, confidential information,
franchises, licenses, inventions, instructions, marketing materials, trade
dress, logos and designs and all documentation and media constituting,
describing or relating to the foregoing, including manuals, memoranda and
records.
"Legal Requirements" means, as to any Person, all federal, state,
------------------
local or foreign laws, statutes, rules, regulations, ordinances, permits,
certificates, requirements, regulations and restrictions of any Governmental
Authority applicable to such Person or any of its properties or assets.
"Liability" means any liability or obligation, whether known or
---------
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of when
asserted.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or
----
adverse claim affecting title or resulting in a charge against real or personal
property, or security interest of any kind (including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell and any filing of any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Material Adverse Effect" means (a) a material adverse effect upon the
-----------------------
business, operations, prospects, properties, assets or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, or (b) a
material adverse effect on the ability of the Company to perform its obligations
under this Agreement or any of the other Documents.
"Materials of Environmental Concern" means chemicals, pollutants,
----------------------------------
contaminants, industrial, toxic or hazardous wastes, substances or constituents,
petroleum and petroleum products (or any by-product or constituent thereof),
asbestos or asbestos-containing materials or PCBs.
-5-
<PAGE>
"Order" means any judgment, writ, decree, injunction, order,
-----
stipulation, compliance agreement or settlement agreement issued or imposed by,
or entered into with, a Governmental Authority, whether or not having the force
of law.
"Permitted Lien" shall mean the following Liens: (a) Liens existing on
--------------
the Closing Date as listed on Schedule 1.1; (b) Liens for taxes, assessments or
------------
other governmental charges or levies not yet due; (c) statutory Liens of
landlords, carriers, warehousemen, mechanics, materialmen and other Liens
imposed by law created in the ordinary course of business of the Company
consistent with past practices for amounts not yet due; (d) Liens (other than
any Lien imposed by ERISA) incurred or deposits made in the ordinary course of
business of the Company consistent with past practices in connection with
worker's compensation, unemployment insurance or other types of social security;
and (e) with respect to interests in real property, minor defects of title,
easements, rights-of-way, restrictions and other similar charges or Liens not
materially detracting from the value or materially interfering with the use of
such real property.
"Permitted Transferee" has the meaning given such term in the
--------------------
Stockholders Agreement.
"Person" shall be construed as broadly as possible and shall include
------
an individual, a partnership (including a limited liability partnership), a
company, an association, a joint stock company, a limited liability company, a
trust, a joint venture, an unincorporated organization and a Governmental
Authority.
"Preferred Shares" has the meaning given to it in Section 2.2.
---------------- -----------
"Proceeding" means any legal, administrative or arbitration action,
----------
suit, complaint, charge, hearing, inquiry, investigation or proceeding
(including any partial or threatened proceedings).
"Purchaser" has the meaning given to it in the caption to this
---------
Agreement and any Person succeeding to the rights of a Purchaser pursuant to the
terms hereof.
"Qualified Public Offering" means a firm commitment public offering of
-------------------------
the Company's Class B Common Stock by a major bracket underwriter resulting in
net proceeds to the Company of $40,000,000 or more and at a price per share of
Class B Common Stock (as constituted on December 17, 1997) of $700 or higher.
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement dated as of April 30, 1996, among the Company and the stockholders
party thereto.
"Requisite Holders" means Holders representing a majority of all
-----------------
outstanding Preferred Shares, held by such Holders at the time in question.
"Reserved Common Shares" means the shares of Class B Common Stock
----------------------
issuable upon redemption of the Preferred Shares.
-6-
<PAGE>
"Restricted Securities" shall mean the Preferred Shares, the Reserved
---------------------
Common Shares and any shares of capital stock received in respect of any
thereof, in each case which have not then been sold to the public pursuant to
(a) registration under the Securities Act or (b) Rule 144 (or similar or
successor rule) promulgated under the Securities Act.
"Restricted Shares" shall mean the Reserved Common Shares that
-----------------
constitute Restricted Securities.
"SBA Letter" has the meaning set forth in Section 5.1(i) of this
---------- --------------
Agreement.
"Second Closing" has the meaning given to it in Section 2.4(b).
-------------- --------------
"Second Closing Date" has the meaning given to it in Section 2.4(b).
------------------- --------------
"Securities" means, with respect to any Person, such Person's
----------
"securities" as defined in Section 2(1) of the Securities Act and includes such
Person's capital stock or other equity interests or any options, warrants or
other securities or rights that are directly or indirectly convertible into, or
exercisable or exchangeable for, such Person's capital stock or other equity
interests.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same may from time to time be in effect.
"Significant Holder" has the meaning set forth in Section 8.1.
------------------ -----------
"Stockholders Agreement" means the Second Amended and Restated
----------------------
Stockholders Agreement dated as of December 17, 1997, as amended, among the
Company and the stockholders party thereto.
"Subsidiary" shall mean, at any time, with respect to any Person (the
----------
"Subject Person"), (i) any Person of which either (x) more than 50% of the
--------------
shares of stock or other interests entitled to vote in the election of directors
or comparable Persons performing similar functions (excluding shares or other
interests entitled to vote only upon the failure to pay dividends thereon or
other contingencies) or (y) more than a 50% interest in the profits or capital
of such Person are at the time owned or controlled directly or indirectly by the
Subject Person or through one or more Subsidiaries of the Subject Person or by
the Subject Person and one or more Subsidiaries of the Subject Person, or (ii)
any Person whose assets, or portions thereof, are consolidated with the net
earnings of the Subject Person and are recorded on the books of the Subject
Person for financial reporting purposes in accordance with GAAP.
"Tax" means any Taxes and the term "Taxes" means, with respect to any
--- -----
Person, (A) all income taxes (including any tax on or based upon net income, or
gross income, or income as specially defined, or earnings, or profits, or
selected items of income, earnings or profits) and all gross receipts, sales,
use, ad valorem, transfer, franchise, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property or windfall profits
taxes, alternative or add-on minimum taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or
-7-
<PAGE>
additional amounts imposed by any taxing authority (domestic or foreign) on such
Person and (B)any Liability for the payment of any amount of the type described
in the immediately preceding clause (A) as a result of being a "transferee"
(within the meaning of Section 6901 of the Code or any other Applicable Law) of
another Person or a member of an affiliated or combined group.
"Tax Authority" means the Internal Revenue Service and any other
-------------
domestic or foreign governmental authority responsible for the administration of
any Taxes.
"Tax Returns" shall mean all Federal, state, local and foreign tax
-----------
returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax Return relating to Taxes.
"Transfer" shall mean any disposition of any shares or other units of
--------
Restricted Securities or any interest therein which would constitute a sale
thereof within the meaning of the Securities Act.
1.2 RULES OF CONSTRUCTION.
---------------------
The term "this Agreement" means this agreement together with all schedules
--------------
and exhibits hereto, as the same may from time to time be amended, modified,
supplemented or restated in accordance with the terms hereof. The use in this
Agreement of the term "including" means " including, without limitation." The
words "herein," "hereof," "hereunder" and other words of similar import refer to
------ ------ ---------
this Agreement as a whole, including the schedules and exhibits, as the same may
from time to time be amended, modified, supplemented or restated, and not to any
particular section, subsection, paragraph, subparagraph or clause contained in
this Agreement. All references to sections, schedules and exhibits mean the
sections of this Agreement and the schedules and exhibits attached to this
Agreement, except where otherwise stated. The title of and the section and
paragraph headings in this Agreement are for convenience of reference only and
shall not govern or affect the interpretation of any of the terms or provisions
of this Agreement. The use herein of the masculine, feminine or neuter forms
shall also denote the other forms, as in each case the context may require or
permit. Where specific language is used to clarify by example a general
statement contained herein, such specific language shall not be deemed to
modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement has been
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party. Unless expressly provided
otherwise, the measure of a period of one month or year for purposes of this
Agreement shall be that date of the following month or year corresponding to the
starting date, provided that if no corresponding date exists, the measure shall
be that date of the following month or year corresponding to the next day
following the starting date. For example, one month following February 18 is
March 18, and one month following March31 is May 1.
-8-
<PAGE>
ARTICLE II
PURCHASE AND SALE OF SHARES; CLOSINGS
2.1 CERTIFICATE OF DESIGNATION
--------------------------
Prior to the First Closing, the Company shall file with the Secretary of
State of the State of Delaware the Certificate of Designation. The Certificate
of Designation (i) designates 50,000 shares of Class D Preferred Stock and (ii)
sets forth the terms, designations, powers, preferences and relative rights and
the qualifications, limitations and restrictions, of the Class D Preferred
Stock.
2.2 AUTHORIZATION OF ISSUANCE OF PREFERRED SHARES.
---------------------------------------------
Subject to the terms and conditions hereof, the Company has authorized the
issuance at the Closings of an aggregate of up to 50,000 shares (the "Preferred
Shares") of Class D Preferred Stock at a per share price of $1,000 per share.
2.3 SALE OF SECURITIES.
------------------
(a) At the Closings, subject to the satisfaction or waiver of the
conditions set forth in Article V, the Company shall issue and sell to each
---------
Purchaser, and each Purchaser shall severally purchase from the Company, that
number of Preferred Shares set forth opposite its name on Schedule I for the
----------
aggregate purchase price set forth opposite its name.
(b) At any time and from time to time after the date hereof and prior to
August 31, 1998, the Company and the Requisite Holders may amend this Agreement
by adding additional parties as Purchasers and allocating the Preferred Shares
remaining for purchase after the First Closing among them.
2.4 CLOSINGS.
--------
(a) The first closing (the "First Closing") hereunder with respect to
-------------
the issuance and sale of the Preferred Shares being purchased by each Purchaser
at the First Closing and the consummation of the related transactions
contemplated hereby shall, subject to the satisfaction or waiver of the
applicable conditions set forth in Section 5.1, take place at the offices of
-----------
O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New York, on
August 13, 1998 (the "First Closing Date"), or at such other time, date or place
------------------
as agreed to by the parties.
(b) The second closing (the "Second Closing", and together with the
--------------
First Closing, the "Closings") of the issuance and sale of the Preferred Shares
--------
being purchased by such Purchaser at the Second Closing hereunder shall, subject
to the satisfaction or waiver of the conditions set forth in Section 5.2, take
-----------
place at the offices of O'Sullivan Graev & Karabell, LLP, on or prior to August
31, 1998 (the "Second Closing Date"), or at such other time, date or place,
-------------------
agreed to by the Company, and the Purchasers purchasing Preferred Shares at such
Closing, provided that in no event shall the Second Closing Date occur after
August 31, 1998.
-9-
<PAGE>
2.5 CLOSING DELIVERIES.
------------------
At each Closing, the Company shall deliver to each Purchaser
purchasing Preferred Shares at such Closing (i) in the case of the First
Closing, to each Purchaser purchasing Preferred Shares at the First Closing, a
certificate, registered in its name, representing the Preferred Shares purchased
by such Purchaser at the First Closing, against receipt by the Company of a wire
transfer of immediately available funds to an account designated by the Company
of an amount equal to the purchase price for the Preferred Shares being
purchased by such Purchaser at the Closing and (ii) in the case of the Second
Closing, to each Purchaser purchasing Preferred Shares at the Second Closing, a
certificate, registered in its name, representing the Preferred Shares purchased
by such Purchaser at the Second Closing against receipt by the Company of a wire
transfer of immediately available funds to an account designated by the Company
of an amount equal to the purchase price for the Preferred Shares being
purchased by such Purchaser at the Second Closing.
2.6 USE OF PROCEEDS.
---------------
The proceeds received by the Company from the sale of all Preferred
Shares shall be used by the Company solely for (i) the payment of fees and
expenses incurred in connection with the consummation of this transaction, (ii)
repayment of existing Indebtedness, (iii) general corporate and working capital
needs, (iv) capital expenditures and (v) acquisitions of unaffiliated
businesses.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
The Company represents and warrants to the Purchasers that as of the
date hereof:
3.1 DUE INCORPORATION AND GOOD STANDING.
-----------------------------------
The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware with
corporate power and authority to own, lease and operate its properties, to
conduct its business as currently conducted and as proposed to be conducted and
to enter into and perform its obligations under this Agreement and the other
Documents to which it is a party. The Company is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which such qualification is required.
3.2 CAPITALIZATION.
--------------
(a) The authorized capital stock of the Company consists of (a)
75,000,000 shares of Class A Common Stock, par value $.01 per share (the "Class
-----
A Common Stock"), (b) 100,000,000 shares of Class B Common Stock, par value $.01
- --------------
per share (the "Class B Common Stock"), (c) 750,000 shares of blank check
--------------------
preferred stock, 250,000 shares of which have been designated as Class A
Convertible Preferred Stock, par value $.01 per share (the "Class A Preferred
Stock"), 200,000 shares of which have been designated as Class B Preferred
Stock,
-10-
<PAGE>
15,000 shares of which have been designated as Class C Preferred Stock and
50,000 shares of which have been designated as Class D Preferred Stock. As of
the First Closing Date, after giving effect to the transactions contemplated by
this Agreement and the other Documents, (i) there will be issued and outstanding
(A) no shares of Class A Common Stock, (B) 12,537,764 shares of Class B Common
Stock, all of which will be validly issued and fully paid and nonassessable, (C)
175,691 shares of Class A Preferred Stock, all of which will be validly issued
and fully paid and nonassessable, (D) 98,767 shares of Class B Preferred Stock,
all of which will be validly issued and fully paid and nonassessable, (E) 9,232
shares of Class C Preferred Stock, all of which will be validly issued and fully
paid and nonassessable, and (F) 20,000 shares of Class D Preferred Stock; (ii)
there will be reserved for issuance (A) 46,500,000 shares of Class A Common
Stock to be issued upon conversion of the Class A Preferred Stock, the Class B
Preferred Stock and the Class C Preferred Stock, (B) 9,911,189 shares of Class B
Common Stock to be issued upon the exercise of outstanding options and warrants;
(C) 5,319,711 shares of Class B Common Stock to be issued upon the exercise of
unissued options pursuant to the Company's 1996 Stock Option Plan, as amended,
(D) 12,460 shares of Class B Preferred Stock to be issued upon exercise of
outstanding warrants, (E) 46,500,000 shares of Class B Common Stock to be issued
upon conversion of the Class A Common Stock and (F) 7,662,025 shares of Class B
Common Stock to be issued upon conversion or redemption of the Class D Preferred
Stock. Except as set forth above and on Schedule 3.2 hereto, at the Closing
------------
Date, after giving effect to the transactions contemplated by this Agreement and
the other Documents, no Equity Interests of the Company will be issued or
outstanding and there are not, and at the Closing Date there will not be, any
options, agreements, instruments or securities relating to the issued or
unissued Equity Interests of the Company or any Subsidiary of the Company, or
obligating the Company or any Subsidiary of the Company to issue, transfer,
grant or sell any Equity Interests in the Company or any Subsidiary.
(b) The Company has complied with all federal and state securities laws
in connection with the issuance of all outstanding Equity Interests, except
where such failure would not have a Material Adverse Effect.
(c) Except as listed on Schedule 3.2, and except as contemplated by the
------------
Documents, there are no preemptive rights, voting agreements, transfer
restrictions (except those imposed by applicable federal and state securities
laws) or registration rights (except as set forth in the Registration Rights
Agreement) affecting the Equity Interests in the Company.
3.3 SUBSIDIARIES.
-------------
Schedule 3.3 hereto sets forth a list of all Subsidiaries of the Company
------------
and the respective state or jurisdiction of incorporation or organization. All
of the issued or outstanding Equity Interests of such Subsidiaries have been
duly and validly issued and are fully paid and nonassessable and are owned,
directly or indirectly, by the Company. Each Subsidiary of the Company is duly
incorporated and is in good standing in its respective state or jurisdiction of
incorporation and has the corporate authority to own, lease or operate its
properties and to conduct its business as currently conducted and as proposed to
be conducted. Each Subsidiary of the Company is duly qualified to transact
business and is in good standing as a foreign corporation in each state or
jurisdiction in which such qualification is required, except where the failure
to be so qualified would not reasonably be expected to have a Material Adverse
Effect.
-11-
<PAGE>
3.4 AUTHORITY.
---------
The Company has all necessary corporate power and authority to execute and
deliver this Agreement and each of the other Documents to which it is a party,
and to perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby (the "Transactions"). The execution
------------
and delivery of this Agreement and the other Documents to which it is a party
has been authorized by all necessary corporate action on the part of the Company
and no other corporate proceedings or approvals are required on the part of the
Company to authorize this Agreement or the other Documents to which it is a
party or to consummate the Transactions. This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery thereof by the Purchasers, constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to or affecting creditors' rights generally and
by general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.5 AUTHORIZATION, ETC. OF PREFERRED SHARES.
---------------------------------------
The issuance and sale of the Preferred Shares have been duly authorized and
the Preferred Shares when issued to the Purchasers for the consideration set
forth herein will be fully paid and non-assessable, with no personal liability
attached to the ownership thereof.
3.6 NO VIOLATION OR CONFLICT; NO DEFAULT.
------------------------------------
(a) Neither the nature of the business of the Company or any of its
Subsidiaries, the execution, delivery or performance of this Agreement, the
Preferred Shares or any of the other Documents by the Company, nor the
compliance with its obligations hereunder or thereunder, nor the consummation of
the Transactions, nor the issuance, sale or delivery of the Preferred Shares or
the Reserved Common Shares will:
(i) violate or conflict with any provision of the Fundamental
Documents of the Company or any of its Subsidiaries;
(ii) violate or conflict with any Applicable Laws, except where
such violation would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect; or
(iii) violate, be in conflict with, or constitute a breach or
default (or any event which, with the passage of time or notice or both,
would become a default) under, or permit the termination of or require the
consent of any Person under, result in the creation or imposition of any
Lien upon any property of the Company or its Subsidiaries under, result in
the loss (by the Company or any Subsidiary) or modification in any manner
adverse to the Company and its Subsidiaries of any right or benefit under,
or give to any other Person any right of termination, amendment,
acceleration, repurchase or repayment, increased payments or cancellation
under, any mortgage, indenture, note,
-12-
<PAGE>
debenture, agreement, lease, license, permit, franchise or other instrument
or obligation, whether written or oral (collectively, "Contracts") to which
---------
the Company or any of its Subsidiaries is a party or by which their
properties may be bound or affected except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) The Company is not in default (without giving effect to any grace
or cure period or notice requirement) under any Contract, any of the Fundamental
Documents or any applicable judgments or orders, except where such default would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(c) The execution and delivery of this Agreement and the other
Documents to which the Company is a party do not, and the performance of its
obligations under this Agreement and the other Documents and the consummation of
the Transactions will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Authority
pursuant to any Applicable Law, except for (i) required filings under the
Securities Act or state "blue sky" laws as a result of the exercise of rights
under the Registration Rights Agreement, and (ii) where the failure to obtain
such consents, approvals, authorizations or permits or to make such filings or
notifications, would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or prevent or delay in any material
respect consummation of the Transactions, or otherwise prevent the Company from
performing its obligations under this Agreement or the other Documents.
3.7 NO MATERIAL ADVERSE CHANGE; FINANCIAL STATEMENTS.
------------------------------------------------
(a) Except as set forth on Schedule 3.7 hereto, subsequent to May 31,
------------
1998, there has not been (i) any material adverse change in the properties,
business, prospects, operations, assets or condition (financial or otherwise) of
the Company and its Subsidiaries taken as a whole, (ii) any asset or property of
the Company made subject to a Lien of any kind, other than a Permitted Lien,
(iii) any waiver of any valuable right of the Company or any Subsidiary, or the
cancellation of any material debt or material claim held by the Company or any
Subsidiary, (iv) any payment of dividends on, or other distributions with
respect to, or any direct or indirect redemption or acquisition of' any shares
of the capital stock of the Company, or any agreement or commitment therefor,
(v) any mortgage, pledge, sale, assignment or transfer of any material tangible
or intangible assets of the Company, except in the ordinary course of business,
(vi) any loan by the Company or any Subsidiary to any officer, director,
employee, consultant or stockholder or any agreement or commitment therefor,
other than travel expense advances made by the Corporation to its officers,
directors, employees, consultants or stockholders in the ordinary course of
business, (vii) any material damage, destruction or loss (whether or not covered
by insurance) affecting the assets of the Company or any Subsidiary or (viii)
any increase, direct or indirect, in the compensation paid or payable to any
officer, director, employee or consultant of the Company or any Subsidiary other
than in the ordinary course of business.
(b) The Company has heretofore furnished the Purchasers with a true
and complete copy of (i) the audited financial statements of iXL Interactive
Excellence, Inc. (n/k/a iXL, Inc.) as of and for the years ended December 31,
1993, 1994 and 1995, and as of and for the
-13-
<PAGE>
four-month period ended April 30, 1996; (ii) audited combined financial
statements for Creative Video, Inc. (n/k/a iXL, Inc.), Creative Video Library,
Inc. and Entrepreneur Television, Inc. as of and for the years ending December
31, 1993, 1994 and 1995, and as of and for the four-month period ended April 30,
1996; (iii) the audited consolidated financial statements for the Company and
its Subsidiaries as of and for the eight months ended December 31, 1996; (iv)
the audited consolidated financial statements for the Company and its
Subsidiaries as of and for the year ending December 31, 1997; and (v) the
unaudited consolidated financial statements for the Company and its Subsidiaries
as of and for the six months ended May 31, 1998. Such financial statements
present fairly in all material respects the consolidated financial position,
results of operations, shareholders' equity and cash flows of the Company at the
respective dates or for the respective periods to which they apply. Except as
disclosed therein, such statements and related notes have been prepared each in
accordance with GAAP consistently applied throughout the periods involved
(except, in the case of the unaudited financial statements, for the exclusion of
footnotes and normal year end adjustments). Except as set forth on Schedule 3.7,
------------
since May 31, 1998, neither the Company nor any of its Subsidiaries has incurred
any liabilities or obligations (whether absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due) of any
nature, except for liabilities, obligations or contingencies (a) which are
reflected in the unaudited balance sheet of the Company at May 31, 1998, (b)
which were incurred in the ordinary course of business after May 31, 1998 and
consistent with past practices, (c) which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect or (d) which
arise as a result of this Agreement or the other Documents. Since December 31,
1997, there has been no change in any significant accounting (including tax
accounting) policies, practices or procedures of the Company or its
Subsidiaries. All financial statements concerning the Company and its
Subsidiaries that will hereafter be furnished by the Company and its
Subsidiaries to the Purchasers or any Holder pursuant to this Agreement will be
prepared in accordance with GAAP consistently applied (except as disclosed
therein) (except for, in the case of the unaudited financial statements, for the
exclusion of footnotes and normal year end adjustments) and will present fairly
in all material respects the financial condition of the entities covered thereby
as at the dates thereof and the results of their operations for the periods then
ended.
(c) Except as set forth on Schedule 3.7, the Company has good and
------------
marketable title to all properties, interests in properties and assets, real,
personal and mixed, tangible or intangible, used in the conduct of its business,
free and clear of all Liens other than Permitted Liens.
3.8 FULL DISCLOSURE.
---------------
Neither this Agreement, the financial statements referred to in Section 3.7
-----------
nor any Document contains any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made.
3.9 PRIVATE OFFERING.
----------------
Assuming the correctness of the representations and warranties set forth in
Sections 4.1 and 4.2 hereof, the offer and sale of the Preferred Shares and the
- --------------------
issuance of the Reserved
-14-
<PAGE>
Common Shares, if any, to the Purchasers hereunder is exempt from the
registration and prospectus delivery requirements of the Securities Act. In the
case of each offer or sale of the Preferred Shares, no form of general
solicitation or general advertising was used by the Company and its
representatives, including, but not limited to, advertisements, articles,
notices or other communications published in any newspaper, magazine or similar
medium or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
3.10 NO BROKERS.
----------
Except as disclosed on Schedule 3.10, the Company has not engaged any
-------------
broker, finder, commission agent or other such intermediary in connection with
the sale of the Preferred Shares and the transactions contemplated by this
Agreement and the other Documents, and the Company is under no obligation to pay
any broker's or finder's fee or commission or similar payment in connection with
such transactions.
3.11 LITIGATION.
----------
(a) Except as set forth on Schedule 3.11, there is no Proceeding,
-------------
whether commenced, or to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties or assets, except for such Proceedings that would not reasonably be
expected to have, singly or in the aggregate, a Material Adverse Effect, and
there is no Proceeding seeking to restrain, enjoin, prevent the consummation of
or otherwise challenge this Agreement or any of the other Documents or the
Transactions.
(b) Neither the Company nor any of its Subsidiaries is subject to (i)
any judgment, order or decree of any Governmental Authority or (ii) any rule or
regulation of any Governmental Authority that has had a Material Adverse Effect
or that would reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.
3.12 LABOR RELATIONS.
---------------
(a) Neither the Company nor any of its Subsidiaries, nor any Person
for whom the Company or any of its Subsidiaries is or may be responsible by law
or contract, is engaged in any unfair labor practice that would reasonably be
expected to have, singly or in the aggregate, a Material Adverse Effect. There
is (a) no unfair labor practice charge or complaint pending or, to the knowledge
of the Company, threatened against the Company or any of its Subsidiaries, or
any Person for whom the Company or any of its Subsidiaries is or may be
responsible by law or contract, before the National Labor Relations Board or any
corresponding state, local or foreign agency, and no grievance or arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending or threatened, (b) no strike, labor dispute, slowdown or stoppage
pending or threatened against the Company or any of its Subsidiaries, or any
Person for whom either the Company or any of its Subsidiaries is or may be
responsible by law or contract, and (c) no union representation claim or
question existing with respect to the employees of the Company or any of its
Subsidiaries, or any Person for whom either the Company or any of its
Subsidiaries is or may be responsible by law or contract, and no union
organizing activities taking place. Neither the Company nor any of its
Subsidiaries, nor any Person for whom the
-15-
<PAGE>
Company or any of its Subsidiaries is or may be responsible by law or contract,
is a party to any collective bargaining agreement.
(b) Except as disclosed on Schedule 3.12 or such as would not
-------------
reasonably be expected to result in a Material Adverse Effect, neither the
Company nor any of its Subsidiaries has violated any Applicable Laws relating to
employment or employment practices or the terms and conditions of employment,
including, without limitation, discrimination in the hiring, promotion or pay of
employees, wages, hours of work, plant closings and layoffs, collective
bargaining, immigration and occupational safety and health. Except as disclosed
on Schedule 3.12, to the knowledge of the Company or any of its Subsidiaries, no
-------------
charges with respect to or relating to the Company or any of its Subsidiaries
are pending before the Equal Employment Opportunity Commission or any other
corresponding state agency, and the Company and each of its Subsidiaries have at
all times been in material compliance with all Legal Requirements prohibiting
discrimination in the workplace including, without limitation, Legal
Requirements that prohibit discrimination and/or harassment on account of race,
national origin, religion, gender, disability, age, immigration status, workers
compensation status or otherwise.
3.13 TAXES.
-----
Except as otherwise disclosed in Schedule 3.13:
-------------
(a) The Company and its Subsidiaries have timely filed or will timely
file or cause to be timely filed, all Tax Returns (or extensions) required by
applicable law to be filed by any of it prior to or as of the Closing Date. All
such Tax Returns and amendments thereto are or will be true, complete and
correct in all material respects.
(b) The Company and its Subsidiaries have paid or where payment is
not yet due, have established, or will establish or cause to be established on
or before the Closing Date, an adequate accrual for the payment of all Taxes due
with respect to any period ending prior to or as of the Closing Date.
(c) No Audit by a Tax Authority is pending or threatened with respect
to any Tax Returns filed by, or Taxes due from, the Company or its Subsidiaries.
No issue has been raised by any Tax Authority in any Audit of the Company or its
Subsidiaries that if raised with respect to any other period not so audited
would reasonably be expected to result in a material proposed deficiency for any
period not so audited. No deficiency or adjustment for any Taxes has been
threatened, proposed, asserted or assessed against the Company or its
Subsidiaries. There are no liens for Taxes upon the assets of the Company or its
Subsidiaries, except liens for current Taxes not yet due.
(d) Neither Company nor its Subsidiaries have given or been requested
to give any waiver of statutes of limitations relating to the payment of Taxes
or has executed powers of attorney with respect to Tax matters, which will be
outstanding as of the First Closing Date.
(e) Neither the Company nor its Subsidiaries are a party to, or are
bound by any tax sharing, cost sharing or similar agreement or policy relating
to Taxes.
-16-
<PAGE>
(f) Neither the Company nor its Subsidiaries have entered into
agreements that would result in the disallowance of any tax deductions pursuant
to Section 280G of the Code. No "consent" within the meaning of Section 341(f)
------------ -------------
of the Code has been filed with respect to the Company or its Subsidiaries.
3.14 ENVIRONMENTAL MATTERS.
---------------------
(a) Each of the Company and its Subsidiaries is in compliance with
all Environmental Laws, except where such non-compliance would not reasonably be
expected to have a Material Adverse Effect, and neither the Company nor any of
its Subsidiaries has received any written communication that alleges that the
Company or its Subsidiaries is not in compliance with any Environmental Laws,
and there are no circumstances that may prevent or interfere with such
compliance in the future.
(b) There is no Environmental Claim pending or to the knowledge of
the Company threatened against the Company or any of its Subsidiaries with
respect to the operations or business of the Company or its Subsidiaries, or
against any person or entity whose liability for any Environmental Claim the
Company or its Subsidiaries has retained or assumed either contractually or by
operation of law.
(c) To the Company's knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge, presence or disposal of any
Material of Environmental Concern, that could form the basis of any
Environmental Claim against the Company or its Subsidiaries, or against any
person or entity whose liability for any Environmental Claim the Company or its
Subsidiaries has retained or assumed either contractually or by operation of
law, which would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
(d) Without in any way limiting the generality of the foregoing,
Schedule 3.14(d) sets forth (i) all permits, licenses and other governmental
authorizations held by the Company and its Subsidiaries, or required for any of
their operations or business, under any Environmental Law, including the current
status of each such permit, license and authorization, (ii) all on-site and to
the knowledge of the Company off-site locations where the Company or any of its
Subsidiaries has stored, disposed or arranged for the disposal of Materials of
Environmental Concern, (iii) to the knowledge of the Company, all underground
storage tanks, and the capacity and contents of such tanks, located on property
owned, leased or controlled by the Company or its Subsidiaries, (iv) to the
knowledge of the Company, the location and condition of any asbestos or lead
(including furnishings or lead-based paints) contained in or forming part of any
building, building component, structure or office space owned, leased or
controlled by the Company or its Subsidiaries, and (v) to the knowledge of the
Company, all PCBs or PCB-containing items that are used or stored at any
property owned, leased or controlled by the Company or its Subsidiaries.
3.15 ERISA.
-----
(a) Except as set forth on Schedule 3.15, neither the Company nor its
-------------
Subsidiaries, or any other trade or business, whether or not incorporated that
together with the
-17-
<PAGE>
Company or its Subsidiaries would be deemed a "single employer" (within the
meaning of Section 4001 of ERISA (an "ERISA Affiliate") is a "party in interest"
---------------
(as defined in Section 3(14) of ERISA) or a "disqualified person" (within the
meaning of Section 4975 of the Code), with respect to any profit-sharing,
pension or retirement plan, program, arrangement or agreement, or any other
"employee benefit plan" (within the meaning of Section 3(3) of ERISA) or any
"plan" (within the meaning of Section 4975 of the Code) (collectively, each such
plan, program, arrangement or agreement an "Employee Benefit Plan").
---------------------
(b) With respect to each Employee Benefit Plan: (i) each Employee
Benefit Plan has been administered in compliance in all material respects with
its terms, including, but not limited to, any provisions relating to
contributions thereunder, and is in compliance in all material respects with the
applicable provisions of ERISA, the Code and all other Applicable Laws as they
relate to such Employee Benefit Plans; (ii) no "employee pension benefit plan"
(as defined in Section 3(2) of ERISA) has been the subject of a "reportable
event" (as defined in Section 4043 of ERISA) and there have been no "prohibited
transactions" (as described in Section 4975 of the Code or Title I of ERISA)
effected by the Company or its Subsidiaries with respect to any Employee Benefit
Plan and, to the knowledge of the Company and its Subsidiaries, there have been
no "prohibited transactions" (as described in Section 4975 of the Code or Title
I of ERISA) effected by any Person other than the Company or its Subsidiaries
with respect to any Employee Benefit Plan; (iii) there are no proceedings, suits
or material claims (other than routine claims for benefits) pending or to the
knowledge of the Company or its Subsidiaries threatened with respect to any
Employee Benefit Plan, the assets of any trust thereunder or the Employee
Benefit Plan sponsor with respect to the design or operation of any Employee
Benefit Plan; (iv) no condition exists or event or transaction has occurred in
connection with any Employee Benefit Plan that has resulted or is reasonably
likely to result in the Company or its Subsidiaries or any such ERISA Affiliate
incurring any liability, fine or penalty except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;
(v) no Employee Benefit Plan is or ever has been subject to Title IV of ERISA
and neither the Company nor its Subsidiaries has any liability under Title IV of
ERISA, whether actual or contingent; and (vi) no amounts payable pursuant to any
Employee Benefit Plan will, in connection with the Transactions, fail for any
reason to be deductible for Federal income tax purposes.
3.16 INTELLECTUAL PROPERTY RIGHTS.
----------------------------
Each of the Company and its Subsidiaries owns or possesses adequate
licenses or other rights to use all Intellectual Property Rights material to its
business as currently conducted and as proposed to be conducted, and neither the
Company nor any of its Subsidiaries has received any written notice of
infringement of or conflict with asserted rights of others with respect to the
use of Intellectual Property Rights, which would reasonably be expected to
result in any Material Adverse Effect. To the knowledge of the Company, all
Intellectual Property Rights material to its business as currently conducted and
as proposed to be conducted are valid and enforceable and the Company has
performed all acts and has paid all required fees and taxes to maintain all
registrations and applications of such Intellectual Property Rights in full
force and effect. Neither the Company nor any of its Subsidiaries, in the
conduct of their business as now conducted or as proposed to be conducted,
infringes or conflicts with any right of any third party, known to the Company,
where such infringement or conflict would reasonably be expected to
-18-
<PAGE>
result in any Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is, nor will it be as a result of the execution and delivery of
this Agreement and the other Documents or the performance of any obligations
hereunder and thereunder, in breach of any license or other agreement relating
to any Intellectual Property Rights, except as would not reasonably be expected
to have a Material Adverse Effect. To the knowledge of the Company, no third
party is infringing or has infringed any Intellectual Property Rights of the
Company or its Subsidiaries. Schedule 3.16 hereto lists all material
-------------
Intellectual Property Rights owned or licensed by the Company or its
Subsidiaries. For the purposes of Schedule 3.16, "material Intellectual Property
-------------
Rights" shall not include any retail shrinkwrap software licensed by the
Company.
3.17 COMPLIANCE WITH LAWS.
--------------------
Each of the Company and its Subsidiaries has obtained and has maintained
in good standing any licenses, permits, consents and authorizations required to
be obtained by it under all Legal Requirements relating to its business, the
absence of which would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, and any such licenses, permits, consents
and authorizations remain in full force and effect, except as to any of the
foregoing the absence of which would not reasonably be expected to have, singly
or in the aggregate, a Material Adverse Effect. Each of the Company and its
Subsidiaries is in compliance, in all material respects, with all Applicable
Laws and there is no pending or, to the Company's knowledge, threatened,
Proceedings against either the Company or its Subsidiaries pursuant to any Legal
Requirements, other than any such Proceedings which, if adversely determined,
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
3.18 AGREEMENTS.
----------
Except as set forth on Schedule 3.18 hereto, the Company is not a party to
-------------
any written or oral (a) Contract with any labor union; (b) Contract for the
future purchase of fixed assets or for the future purchase of materials,
supplies or equipment in excess of normal operating require ments; (c) Contract
for the employment of any officer, individual employee or other person on a
full-time basis or any contract with any Person on a consulting basis; (d)
agreement or indenture relating to the borrowing of money or to the mortgaging,
pledging or otherwise placing a material Lien on any assets of the Company; (e)
guaranty of any obligation for borrowed money; (f) material lease or agreement
under which the Company is lessee of or holds or operates any property, real or
personal, owned by any other party; (g) material lease or agreement under which
the Company is lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by the Company; (h) agreement or
other commitment for capital expenditures in excess of $250,000; (i) Contract,
agreement or commitment under which the Company is obligated to pay any broker's
fees, finder's fees or any such similar fees, to any third party in connection
with the Transactions; or (j) any other Contract, agreement, arrangement or
understanding which is material to the business of the Company. All such
Contracts constitute the valid and binding obligations of the Company and, to
the knowledge of the Company, the other parties thereto, enforceable in
accordance with their terms, except as enforcement may be limited by general
principles of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally. For the purposes of this Section 3.18,
------------
"material" shall mean any Contract involving more than $250,000.
-19-
<PAGE>
3.19 YEAR 2000.
---------
The Company represents and warrants that its computer system and software
are able to accurately process date data, including but not limited to,
calculating comparing and sequencing from, into and between the twentieth
century (throughout the year 1999), the year 2000 and the twenty-first century,
including leap year calculations.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants to the Company as to itself
severally, and not jointly as to any other Purchaser, as of the date hereof, as
follows:
4.1 PURCHASE FOR OWN ACCOUNT.
------------------------
Such Purchaser is purchasing the Preferred Shares to be purchased by it
solely for its own account and not as nominee or agent for any other person and
not with a view to, or for offer or sale in connection with, any current
distribution thereof (within the meaning of the Securities Act) that would cause
the original purchase of the Preferred Shares to be in violation of the
securities laws of the United States of America or any state thereof, without
prejudice, however, to its right at all times to sell or otherwise dispose of
all or any part of such Preferred Shares pursuant to a registration statement
under the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act, and subject, nevertheless, to the
disposition of its property being at all times within its control.
4.2 ACCREDITED INVESTOR.
-------------------
Such Purchaser is knowledgeable, sophisticated and experienced in business
and financial matters and in investing in privately held business enterprises;
it has previously invested in securities similar to the Preferred Shares and it
acknowledges that the Securities have not been registered under the Securities
Act and understands that the Preferred Shares must be held indefinitely unless
they are subsequently registered under the Securities Act or such sale is
permitted pursuant to an available exemption from such registration requirement;
it is able to bear the economic risk of its investment in the Preferred Shares
and is presently able to afford the complete loss of such investment; and it is
an "accredited investor" as defined in Regulation D promulgated under the
Securities Act.
4.3 AUTHORIZATION.
-------------
Each Purchaser has taken all actions necessary to authorize it (i) to
execute, deliver and perform all of its obligations under this Agreement, (ii)
to perform all of its obligations under the Documents and (iii) to consummate
the transactions contemplated hereby and thereby. This Agreement is a legally
valid and binding obligation of each Purchaser enforceable against it in
accordance with its terms, except for (a) the effect thereon of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting the rights of creditors generally and (b) limitations imposed by
Federal or state law or equitable principles upon the
-20-
<PAGE>
specific enforceability of any of the remedies, covenants or other provisions
thereof and upon the availability of injunctive relief or other equitable
remedies.
4.4 ERISA.
-----
Each such Purchaser represents that either:
(a) it is not acquiring the Preferred Shares for or on behalf of any
Employee Benefit Plan;
(b) the assets used to acquire the Preferred Shares are assets of an
insurance company general account and the purchase of the Preferred Shares would
be exempt under the provisions of Prohibited Transaction Class Exemption 95-60;
(c) the assets used to acquire the Preferred Shares are assets of a
"venture capital operating company" or "real estate operating company" (as
defined in 29 C.F.R. 25 10.3-101); or
(d) if it is otherwise acquiring the Preferred Shares on behalf of an
employee pension benefit plan, an employee welfare benefit plan or a "Plan,"
either directly or through an investment fund (such as a bank collective
investment fund or insurance company pooled separate account), then, assuming
that the plans identified to such Purchaser by the Company in writing are the
only employee benefit plans (as defined in Section 3 of ERISA) or Plans with
respect to which the Company is a "party in interest" or "disqualified person"
(as such terms are defined in section 3 of ERISA and section 4975 of the Code,
respectively), either
(i) no part of the funds to be used to purchase the Preferred
Shares constitutes assets allocable to any trust that contains assets of
any of such employee benefit plans, or
(ii) exemption from the prohibited transaction rules applies such
that the use of such funds does not constitute a non-exempt prohibited
transaction in violation of section 406 of ERISA or section 4975 of the
Code, which could be subject to a civil penalty assessed pursuant to
section 502 of ERISA or a tax imposed under section 4975 of the Code.
ARTICLE V
CONDITIONS TO CLOSING
5.1 FIRST CLOSING.
-------------
The obligation of each Purchaser to purchase and pay for the Preferred
Shares to be purchased hereunder at the First Closing is subject to the
satisfaction of the following conditions precedent (unless waived by such
Purchaser). The Company shall use its best efforts to ensure that all conditions
to the First Closing set forth in this Section 5.1 are satisfied on or prior to
-----------
the First Closing Date, including executing and delivering all documents
required to be delivered by the Company at the First Closing and taking any and
all actions which may be necessary on its part to cause each other party to the
Documents to so execute and deliver each Document.
-21-
<PAGE>
(a) CERTIFICATE OF DESIGNATION.
--------------------------
(i) The Certificate of Designation shall have been filed with
and accepted by the Secretary of the State of Delaware and evidence of such
filing and acceptance satisfactory to the Purchasers shall have been
delivered to the Purchasers.
(ii) The Company shall have duly issued and delivered to the
Purchasers of Preferred Shares at the First Closing the certificate for the
number of Preferred Shares purchased by such Purchasers.
(b) RESERVATION OF COMMON SHARES.
----------------------------
The Company shall have reserved the Reserved Common Shares for
issuance upon conversion of the Preferred Shares.
(c) REPRESENTATIONS AND WARRANTIES.
------------------------------
The Company shall deliver a certificate executed by an officer of
the Company stating that the representations and warranties contained in Article
-------
III are true, correct and complete in all material respects on and as of the
- ---
First Closing Date.
(d) PERFORMANCE.
-----------
The Company shall have performed and complied in all material
respects with all agreements and conditions contained in the Documents required
to be performed or complied with by it prior to or at the First Closing and
shall have certified to such effect to such Purchaser in writing.
(e) ALL PROCEEDINGS TO BE SATISFACTORY.
----------------------------------
All corporate and other proceedings to be taken and all waivers,
consents, approvals, qualifications and registrations required to be obtained or
effected in connection with the execution, delivery and performance of this
Agreement and the other Documents and the Transactions shall have been taken,
obtained or effected (except for the filing of any notice subsequent to the
First Closing that may be required under applicable Federal or state securities
laws, which notice shall be filed on a timely basis following the First Closing
as so required), and all documents incident thereto shall be reasonably
satisfactory in form and substance to such Purchaser. Such Purchaser shall have
received all such originals or certified or other copies of such documents as
have been reasonably requested by them.
(f) OPINION OF COUNSEL.
------------------
Minkin & Snyder, P.C., counsel to the Company, shall have delivered
its opinion addressed to the Purchasers, dated as of the First Closing Date, in
a form reasonably acceptable to the Purchasers.
(g) SUPPORTING DOCUMENTS.
--------------------
-22-
<PAGE>
Such Purchaser shall have received copies of the following
supporting documents (in form and substance satisfactory to such Purchaser):
(i) certificates of the Secretary of State of the State of
Delaware, dated as of a recent date as to the due incorporation or
organization and good standing of the Company and listing all documents of
the Company on file with said Secretary;
(ii) a telegram, telex or other acceptable method of
confirmation from said Secretary as of the close of business on the next
business day preceding the date of the First Closing as to the continued
good standing of the Company;
(iii) a certificate of the Secretary or an Assistant Secretary of
the Company, dated as of the date of the First Closing and certifying: (1)
that attached thereto is a true, correct and complete copy of each of the
Certificate of Incorporation and By-Laws as in effect on the date of such
certification (each of which shall be in form and substance satisfactory to
such Purchaser); (2) that attached thereto is a true, correct and complete
copy of all resolutions adopted by the Board of Directors (and any
committees thereof) of the Company authorizing the execution, delivery and
performance of the Documents and the issuance, sale, and delivery of the
Preferred Shares, and that all such resolutions are still in full force and
effect; (3) that the Certificate of Incorporation has not been amended
since the date of the last amendment referred to in the certificate
delivered pursuant to clause (i) above; and (4) the incumbency and specimen
signature of all officers of the Company executing the Documents, the stock
certificates representing the Preferred Shares, and any certificate or
instrument furnished pursuant hereto, and a certification by another
officer of the Company as to the incumbency and signature of the officer
signing the certificate referred to in this clause (iii); and
(iv) such additional supporting documents and other information
with respect to the operations and affairs of the Company as such Purchaser
may reasonably request.
(b) NO LITIGATION OR LEGISLATION.
----------------------------
No Legal Requirement shall have been enacted after the date hereof
and no Proceeding shall be pending which prohibits or seeks to prohibit, or
materially restricts or delays the consummation of the transactions contemplated
by the Documents or materially restricts or impairs the ability of the
Purchasers to own Securities of the Company.
(i) SBA LETTER.
----------
CBI shall have prepared the side letter regarding SBA regulatory
compliance (the "SBA Letter") and the forms required to file with the SBA in
connection with the transactions contemplated hereby and the Company shall have
executed such letter and forms and delivered same to CBI.
(j) AMENDMENT OF STOCKHOLDERS AGREEMENT.
-----------------------------------
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<PAGE>
The Stockholders Agreement shall have been amended in a manner
reasonably acceptable to the Purchasers purchasing Preferred Shares at the First
Closing.
5.2 SECOND CLOSING.
--------------
The obligation of each Purchaser to purchase and pay for the Preferred
Shares to be purchased hereunder at the Second Closing, is subject to the
satisfaction of the following conditions precedent (unless waived by such
Purchaser). The Company shall use its best efforts to ensure that all conditions
to the Second Closing set forth in this Section 5.2 are satisfied on or prior to
-----------
the Second Closing Date.
(a) REGISTRATION RIGHTS AGREEMENT.
-----------------------------
Each Purchaser purchasing Preferred Shares at the Second Closing
that is not at such time a party to the Registration Rights Agreement shall have
executed a joinder agreement agreeing to be bound by the terms of such
agreement.
(b) AMENDED AND RESTATED STOCKHOLDERS AGREEMENT.
-------------------------------------------
Each Purchaser purchasing Preferred Shares at the Second Closing
that is not then a party to the Stockholders Agreement shall have executed a
joinder agreement agreeing to be bound by the terms of such agreement.
(c) ISSUANCE OF PREFERRED SHARES.
----------------------------
The Company shall have duly issued and delivered to each Purchaser
purchasing Preferred Shares at the Second Closing the certificate for the number
of Preferred Shares being purchased by such Purchaser at such Closing.
(d) PERFORMANCE.
-----------
The Company shall have performed and complied in all material
respects with all agreements and conditions contained in the Documents required
to be performed or complied with by it prior to or at the Second Closing and
shall have certified to such effect to such Purchaser in writing.
(e) ALL PROCEEDINGS TO BE SATISFACTORY.
----------------------------------
All corporate and other proceedings to be taken and all waivers,
consents, approvals, qualifications and registrations required to be obtained or
effected in connection with the execution, delivery and performance of this
Agreement and the other Documents and the Transactions shall have been taken,
obtained or effected (except for the filing of any notice subsequent to the
Second Closing that may be required under applicable Federal or state securities
laws, which notice shall be filed on a timely basis following the Second Closing
as so required), and all documents incident thereto shall be reasonably
satisfactory in form and substance to such Purchaser. Such Purchaser shall have
received all such originals or certified or other copies of such documents as
have been reasonably requested by them
-24-
<PAGE>
(f) OPINION OF COUNSEL.
------------------
Minkin & Snyder, P.C., counsel to the Company, shall have delivered
its opinion addressed to the Purchasers, dated as of the Second Closing Date,
substantially similar to the opinion delivered at the First Closing.
(g) SUPPORTING DOCUMENTS.
--------------------
Such Purchaser shall have received copies of the following
supporting documents (in form and substance satisfactory to such Purchaser):
(i) certificates of the Secretary of State of the State of
Delaware, dated as of a recent date as to the due incorporation or
organization and good standing of the Company and listing all documents of
the Company on file with said Secretary;
(ii) a telegram, telex or other acceptable method of
confirmation from said Secretary as of the close of business on the next
business day preceding the date of the Second Closing as to the continued
good standing of the Company;
(iii) a certificate of the Secretary or an Assistant Secretary of
the Company, dated as of the date of the Second Closing and certifying: (1)
that attached thereto is a true, correct and complete copy of each of the
Certificate of Incorporation and By-Laws as in effect on the date of such
certification (each of which shall be in form and substance satisfactory to
such Purchaser); (2) that attached thereto is a true, correct and complete
copy of all resolutions adopted by the Board of Directors (and any
committees thereof) of the Company authorizing the execution, delivery and
performance of the Documents and the issuance, sale, and delivery of the
Preferred Shares, and that all such resolutions are still in full force and
effect; (3) that the Certificate of Incorporation has not been amended
since the date of the last amendment referred to in the certificate
delivered pursuant to clause (i) above; and (4) the incumbency and specimen
signature of all officers of the Company executing the Documents, the
certificates representing the Preferred Shares, and any certificate or
instrument furnished pursuant hereto, and a certification by another
officer of the Company as to the incumbency and signature of the officer
signing the certificate referred to in this clause (iii); and
(iv) such additional supporting documents and other information
with respect to the operations and affairs of the Company as such Purchaser
may reasonably request.
(h) NO LITIGATION OR LEGISLATION.
----------------------------
No Legal Requirement shall have been enacted after the date hereof
and no Proceeding shall be pending which prohibits or seeks to prohibit, or
materially restricts or delays the consummation of the transactions contemplated
by the Documents or materially restricts or impairs the ability of the
Purchasers to own Preferred Shares of the Company.
-25-
<PAGE>
ARTICLE VI
TRANSFER OF SECURITIES
6.1 RESTRICTION OR TRANSFER.
-----------------------
The Restricted Securities shall not be transferable except in compliance
with the Stockholders Agreement and the provisions of the Securities Act in
respect of the transfer thereof. Upon any such Transfer, the holder shall give
prompt written notice to the Company of such Transfer, which shall include the
identity of the transferee and the number of Restricted Securities Transferred.
6.2 RESTRICTIVE LEGENDS.
-------------------
Each certificate evidencing the Restricted Securities and each certificate
for any such securities issued to subsequent transferees of any such certificate
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE BLUE SKY LAWS.
ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS
SPECIFIED IN THE SECURITIES PURCHASE AGREEMENT DATED AS OF AUGUST __, 1998,
AMONG THE ISSUER HEREOF AND CERTAIN OTHER SIGNATORIES THERETO, AND NO TRANSFER
OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
ISSUER HEREOF."
6.3 TRANSFER PURSUANT TO RULE 144.
-----------------------------
The Company agrees to provide to the holders of the Restricted Securities
and upon a holder's request to any prospective purchasers designated by a holder
the financial and other information specified in Rule 144 under the Securities
Act and to take any other action or to execute any certificates necessary to
permit a transfer by any holder of Restricted Securities to qualify for the
exemption set forth in Rule 144.
ARTICLE VII
INFORMATION RIGHTS
7.1 INSPECTION OF PROPERTIES AND RECORDS.
------------------------------------
Until the closing of a Qualified Public Offering, the Company agrees to
allow, and to cause each of its Subsidiaries to allow, each Purchaser or
subsequent Holder who continues to
-26-
<PAGE>
hold Preferred Shares with an original cost of at least $1,000,000 (each a
"Significant Holder") or, such Persons as any of them may designate
------------------
(individually and collectively, "Inspectors"), subject to appropriate agreements
----------
as to confidentiality, (i) to visit and inspect any of the properties of the
Company or any of its Subsidiaries, (ii) to examine all their books of account,
records, reports and other papers and to make copies and extracts therefrom,
(iii) to discuss its affairs, finances and accounts with its officers and
employees and (iv) to discuss the financial condition of the Company and its
Subsidiaries with their independent accountants upon reasonable notice to the
Company of its intention to do so and so long as the Company shall be given the
reasonable opportunity to participate in such discussions (and by this provision
the Company authorizes such accountants to have such discussions with the
Inspectors). All such visits, examinations and discussions set forth in the
preceding sentence shall be at such reasonable times and as often as may be
reasonably requested.
7.2 INFORMATION TO PROSPECTIVE PURCHASERS.
-------------------------------------
Until the closing of a Qualified Public Offering, the Company shall, upon
the request of any Purchaser or subsequent Holder, deliver to such Purchaser or
such Holder and any prospective purchaser designated by such Purchaser or such
Holder promptly following the request of such Purchaser or such Holder or such
prospective purchaser such information which such Purchaser or such Holder or
such prospective purchaser may reasonably request in order to comply with the
information requirements of Rule 144A.
7.3 FINANCIAL STATEMENTS.
--------------------
Until the closing of a Qualified Public Offering, the Company will deliver
to each Significant Holder:
(a) Not more than 30 days after the end of each month, a consolidated
balance sheet of the Company as at the end of such month and the related
consolidated statements of income of the Company for such month and (in the case
of all months other than the first month of such fiscal year) for the period
from the beginning of the current fiscal year to the end of such month, and
setting forth, in each case in comparative form, figures for the corresponding
month and each previous month and period in the Company's budget for the current
fiscal year, certified by the chief financial officer of the Company as fairly
presenting in all material respects the financial condition of the Company as at
the dates indicated and the results of their operations for the periods
indicated, prepared in accordance with generally accepted accounting principles
consistently applied except for the absence of footnotes and subject to changes
resulting from periodic adjustments;
(b) Not more than 90 days after the end of each fiscal year of the
Company, a consolidated balance sheet of the Company as of such year and the
related consolidated statements of income and cash flows of the Company for such
year, corresponding figures from the preceding fiscal year, and in the case of
such consolidated financial statements, accompanied by a report thereon of
PricewaterhouseCoopers LLP or such other independent public accountants of
recognized national standing selected by the Company, which report shall state
that such consolidated financial statements were prepared in accordance with
generally accepted
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<PAGE>
accounting principles consistently applied and present fairly in all material
respects the consolidated financial condition of the Company as of the dates
indicated; and
(c) Not later than 30 days prior to the start of each fiscal year
beginning with the fiscal year beginning January 1, 1999, monthly and annual
management projections and budgets for such fiscal year.
ARTICLE VIII
ADDITIONAL AGREEMENTS OF THE COMPANY
8.1 COMPLIANCE WITH LAWS.
--------------------
The Company shall, and shall cause each of its Subsidiaries to, comply with
all statutes, ordinances, governmental rules and regulations, judgments, orders
and decrees (including all Environmental Laws) to which any of them is subject,
and maintain, obtain and keep in effect all licenses, permits, franchises and
other governmental authorizations necessary to the ownership or operation of its
properties or the conduct of its businesses, except to the extent that the
failure to so comply or maintain, obtain and keep in effect would not reasonably
be expected to have, singly or in the aggregate, a Material Adverse Effect.
8.2 INSURANCE.
---------
(a) All the insurable properties of the Company and the Subsidiaries
shall be insured for the benefit of the Company and its Subsidiaries in the full
amounts required to protect the Company and its Subsidiaries against all risks
usually insured against by Persons operating similar properties in the
localities in which such properties are located under policies in effect and
issued by national insurers of recognized responsibility.
(b) The Company shall maintain the other insurance coverage specified
on Schedule 8.2(b) hereto including directors' and officers' liability.
---------------
8.3 COVENANTS.
---------
As long as any Preferred Shares are outstanding, the Company shall, and
shall cause its Subsidiaries, as applicable, to observe and perform the
following:
(a) Payment Under the Documents. The Company shall pay or accrue, as
---------------------------
the case may be, and any amounts payable under the Documents in accordance with
the terms of the Documents.
(b) Proceeds. The Company shall use the proceeds of the sale of the
--------
Preferred Shares solely in the manner described in Section 2.6 of this
-----------
Agreement.
(c) Payment of Taxes. etc. The Company shall pay and discharge, and
---------------------
cause each of its Subsidiaries to pay and discharge, before the same shall
become delinquent, (i) all amounts of taxes, assessments and governmental
charges or levies imposed upon it or upon its property and (ii) all lawful
claims that, if unpaid, could reasonably be expected by law to become a Lien
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<PAGE>
upon its property; provided, however, that neither the Company nor any of its
--------- -------
Subsidiaries shall be required to pay or discharge any such tax, assessment,
charge or claim (y) that is being contested in good faith and by proper
proceedings and as to which appropriate reserves are being maintained or (z) the
non-payment or non-discharge of which could not reasonably be expected to have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
(d) Preservation of Corporate Existence. etc. The Company shall
----------------------------------------
preserve and maintain, and cause each of its Subsidiaries to preserve and
maintain, its corporate existence; provided, however, that any Subsidiary may
--------- -------
merge or consolidate with any other Subsidiary or the Company. The Company shall
preserve and maintain, and cause each of its Subsidiaries to preserve and
maintain, its rights (charter and statutory), and all material permits,
licenses, approvals, privileges and franchises necessary or desirable in the
normal conduct of its business, except any thereof the non-preservation or non-
maintenance of which could not reasonably be expected to have a Material Adverse
Effect on the Company and its Subsidiaries taken as a whole.
(e) Keeping of Books. The Company shall keep, and cause each of its
----------------
Subsidiaries to keep, proper books of record and account, in which entries which
are full and correct in all material respects shall be made of all financial
transactions and the assets and business of the Company and each such Subsidiary
in accordance with GAAP.
(f) Maintenance of Properties, etc. The Company shall maintain and
------------------------------
preserve, and cause each of its Subsidiaries to maintain and preserve, all of
its properties that are reasonably required in the conduct of its business in
good working order and condition, ordinary wear, tear and depletion excepted,
except any thereof the non-maintenance or non-preservation of which could not
reasonably be expected to have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole.
8.4 INCONSISTENT AGREEMENTS.
-----------------------
Neither the Company shall enter into, nor shall the Company cause any of
its Subsidiaries to enter into, any agreement (other than (i) the Credit
Agreement dated as of July 29, 1998 (the "Credit Agreement"), among the Company,
the Lenders (as defined herein) and The Chase Manhattan Bank, as Administrative
Agent, as amended (so long as such amendment does not impair or restrict in any
material respect the ability of the Company to comply with the terms of the
Documents or perform its obligations thereunder to a greater extent than any
impairment or restrictions that existed prior to the date of such amendment) or
(ii) agreements ("Indebtedness Agreements"), for the incurrence of Indebtedness
in individual amounts in excess of $1,000,000, so long as such agreements do not
cause the Company to violate Section 1 (b)(vii) of the Certificate of
------------------
Designation or otherwise impair or restrict in any material respect the
Company's ability to comply with the terms of the Documents or perform its
obligations thereunder to a greater extent than any impairment or restrictions
that existed prior to the date of such Indebtedness Agreement), containing any
provision which would (a) be violated or breached by the exercise or performance
by Company of any of its rights or obligations under any Document or (b) impair
in any material respect the ability of the Company to comply with the terms of
the Documents.
-29-
<PAGE>
8.5 SECURITIES ACT REGISTRATION STATEMENTS.
--------------------------------------
Except for securities of the Company registered on Form S-4 or Form S-8
promulgated under the Securities Act or any successor forms thereto, the Company
shall not file any registration statement under the Securities Act covering any
securities unless it shall first have given the Holders written notice thereof.
In connection with any registration statement referred to in this Section 8.5,
-----------
the Company will indemnify, to the extent permitted by law, each Holder, its
partners, officers and directors and each person, if any, who controls such
Holder within the meaning of Section 15 of the Securities Act, against all
losses, claims, damages, liabilities and expenses caused by any untrue statement
or alleged untrue statement of a material fact contained in any registration
statement or prospectus or any preliminary prospectus or any amendment thereof
or supplement thereto or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by any untrue statement or alleged
untrue statement or omission or alleged omission contained in written
information furnished to the Company by such Holder for use in such registration
statement. If, in connection with any such registration statement, a Holder
shall furnish written information to the Company for use in the registration
statement, such Holder will indemnify, to the extent permitted by law, the
Company, its directors, each of its officers who sign such registration
statement and each person, if any, who controls the Company within the meaning
of the Securities Act against all losses, claims, damages, liabilities and
expenses caused by any untrue statement or alleged untrue statement of a
material fact or any omission or alleged omission of a material fact required to
be stated in the registration statement or prospectus or any preliminary
prospectus or any amendment thereof or supplement thereto or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or alleged untrue statement or such omission or alleged omission is
contained in information so furnished in writing by such Holder for use therein.
8.6 PUBLICITY; PRESS RELEASES.
-------------------------
The Company shall not issue any press release or make any public disclosure
regarding a Purchaser's investment in the Company contemplated hereby unless
such press release or public disclosure is approved by such Purchaser in
advance.
ARTICLE IX
MISCELLANEOUS
9.1 TERMINATION EVENTS.
------------------
In the event the First Closing contemplated under this Agreement shall not
have occurred on or before August 17, 1998, this Agreement may be terminated by
CBI or the Company; provided however, that the right to terminate this Agreement
-------- -------
pursuant to this Section 9.1 shall not be available to either of the respective
-----------
parties whose failure to fulfill any obligation under this Agreement has been
the cause of' or resulted in, the failure of the Closing to occur on or before
such date.
-30-
<PAGE>
9.2 FEES.
----
(a) The Company will pay, and save the Purchasers harmless against
all Liability, whether or not the Closing hereunder occurs, for the payment of
(i) all costs and other expenses incurred from time to time by the Company in
connection with the Company's performance of and compliance with all agreements
and conditions contained herein on its part to be performed or complied with
(including the reasonable costs and expenses of counsel incurred in connection
with the review and preparation of the Documents), (ii) the actual and
reasonable out-of-pocket costs and expenses incurred by the Purchasers at or
prior to closing in connection with the transactions contemplated hereby,
including reasonable fees and charges of O'Sullivan Graev & Karabell, LLP
(counsel to the Purchasers), in connection with the purchase and ownership of
the Preferred Shares, (iii) the reasonable costs and expenses (including fees
and expenses of counsel) incurred by the Purchasers in connection with any
amendment or waiver of' or enforcement of' any Document relating to the
transactions contemplated hereby and (iv) the reasonable fees and expenses
incurred by each Purchaser in any filing with any Governmental Authority with
respect to its investment in the Company or in any other filing with any
Governmental Authority with respect to the Company that mentions such Purchaser.
(b) The Company further agrees that it will pay, and will save the
Purchasers harmless from, any and all Liability with respect to any stamp or
similar taxes which may be determined to be payable in connection with the
execution and delivery and performance of the Documents or any modification,
amendment or alteration of the terms or provisions of the Documents, and that it
will similarly pay and hold the Purchasers harmless from all issue Taxes in
respect of the issuance of the Reserved Common Shares to the Purchasers.
9.3 FURTHER ASSURANCES.
------------------
The Company shall duly execute and deliver, or cause to be duly executed
and delivered, at its own cost and expense, such further instruments and
documents and to take all such action, in each case as may be necessary or
proper in the reasonable judgment of the Purchasers to carry out the provisions
and purposes of the Agreement and the other Documents.
9.4 REMEDIES.
--------
In case any one or more of the representations, warranties, covenants
and/or agreements set forth in this Agreement shall have been breached by the
Company or the Purchaser, the Company or the Purchasers (or any Purchaser), as
applicable, may proceed to protect and enforce its or their rights either by
suit in equity and/or by action at law, including an action for damages as a
result of any such breach and/or an action for specific performance of any such
covenant or agreement contained in this Agreement; provided, however, in no
--------- -------
event shall the Company be liable to a Purchaser in an amount greater than the
purchase price paid by such Purchaser for its Preferred Shares plus any accrued
but unpaid dividends thereon, less the aggregate amounts of any Redemption Price
(as defined in the Certificate of Designation) previously received by such
Purchaser.
-31-
<PAGE>
9.5 SUCCESSORS AND ASSIGNS.
----------------------
This Agreement shall bind and inure to the benefit of the Company and the
Purchasers and their respective successors, assigns, heirs and personal
representatives. Upon any transfer of the Preferred Shares or the Reserved
Common Shares, the transferee shall be bound by, and entitled to the benefits
of, this Agreement with respect to such transferred Securities in the same
manner as the transferring Purchaser.
9.6 ENTIRE AGREEMENT.
----------------
This Agreement and the other writings referred to herein or delivered
pursuant hereto which form a part hereof contain the entire agreement among the
parties with respect to the subject matter hereof and thereof and supersede all
prior and contemporaneous arrangements or understandings with respect thereto.
9.7 NOTICES.
-------
All notices and other communications delivered hereunder (whether or not
required to be delivered hereunder) shall be deemed to be sufficient and duly
given if contained in a written instrument (a) personally delivered, (b) sent by
telecopier, (c) sent by nationally recognized overnight courier guaranteeing
next Business Day delivery or (d) sent by first class registered or certified
mail, postage prepaid, return receipt requested, in each case addressed as
follows:
if to the Company:
IXL Holdings, Inc.
Two Park Place
1888 Emery Street, 2nd Floor
Atlanta, Georgia, 30318
Attention: U. Bertram Ellis, Jr.
Telecopy No.: (404) 267-3801;
with a copy (which shall not constitute Notice) to:
Minkin & Snyder, PC
One Buckhead Plaza
3060 Peachtree Street, N.E., Suite 1100
Atlanta, Georgia 30305
Attn: James S. Altenbach, Esq.
Telecopy No.: (404) 261-5064; and
with an additional copy (which shall not constitute Notice) to:
Kelso & Company
320 Park Avenue -24th Floor
New York, New York 10022
Attn: James J. Connors II, Esq.
Telecopy No.: (212)223-2379; and
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<PAGE>
if to the Purchasers:
to the address specified on the signature page executed by each such
Purchaser;
with a copy (which shall not constitute Notice) to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attn: Julie M. Allen, Esq.
Telecopy No.: (212)408-2420;
or to such other address as the party to whom such notice or other communication
is to be given may have furnished to each other party in writing in accordance
herewith. Any such notice or communication shall be deemed to have been received
(i) when delivered, if personally delivered, (ii) when sent, if sent by telecopy
on a Business Day (or, if not sent on a Business Day, on the next Business Day
after the date sent by telecopy), (iii) on the next Business Day after dispatch,
if sent by nationally recognized, overnight courier guaranteeing next Business
Day delivery, and (iv) on the fifth Business Day following the date on which the
piece of mail containing such communication is posted, if sent by mail.
9.8 AMENDMENTS, MODIFICATIONS AND WAIVERS.
-------------------------------------
The terms and provisions of this Agreement may not be modified or amended,
nor may any of the provisions hereof be waived, temporarily or permanently,
except pursuant to a written instrument executed by the Company and the
Requisite Holders; provided however, that any such amendment, modification or
-------- -------
waiver that would adversely affect the rights hereunder of any Holders, in its
capacity as a Holder, without similarly affecting the rights hereunder of all
Holders, in their capacities as Holders, shall not be effective as to such
Holders without its prior written consent.
9.9 GOVERNING LAW; WAIVER OF JURY TRIAL.
-----------------------------------
(a) All questions concerning the construction, interpretation and
validity of the Documents shall be governed by and construed and enforced in
accordance with the domestic laws of the State of New York, without giving
effect to any choice or conflict of law provision or rule (whether in the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York. In furtherance of the
foregoing, the internal law of the State of New York will control the
interpretation and construction of the Documents, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily or necessarily apply.
(b) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF
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<PAGE>
THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE
OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED
HERETO.
9.10 NO THIRD PARTY RELIANCE.
-----------------------
Anything contained herein to the contrary notwithstanding, the
representations and warranties of the Company contained in this Agreement (a)
are being given by the Company as an inducement to the Purchasers to enter into
this Agreement and the other Documents (and the Company acknowledges that the
Purchasers have expressly relied thereon) and (b) are solely for the benefit of
the Purchasers. Accordingly, no third party (including, without limitation, any
holder of capital stock of the Company) or anyone acting on behalf of any
thereof other than the Purchasers, and each of them, shall be a third party or
other beneficiary of such representations and warranties and no such third party
shall have any rights of contribution against the Purchasers or the Company with
respect to such representations or warranties or any matter subject to or
resulting in indemnification under this Agreement or otherwise.
9.11 SUBMISSION TO JURISDICTION.
--------------------------
Any legal action or proceeding with respect to this Agreement or the other
Documents may be brought in the courts of the State of New York and the United
States of America for the Southern District of New York and, by execution and
delivery of this Agreement, the Company hereby accepts for itself and in respect
of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. The Company hereby irrevocably waives, in connection with any
such action or proceeding, any objection, including, without limitation, any
objection to the venue or based on the grounds of forum non conveniens, which it
may now or hereafter have to the bringing of any such action or proceeding in
such respective jurisdictions. The Company hereby irrevocably consents to the
service of process of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to it at its address as set forth herein. Nothing herein shall
affect the right of the Purchasers to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
the Company in any other jurisdiction.
9.12 EXTENSION; WAIVER.
-----------------
At any time prior to the First Closing, the parties may (a) extend the time
for the performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement and (c) waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party, and any such waiver shall not operate or be
construed as a waiver of any subsequent breach by the other party.
-34-
<PAGE>
9.13 SEVERABILITY.
------------
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not be invalid,
prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
9.14 INDEPENDENCE OF AGREEMENTS, COVENANTS, REPRESENTATIONS AND WARRANTIES.
---------------------------------------------------------------------
All agreements and covenants hereunder shall be given independent effect so
that if a certain action or condition constitutes a default under a certain
agreement or covenant, the fact that such action or condition is permitted by
another agreement or covenant shall not affect the occurrence of such default,
unless expressly permitted under an exception to such initial covenant. In
addition, all representations and warranties hereunder shall be given
independent effect so that if a particular representation or warranty proves to
be incorrect or is breached, the fact that another representation or warranty
concerning the same or similar subject matter is correct or is not breached will
not affect the incorrectness of or a breach of a representation and warranty
hereunder. The exhibits and schedules attached hereto are hereby made part of
this Agreement in all respects. Any disclosure made in any Schedule to this
Agreement which should, based on the substance of such disclosure, be applicable
to another Schedule to this Agreement shall be deemed to be made with respect to
such other Schedule regardless of whether or not a specific reference is made
thereto; provided, that the description of such item on a Schedule is such that
the Purchaser could reasonably be expected to ascertain that such disclosure
would relate to such other provision of this Agreement.
9.15 COUNTERPARTS; FACSIMILE SIGNATURES.
----------------------------------
This Agreement may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement. Facsimile counterpart
signatures to this Agreement shall be acceptable and binding.
9.16 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS; NO RECOURSE.
-------------------------------------------------------------------
With respect to each Purchaser purchasing Preferred Shares in connection
with the First Closing, the representations, warranties and agreements of such
Purchasers and the Company in this Agreement shall survive the First Closing
until the period ending on the date six months after the date hereof. With
respect to each Purchaser purchasing Preferred Shares in connection with the
Second Closing, the representations, warranties and agreements of the such
Purchasers and the Company in this Agreement shall survive the Second Closing
until the period ending on the date six months after the date thereof.
Notwithstanding the foregoing, the agreements and
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<PAGE>
covenants contained in Articles VI, VII, VIII, and IX shall survive both the
First Closing and the Second Closing (except to the extent a shorter period of
time is specified therein). In no event shall any Purchaser have any recourse
against the present or former directors, officers or stockholders of the Company
or any of its Affiliates with respect to any representation, warranty or
agreement made by the Company in this Agreement.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
IXL HOLDINGS, INC.
By: /s/ James V. Sandry
---------------------------------
Name: James V. Sandry
Title: Executive Vice President
Address:
- -------
CB CAPITAL INVESTORS, L.P.
380 Madison Avenue By: CB Capital Investors, Inc.,
New York, NY 10017 its General Partner
Attention: I. Robert Greene
Telecopy No.: (212) 622-3101
By: /s/ Mitchell Blutt
---------------------------------
Name: Mitchell Blutt
Title: Executive Partner
THE FLATIRON FUND 1998/99, LLC
257 Park Avenue South
12th Floor By: /s/ Fred Wilson
New York, NY 10010 ---------------------------------
Attention: Jerry Colonna Name: Fred Wilson
Telecopy No. (212) 228-0552 Title: Managing Member
FRIENDS OF FLATIRON, LLC
257 Park Avenue South By: Flatiron Partners, LLC,
12th Floor its Manager
New York, NY 10010
Attention: Jerry Colonna
Telecopy N9.(212) 228-0552 By: /s/ Fred Wilson
---------------------------------
Name: Fred Wilson
Title: Managing Member
MELLON VENTURES II, L.P.
Mellon Bank Center By: MVMA II, L.P., a Delaware
400 South Hope Street, limited partnership
5th Floor its General Partner
Los Angeles, CA 90071-2806
Attention: Jeffrey H. Anderson By: MVMA, Inc., a Delaware
Telecopy No.: (213) 553-969O; corporation,
its General Partner
with a copy to:
Milbank, Tweed, Hadley By: /s/ Jeff Anderson
& McCloy ---------------------------------
601 South Figueroa Street Name: Jeff Anderson
Los Angeles, California 90017 Title: Vice President
Attn: Neil Wertlieb
Telephone No. (213) 629-5063
<PAGE>
KELSO INVESTMENT ASSOCIATES V, L.P.
c/o Kelso & Company By: KELSO PARTNERS V, L.P.
320 Park Avenue
New York. NY 10022 By: /s/ George E. Matelich
-----------------------------
Attention: James J. Connors, II, Esq. Name: George E. Matelich
Telecopy No).: (212) 223-2379 Title: General Partner
KELSO EQUITY PARTNERS, V, L.P.
c/o Kelso & Company By: /s/ George E. Matelich
-----------------------------
320 Park Avenue Name: George E. Matelich
New York, NY 10022 Title: General Partner
Attention: James J. Connors, II, Esq.
Telecopy No.: (212) 223-2379
<PAGE>
EXHIBITS
--------
Exhibit A -- Certificate of Designation
<PAGE>
List of Schedules to Securities Purchase Agreement
dated as of August 14, 1998
--------------------------------------------------
Schedule 1 Purchasers receiving Preferred Shares
Schedule 1.1 Permitted Liens
Schedule 3.2 Capitalization
Schedule 3.3 Subsidiaries
Schedule 3.7 Material Adverse Changes; Financial
Statements
Schedule 3.10 Brokers
Schedule 3.11 Litigation
Schedule 3.12 Violations of Labor Relations
Schedule 3.13 Taxes - Exceptions
Schedule 3.14 Governmental Authorizations required
under Environmental Law
Schedule 3.15 ERISA Issues
Schedule 3.16 Material Intellectual Property
Schedule 3.18 Agreements
Schedule 8.2(b) Insurance Requirements
<PAGE>
EXHIBIT 10.47
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement") dated as of January 15,
---------
1999, among IXL ENTERPRISES, INC., a Delaware corporation (the "Company"), and
-------
the Purchasers listed on Schedule I (collectively, the "Purchasers").
---------- ----------
The Company desires to raise up to $40,000,000 in equity financing, and the
Purchasers are willing to purchase certain shares of the Company's preferred
stock in connection therewith, all on the terms and subject to the conditions
set forth herein.
ACCORDINGLY, in consideration of the foregoing and the covenants,
agreements, representations and warranties contained in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties, the parties hereto hereby agree as follows:
ARTICLE I
DEFINED TERMS; RULES OF CONSTRUCTION
1.1 DEFINED TERMS.
-------------
Capitalized terms used and not otherwise defined in this Agreement have the
meanings ascribed to them below or in the other locations of this Agreement
specified below:
"Affiliate," as applied to any specified Person, shall mean any other
---------
Person that, directly or indirectly, controls, is controlled by or is under
common control with such specified Person. For purposes of the foregoing,
"control," when used with respect to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities,
by contract or otherwise, and the terms "controlled" and "controlling" shall
have meanings correlative to the foregoing. In the case of a Person who is an
individual, the term "Affiliate" shall include, with respect to such specified
Person, (i) members of such specified Person's immediate family (as defined in
Instruction 2 of Item 404(a) of Regulation S-K under the Securities Act), and
(ii) trusts, the trustee or the beneficiaries of which are such specified Person
or members of such Person's immediate family as determined in accordance with
the foregoing clause (i). Notwithstanding the foregoing, the Purchasers and
their respective Affiliates shall not be deemed Affiliates of the Company for
purposes of this Agreement.
"Audit" shall mean any audit, assessment of Taxes, other examination
-----
by any Tax Authority, proceeding or appeal of such proceeding relating to Taxes.
"Agreement" shall have the meaning given to such term in the caption.
---------
"Applicable Law," with respect to any Person, means all provisions of
--------------
laws, statutes, ordinances, rules, regulations, permits, certificates or orders
of any Governmental Authority applicable to such Person or any of its assets or
property or to which such Person or any of its assets or property is subject,
and all judgments, injunctions, orders and decrees of all
-1-
<PAGE>
courts and arbitrators in proceedings or actions in which such Person is a party
or by which it or any of its assets or properties is or may be bound or subject.
"Board" means the Board of Directors of the Company.
-----
"Business Day" means any day that is not a Saturday, Sunday, legal
------------
holiday or other day on which banks are required to be closed in New York, New
York, or Atlanta, Georgia.
"By-Laws" means the by-laws of the Company, as amended and in effect
-------
at the time in question.
"Certificate of Incorporation" means the Amended and Restated
----------------------------
Certificate of Incorporation of the Company, as amended and in effect at the
time in question.
"Claim" means any claim, demand, assessment, judgment, order, decree,
-----
action, cause of action, litigation, suit, investigation or other Proceeding.
"Class A Conversion Shares" means the shares of Class A Common Stock
-------------------------
reserved for issuance upon the conversion of the Preferred Shares.
"Class A Preferred Stock" means the Class A Convertible Preferred
-----------------------
Stock, $.01 par value, of the Company.
"Class B Conversion Shares" means the shares of Class B Common Stock
-------------------------
reserved for issuance upon the conversion of the Class A Conversion Shares.
"Class B Common Stock" means the Class B Common Stock, $.01 par value,
--------------------
of the Company.
"Closings" means collectively, the First Closing and the Subsequent
--------
Closings.
"Code" means the Internal Revenue Code of 1986, as amended, or any
----
similar Federal law then in force, and the rules and regulations promulgated
thereunder, all as the same may from time to time be in effect.
"Company" has the meaning given to it in the caption to this
-------
Agreement.
"Consolidated" or "consolidated," when used with reference to any
------------ ------------
accounting term, means the amount described by such accounting term, determined
on a consolidated basis in accordance with GAAP, after elimination of
intercompany items.
"Documents" means this Agreement and the other documents, agreements
---------
and certificates executed pursuant to or in connection with this Agreement.
"Employee Benefit Plan" has the meaning ascribed thereto in Section
--------------------- --------
3.15.
- ----
"Environmental Claim" means any claim, action, cause of action,
-------------------
investigation of which the Company or any of its Subsidiaries, including any of
their management employees, are
-2-
<PAGE>
aware, or written notice by any Person alleging potential liability (including,
without limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (a)
the presence, or release into the environment, of any Material of Environmental
Concern at any location owned, leased, used or operated by the Company or any of
its Subsidiaries, or (b) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.
"Environmental Laws" means all Legal Requirements relating to
------------------
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata and natural resources), including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened releases
of Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern.
"Equity Interest" means (i) with respect to a corporation, any and all
---------------
issued and outstanding capital stock and warrants, options or other rights to
acquire capital stock and (ii) with respect to a partnership, limited liability
company or similar Person, any and all units, interests, or other equivalents
of, or other ownership interests in any such Person and warrants, options or
other rights to acquire any such units or interests.
"ERISA" means The Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and any successor statute or law thereto.
"ERISA Affiliate" has the meaning ascribed thereto in Section 3.15.
--------------- ------------
"First Closing" shall have the meaning given to such term in Section
------------- -------
2.3(a).
- ------
"First Closing Date" shall have the meaning given to such term in
------------------
Section 2.3(a).
- --------------
"Fundamental Documents" means the documents by which any Person (other
---------------------
than an individual) establishes its legal existence or which govern its internal
affairs. The Fundamental Documents of the Company are the Certificate of
Incorporation and By-Laws and any other organizational document as amended or
restated (or both) to date.
"GAAP" means United States generally accepted accounting principles.
----
"Governmental Authority" means any domestic or foreign government or
----------------------
political subdivision thereof, whether on a federal, state or local level and
whether executive, legislative or judicial in nature, including any agency,
authority, board, bureau, commission, court, department or other instrumentality
thereof.
"Holder" means any Purchaser and any Permitted Transferee of such
------
Purchaser that is or becomes a holder of the Preferred Shares, in each case, so
long as the Person holds any Preferred Shares.
-3-
<PAGE>
"Intellectual Property Rights" means all industrial and intellectual
----------------------------
property rights, including, without limitation, patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service mark applications, copyrights, copyright applications, know-how, trade
secrets, proprietary processes and formulae, confidential information,
franchises, licenses, inventions, instructions, marketing materials, trade
dress, logos and designs and all documentation and media constituting,
describing or relating to the foregoing, including manuals, memoranda and
records.
"Legal Requirements" means, as to any Person, all federal, state,
------------------
local or foreign laws, statutes, rules, regulations, ordinances, permits,
certificates, requirements, regulations and restrictions of any Governmental
Authority applicable to such Person or any of its properties or assets.
"Liability" means any liability or obligation, whether known or
---------
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of when
asserted.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or
----
adverse claim affecting title or resulting in a charge against real or personal
property, or security interest of any kind (including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell and any filing of any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Material Adverse Effect" means (a) a material adverse effect upon the
-----------------------
business, operations, prospects, properties, assets or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, or (b) a
material adverse effect on the ability of the Company to perform its obligations
under this Agreement or any of the other Documents.
"Materials of Environmental Concern" means chemicals, pollutants,
----------------------------------
contaminants, industrial, toxic or hazardous wastes, substances or constituents,
petroleum and petroleum products (or any by-product or constituent thereof),
asbestos or asbestos-containing materials or PCBs.
"Order" means any judgment, writ, decree, injunction, order,
-----
stipulation, compliance agreement or settlement agreement issued or imposed by,
or entered into with, a Governmental Authority, whether or not having the force
of law.
"Permitted Lien" shall mean the following Liens: (a) Liens existing
--------------
on the First Closing Date as listed on Schedule 1.1; (b) Liens for taxes,
------------
assessments or other governmental charges or levies not yet due; (c) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen and other
Liens imposed by law created in the ordinary course of business of the Company
consistent with past practices for amounts not yet due; (d) Liens (other than
any Lien imposed by ERISA) incurred or deposits made in the ordinary course of
business of the Company consistent with past practices in connection with
worker's compensation, unemployment insurance or other types of social security;
and (e) with respect to interests in real property, minor defects of title,
easements, rights-of-way, restrictions and other similar charges
-4-
<PAGE>
or Liens not materially detracting from the value or materially interfering with
the use of such real property.
"Permitted Transferee" has the meaning given such term in the
--------------------
Stockholders Agreement.
"Person" shall be construed as broadly as possible and shall include
------
an individual, a partnership (including a limited liability partnership), a
company, an association, a joint stock company, a limited liability company, a
trust, a joint venture, an unincorporated organization and a Governmental
Authority.
"Preferred Shares" has the meaning given to it in Section 2.1.
---------------- -----------
"Proceeding" means any legal, administrative or arbitration action,
----------
suit, complaint, charge, hearing, inquiry, investigation or proceeding
(including any partial or threatened proceedings).
"Purchaser" has the meaning given to it in the caption to this
---------
Agreement and any Person succeeding to the rights of a Purchaser pursuant to the
terms hereof.
"Qualified Public Offering" means a firm commitment public offering of
-------------------------
the Company's Class B Common Stock by a major bracket underwriter resulting in
net proceeds to the Company of $40,000,000 or more and at a price per share of
Class B Common Stock (as constituted on December 17, 1997) of $700 or higher.
"Registration Rights Agreement" means the Registration Rights
-----------------------------
Agreement dated as of April 30, 1996, among the Company and the stockholders
party thereto.
"Requisite Holders" means Holders representing a majority of all
-----------------
outstanding Preferred Shares, held by such Holders at the time in question.
"Reserved Common Shares" means the Class A Conversion Shares and the
----------------------
Class B Conversion Shares.
"Restricted Securities" shall mean the Preferred Shares and the
---------------------
Reserved Common Shares, and any shares of capital stock received in respect
thereof, in each case which have not then been sold to the public pursuant to
(a) registration under the Securities Act or (b) Rule 144 (or similar or
successor rule) promulgated under the Securities Act.
"Securities" means, with respect to any Person, such Person's
----------
"securities" as defined in Section 2(1) of the Securities Act and includes such
Person's capital stock or other equity interests or any options, warrants or
other securities or rights that are directly or indirectly convertible into, or
exercisable or exchangeable for, such Person's capital stock or other equity
interests.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same may from time to time be in effect.
-5-
<PAGE>
"Significant Holder" has the meaning set forth in Section 8.1.
------------------ -----------
"Stockholders Agreement" means the Second Amended and Restated
----------------------
Stockholders Agreement dated as of December 17, 1997, as amended, among the
Company and the stockholders party thereto.
"Subsequent Closing" has the meaning given to it in Section 2.3(b).
------------------ --------------
"Subsidiary" shall mean, at any time, with respect to any Person (the
----------
"Subject Person"), (i) any Person of which either (x) more than 50% of the
--------------
shares of stock or other interests entitled to vote in the election of directors
or comparable Persons performing similar functions (excluding shares or other
interests entitled to vote only upon the failure to pay dividends thereon or
other contingencies) or (y) more than a 50% interest in the profits or capital
of such Person are at the time owned or controlled directly or indirectly by the
Subject Person or through one or more Subsidiaries of the Subject Person or by
the Subject Person and one or more Subsidiaries of the Subject Person, or (ii)
any Person whose assets, or portions thereof, are consolidated with the net
earnings of the Subject Person and are recorded on the books of the Subject
Person for financial reporting purposes in accordance with GAAP.
"Tax" means any Taxes and the term "Taxes" means, with respect to any
--- -----
Person, (A) all income taxes (including any tax on or based upon net income, or
gross income, or income as specially defined, or earnings, or profits, or
selected items of income, earnings or profits) and all gross receipts, sales,
use, ad valorem, transfer, franchise, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property or windfall profits
taxes, alternative or add-on minimum taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) on such Person and (B) any Liability for the
payment of any amount of the type described in the immediately preceding clause
(A) as a result of being a "transferee" (within the meaning of Section 6901 of
the Code or any other Applicable Law) of another Person or a member of an
affiliated or combined group.
"Tax Authority" means the Internal Revenue Service and any other
-------------
domestic or foreign governmental authority responsible for the administration of
any Taxes.
"Tax Returns" shall mean all Federal, state, local and foreign tax
-----------
returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax Return relating to Taxes.
"Transfer" shall mean any disposition of any shares or other units of
--------
Restricted Securities or any interest therein which would constitute a sale
thereof within the meaning of the Securities Act.
1.2 RULES OF CONSTRUCTION.
---------------------
The term "this Agreement" means this agreement together with all schedules
--------------
and exhibits hereto, as the same may from time to time be amended, modified,
supplemented or restated in accordance with the terms hereof. The use in this
Agreement of the term "including" means
-6-
<PAGE>
"including, without limitation." The words "herein," "hereof," "hereunder" and
------ ------ ---------
other words of similar import refer to this Agreement as a whole, including the
schedules and exhibits, as the same may from time to time be amended, modified,
supplemented or restated, and not to any particular section, subsection,
paragraph, subparagraph or clause contained in this Agreement. All references to
sections, schedules and exhibits mean the sections of this Agreement and the
schedules and exhibits attached to this Agreement, except where otherwise
stated. The title of and the section and paragraph headings in this Agreement
are for convenience of reference only and shall not govern or affect the
interpretation of any of the terms or provisions of this Agreement. The use
herein of the masculine, feminine or neuter forms shall also denote the other
forms, as in each case the context may require or permit. Where specific
language is used to clarify by example a general statement contained herein,
such specific language shall not be deemed to modify, limit or restrict in any
manner the construction of the general statement to which it relates. The
language used in this Agreement has been chosen by the parties to express their
mutual intent, and no rule of strict construction shall be applied against any
party. Unless expressly provided otherwise, the measure of a period of one month
or year for purposes of this Agreement shall be that date of the following month
or year corresponding to the starting date, provided that if no corresponding
date exists, the measure shall be that date of the following month or year
corresponding to the next day following the starting date. For example, one
month following February 18 is March 18, and one month following March 31 is May
1.
ARTICLE II
PURCHASE AND SALE OF SHARES; CLOSINGS
2.1 AUTHORIZATION OF ISSUANCE OF PREFERRED SHARES.
----------------------------------------------
Subject to the terms and conditions hereof, the Company has authorized the
issuance at the Closings of an aggregate of up to 40,000 shares (the "Preferred
Shares") of Class A Preferred Stock at a per share price of $1,000 per share.
2.2 SALE OF SECURITIES.
------------------
(a) At the Closings, subject to the satisfaction or waiver of the
conditions set forth in Article V, the Company shall issue and sell to each
---------
Purchaser, and each Purchaser shall severally purchase from the Company, that
number of Preferred Shares set forth opposite its name on Schedule I for the
----------
aggregate purchase price set forth opposite its name.
(b) At any time and from time to time after the date hereof, the
Company may amend this Agreement by adding additional parties as Purchasers and
allocating the Preferred Shares remaining for purchase among them.
2.3 CLOSINGS.
--------
(a) The first closing (the "First Closing") hereunder with respect to
-------------
the issuance and sale of the Preferred Shares being purchased by each Purchaser
at the First Closing and the consummation of the related transactions
contemplated hereby shall, subject to the satisfaction or waiver of the
applicable conditions set forth in Section 5.1, take place at the offices of
-----------
Minkin &
-7-
<PAGE>
Snyder, One Buckhead Plaza, 3060 Peachtree Road, Suite 1100, Atlanta, Georgia
30305 on January 15, 1999 (the "First Closing Date"), or at such other time,
------------------
date or place as agreed to by the Company and the Purchasers purchasing
Preferred Shares at the First Closing.
(b) Subsequent closings (the "Subsequent Closings", and together with
-------------------
the First Closing, the "Closings") of the issuance and sale of the Preferred
--------
Shares being purchased by such Purchaser at the Subsequent Closings hereunder
shall, subject to the satisfaction or waiver of the conditions set forth in
Section 5.2, take place at the offices of Minkin & Snyder, One Buckhead Plaza,
- -----------
3060 Peachtree Road, Suite 1100, Atlanta, Georgia 30305, or at such other time,
date or place, agreed to by the Company and the Purchasers purchasing Preferred
Shares at such Closing.
2.4 CLOSING DELIVERIES.
------------------
At each Closing, the Company shall deliver to each Purchaser purchasing
Preferred Shares at such Closing a certificate, registered in its name,
representing the Preferred Shares purchased by such Purchaser at such Closing,
against receipt by the Company of a wire transfer of immediately available funds
to an account designated by the Company of an amount equal to the purchase price
for the Preferred Shares being purchased by such Purchaser at such Closing.
2.5 USE OF PROCEEDS.
---------------
The proceeds received by the Company from the sale of all Preferred Shares
shall be used by the Company solely for (i) the payment of fees and expenses
incurred in connection with the consummation of this transaction, (ii) repayment
of existing indebtedness, (iii) general corporate and working capital needs,
(iv) capital expenditures, and (v) acquisitions of unaffiliated businesses.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
The Company represents and warrants to the Purchasers that as of the date
hereof:
3.1 DUE INCORPORATION AND GOOD STANDING.
-----------------------------------
The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware with
corporate power and authority to own, lease and operate its properties, to
conduct its business as currently conducted and as proposed to be conducted and
to enter into and perform its obligations under this Agreement and the other
Documents to which it is a party. The Company is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which such qualification is required.
-8-
<PAGE>
3.2 CAPITALIZATION.
---------------
(a) As of the First Closing Date, the authorized capital stock of the
Company consists of (a) 75,000,000 shares of Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), (b) 200,000,000 shares of Class B
--------------------
Common Stock, (c) 750,000 shares of blank check preferred stock, 250,000 shares
of which have been designated as Class A Convertible Preferred Stock, par value
$.01 per share (the "Class A Preferred Stock"), 200,000 shares of which have
been designated as Class B Convertible Preferred Stock, par value $.01 per share
(the "Class B Preferred Stock"), 15,000 shares of which have been designated as
-----------------------
Class C Convertible Preferred Stock, par value $.01 per share (the "Class C
--------
Preferred Stock") and 50,000 shares of which have been designated as Class D
- ---------------
Nonvoting Preferred Stock, par value $.01 per share (the "Class D Preferred
-----------------
Stock"). As of the date hereof, before giving effect to the transactions
- ------
contemplated by this Agreement and the other Documents, (i) there will be issued
and outstanding (A) no shares of Class A Common Stock, (B) 16,082,489 shares of
Class B Common Stock, all of which are validly issued and fully paid and
nonassessable, (C) 177,291 shares of Class A Preferred Stock, all of which are
validly issued and fully paid and nonassessable, (D) 98,767 shares of Class B
Preferred Stock, all of which are validly issued and fully paid and
nonassessable, (E) 9,232 shares of Class C Preferred Stock, all of which are
validly issued and fully paid and nonassessable, and (F) 35,700 shares of Class
D Preferred Stock all of which are validly issued and fully paid and
nonassessable; (ii) there are reserved for issuance (A) 46,500,000 shares of
Class A Common Stock to be issued upon conversion of the Class A Preferred
Stock, the Class B Preferred Stock and the Class C Preferred Stock, (B) 500,000
shares of Class A Common Stock to be issued upon the exercise of outstanding
warrants, (C) 740,006 shares of Class B Common Stock to be issued upon the
exercise of outstanding warrants; (D) 26,000,000 shares of Class B Common Stock
to be issued upon the exercise of options pursuant to the Company's 1996 Stock
Option Plan, as amended, or the Company's 1998 Non-Employee Stock Option Plan,
(E) 12,460 shares of Class B Preferred Stock to be issued upon exercise of
outstanding warrants, (F) 47,000,000 shares of Class B Common Stock to be issued
upon conversion of the Class A Common Stock, and (G) 7,662,025 shares of Class B
Common Stock to be issued upon conversion or redemption of the Class D Preferred
Stock. Except as set forth above and on Schedule 3.2 hereto, as of the
------------
date hereof, before giving effect to the transactions contemplated by this
Agreement and the other Documents, no Equity Interests of the Company will be
issued or outstanding and there are not, and as of the date hereof there will
not be, any options, agreements, instruments or securities relating to the
issued or unissued Equity Interests of the Company or any Subsidiary of the
Company, or obligating the Company or any Subsidiary of the Company to issue,
transfer, grant or sell any Equity Interests in the Company or any Subsidiary.
(b) The Company has complied with all federal and state securities
laws in connection with the issuance of all outstanding Equity Interests, except
where such failure would not have a Material Adverse Effect.
(c) Except as listed on Schedule 3.2, and except as contemplated by
------------
the Documents, there are no preemptive rights, voting agreements, transfer
restrictions (except those imposed by applicable federal and state securities
laws) or registration rights (except as set forth in the Registration Rights
Agreement) affecting the Equity Interests in the Company.
-9-
<PAGE>
3.3 SUBSIDIARIES.
------------
Schedule 3.3 hereto sets forth a list of all Subsidiaries of the Company
------------
and the respective state or jurisdiction of incorporation or organization.
Except as set forth on Schedule 3.3, all of the issued or outstanding Equity
------------
Interests of such Subsidiaries have been duly and validly issued and are fully
paid and nonassessable and are owned, directly or indirectly, by the Company.
Each Subsidiary of the Company is duly incorporated and is in good standing in
its respective state or jurisdiction of incorporation and has the corporate
authority to own, lease or operate its properties and to conduct its business as
currently conducted and as proposed to be conducted. Each Subsidiary of the
Company is duly qualified to transact business and is in good standing as a
foreign corporation in each state or jurisdiction in which such qualification is
required, except where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect.
3.4 AUTHORITY.
---------
The Company has all necessary corporate power and authority to execute and
deliver this Agreement and each of the other Documents to which it is a party,
and to perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby (the "Transactions"). The
------------
execution and delivery of this Agreement and the other Documents to which it is
a party has been authorized by all necessary corporate action on the part of the
Company and no other corporate proceedings or approvals are required on the part
of the Company to authorize this Agreement or the other Documents to which it is
a party or to consummate the Transactions. This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery thereof by the Purchasers, constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to or affecting creditors' rights generally and
by general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.5 AUTHORIZATION OF PREFERRED SHARES.
---------------------------------
The issuance and sale of the Preferred Shares have been duly authorized and
the Preferred Shares when issued to the Purchasers for the consideration set
forth herein will be fully paid and non-assessable, with no personal liability
attached to the ownership thereof.
3.6 NO VIOLATION OR CONFLICT; NO DEFAULT.
------------------------------------
(a) Neither the nature of the business of the Company or any of its
Subsidiaries, the execution, delivery or performance of this Agreement, the
Preferred Shares or any of the other Documents by the Company, nor the
compliance with its obligations hereunder or thereunder, nor the consummation of
the Transactions, nor the issuance, sale or delivery of the Preferred Shares or
the Reserved Common Shares will:
(i) violate or conflict with any provision of the Fundamental
Documents of the Company or any of its Subsidiaries;
-10-
<PAGE>
(ii) violate or conflict with any Applicable Laws, except where
such violation would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect; or
(iii) violate, be in conflict with, or constitute a breach or
default (or any event which, with the passage of time or notice or both,
would become a default) under, or permit the termination of, or require the
consent of any Person under, result in the creation or imposition of any
Lien upon any property of the Company or its Subsidiaries under, result in
the loss (by the Company or any Subsidiary) or modification in any manner
adverse to the Company and its Subsidiaries of any right or benefit under,
or give to any other Person any right of termination, amendment,
acceleration, repurchase or repayment, increased payments or cancellation
under, any mortgage, indenture, note, debenture, agreement, lease, license,
permit, franchise or other instrument or obligation, whether written or
oral (collectively, "Contracts") to which the Company or any of its
---------
Subsidiaries is a party or by which their properties may be bound or
affected except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(b) The Company is not in default (without giving effect to any grace
or cure period or notice requirement) under any Contract, any of the Fundamental
Documents or any applicable judgments or orders, except where such default would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(c) The execution and delivery of this Agreement and the other
Documents to which the Company is a party do not, and the performance of its
obligations under this Agreement and the other Documents and the consummation of
the Transactions will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Authority
pursuant to any Applicable Law, except for (i) required filings under the
Securities Act or state "blue sky" laws as a result of the exercise of rights
under the Registration Rights Agreement, and (ii) where the failure to obtain
such consents, approvals, authorizations or permits or to make such filings or
notifications, would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or prevent or delay in any material
respect consummation of the Transactions, or otherwise prevent the Company from
performing its obligations under this Agreement or the other Documents.
3.7 NO MATERIAL ADVERSE CHANGE; FINANCIAL STATEMENTS.
------------------------------------------------
(a) Except as set forth on Schedule 3.7 hereto, subsequent to
------------
November 30, 1998, there has not been (i) any material adverse change in the
properties, business, prospects, operations, assets or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole, (ii) any asset
or property of the Company made subject to a Lien of any kind, other than a
Permitted Lien, (iii) any waiver of any valuable right of the Company or any
Subsidiary, or the cancellation of any material debt or material claim held by
the Company or any Subsidiary, (iv) any payment of dividends on, or other
distributions with respect to, or any direct or indirect redemption or
acquisition of, any shares of the capital stock of the Company, or any agreement
or commitment therefor, (v) any mortgage, pledge, sale, assignment or transfer
of any material tangible or intangible assets of the Company, except in the
ordinary course of business,
-11-
<PAGE>
(vi) any loan by the Company or any Subsidiary to any officer, director,
employee, consultant or stockholder or any agreement or commitment therefor in
excess of $100,000, other than travel expense advances made by the Corporation
to its officers, directors, employees, consultants or stockholders in the
ordinary course of business, (vii) any material damage, destruction or loss
(whether or not covered by insurance) affecting the assets of the Company or any
Subsidiary or (viii) any increase, direct or indirect, in the compensation paid
or payable to any officer, director, employee or consultant of the Company or
any Subsidiary other than in the ordinary course of business.
(b) The Company has heretofore furnished the Purchasers with a true
and complete copy of (i) the audited financial statements of iXL Interactive
Excellence, Inc. (n/k/a iXL, Inc.) as of and for the years ended December 31,
1993, 1994 and 1995, and as of and for the four-month period ended April 30,
1996; (ii) audited combined financial statements for Creative Video, Inc. (n/k/a
iXL, Inc.), Creative Video Library, Inc. and Entrepreneur Television, Inc. as of
and for the years ending December 31, 1993, 1994 and 1995, and as of and for the
four-month period ended April 30, 1996; (iii) the audited consolidated financial
statements for the Company and its Subsidiaries as of and for the eight months
ended December 31, 1996; (iv) the audited consolidated financial statements for
the Company and its Subsidiaries as of and for the year ending December 31,
1997; and (v) the unaudited consolidated financial statements for the Company
and its Subsidiaries as of and for the eleven months ended November 30, 1998,
all as attached to Schedule 3.7. Such financial statements present fairly in all
material respects the consolidated financial position, results of operations,
cash flows, and shareholders' equity of the Company at the respective dates or
for the respective periods to which they apply. Except as disclosed therein,
such statements and related notes have been prepared each in accordance with
GAAP consistently applied throughout the periods involved (except, in the case
of the unaudited financial statements, for the exclusion of footnotes and normal
year end adjustments). Except as set forth on Schedule 3.7, since November 30,
------------
1998, neither the Company nor any of its Subsidiaries has incurred any
liabilities or obligations (whether absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due) of any
nature, except for liabilities, obligations or contingencies (a) which are
reflected in the unaudited balance sheet of the Company at November 30, 1998,
(b) which were incurred in the ordinary course of business after November 30,
1998 and consistent with past practices, (c) which would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect or (d)
which arise as a result of this Agreement or the other Documents. Since December
31, 1997, there has been no change in any significant accounting (including tax
accounting) policies, practices or procedures of the Company or its
Subsidiaries. All financial statements concerning the Company and its
Subsidiaries that will hereafter be furnished by the Company and its
Subsidiaries to the Purchasers or any Holder pursuant to this Agreement will be
prepared in accordance with GAAP consistently applied (except as disclosed
therein) (except for, in the case of the unaudited financial statements, the
exclusion of footnotes and normal year end adjustments) and will present fairly
in all material respects the financial condition of the entities covered thereby
as at the dates thereof and the results of their operations for the periods then
ended.
(c) Except as set forth on Schedule 3.7, the Company has good and
------------
Company or any of its Subsidiaries; marketable title to all properties,
interests in properties and assets, real, personal and mixed, tangible or
-12-
<PAGE>
intangible, used in the conduct of its business, free and clear of all Liens
other than Permitted Liens.
3.8 FULL DISCLOSURE.
---------------
Neither this Agreement, the financial statements referred to in Section
-------
3.7 nor any Document contains any untrue statement of a material fact or omits
- ---
or will omit to state a material fact necessary to make the statements contained
herein or therein not misleading in light of the circumstances under which they
were made.
3.9 PRIVATE OFFERING.
----------------
Assuming the correctness of the representations and warranties set forth
in Sections 4.1 and 4.2 hereof, the offer and sale of the Preferred Shares and
--------------------
the issuance of the Reserved Common Shares, if any, to the Purchasers hereunder
is exempt from the registration and prospectus delivery requirements of the
Securities Act. In the case of each offer or sale of the Preferred Shares, no
form of general solicitation or general advertising was used by the Company and
its representatives, including, but not limited to, advertisements, articles,
notices or other communications published in any newspaper, magazine or similar
medium or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
3.10 NO BROKERS.
----------
Except as disclosed on Schedule 3.10, the Company has not engaged any
-------------
broker, finder, commission agent or other such intermediary in connection with
the sale of the Preferred Shares and the transactions contemplated by this
Agreement and the other Documents, and the Company is under no obligation to pay
any broker's or finder's fee or commission or similar payment in connection with
such transactions.
3.11 LITIGATION.
----------
(a) Except as set forth on Schedule 3.11, there is no Proceeding,
-------------
whether commenced, or to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties or assets, except for such Proceedings that would not reasonably be
expected to have, singly or in the aggregate, a Material Adverse Effect, and
there is no Proceeding seeking to restrain, enjoin, prevent the consummation of
or otherwise challenge this Agreement or any of the other Documents or the
Transactions.
(b) Neither the Company nor any of its Subsidiaries is subject to (i)
any judgment, order or decree of any Governmental Authority or (ii) any rule or
regulation of any Governmental Authority that has had a Material Adverse Effect
or that would reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.
3.12 LABOR RELATIONS.
---------------
(a) Neither the Company nor any of its Subsidiaries, nor any Person
for whom the Company or any of its Subsidiaries is or may be responsible by law
or contract, is engaged in
-13-
<PAGE>
any unfair labor practice that would reasonably be expected to have, singly or
in the aggregate, a Material Adverse Effect. There is (i) no unfair labor
practice charge or complaint pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, or any Person for
whom the Company or any of its Subsidiaries is or may be responsible by law or
contract, before the National Labor Relations Board or any corresponding state,
local or foreign agency, and no grievance or arbitration proceeding arising out
of or under any collective bargaining agreement is so pending or threatened,
(ii) no strike, labor dispute, slowdown or stoppage pending or threatened
against the Company or any of its Subsidiaries, or any Person for whom either
the Company or any of its Subsidiaries is or may be responsible by law or
contract, and (iii) no union representation claim or question existing with
respect to the employees of the Company or any of its Subsidiaries, or any
Person for whom either the Company or any of its Subsidiaries is or may be
responsible by law or contract, and no union organizing activities taking place.
Neither the Company nor any of its Subsidiaries, nor any Person for whom the
Company or any of its Subsidiaries is or may be responsible by law or contract,
is a party to any collective bargaining agreement.
(b) Except as disclosed on Schedule 3.12 or such as would not
-------------
reasonably be expected to result in a Material Adverse Effect, neither the
Company nor any of its Subsidiaries has violated any Applicable Laws relating to
employment or employment practices or the terms and conditions of employment,
including, without limitation, discrimination in the hiring, promotion or pay of
employees, wages, hours of work, plant closings and layoffs, collective
bargaining, immigration and occupational safety and health. Except as disclosed
on Schedule 3.12, to the knowledge of the Company or any of its Subsidiaries, no
-------------
charges with respect to or relating to the Company or any of its Subsidiaries
are pending before the Equal Employment Opportunity Commission or any other
corresponding state agency, and the Company and each of its Subsidiaries have at
all times been in material compliance with all Legal Requirements prohibiting
discrimination in the workplace including, without limitation, Legal
Requirements that prohibit discrimination and/or harassment on account of race,
national origin, religion, gender, disability, age, immigration status, workers
compensation status or otherwise.
3.13 TAXES.
-----
Except as otherwise disclosed in Schedule 3.13:
-------------
(a) The Company and its Subsidiaries have timely filed or will timely
file or cause to be timely filed, all material Tax Returns (or extensions)
required by applicable law to be filed by any of it prior to or as of the First
Closing Date. All such Tax Returns and amendments thereto are or will be true,
complete and correct in all material respects.
(b) The Company and its Subsidiaries have paid, or where payment is
not yet due, have established, or will establish or cause to be established on
or before the First Closing Date, an adequate accrual for the payment of, all
material Taxes due with respect to any period ending prior to or as of the First
Closing Date.
(c) No Audit by a Tax Authority is pending or threatened with respect
to any Tax Returns filed by, or Taxes due from, the Company or its Subsidiaries.
No issue has been raised by any Tax Authority in any Audit of the Company or its
Subsidiaries that if raised with respect
-14-
<PAGE>
to any other period not so audited would reasonably be expected to result in a
material proposed deficiency for any period not so audited. No deficiency or
adjustment for any Taxes has been threatened, proposed, asserted or assessed
against the Company or its Subsidiaries. There are no liens for Taxes upon the
assets of the Company or its Subsidiaries, except liens for current Taxes not
yet due.
(d) Neither Company nor its Subsidiaries have given or been requested
to give any waiver of statutes of limitations relating to the payment of Taxes
or has executed powers of attorney with respect to Tax matters, which will be
outstanding as of the First Closing Date.
(e) Neither the Company nor its Subsidiaries are a party to, or are
bound by any tax sharing, cost sharing or similar agreement or policy relating
to Taxes.
(f) Neither the Company nor its Subsidiaries have entered into
agreements that would result in the disallowance of any tax deductions pursuant
to Section 280G of the Code. No "consent" within the meaning of Section 341(f)
------------ --------------
of the Code has been filed with respect to the Company or its Subsidiaries.
3.14 ENVIRONMENTAL MATTERS.
---------------------
(a) Each of the Company and its Subsidiaries is in compliance with
all Environmental Laws, except where such non-compliance would not reasonably be
expected to have a Material Adverse Effect, and neither the Company nor any of
its Subsidiaries has received any written communication that alleges that the
Company or its Subsidiaries is not in compliance with any Environmental Laws,
and there are no circumstances that may prevent or interfere with such
compliance in the future.
(b) There is no Environmental Claim pending or to the knowledge of
the Company threatened against the Company or any of its Subsidiaries with
respect to the operations or business of the Company or its Subsidiaries, or
against any person or entity whose liability for any Environmental Claim the
Company or its Subsidiaries has retained or assumed either contractually or by
operation of law.
(c) To the Company's knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge, presence or disposal of any
Material of Environmental Concern, that could form the basis of any
Environmental Claim against the Company or its Subsidiaries, or against any
person or entity whose liability for any Environmental Claim the Company or its
Subsidiaries has retained or assumed either contractually or by operation of
law, which would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.
(d) Without in any way limiting the generality of the foregoing,
Schedule 3.14(d) sets forth (i) all permits, licenses and other governmental
- ----------------
authorizations held by the Company and its Subsidiaries, or required for any of
their operations or business, under any Environmental Law, including the current
status of each such permit, license and authorization, (ii) all on-site and to
the knowledge of the Company off-site locations where the Company or any of its
Subsidiaries has stored, disposed or arranged for the disposal of Materials of
Environmental Concern, (iii) to the knowledge of the Company, all underground
storage tanks, and the capacity
-15-
<PAGE>
and contents of such tanks, located on property owned, leased or controlled by
the Company or its Subsidiaries, (iv) to the knowledge of the Company, the
location and condition of any asbestos or lead (including furnishings or lead-
based paints) contained in or forming part of any building, building component,
structure or office space owned, leased or controlled by the Company or its
Subsidiaries, and (v) to the knowledge of the Company, all PCBs or PCB-
containing items that are used or stored at any property owned, leased or
controlled by the Company or its Subsidiaries.
3.15 ERISA.
-----
(a) Except as set forth on Schedule 3.15, neither the Company nor its
-------------
Subsidiaries, or any other trade or business, whether or not incorporated that
together with the Company or its Subsidiaries would be deemed a "single
employer" (within the meaning of Section 4001 of ERISA (an "ERISA Affiliate") is
---------------
a "party in interest" (as defined in Section 3(14) of ERISA) or a "disqualified
person" (within the meaning of Section 4975 of the Code), with respect to any
profit-sharing, pension or retirement plan, program, arrangement or agreement,
or any other "employee benefit plan" (within the meaning of Section 3(3) of
ERISA) or any "plan" (within the meaning of Section 4975 of the Code)
(collectively, each such plan, program, arrangement or agreement an "Employee
--------
Benefit Plan").
- ------------
(b) With respect to each Employee Benefit Plan: (i) each Employee
Benefit Plan has been administered in compliance in all material respects with
its terms, including, but not limited to, any provisions relating to
contributions thereunder, and is in compliance in all material respects with the
applicable provisions of ERISA, the Code and all other Applicable Laws as they
relate to such Employee Benefit Plans; (ii) no "employee pension benefit plan"
(as defined in Section 3(2) of ERISA) has been the subject of a "reportable
event" (as defined in Section 4043 of ERISA) and there have been no "prohibited
transactions" (as described in Section 4975 of the Code or Title I of ERISA)
effected by the Company or its Subsidiaries with respect to any Employee Benefit
Plan and, to the knowledge of the Company and its Subsidiaries, there have been
no "prohibited transactions" (as described in Section 4975 of the Code or Title
I of ERISA) effected by any Person other than the Company or its Subsidiaries
with respect to any Employee Benefit Plan; (iii) there are no proceedings, suits
or material claims (other than routine claims for benefits) pending or to the
knowledge of the Company or its Subsidiaries threatened with respect to any
Employee Benefit Plan, the assets of any trust thereunder or the Employee
Benefit Plan sponsor with respect to the design or operation of any Employee
Benefit Plan; (iv) no condition exists or event or transaction has occurred in
connection with any Employee Benefit Plan that has resulted or is reasonably
likely to result in the Company or its Subsidiaries or any such ERISA Affiliate
incurring any liability, fine or penalty except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;
(v) no Employee Benefit Plan is or ever has been subject to Title IV of ERISA
and neither the Company nor its Subsidiaries has any liability under Title IV of
ERISA, whether actual or contingent; and (vi) no amounts payable pursuant to any
Employee Benefit Plan will, in connection with the Transactions, fail for any
reason to be deductible for Federal income tax purposes.
-16-
<PAGE>
3.16 INTELLECTUAL PROPERTY RIGHTS.
----------------------------
Each of the Company and its Subsidiaries owns or possesses adequate
licenses or other rights to use all Intellectual Property Rights material to its
business as currently conducted and as proposed to be conducted, and neither the
Company nor any of its Subsidiaries has received any written notice of
infringement of or conflict with asserted rights of others with respect to the
use of Intellectual Property Rights, which would reasonably be expected to
result in any Material Adverse Effect. To the knowledge of the Company, all
Intellectual Property Rights material to its business as currently conducted and
as proposed to be conducted are valid and enforceable and the Company has
performed all acts and has paid all required fees and taxes to maintain all
registrations and applications of such Intellectual Property Rights in full
force and effect. Neither the Company nor any of its Subsidiaries, in the
conduct of their business as now conducted or as proposed to be conducted,
infringes or conflicts with any right of any third party, known to the Company,
where such infringement or conflict would reasonably be expected to result in
any Material Adverse Effect. Neither the Company nor any of its Subsidiaries
is, nor will it be as a result of the execution and delivery of this Agreement
and the other Documents or the performance of any obligations hereunder and
thereunder, in breach of any license or other agreement relating to any
Intellectual Property Rights, except as would not reasonably be expected to have
a Material Adverse Effect. To the knowledge of the Company, no third party is
infringing or has infringed any Intellectual Property Rights of the Company or
its Subsidiaries. Schedule 3.16 hereto lists all material Intellectual Property
-------------
Rights owned or licensed by the Company or its Subsidiaries. For the purposes
of Schedule 3.16, "material Intellectual Property Rights" shall not include any
-------------
retail shrinkwrap software licensed by the Company.
3.17 COMPLIANCE WITH LAWS.
--------------------
Each of the Company and its Subsidiaries has obtained and has maintained
in good standing any licenses, permits, consents and authorizations required to
be obtained by it under all Legal Requirements relating to its business, the
absence of which would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, and any such licenses, permits, consents
and authorizations remain in full force and effect, except as to any of the
foregoing the absence of which would not reasonably be expected to have, singly
or in the aggregate, a Material Adverse Effect. Each of the Company and its
Subsidiaries is in compliance, in all material respects, with all Applicable
Laws and there is no pending or, to the Company's knowledge, threatened,
Proceedings against either the Company or its Subsidiaries pursuant to any Legal
Requirements, other than any such Proceedings which, if adversely determined,
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
3.18 AGREEMENTS.
----------
Except as set forth on Schedule 3.18 hereto, the Company and its
-------------
Subsidiaries are not a party to any written or oral (a) Contract with any labor
union; (b) material Contract for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of normal
operating requirements; (c) Contract for the employment of any officer,
individual employee or other person on a full-time basis or any contract with
any Person on a consulting basis providing for a payment to such officer,
employee or other person in excess of $250,000
-17-
<PAGE>
per year; (d) agreement or indenture relating to the borrowing of money or to
the mortgaging, pledging or otherwise placing a material Lien on any assets of
the Company; (e) guaranty of any material obligation for borrowed money; (f)
material lease or agreement under which the Company is lessee of or holds or
operates any property, real or personal, owned by any other party; (g) material
lease or agreement under which the Company is lessor of or permits any third
party to hold or operate any property, real or personal, owned or controlled by
the Company; (h) agreement or other commitment for capital expenditures in
excess of $1,000,000; (i) Contract, agreement or commitment under which the
Company is obligated to pay any broker's fees, finder's fees or any such similar
fees, to any third party in connection with the Transactions; or (j) any other
Contract, agreement, arrangement or understanding, other than customer
contracts, which is material to the business of the Company. All such Contracts
constitute the valid and binding obligations of the Company and, to the
knowledge of the Company, the other parties thereto, enforceable in accordance
with their terms, except as enforcement may be limited by general principles of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally. For the purposes of this Section 3.18, "material"
------------
shall mean any Contract involving more than $1,000,000.
3.19 YEAR 2000.
---------
The Company represents and warrants that its computer system and software
are able to accurately process date data, including but not limited to,
calculating comparing and sequencing from, into and between the twentieth
century (throughout the year 1999), the year 2000 and the twenty-first century,
including leap year calculations.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants to the Company as to itself
severally, and not jointly as to any other Purchaser, as of the date hereof, as
follows:
4.1 PURCHASE FOR OWN ACCOUNT.
------------------------
Such Purchaser is purchasing the Preferred Shares to be purchased by it
solely for its own account and not as nominee or agent for any other person and
not with a view to, or for offer or sale in connection with, any current
distribution thereof (within the meaning of the Securities Act) that would cause
the original purchase of the Preferred Shares to be in violation of the
securities laws of the United States of America or any state thereof, without
prejudice, however, to its right at all times to sell or otherwise dispose of
all or any part of such Preferred Shares pursuant to a registration statement
under the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act, and subject, nevertheless, to the
disposition of its property being at all times within its control.
4.2 ACCREDITED INVESTOR.
-------------------
Such Purchaser is knowledgeable, sophisticated and experienced in business
and financial matters and in investing in privately held business enterprises;
it has previously
-18-
<PAGE>
invested in securities similar to the Preferred Shares and it acknowledges that
the Securities have not been registered under the Securities Act and understands
that the Preferred Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or such sale is permitted pursuant to an
available exemption from such registration requirement; it is able to bear the
economic risk of its investment in the Preferred Shares and is presently able to
afford the complete loss of such investment; and it is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act.
4.3 AUTHORIZATION.
-------------
Each Purchaser has taken all actions necessary to authorize it (i) to
execute, deliver and perform all of its obligations under this Agreement, (ii)
to perform all of its obligations under the Documents and (iii) to consummate
the transactions contemplated hereby and thereby. This Agreement is a legally
valid and binding obligation of each Purchaser enforceable against it in
accordance with its terms, except for (a) the effect thereon of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting the rights of creditors generally and (b) limitations imposed by
Federal or state law or equitable principles upon the specific enforceability of
any of the remedies, covenants or other provisions thereof and upon the
availability of injunctive relief or other equitable remedies.
4.4 ERISA.
-----
Each such Purchaser represents that either:
(a) it is not acquiring the Preferred Shares for or on behalf of any
Employee Benefit Plan;
(b) the assets used to acquire the Preferred Shares are assets of an
insurance company general account and the purchase of the Preferred Shares would
be exempt under the provisions of Prohibited Transaction Class Exemption 95-60;
(c) the assets used to acquire the Preferred Shares are assets of a
"venture capital operating company" or "real estate operating company" (as
defined in 29 C.F.R. 25 10.3-101); or
(d) if it is otherwise acquiring the Preferred Shares on behalf of an
employee pension benefit plan, an employee welfare benefit plan or a "Plan,"
either directly or through an investment fund (such as a bank collective
investment fund or insurance company pooled separate account), then, assuming
that the plans identified to such Purchaser by the Company in writing are the
only employee benefit plans (as defined in Section 3 of ERISA) or Plans with
respect to which the Company is a "party in interest" or "disqualified person"
(as such terms are defined in section 3 of ERISA and section 4975 of the Code,
respectively), either
(i) no part of the funds to be used to purchase the Preferred
Shares constitutes assets allocable to any trust that contains assets of
any of such employee benefit plans, or
(ii) exemption from the prohibited transaction rules applies
such that the use of such funds does not constitute a non-exempt prohibited
transaction in violation of
-19-
<PAGE>
section 406 of ERISA or section 4975 of the Code, which could be subject to
a civil penalty assessed pursuant to section 502 of ERISA or a tax imposed
under section 4975 of the Code.
ARTICLE V
CONDITIONS TO CLOSING
5.1 FIRST CLOSING.
-------------
The obligation of each Purchaser to purchase and pay for the Preferred
Shares to be purchased hereunder at the First Closing is subject to the
satisfaction of the following conditions precedent (unless waived by such
Purchaser). The Company shall use its best efforts to ensure that all
conditions to the First Closing set forth in this Section 5.1 are satisfied on
-----------
or prior to the First Closing Date, including executing and delivering all
documents required to be delivered by the Company at the First Closing and
taking any and all actions which may be necessary on its part to cause each
other party to the Documents to so execute and deliver each Document. The
obligation of a Purchaser to purchase and pay for the Preferred Shares to be
purchased hereunder at the First Closing shall not be subject to any condition
that any other Person purchase Preferred Shares at the First Closing.
(a) REGISTRATION RIGHTS AGREEMENT.
-----------------------------
Each Purchaser purchasing Preferred Shares at the First Closing
that is not at such time a party to the Registration Rights Agreement shall have
executed a joinder agreement agreeing to be bound by the terms of such
agreement.
(b) AMENDED AND RESTATED STOCKHOLDERS AGREEMENT.
-------------------------------------------
Each Purchaser purchasing Preferred Shares at the First Closing
that is not then a party to the Stockholders Agreement shall have executed a
joinder agreement agreeing to be bound by the terms of such agreement.
(c) ISSUANCE OF PREFERRED SHARES.
----------------------------
The Company shall have duly issued and delivered to the Purchasers
of Preferred Shares at the First Closing the certificate for the number of
Preferred Shares purchased by such Purchasers.
(d) REPRESENTATIONS AND WARRANTIES.
------------------------------
The Company shall deliver a certificate executed by an officer of
the Company stating that the representations and warranties contained in Article
-------
III are true, correct and complete in all material respects on and as of the
- ---
First Closing Date.
-20-
<PAGE>
(e) PERFORMANCE.
-----------
The Company shall have performed and complied in all material respects
with all agreements and conditions contained in the Documents required to be
performed or complied with by it prior to or at the First Closing and shall have
certified to such effect to such Purchaser in writing.
(f) ALL PROCEEDINGS TO BE SATISFACTORY.
----------------------------------
All corporate and other proceedings to be taken and all waivers,
consents, approvals, qualifications and registrations required to be obtained or
effected in connection with the execution, delivery and performance of this
Agreement and the other Documents and the Transactions shall have been taken,
obtained or effected (except for the filing of any notice subsequent to the
First Closing that may be required under applicable Federal or state securities
laws, which notice shall be filed on a timely basis following the First Closing
as so required), and all documents incident thereto shall be reasonably
satisfactory in form and substance to such Purchaser. Such Purchaser shall have
received all such originals or certified or other copies of such documents as
have been reasonably requested by them.
(g) OPINION OF COUNSEL.
------------------
Minkin & Snyder, P.C., counsel to the Company, shall have delivered
its opinion addressed to the Purchasers, dated as of the First Closing Date, in
a form reasonably acceptable to the Purchasers.
(h) SUPPORTING DOCUMENTS.
--------------------
Such Purchaser shall have received copies of the following supporting
documents (in form and substance satisfactory to such Purchaser):
(i) certificates of the Secretary of State of the State of
Delaware, dated as of a recent date as to the due incorporation or
organization and good standing of the Company and listing all documents of
the Company on file with said Secretary;
(ii) a telegram, telex or other acceptable method of
confirmation from said Secretary as of the close of business on the next
business day preceding the date of the First Closing as to the continued
good standing of the Company;
(iii) a certificate of the Secretary or an Assistant Secretary
of the Company, dated as of the date of the First Closing and certifying:
(1) that attached thereto is a true, correct and complete copy of each of
the Certificate of Incorporation and By-Laws as in effect on the date of
such certification (each of which shall be in form and substance
satisfactory to such Purchaser); (2) that attached thereto is a true,
correct and complete copy of all resolutions adopted by the Board of
Directors (and any committees thereof) of the Company authorizing the
execution, delivery and performance of the Documents and the issuance,
sale, and delivery of the Preferred Shares, and that all such resolutions
are still in full force and effect; (3) that the Certificate of
Incorporation has not been amended since the date of the last amendment
referred to in the certificate delivered pursuant to
-21-
<PAGE>
clause (i) above; and (4) the incumbency and specimen signature of all
officers of the Company executing the Documents, the stock certificates
representing the Preferred Shares, and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of the
Company as to the incumbency and signature of the officer signing the
certificate referred to in this clause (iii); and
(iv) such additional supporting documents and other information
with respect to the operations and affairs of the Company as such Purchaser
may reasonably request.
(i) NO LITIGATION OR LEGISLATION.
----------------------------
No Legal Requirement shall have been enacted after the date hereof and
no Proceeding shall be pending which prohibits or seeks to prohibit, or
materially restricts or delays the consummation of the transactions contemplated
by the Documents or materially restricts or impairs the ability of the
Purchasers to own Securities of the Company.
5.2 SUBSEQUENT CLOSINGS.
-------------------
The obligation of each Purchaser to purchase and pay for the Preferred
Shares to be purchased hereunder at the Subsequent Closings is subject to the
satisfaction of the following conditions precedent (unless waived by such
Purchaser). The Company shall use its best efforts to ensure that all
conditions to the Subsequent Closings set forth in this Section 5.2 are
-----------
satisfied on or prior to the date of each such Closing. The obligation of a
Purchaser to purchase and pay for the Preferred Shares to be purchased hereunder
at any Subsequent Closing shall not be subject to any condition that any other
Person purchase Preferred Shares at such Subsequent Closing.
(a) REGISTRATION RIGHTS AGREEMENT.
-----------------------------
Each Purchaser purchasing Preferred Shares at a Subsequent Closing
that is not at such time a party to the Registration Rights Agreement shall have
executed a joinder agreement agreeing to be bound by the terms of such
agreement.
(b) AMENDED AND RESTATED STOCKHOLDERS AGREEMENT.
-------------------------------------------
Each Purchaser purchasing Preferred Shares at a Subsequent Closing
that is not then a party to the Stockholders Agreement shall have executed a
joinder agreement agreeing to be bound by the terms of such agreement.
(c) ISSUANCE OF PREFERRED SHARES.
----------------------------
The Company shall have duly issued and delivered to each Purchaser
purchasing Preferred Shares at a Subsequent Closing the certificate for the
number of Preferred Shares being purchased by such Purchaser at such Closing.
-22-
<PAGE>
(d) REPRESENTATIONS AND WARRANTIES.
------------------------------
The Company shall deliver a certificate executed by an officer of the
Company stating that the representations and warranties contained in Article III
-----------
are true, correct and complete in all material respects on and as of the date of
such Subsequent Closing.
(e) PERFORMANCE.
-----------
The Company shall have performed and complied in all material respects
with all agreements and conditions contained in the Documents required to be
performed or complied with by it prior to or at such Subsequent Closing and
shall have certified to such effect to such Purchaser in writing.
(f) ALL PROCEEDINGS TO BE SATISFACTORY.
----------------------------------
All corporate and other proceedings to be taken and all waivers,
consents, approvals, qualifications and registrations required to be obtained or
effected in connection with the execution, delivery and performance of this
Agreement and the other Documents and the Transactions shall have been taken,
obtained or effected (except for the filing of any notice subsequent to a
Subsequent Closing that may be required under applicable Federal or state
securities laws, which notice shall be filed on a timely basis following the
Subsequent Closing as so required), and all documents incident thereto shall be
reasonably satisfactory in form and substance to such Purchaser. Such Purchaser
shall have received all such originals or certified or other copies of such
documents as have been reasonably requested by them.
(g) OPINION OF COUNSEL.
------------------
Minkin & Snyder, P.C., counsel to the Company, shall have delivered
its opinion addressed to the Purchasers purchasing Preferred Shares at each
such Subsequent Closing, dated as of each Subsequent Closing Date, substantially
similar to the opinion delivered at the First Closing.
(h) SUPPORTING DOCUMENTS.
--------------------
Such Purchaser shall have received copies of the following supporting
documents (in form and substance satisfactory to such Purchaser):
(i) certificates of the Secretary of State of the State of
Delaware, dated as of a recent date as to the due incorporation or
organization and good standing of the Company and listing all documents of
the Company on file with said Secretary;
(ii) a telegram, telex or other acceptable method of
confirmation from said Secretary as of the close of business on the next
business day preceding the date of such Subsequent Closing as to the
continued good standing of the Company;
(iii) a certificate of the Secretary or an Assistant Secretary
of the Company, dated as of the date of such Subsequent Closing and
certifying: (1) that attached thereto is a true, correct and complete copy
of each of the Certificate of Incorporation and By-
-23-
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Laws as in effect on the date of such certification (each of which shall be
in form and substance satisfactory to such Purchaser); (2) that attached
thereto is a true, correct and complete copy of all resolutions adopted by
the Board of Directors (and any committees thereof) of the Company
authorizing the execution, delivery and performance of the Documents and
the issuance, sale, and delivery of the Preferred Shares, and that all such
resolutions are still in full force and effect; (3) that the Certificate of
Incorporation has not been amended since the date of the last amendment
referred to in the certificate delivered pursuant to clause (i) above; and
(4) the incumbency and specimen signature of all officers of the Company
executing the Documents, the certificates representing the Preferred
Shares, and any certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Company as to the incumbency and
signature of the officer signing the certificate referred to in this clause
(iii); and
(iv) such additional supporting documents and other information with
respect to the operations and affairs of the Company as such Purchaser may
reasonably request.
(i) NO LITIGATION OR LEGISLATION.
----------------------------
No Legal Requirement shall have been enacted after the date hereof and
no Proceeding shall be pending which prohibits or seeks to prohibit, or
materially restricts or delays the consummation of the transactions contemplated
by the Documents or materially restricts or impairs the ability of the
Purchasers to own Preferred Shares of the Company.
ARTICLE VI
TRANSFER OF SECURITIES
6.1 RESTRICTION ON TRANSFER.
-----------------------
The Restricted Securities shall not be transferable except in compliance
with the Stockholders Agreement and the provisions of the Securities Act in
respect of the transfer thereof. Upon any such Transfer, the holder shall give
prompt written notice to the Company of such Transfer, which shall include the
identity of the transferee and the number of Restricted Securities Transferred.
6.2 RESTRICTIVE LEGENDS.
-------------------
Each certificate evidencing the Restricted Securities and each certificate
for any such securities issued to subsequent transferees of any such certificate
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE BLUE
-24-
<PAGE>
SKY LAWS. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN THE SECURITIES PURCHASE AGREEMENT DATED AS OF JANUARY15,
1999, AMONG THE ISSUER HEREOF AND CERTAIN OTHER SIGNATORIES THERETO, AND NO
TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS
HAVE BEEN FULFILLED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE ISSUER HEREOF."
6.3 TRANSFER PURSUANT TO RULE 144.
-----------------------------
The Company agrees to provide to the holders of the Restricted Securities
and upon a holder's request to any prospective purchasers designated by a holder
the financial and other information specified in Rule 144 under the Securities
Act and to take any other action or to execute any certificates necessary to
permit a transfer by any holder of Restricted Securities to qualify for the
exemption set forth in Rule 144.
ARTICLE VII
INFORMATION RIGHTS
7.1 INSPECTION OF PROPERTIES AND RECORDS.
------------------------------------
Until the closing of a Qualified Public Offering, the Company agrees to
allow, and to cause each of its Subsidiaries to allow, each Purchaser or
subsequent Holder who continues to hold Preferred Shares with an original cost
of at least $1,000,000 (each a "Significant Holder") or, such Persons as any of
------------------
them may designate (individually and collectively, "Inspectors"), subject to
----------
appropriate agreements as to confidentiality, (i) to visit and inspect any of
the properties of the Company or any of its Subsidiaries, (ii) to examine all
their books of account, records, reports and other papers and to make copies and
extracts therefrom, (iii) to discuss its affairs, finances and accounts with its
officers and employees and (iv) to discuss the financial condition of the
Company and its Subsidiaries with their independent accountants upon reasonable
notice to the Company of its intention to do so and so long as the Company shall
be given the reasonable opportunity to participate in such discussions (and by
this provision the Company authorizes such accountants to have such discussions
with the Inspectors). All such visits, examinations and discussions set forth
in the preceding sentence shall be at such reasonable times and as often as may
be reasonably requested.
7.2 INFORMATION TO PROSPECTIVE PURCHASERS.
-------------------------------------
Until the closing of a Qualified Public Offering, the Company shall, upon
the request of any Purchaser or subsequent Holder, deliver to such Purchaser or
such Holder and any prospective purchaser designated by such Purchaser or such
Holder promptly following the request of such Purchaser or such Holder or such
prospective purchaser such information which such Purchaser or such Holder or
such prospective purchaser may reasonably request in order to comply with the
information requirements of Rule 144A.
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<PAGE>
7.3 FINANCIAL STATEMENTS.
--------------------
Until the closing of a Qualified Public Offering, the Company will deliver
to each Significant Holder:
(a) Not more than 30 days after the end of each month, a consolidated
balance sheet of the Company as at the end of such month and the related
consolidated statements of income of the Company for such month and (in the case
of all months other than the first month of such fiscal year) for the period
from the beginning of the current fiscal year to the end of such month, and
setting forth, in each case in comparative form, figures for the corresponding
month and each previous month and period in the Company's budget for the current
fiscal year, certified by the chief financial officer of the Company as fairly
presenting in all material respects the financial condition of the Company as at
the dates indicated and the results of their operations for the periods
indicated, prepared in accordance with generally accepted accounting principles
consistently applied except for the absence of footnotes and subject to changes
resulting from periodic adjustments;
(b) Not more than 90 days after the end of each fiscal year of the
Company, a consolidated balance sheet of the Company as of such year and the
related consolidated statements of income and cash flows of the Company for such
year, corresponding figures from the preceding fiscal year, and in the case of
such consolidated financial statements, accompanied by a report thereon of
PricewaterhouseCoopers LLP or such other independent public accountants of
recognized national standing selected by the Company, which report shall state
that such consolidated financial statements were prepared in accordance with
generally accepted accounting principles consistently applied and present fairly
in all material respects the consolidated financial condition of the Company as
of the dates indicated; and
(c) Not later than 30 days prior to the start of each fiscal year
beginning with the fiscal year beginning January 1, 2000, monthly and annual
management projections and budgets for such fiscal year.
ARTICLE VIII
ADDITIONAL AGREEMENTS OF THE COMPANY
8.1 COMPLIANCE WITH LAWS.
--------------------
The Company shall, and shall cause each of its Subsidiaries to, comply with
all statutes, ordinances, governmental rules and regulations, judgments, orders
and decrees (including all Environmental Laws) to which any of them is subject,
and maintain, obtain and keep in effect all licenses, permits, franchises and
other governmental authorizations necessary to the ownership or operation of its
properties or the conduct of its businesses, except to the extent that the
failure to so comply or maintain, obtain and keep in effect would not reasonably
be expected to have, singly or in the aggregate, a Material Adverse Effect.
-26-
<PAGE>
8.2 INSURANCE.
---------
(a) All the insurable properties of the Company and the Subsidiaries
shall be insured for the benefit of the Company and its Subsidiaries in the full
amounts required to protect the Company and its Subsidiaries against all risks
usually insured against by Persons operating similar properties in the
localities in which such properties are located under policies in effect and
issued by national insurers of recognized responsibility.
(b) The Company shall maintain the other insurance coverage specified
on Schedule 8.2(b) hereto including directors' and officers' liability.
---------------
8.3 COVENANTS.
---------
As long as any Preferred Shares are outstanding, the Company shall, and
shall cause its Subsidiaries, as applicable, to observe and perform the
following:
(a) Payment Under the Documents. The Company shall pay or accrue, as
---------------------------
the case may be, and any amounts payable under the Documents in accordance with
the terms of the Documents.
(b) Proceeds. The Company shall use the proceeds of the sale of the
--------
Preferred Shares solely in the manner described in Section 2.6 of this
-----------
Agreement.
(c) Payment of Taxes, etc. The Company shall pay and discharge, and
---------------------
cause each of its Subsidiaries to pay and discharge, before the same shall
become delinquent, (i) all amounts of taxes, assessments and governmental
charges or levies imposed upon it or upon its property and (ii) all lawful
claims that, if unpaid, could reasonably be expected by law to become a Lien
upon its property; provided, however, that neither the Company nor any of its
-------- -------
Subsidiaries shall be required to pay or discharge any such tax, assessment,
charge or claim (y) that is being contested in good faith and by proper
proceedings and as to which appropriate reserves are being maintained or (z) the
non-payment or non-discharge of which could not reasonably be expected to have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
(d) Preservation of Corporate Existence, etc. The Company shall
----------------------------------------
preserve and maintain, and cause each of its Subsidiaries to preserve and
maintain, its corporate existence; provided, however, that any Subsidiary may
-------- -------
merge or consolidate with any other Subsidiary or the Company. The Company shall
preserve and maintain, and cause each of its Subsidiaries to preserve and
maintain, its rights (charter and statutory), and all material permits,
licenses, approvals, privileges and franchises necessary or desirable in the
normal conduct of its business, except any thereof the non-preservation or non-
maintenance of which could not reasonably be expected to have a Material Adverse
Effect on the Company and its Subsidiaries taken as a whole.
(e) Keeping of Books. The Company shall keep, and cause each of its
----------------
Subsidiaries to keep, proper books of record and account, in which entries which
are full and correct in all material respects shall be made of all financial
transactions and the assets and business of the Company and each such Subsidiary
in accordance with GAAP.
-27-
<PAGE>
(f) Maintenance of Properties, etc. The Company shall maintain and
------------------------------
preserve, and cause each of its Subsidiaries to maintain and preserve, all of
its properties that are reasonably required in the conduct of its business in
good working order and condition, ordinary wear, tear and depletion excepted,
except any thereof the non-maintenance or non-preservation of which could not
reasonably be expected to have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole.
8.4 INCONSISTENT AGREEMENTS.
-----------------------
Neither the Company shall enter into, nor shall the Company cause any of
its Subsidiaries to enter into, any agreement containing any provision which
would (a) be violated or breached by the exercise or performance by Company of
any of its rights or obligations under any Document or (b) impair in any
material respect the ability of the Company to comply with the terms of the
Documents.
8.5 SECURITIES ACT REGISTRATION STATEMENTS.
--------------------------------------
Except for securities of the Company registered on Form S-4 or Form S-8
promulgated under the Securities Act or any successor forms thereto, the Company
shall not file any registration statement under the Securities Act covering any
securities unless it shall first have given the Holders written notice thereof.
In connection with any registration statement referred to in this Section 8.5,
-----------
the Company will indemnify, to the extent permitted by law, each Holder, its
partners, officers and directors and each person, if any, who controls such
Holder within the meaning of Section 15 of the Securities Act, against all
losses, claims, damages, liabilities and expenses caused by any untrue statement
or alleged untrue statement of a material fact contained in any registration
statement or prospectus or any preliminary prospectus or any amendment thereof
or supplement thereto or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by any untrue statement or alleged
untrue statement or omission or alleged omission contained in written
information furnished to the Company by such Holder for use in such registration
statement. If, in connection with any such registration statement, a Holder
shall furnish written information to the Company for use in the registration
statement, such Holder will indemnify, to the extent permitted by law, the
Company, its directors, each of its officers who sign such registration
statement and each person, if any, who controls the Company within the meaning
of the Securities Act against all losses, claims, damages, liabilities and
expenses caused by any untrue statement or alleged untrue statement of a
material fact or any omission or alleged omission of a material fact required to
be stated in the registration statement or prospectus or any preliminary
prospectus or any amendment thereof or supplement thereto or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or alleged untrue statement or such omission or alleged omission is
contained in information so furnished in writing by such Holder for use therein.
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<PAGE>
8.6 PUBLICITY; PRESS RELEASES.
-------------------------
The Company shall not issue any press release or make any public disclosure
regarding a Purchaser's investment in the Company contemplated hereby unless
such press release or public disclosure is approved by such Purchaser in
advance.
ARTICLE IX
MISCELLANEOUS
9.1 FEES.
----
(a) The Company will pay, and save the Purchasers harmless against
all Liability, whether or not any Closing hereunder occurs, for the payment of
(i) all costs and other expenses incurred from time to time by the Company in
connection with the Company's performance of and compliance with all agreements
and conditions contained herein on its part to be performed or complied with
(including the reasonable costs and expenses of counsel incurred in connection
with the review and preparation of the Documents), (ii) the actual and
reasonable out-of-pocket costs and expenses incurred by the Purchasers at or
prior to closing in connection with the transactions contemplated hereby,
including reasonable fees and charges of counsel to each of the Purchasers, in
connection with the purchase and ownership of the Preferred Shares, (iii) the
reasonable costs and expenses (including reasonable fees and expenses of
counsel) incurred by each of the Purchasers in connection with any amendment or
waiver of, or enforcement of, any Document relating to the transactions
contemplated hereby and (iv) the reasonable fees and expenses incurred by each
Purchaser in any filing with any Governmental Authority with respect to its
investment in the Company or in any other filing with any Governmental Authority
with respect to the Company that mentions such Purchaser.
(b) The Company further agrees that it will pay, and will save the
Purchasers harmless from, any and all Liability with respect to any stamp or
similar taxes which may be determined to be payable in connection with the
execution and delivery and performance of the Documents or any modification,
amendment or alteration of the terms or provisions of the Documents, and that it
will similarly pay and hold the Purchasers harmless from all issue Taxes in
respect of the issuance of the Reserved Common Shares to the Purchasers.
9.2 FURTHER ASSURANCES.
------------------
The Company shall duly execute and deliver, or cause to be duly executed
and delivered, at its own cost and expense, such further instruments and
documents and to take all such action, in each case as may be necessary or
proper in the reasonable judgment of the Purchasers to carry out the provisions
and purposes of the Agreement and the other Documents.
9.3 REMEDIES.
--------
In case any one or more of the representations, warranties, covenants
and/or agreements set forth in this Agreement shall have been breached by the
Company or the Purchaser, the Company or the Purchasers (or any Purchaser), as
applicable, may proceed to protect and enforce
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<PAGE>
its or their rights either by suit in equity and/or by action at law, including
an action for damages as a result of any such breach and/or an action for
specific performance of any such covenant or agreement contained in this
Agreement; provided, however, in no event shall the Company be liable to a
-------- -------
Purchaser in an amount greater than the purchase price paid by such Purchaser
for its Preferred Shares plus any accrued but unpaid dividends thereon.
9.4 SUCCESSORS AND ASSIGNS.
----------------------
This Agreement shall bind and inure to the benefit of the Company and the
Purchasers and their respective successors, assigns, heirs and personal
representatives. Upon any transfer of the Preferred Shares or the Reserved
Common Shares, the transferee shall be bound by, and entitled to the benefits
of, this Agreement with respect to such transferred Securities in the same
manner as the transferring Purchaser.
9.5 ENTIRE AGREEMENT.
----------------
This Agreement and the other writings referred to herein or delivered
pursuant hereto which form a part hereof contain the entire agreement among the
parties with respect to the subject matter hereof and thereof and supersede all
prior and contemporaneous arrangements or understandings with respect thereto.
9.6 NOTICES.
-------
All notices and other communications delivered hereunder (whether or not
required to be delivered hereunder) shall be deemed to be sufficient and duly
given if contained in a written instrument (a) personally delivered, (b) sent by
telecopier, (c) sent by nationally recognized overnight courier guaranteeing
next Business Day delivery or (d) sent by first class registered or certified
mail, postage prepaid, return receipt requested, in each case addressed as
follows:
if to the Company:
iXL Enterprises, Inc.
1888 Emery Street, 2nd Floor
Atlanta, Georgia, 30318
Attention: U. Bertram Ellis, Jr.
Telecopy No.: (404) 267-3801;
with a copy (which shall not constitute Notice) to:
Minkin & Snyder, PC
One Buckhead Plaza
3060 Peachtree Street, N.E., Suite 1100
Atlanta, Georgia 30305
Attn: James S. Altenbach, Esq.
Telecopy No.: (404) 261-5064; and
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<PAGE>
with an additional copy (which shall not constitute Notice) to:
Kelso & Company
320 Park Avenue - 24th Floor
New York, New York 10022
Attn: James J. Connors II, Esq.
Telecopy No.: (212) 223-2379; and
if to the Purchasers:
to the address specified on the signature page executed by each such
Purchaser, with such additional copies as set forth on such
signature page;
or to such other address as the party to whom such notice or other communication
is to be given may have furnished to each other party in writing in accordance
herewith. Any such notice or communication shall be deemed to have been
received (i) when delivered, if personally delivered, (ii) when sent, if sent by
telecopy on a Business Day (or, if not sent on a Business Day, on the next
Business Day after the date sent by telecopy), (iii) on the next Business Day
after dispatch, if sent by nationally recognized, overnight courier guaranteeing
next Business Day delivery, and (iv) on the fifth Business Day following the
date on which the piece of mail containing such communication is posted, if sent
by mail.
9.7 AMENDMENTS, MODIFICATIONS AND WAIVERS.
-------------------------------------
The terms and provisions of this Agreement may not be modified or amended,
nor may any of the provisions hereof be waived, temporarily or permanently,
except pursuant to a written instrument executed by the Company and the
Requisite Holders; provided however, that any such amendment, modification or
-------- -------
waiver that would adversely affect the rights hereunder of any Holder, in its
capacity as a Holder, without similarly affecting the rights hereunder of all
Holders, in their capacities as Holders, shall not be effective as to such
Holder without its prior written consent.
9.8 GOVERNING LAW; WAIVER OF JURY TRIAL.
-----------------------------------
(a) All questions concerning the construction, interpretation and
validity of the Documents shall be governed by and construed and enforced in
accordance with the domestic laws of the State of New York, without giving
effect to any choice or conflict of law provision or rule (whether in the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York. In furtherance of the
foregoing, the internal law of the State of New York will control the
interpretation and construction of the Documents, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive law of
some other jurisdiction would ordinarily or necessarily apply.
(b) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING
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<PAGE>
SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
9.9 NO THIRD PARTY RELIANCE.
-----------------------
Anything contained herein to the contrary notwithstanding, the
representations and warranties of the Company contained in this Agreement (a)
are being given by the Company as an inducement to the Purchasers to enter into
this Agreement and the other Documents (and the Company acknowledges that the
Purchasers have expressly relied thereon) and (b) are solely for the benefit of
the Purchasers. Accordingly, no third party (including, without limitation, any
holder of capital stock of the Company) or anyone acting on behalf of any
thereof other than the Purchasers, and each of them, shall be a third party or
other beneficiary of such representations and warranties and no such third party
shall have any rights of contribution against the Purchasers or the Company with
respect to such representations or warranties or any matter subject to or
resulting in indemnification under this Agreement or otherwise.
9.10 SUBMISSION TO JURISDICTION.
--------------------------
Any legal action or proceeding with respect to this Agreement or the other
Documents may be brought in the courts of the State of New York and the United
States of America for the Southern District of New York and, by execution and
delivery of this Agreement, the Company hereby accepts for itself and in respect
of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. The Company hereby irrevocably waives, in connection with any
such action or proceeding, any objection, including, without limitation, any
objection to the venue or based on the grounds of forum non conveniens, which it
may now or hereafter have to the bringing of any such action or proceeding in
such respective jurisdictions. The Company hereby irrevocably consents to the
service of process of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to it at its address as set forth herein. Nothing herein shall
affect the right of the Purchasers to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
the Company in any other jurisdiction.
9.11 EXTENSION; WAIVER.
-----------------
At any time prior to the First Closing, the parties may (a) extend the time
for the performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement and (c) waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party, and any such waiver shall not operate or be
construed as a waiver of any subsequent breach by the other party.
-32-
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9.12 SEVERABILITY.
------------
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not be invalid,
prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
9.13 INDEPENDENCE OF AGREEMENTS, COVENANTS, REPRESENTATIONS AND WARRANTIES.
---------------------------------------------------------------------
All agreements and covenants hereunder shall be given independent effect
so that if a certain action or condition constitutes a default under a certain
agreement or covenant, the fact that such action or condition is permitted by
another agreement or covenant shall not affect the occurrence of such default,
unless expressly permitted under an exception to such initial covenant. In
addition, all representations and warranties hereunder shall be given
independent effect so that if a particular representation or warranty proves to
be incorrect or is breached, the fact that another representation or warranty
concerning the same or similar subject matter is correct or is not breached will
not affect the incorrectness of or a breach of a representation and warranty
hereunder. The exhibits and schedules attached hereto are hereby made part of
this Agreement in all respects. Any disclosure made in any Schedule to this
Agreement which should, based on the substance of such disclosure, be applicable
to another Schedule to this Agreement shall be deemed to be made with respect to
such other Schedule regardless of whether or not a specific reference is made
thereto; provided, that the description of such item on a Schedule is such that
the Purchaser could reasonably be expected to ascertain that such disclosure
would relate to such other provision of this Agreement.
9.14 COUNTERPARTS; FACSIMILE SIGNATURES.
----------------------------------
This Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement. Facsimile
counterpart signatures to this Agreement shall be acceptable and binding.
9.15 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS; NO RECOURSE.
-------------------------------------------------------------------
With respect to each Purchaser purchasing Preferred Shares in connection
with the First Closing, the representations, warranties and agreements of such
Purchasers and the Company in this Agreement shall survive the First Closing
until the period ending on the date six months after the date hereof. With
respect to each Purchaser purchasing Preferred Shares in connection with the
Subsequent Closings, the representations, warranties and agreements of the such
Purchasers and the Company in this Agreement shall survive each such Subsequent
Closing until the period ending on the date six months after the date thereof.
Notwithstanding the foregoing,
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<PAGE>
the agreements and covenants contained in Articles VI, VII, VIII, and IX shall
survive both the First Closing and the Subsequent Closings (except to the extent
a shorter period of time is specified therein). In no event shall any Purchaser
have any recourse against the present or former directors, officers or
stockholders of the Company or any of its Affiliates with respect to any
representation, warranty or agreement made by the Company in this Agreement.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first above written.
IXL ENTERPRISES, INC.
By: /s/ M. Wayne Boylston
-----------------------------
Name: M. Wayne Boylston
---------------------------
Title: Executive Vice President
--------------------------
ADDRESS(ES) FOR NOTICES:
- ------------------------
GREYSTONE CAPITAL PARTNERS I, L.P.
Greystone Capital Partners /s/ Thomas G. Rosencrants
1200 Ashwood Parkway, Suite 500 ------------------------------
Atlanta, GA 30338 Thomas G. Rosencrants, Operating
Attn: Thomas G. Rosencrants Member of Greystone Capital
fax: 770/730-9049 Group, L.L.C., General Partner
/s/ Errol O. Kendall
------------------------------
with a copy to: Errol O. Kendall, Operating
Sheldon Friedman Member of Greystone Capital
S. Friedman & Associates, P.C. Group, L.L.C., General Partner
1050 Crown Pointe Parkway, Suite 1550
Atlanta, GA 30338
fax: 770/396-0001
[Signatures Continue on Following Page]
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<PAGE>
Intentionally Omitted
[Signatures Continue on Following Page]
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<PAGE>
ADDRESS(ES) FOR NOTICES:
- ------------------------
601 Union Street GENERAL ELECTRIC CAPITAL
Suite 1400 ASSURANCE COMPANY
Seattle, Washington 98101
Attn: Dan Greenshields By: /s/ Victor C. Moses
-----------------------------
Name: Victor C. Moses
---------------------------
Title: Senior Vice President
--------------------------
[Signatures Continue on Following Page]
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<PAGE>
ADDRESS(ES) FOR NOTICES:
- ------------------------
Thomas G. Snead, Jr.
President and Chief Operating TRIGON HEALTHCARE, INC.
Officer
Trigon Healthcare, Inc. By: /s/ Thomas R. Boyd
2221 Edward Holland Drive --------------------------
Richmond, VA 23230 Name: Thomas R. Boyd
FAX: 804/354-3510 ------------------------
Title: Senior Vice President
and Chief Financial
Officer
-----------------------
[Signatures Continue on Following Page]
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<PAGE>
ADDRESS(ES) FOR NOTICES:
- ------------------------
Cox Enterprises, Inc. COX TECHNOLOGY INVESTMENTS, INC.
1400 Lake Hearn Drive
Atlanta, GA 30319 By: /s/ David E. Easterly
Attn. William L. Killeen, Jr. -----------------------------
FAX: 404-843-5256 Name: David E. Easterly
Copy to: Andrew A. Merdek ---------------------------
Cox Enterprises, Inc. Title: President
FAX: 404-843-5450 --------------------------
-39-
<PAGE>
SCHEDULE I
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First Closing
-------------
Number of Aggregate Price of
Purchaser Preferred Shares Preferred Shares
- --------- ---------------- ------------------
Greystone Capital Partners I, L.P. 10,000 $10,000,000
General Electric Capital Assurance 5,000 $ 5,000,000
Company
Trigon Healthcare, Inc. 1,000 $ 1,000,000
Cox Technology Investments, Inc. 2,000 $ 2,000,000
Totals at First Closing 18,000 $18,000,000.00
<PAGE>
SCHEDULES
---------
Schedule 1.1 -- Permitted Liens
Schedule 3.2 -- Capitalization: Equity Interests
Schedule 3.3 -- Subsidiaries
Schedule 3.7 -- Material Adverse Changes; Financial Statements
Schedule 3.10 -- Brokers
Schedule 3.11 -- Litigation
Schedule 3.12 -- Violations re Labor Relations
Schedule 3.13 -- Taxes
Schedule 3.14(d) -- Governmental Authorizations Required Under Environmental Law
Schedule 3.15 -- ERISA
Schedule 3.16 -- Intellectual Property
Schedule 3.18 -- Agreements
Schedule 8.2(b) -- Insurance
<PAGE>
EXHIBIT 10.49
================================================================================
WARRANT AGREEMENT
among
iXL ENTERPRISES, INC.
and
GENERAL ELECTRIC CAPITAL CORPORATION
Dated as of
November 3, 1998
================================================================================
<PAGE>
WARRANT AGREEMENT
This WARRANT AGREEMENT is dated as of November 3,1998 (the "Agreement")
---------
and entered into by and among iXL Enterprises, Inc., a Delaware corporation (the
"Company"), and General Electric Capital Corporation ("GECC"), a Delaware
-------
corporation. Certain capitalized terms used herein are defined in Section 18.
Section 1. Issue of Warrants.
-----------------
1.1 Marketing Campaign. Promptly after the date hereof, the Company and
------------------
GECC will discuss a marketing campaign to publicize the services of the Company
and Consumer Financial Network, Inc., a subsidiary of the Company (the
"Marketing Campaign"). If, upon the culmination of such discussions, the
Company, in its sole discretion, approves the Marketing Campaign proposed by
GECC for general use, the Company will issue to GECC warrants (the "Warrants")
to purchase 500,000 shares of the Class A Common Stock of the Company (the
"Common Stock"), par value $.0l per share (the "Warrant Shares").
1.2 Adjustment. The number of Warrant Shares issued pursuant to Section
----------
1.1 may be subject to adjustment as provided in Section 9 hereof.
Section 2. Warrant Certificates.
--------------------
2.1 Delivery of Warrant Certificates. If Warrants are to be issued
--------------------------------
pursuant to Section 1.1, the Company shall issue and deliver to GECC, within ten
Business Days after the determination by the Company that Warrants are to be
issued, a certificate evidencing the Warrants.
2.2 Form of Certificates. The certificate representing the Warrants
--------------------
("Warrant Certificate") shall be substantially in the form set forth as Exhibit
A attached hereto. The Warrant Certificate shall be dated the date of issuance
of the Warrants by the Company.
Section 3. Execution of Warrant Certificates. Each Warrant Certificate
---------------------------------
shall be signed on behalf of the Company by its Chairman of the Board or its
Chief Executive Officer, President or any Vice President. Each Warrant
Certificate shall also be signed on behalf of the Company by its Secretary or an
Assistant Secretary.
<PAGE>
Section 4. Restrictions on Transfer; Legend. Subject to the conditions to
--------------------------------
and restrictions on transfer contained in the Second Amended and Restated
Stockholders Agreement of the Company, as such agreement may be amended from
time to time (the "Stockholders Agreement") which shall apply to each Holder of
----------------------
any Warrants (with respect to such Warrants) or Warrant Shares (with respect to
such Warrant Shares) as if such Holder were a "Chase Investor" thereunder and as
if such Warrants and Warrant Shares were "Stock" thereunder, the Company shall
from time to time register the transfer of any outstanding Warrant Certificate
and any certificate evidencing Warrant Shares in the applicable register to be
maintained by the Company upon surrender thereof accompanied by a written
instrument or instruments of transfer in form reason-ably satisfactory to the
Company, duly executed by the registered Holder or Holders thereof or by the
duly appointed legal representative thereof or by a duly authorized attorney.
Notwithstanding the foregoing, each Holder of Warrants and Warrant Shares agrees
that it will not transfer such securities for 180 days after any public offering
of common stock (or security convertible with common stock) by the Company
unless the managing underwriter for such offering decides such restriction is
unnecessary, and each Holder agrees to execute any agreement or document
reasonably requested by any such underwriter which relates to such restriction.
Upon any such registration of transfer, a new Warrant Certificate or Stock
Certificate, as the case may be, shall be issued to the transferee Holder(s) and
the surrendered Warrant Certificate or certificate evidencing any Warrant
Shares, as the case may be, shall be canceled and disposed of by the Company.
Any attempted transfer in violation of the Stockholders' Agreement and this
Section 4 shall be null and void.
Upon original issuance thereof, and until such time as the same shall have
been registered under the Securities Act or Sold pursuant to Rule 144
promulgated thereunder (or any similar rule or regulation) each Warrant
Certificate shall bear the legend included on the first page of Exhibit A,
unless in such opinion of counsel, such legend is no longer required by the Act.
Section 5. Warrants; Exercise of Warrants. Subject to the terms of this
------------------------------
Agreement, each Holder shall have the right, which may be exercised at any time
during the period commencing on the date hereof and ending at 5:00 p.m., New
York City time, on the date that is three years from the date hereof (the
"Expiration Date"), to receive from the Company the number of fully paid and
---------------
nonassessable Warrant Shares which the Holder may at the time be entitled to
receive on exercise of such Warrants and payment of the Exercise Price (as
defined below) for such Warrant Shares. Each Warrant not exercised prior to 5:00
p.m., New York City time, on the Expiration Date shall become void and all
rights thereunder and all rights in respect thereof under this Agreement shall
2
<PAGE>
cease as of such time. No adjustments as to dividends will be made upon exercise
of the Warrants, except as otherwise expressly provided herein.
The price at which each Warrant shall be exercisable (the "Exercise
--------
Price") shall be equal to $10.00 per share of Common Stock.
- -----
A Warrant may be exercised upon surrender to the Company at its office
designated for such purpose of the Warrant Certificate or Certificates to be
exercised with the form of election to purchase attached thereto duly filled in
and signed, and upon payment to the Company of the applicable Exercise Price for
the number of Warrant Shares in respect of which such Warrants are then
exercised. Payment of the aggregate Exercise Price shall be made, at the
election of the Holder, (i) in cash, by certified or official bank check payable
to the order of the Company, (ii) by delivering for surrender and cancellation
to the Company Warrants with an aggregate Surrender Value, as of the date of
such exercise, equal to the Exercise Price for the Warrants being exercised, or
(iii) any combination thereof. For the purposes of this paragraph, the
"Surrender Value" of any Warrant is equal to the fair market value (as
---------------
determined in good faith by the board of directors of the Company), as of the
date of such surrender, of the Warrant Shares issuable upon the exercise of such
Warrant, minus the Exercise Price of such Warrant.
Subject to the provisions of this Section 5, upon such surrender of
Warrant Certificates and payment of the Exercise Price, the Company shall issue
and cause to be delivered, as promptly as practicable, to the Holder, or, upon
the written order of the Holder, to such other person or persons as such Holder
may designate, a certificate or certificates for the number of full Warrant
Shares issuable upon the exercise of such Warrants (and such other consideration
as may be deliverable upon exercise of such Warrants pursuant to the terms of
this Agreement) together with cash for fractional Warrant Shares as provided in
Section 10. The certificate or certificates for such Warrant Shares shall be
deemed to have been issued and the person so named therein shall be deemed to
have become a holder of record of such Warrant Shares as of the date of the
surrender of such Warrants and payment of the Exercise Price, irrespective of
the date of delivery of such certificate or certificates for Warrant Shares.
Each Warrant shall be exercisable, at the election of the Holder thereof,
either in full or from time to time in part and, in the event that a Warrant
Certificate is exercised in respect of fewer than all of the Warrant Shares
issuable on such exercise at any time prior to the date of expiration of the
Warrants, a new certificate evidencing the remaining Warrant or Warrants will be
issued and delivered pursuant to the provisions hereof.
3
<PAGE>
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled and disposed of by the Company. The Company shall keep copies of this
Agreement and any notices given or received hereunder available for inspection
by the Holders during normal business hours at its office.
Section 6. Payment of Taxes. The Company will pay all documentary stamp
----------------
taxes and other governmental charges (excluding all foreign, federal or state
income, franchise, property, estate, inheritance, gift or similar taxes) in
connection with the issuance or delivery of the Warrants hereunder, as well as
all such taxes attributable to the initial issuance or delivery of Warrant
Shares upon the exercise of Warrants and payment of the Exercise Price. The
Company shall not, however, be required to pay any tax that may be payable in
respect of any subsequent transfer of the Warrants or any transfer involved in
the issuance and delivery of Warrant Shares in a name other than that in which
the Warrants to which such issuance relates were registered, and, if any such
tax would otherwise be payable by the Company, no such issuance or delivery
shall be made unless and until the person requesting such issuance has paid to
the Company the amount of any such tax, or it is established to the reasonable
satisfaction of the Company that any such tax has been paid.
Section 7. Mutilated or Missing Warrant Certificates. If a mutilated
-----------------------------------------
Warrant Certificate is surrendered to the Company, or if the Holder of a Warrant
Certificate claims and submits an affidavit or other evidence satisfactory to
the Company to the effect that the Warrant Certificate has been lost, destroyed
or wrongfully taken, the Company shall issue a replacement Warrant Certificate.
If reasonably required by the Company, such Holder must provide an indemnity
bond, or other form of indemnity, sufficient in the reasonable judgment of the
Company to protect the Company from any loss which it may suffer if a Warrant
Certificate is replaced. If any Investor or any other Holder is the owner of any
such lost, stolen or destroyed Warrant Certificate, then the affidavit of an
authorized officer of such owner, setting forth the fact of loss, theft or
destruction and of its ownership of the Warrant Certificate at the time of such
loss, theft or destruction shall be accepted as satisfactory evidence thereof
and no further indemnity shall be required as a condition to the execution and
delivery of a new Warrant Certificate other than the unsecured written agreement
of such owner to indemnify the Company.
Section 8. Reservation of Warrant Shares. The Company shall at all times
-----------------------------
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock or its authorized and issued Common
Stock held in its treasury, for the purpose of enabling it to satisfy any
obligation to issue Warrant
4
<PAGE>
Shares upon exercise of Warrants, the maximum number of shares of Common Stock
which may then be deliverable upon the exercise of all outstanding Warrants.
The Company or, if appointed, any transfer agent for any shares of the
Common Stock (the "Transfer Agent") will be irrevocably authorized and directed
--------------
at all times to reserve such number of authorized shares as shall be required
for such purpose. The Company shall keep a copy of this Agreement on file with
any such Transfer Agent. The Company will supply any such Transfer Agent with
duly executed certificates for such purposes and will provide or otherwise make
available all other consideration that may be deliverable upon exercise of the
Warrants. The Company will furnish any such Transfer Agent a copy of all notices
of adjustments and certificates related thereto, transmitted to each Holder
pursuant to Section 11 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 9 hereof to reduce the Exercise Price below the then par value of the
Warrant Shares, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares at the Exercise Price
as so adjusted.
The Company covenants that all Warrant Shares and other capital stock
issued upon exercise of Warrants will, upon payment of the Exercise Price
therefor and issue thereof, be validly authorized and issued, fully paid,
nonassessable, free of preemptive rights and free, subject to Section 6 hereof,
from all taxes, liens, charges and security interests with respect to the issue
thereof, provided, that such Warrant Shares or other capital stock shall be
--------
treated as "Stock", and the Holders of Warrant Shares shall be subject to all
restrictions applicable to "Outside" Investors" pursuant to the Stockholders'
Agreement.
Section 9. Adjustment of Exercise Price and Warrant Number. The number of
-----------------------------------------------
shares of Common Stock issuable upon the exercise of each Warrant (the "Warrant
-------
Number") is initially one. The Warrant Number is subject to adjustment from time
- ------
to time upon the occurrence of the events enumerated in, or as otherwise
provided in, this Section 9.
(a) Adjustment for Change in Common Stock
-------------------------------------
If the Company:
(1) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
5
<PAGE>
(2) subdivides or reclassifies its outstanding shares of Common
Stock into a greater number of shares;
(3) combines or reclassifies its outstanding shares of Common Stock
into a smaller number of shares; or
(4) issues by reclassification of its Common Stock any shares of its
capital stock (other than reclassification arising solely as a result
of a change in the par value or no par value of the Common Stock);
then the Warrant Number and the Exercise Price in effect immediately prior to
such action shall be proportionately adjusted so that the holder of any
Warrant thereafter exercised shall receive the aggregate number and kind of
shares of capital stock of the Company which it would have received
immediately following such action if such Warrant had been exercised
immediately prior to such action for the same aggregate consideration that
such holder would have paid if such Warrant had been exercised immediately
prior to such action.
The adjustment shall become effective immediately after the record date
in the case of a dividend or distribution and immediately after the effective
date in the case of a subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event listed
above shall occur.
The Company shall not issue shares of Common Stock as a dividend or
distribution on any class of capital stock, other than the Common Stock,
unless the Warrant Holders also receive such dividend or distribution on a
ratable basis or an appropriate adjustment to the Warrant Number and Exercise
Price is made under this Section 9.
(b) Notice of Adjustment
--------------------
Whenever the Warrant Number is adjusted, the Company shall provide the
notices required by Section 11 hereof.
(c) Voluntary Increase
------------------
The Company from time to time may increase the Warrant Number by any
amount for any period of time (including, without limitation, permanently) if
the period is at least 20 business days and if the increase is irrevocable
during the period. Whenever
6
<PAGE>
the Warrant Number is increased, the Company shall mail to the Holders a notice
of the increase. The Company shall mail the notice at least 15 days before the
date the increased Warrant Number takes effect The notice shall state the
increased Warrant Number and the period it will be in effect.
An increase of the Warrant Number under this Subsection (c) (other than a
permanent increase) does not change or adjust the Warrant Number otherwise in
effect for purposes of subsection (a) of this Section 9.
(d) Reorganizations
---------------
In case of any capital reorganization, other than in the cases referred to
in Section 9(a) hereof, or the consolidation or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the continuing corporation and which does not result in any
reclassification of the outstanding shares of Common Stock into shares of other
stock or other securities or property), or the sale of the property of the
Company as an entirety or substantially as an entirety (collectively, such
actions being hereinafter referred to as "Reorganizations"), there shall
---------------
thereafter be deliverable upon exercise of any Warrant (in lieu of the number of
shares of Common Stock theretofore deliverable) the number of shares of stock or
other securities or property to which a holder of the number of shares of Common
Stock that would otherwise have been deliverable upon the exercise of such
Warrant would have been entitled upon such Reorganization if such Warrant had
been exercised in full immediately prior to such Reorganization. In the event
that the Warrants are not exercised in connection with such Reorganization,
appropriate adjustment, as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a duly adopted resolution
certified by the Company's Secretary or Assistant Secretary, shall be made in
the application of the provisions herein set forth with respect to the rights
and interests of Holders so that the anti-dilution provisions set forth in this
Section 9 shall thereafter be applicable, as nearly as possible, in relation to
any shares or other property thereafter deliverable upon exercise of Warrants.
The Company shall not effect any such Reorganization unless prior to or
simultaneously with the consummation thereof, (i) notice of such Reorganization
-
shall be given to each of the Holders of the Warrants, and (ii) the successor
--
corporation (if other than the Company) resulting from such Reorganization or
the corporation purchasing or leasing such assets or other appropriate
corporation or entity shall expressly assume, by a supplemental Warrant
Agreement or other acknowledgment executed and delivered to the Holder(s), the
obligation to deliver to each such Holder such shares of stock,
7
<PAGE>
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase, and all other obligations and liabilities
under this Agreement
(e) Form of Warrants
----------------
Irrespective of any adjustments in the Exercise Price or the number or
kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement but shall nevertheless be exercisable for the
adjusted number of Warrant Shares at the adjusted Exercise Price.
Section 10. Fractional Interests. The Company shall not be required to
--------------------
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 10,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the fair market value (as
determined in good faith by the Board of Directors) of the Warrant Share so
issuable, multiplied by such fraction.
Section 11. Notices to Warrant Holders. Upon any adjustment pursuant to
--------------------------
Section 9 hereof, the Company shall promptly thereafter (i) cause to be filed
-
with the Company a certificate of an officer of the Company setting forth the
Warrant Number and Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based, and (ii) cause to be given to each of the Holders at its
--
address appearing on the Warrant Register written notice of such adjustments.
Where appropriate, such notice may be given in advance and included as a part of
the notice required to be mailed under the other provisions of this Section 11.
In case:
(a) the Company shall authorize the issuance to all holders of shares of
Common Stock of rights, options or warrants to subscribe for or purchase shares
of Common Stock or of any other subscription rights or warrants;
8
<PAGE>
(b) the Company shall authorize the distribution to all holders of shares
of Common Stock of assets, including cash, evidences of its indebtedness, or
other securities;
(c) of any consolidation or merger to which the Company is a party and for
which approval of any shareholders of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any reclassification or change of Common Stock issuable
upon exercise of the Warrants (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination),. or a tender offer or exchange offer for shares of
Common Stock;
(d) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company; or
(e) the Company proposes to take any action that would require an
adjustment to the Warrant Number pursuant to Section 9 hereof;
then the Company shall cause to be given to each of the Holders at its address
appearing on the Warrant Register, at least 20 days prior to the applicable
record date hereinafter specified, or the date of the event in the case of
events for which there is no record date, in accordance with the provisions of
Section 12 hereof, a written notice stating (i) the date as of which the holders
-
of record of shares of Common Stock or the preferred stock of the Company to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in any tender offer or
--
exchange offer for shares of Preferred Stock or Common Stock, or (iii) the date
---
on which any such consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up is expected to become effective or consummated, and
the date as of which it is expected that holders of record of shares of
Preferred Stock or Common Stock shall be entitled to exchange such shares for
securities or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up. The failure to give the notice required by this Section 11 or any defect
therein shall not affect the legality or validity of any distribution, right,
option, warrant, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
Nothing contained in this Agreement or in any Warrant Certificate shall be
construed as conferring upon the Holders (prior to the exercise of such
Warrants) the right to vote or to consent or to receive notice as shareholder in
respect of the meetings of shareholders or the election of Directors of the
Company or any other matter, or any rights whatsoever as shareholders of the
Company; provided, however, that nothing in the
9
<PAGE>
foregoing provision is intended to detract from any rights explicitly granted to
any Holder hereunder.
Section 12. Notices to the Company and Warrant Holders. All notices and
------------------------------------------
other communications provided for or permitted hereunder shall be made by hand-
delivery, first-class mail, telex, telecopier, or overnight air courier
guaranteeing next day delivery:
(a) if to the GECC, to General Electric Capital Corporation, 120 Long
Ridge Road, Stamford, CT 06902, with a copy to Paul, Hastings, Janofsky & Walker
LLP, 399 Park Avenue, 31st Hoor, New York, NY 10022, Fax no: (212) 319-4090,
Attention: William F. Schwitter, Esq.;
(b) if to the Company, to iXL Enterprises, Inc., 1888 Emery Street, Suite
200, Atlanta, Georgia, 30318, Fax no.(404)267-3801, Attention: M. Wayne
Boylston, with a copy to Minkin & Snyder PC, One Buckhead Plaza, 3060 Peachtree
Road, N.E., Suite 1100, Atlanta, Georgia 30305, Fax no.(404)233-5064, Attention:
James S. Altenbach, Esq. and Debevoise & Plimpton, 875 Third Avenue, New York,
New York 10022, Fax no.(212)909-6836, Attention: Margaret Andrews Davenport,
Esq., and with an additional copy to Kelso & Company, 320 Park Avenue, Suite
2400, New York, New York 10022, Fax no: (212) 223-2379 Attention: James J.
Connors II, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed (so long as a
fax copy is sent and receipt acknowledged within two business days after
mailing); when answered back if telexed; when receipt acknowledged, if
telecopied; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery. The patties may
change the addresses to which notices are to be given by giving five days' prior
written notice of such change in accordance herewith.
Section 13. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to GECC on the date hereof as follows:
(a) Due Incorporation and Good Standing. The Company has been duly
-----------------------------------
incorporated and is validly existing as a corporation in good standing under the
laws of the State of Delaware with corporate power and authority to enter into
and perform its obligations under this Agreement.
10
<PAGE>
(b) Authority. The Company has all necessary corporate power and
---------
authority to execute and deliver this Agreement, and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement has been authorized by all necessary corporate
action on the part of the Company and no other corporate proceedings or
approvals are required on the part of the Company to authorize this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been duly
authorized and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery thereof by GECC, will constitute a
legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as such enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to or affecting creditors' rights generally and
by general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The Company has duly authorized
and reserved a sufficient number of shares of Common Stock for issuance upon
exercise of the Warrants, and the Warrant Shares, when issued upon exercise of
the Warrants in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable, with no personal liability attached to the
ownership thereof.
(c) No Violation or Conflict: No Default.
------------------------------------
(i) The execution, delivery or performance of this Agreement by the
-
Company and the consummation of the transactions contemplated hereby will not:
(A) violate or conflict with any provision of the certificate of
-
incorporation or by-laws of the Company or any of its subsidiaries;
(B) violate or conflict with any statute, law, rule or regulation
-
or any judgment, decree, order, regulation or rule of any court or governmental
authority or body (collectively, "Laws") applicable to the Company or any of its
----
subsidiaries or by which any of their respective properties or assets may be
subject, except where such violation would not reasonably be expected to have,
singly or in the aggregate, a material adverse effect on the Company; or
(C) violate, be in contact with, or constitute a breach or default
-
(or any event which, with the passage of time or notice or both, would become a
default) under, or permit the termination of, or require the consent of any
person or entity under, result in the creation or imposition of any lien or
encumbrance upon any property of the Company or any of its subsidiaries under,
result in the loss (by the Company or any subsidiary) or modification in any
manner adverse to the Company and its subsidiaries of
11
<PAGE>
any right or benefit under, or give to any other person or entity any right of
termination, amendment, acceleration, repurchase or repayment, increased
payments or cancellation under, any mortgage, indenture, note, debenture,
agreement, lease, license, permit, franchise or other instrument or obligation,
whether written or oral, to which the Company or any of its subsidiaries is a
party or by which their properties may be bound or affected except as would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the Company.
(ii) The execution and delivery of this Agreement does not, and the
--
issuance of the Warrants and the performance of its obligations under this
Agreement will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental authority under any laws or
regulations, except for (i) required filings under the Securities Act or state
-
"blue sky" laws as a result of the exercise of rights under the Registration
Rights Agreement, or (ii) where the failure to obtain such consents, approvals,
--
authorizations or permits or to make such filings or notifications, would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the Company.
(d) Private Offering. Assuming the correctness of the representations
----------------
and warranties set forth in Sections 14 hereof, the issuance of the Warrants to
-----------
GECC hereunder will be exempt from the registration and prospectus delivery
requirements of the Securities Act.
(e) No Brokers. The Company has not engaged any broker, finder,
----------
commission agent or other such intermediary in connection with the issuance of
the Warrants and the transactions contemplated by this Agreement, and the
Company is under no obligation to pay any broker's or finder's fee or commission
or similar payment in connection with such transactions.
Section 14. Representations and Warranties of GECC. GECC represents and
--------------------------------------
warrants to the Company that:
(a) Purchase for Own Account. GECC will purchase the Warrants solely
------------------------
for its own account and not as nominee or agent for any other person and not
with a view to, or for offer or sale in connection with, any current
distribution thereof (within the meaning of the Securities Act) that would cause
the original purchase of the Warrants and Warrant Shares to be in violation of
the securities laws of the United States of America or any state thereof,
without prejudice, however, to its right at all times to sell or otherwise
dispose of all or any part of such Warrants or the Warrant Shares pursuant to a
registration statement under the Securities Act or pursuant to an exemption from
the
12
<PAGE>
registration requirements of the Securities Act, and subject, nevertheless, to
the disposition of its property being at all times within its control.
(b) Accredited Investor. GECC is knowledgeable, sophisticated and
-------------------
experienced in business and financial matters and in investing in privately held
business enterprises; it has previously invested in securities similar to the
Warrants and the Warrant Shares and it acknowledges that the Warrants and the
Warrant Shares, when issued, will not have been registered under the Securities
Act and understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or such sale is permitted
pursuant to an available exemption from such registration requirement; it is
able to bear the economic risk of its investment in the Warrants and the Warrant
Shares and is presently able to afford the complete loss of such investment; and
it is an "accredited investor" as defined in Regulation D promulgated under the
Securities Act.
(c) Authorization. GECC has taken all actions necessary to authorize it
-------------
(j) to execute, deliver and perform all of its obligations under this Agreement
and (ii) to consummate the transactions contemplated hereby. This Agreement is a
legally valid and binding obligation of GECC enforceable against it in
accordance with its terms, except for (a) the effect thereon of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting the rights of creditors generally and (b) limitations imposed by
federal or state law or equitable principles upon the specific enforceability of
any of the remedies, covenants or other provisions thereof and upon the
availability of injunctive relief or other equitable remedies.
Section 15. Certain Supplements and Amendments. The Company may from time
----------------------------------
to time supplement or amend this Agreement without the approval of any Holders
in order to cure any ambiguity or to correct or supplement any provision
contained herein which may be defective or inconsistent with any other provision
herein; provided that any such supplement or amendment shall not in any way
adversely affect the interests of the Holders.
Section 16. Information to Prospective Investors. Provided that a sale of
------------------------------------
the Warrants or the Warrant Shares pursuant to Rule 144A is available to the
Holders, until the closing of a Qualified Public Offering (as such term is
defined in the Stockholders' Agreement), the Company shall, upon the request of
any Holder, deliver to such Holder and any prospective purchaser designated by
such Holder promptly following the request of such Holder or such prospective
purchaser the information which such Holder or prospective purchaser may
reasonably request in order to comply with the information requirements of Rule
144A.
13
<PAGE>
Each Holder is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business, operations or
financial condition of the Company or each of its Subsidiaries which may be
furnished to it hereunder or otherwise, to any other Holder, any court,
Governmental Body claiming to have jurisdiction over such Holder, to the
National Association of Insurance Commissioners or similar organizations, as may
be required or appropriate in response to any summons or subpoena in connection
with any litigation, to the extent necessary to comply with any law, order,
regulation or ruling applicable to such Holder, or to any rating agency, order
to protect its investment hereunder; provided, however; that prior to disclosing
any such information, such Holder shall provide the Company with prompt written
notice so that the Company may seek a protective order or other appropriate
remedy if the Company reasonably determines that such information must be kept
confidential.
Each Holder is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business, operations or
financial condition of the Company or each of its Subsidiaries which may be
furnished to it hereunder or otherwise, to any Person which shall, or shall have
any right or obligation to, succeed to all or any part of such Holder's interest
in the Warrants, the Warrant Shares and this Agreement or to any actual
purchaser or assignee thereof; provided, however, that no disclosure may be made
unless such other Person first executes a confidentiality agreement acceptable
to the Company with respect to any such information disclosed.
Section 17. Successors. All the covenants and provisions of this Agreement
----------
by or for the benefit of the Company and GECC shall bind and inure to the
benefit of their respective successors and assigns hereunder, provided, however,
that this Agreement shall not be assignable by any Holder if such Holder has not
complied with the transfer restrictions of Section 4 hereof. Any such assignment
in violation of Section 4 shall be null and void.
Section 18. Defined Terms. As used in this Agreement, the following terms
-------------
shall have the meanings ascribed to them below:
"Holder" or "Holders" means GECC and any transferee of GECC or a sub-
------ -------
sequent Holder that is or becomes, in accordance with Section 4 thereof, a
holder of any of the Warrants or Warrant Shares, in each case, so long as such
Person holds any Warrants or Warrant Shares.
"Registration Rights Agreement" shall mean the Registration Rights
-----------------------------
Agreement dated as of April 30, 1996, as amended, by and among the Company and
each of the other Persons listed on the signature pages thereto.
14
<PAGE>
"Stockholders' Agreement" shall mean the Second Amended and Restated
-----------------------
Stockholders Agreement, dated as of December 17, 1997, among iXL and the
stockholders listed therein, as amended, modified or restated, from time to
time.
Section 19. Termination. This Agreement shall terminate if all Warrants
-----------
have been exercised or shall have expired or been canceled pursuant to this
Agreement.
SECTION 20. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK (PROVIDED THAT DETERMINATIONS RELATING TO
CORPORATE LAW SHALL BE CONSTRUED IN ACCORDANCE WITH THE DELAWARE GENERAL
CORPORATION LAW). THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT AND THE WARRANTS, AND IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. THE COMPANY AGREES THAT IT WILL NOT
COMMENCE ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY OTHER JURISDICTION. THE
COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT
AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTWITHSTANDING THE FOREGOING, NOTHING HEREIN SHALL AFFECT
THE RIGHT OF ANY HOLDER OF A WARRANT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION.
EACH OF THE PARTIES HERETO HEREBY WAIVES THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE OTHER DOCUMENTS, OR ANY DEALINGS BETWEEN THEM RELATING
TO THE SUBJECT MATTER OF THE HOLDER'S INVESTMENT IN THE COMPANY CONTEMPLATED
HEREBY. THE SCOPE OF THIS JURY TRIAL WAIVER
15
<PAGE>
SHALL BE LIMITED TO DISPUTES BETWEEN THE COMPANY AND THE HOLDERS AND SHALL NOT
EXTEND TO DISPUTES BETWEEN THE COMPANY AND ANY OTHER PERSON.
Section 21. Benefits of This Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any person or corporation other than the Company and the
Holders any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company and
the Holders.
Section 22. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 23. Amendments and Waivers. Subject to Section 15, the Company
----------------------
agrees it will not solicit, request or negotiate for or with respect to any
proposed waiver or amendment of any of the provisions of this Agreement or any
Warrant unless each Holder (irrespective of the amount of Warrants then owned by
it) shall substantially concurrently be informed thereof by the Company and
shall be afforded the opportunity of considering the same and shall be supplied
by the Company with sufficient in-formation (including any offer of
remuneration) to enable it to make an informed decision with respect thereto
which information shall be tile same as that supplied to the other Holders. The
Company will not, directly or indirectly, pay or cause to be paid any
remuneration whether by way of supplement or additional interest fee or
otherwise, to any Holder as consideration for or as an inducement to the
entering into by such Holder of any waiver or amendment of any of the terms and
provisions of this Agreement or any Warrant unless such remunerations is
concurrently paid on the same terms, ratably to each Holder whether or not such
Holder signs such waiver or consent, provided that the foregoing is not intended
to preclude the adoption of any amendment or the giving of any waiver by the
Holders of a majority of the Warrants to the extent permitted by the other
provisions of this Section 23.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to
be duly executed as of the day and year first above written.
iXL ENTERPRISES, INC.
By: /s/ James V. Sandry
--------------------------------
Name: James V. Sandry
Title: EVP
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Tony J. Pantuso
-----------------------------
Name: Tony J. Pantuso
Title: Dept Ops Manager
<PAGE>
EXHIBIT A
[Form of Warrant Certificate)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON [ ],
1998, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED
EXCEPT IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE ACT, OR IN COMPLIANCE WITH RULE 144 OR PURSUANT TO ANOTHER
EXEMPTION THEREFROM. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A WARRANT AGREEMENT, DATED AS OF [ ], 1998, BETWEEN IXL ENTERPRISES, INC.
(THE "COMPANY")AND GENERAL ELECTRIC CAPITAL CORPORATION. THE TRANSFER OF THIS
CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN SUCH AGREEMENT AND THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF THIS CERTIFICATE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH
AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF
UPON WRITTEN REQUEST.
No. _____ _______ Warrants
Warrant Certificate
IXL ENTERPRISES, INC.
This Warrant Certificate certifies that General Electric Capital
Corporation, a Delaware corporation, or registered assigns, is the registered
holder of the number of Warrants (the "Warrants") set forth above to purchase
--------
Class A Common Stock, par value $.0l per share (the "Common Stock"), of win
------------
Enterprises, Inc., a Delaware corporation (the "Company"). Each Warrant entitles
-------
the Holder upon exercise to receive from the Company one fully paid and
nonassessable share of Common Stock (a "Warrant Share"), at an exercise price
-------------
(the "Exercise Price") of $____ payable in lawful money of the United States of
--------------
America, upon surrender of this Warrant Certificate and payment of the Exercise
Price at the office of the Company designated for such purpose, but only subject
to the conditions set forth herein and in the Warrant Agreement referred to
hereinafter. The number of Warrant Shares issuable upon exercise of the Warrants
is subject to adjustment upon the occurrence of certain events, as set forth in
the Warrant Agreement.
18
<PAGE>
Each Warrant is exercisable at any time during the period commencing on the date
hereof and ending at 5:00 p.m., New York City time, on ______-, _____ [i.e. 36
months after the date of the Warrant Agreement].
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, and are issued or to be issued pursuant to a
Warrant Agreement dated as of November __ 1998 (the "Warrant Agreement"), duly
------- -----------
executed and delivered by the Company, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company. Capitalized terms used and not
defined herein shall have the meaning ascribed thereto in the Warrant Agreement.
The holder of Warrants evidenced by this Warrant Certificate may exercise
such Warrants under and pursuant to the terms and conditions of the Warrant
Agreement by surrendering this Warrant Certificate, with the form of election to
purchase set forth hereon (and by this reference made a part hereof) properly
completed and executed, together with payment of the Exercise Price made, at the
election of the Holder, (j) in cash, by certified or official bank check payable
to the order of the Company, (ii) by delivering for surrender and cancellation
to the Company Warrants with an aggregate Surrender Value (as defined in Section
5 of the Warrant Agreement), as of the date of such exercise, equal to the
Exercise Price for the Warrants being exercised or (iii) any combination
thereof. In the event that upon any exercise of Warrants evidenced hereby the
number of Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued by the Company to the holder hereof or
its registered assignee a new Warrant Certificate evidencing the number of
Warrants not exercised.
Warrant Certificates, when surrendered at the office of the Company by the
registered holder thereof in person or by legal representative or attorney duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Subject to the terms and conditions of the Warrant Agreement, upon due
presentation for registration of transfer of this Warrant Certificate at the
office of the Company a new Warrant Certificate or Warrant Certificates of like
tenor and evidencing
19
<PAGE>
in the aggregate a like number of Warrants shall be issued to the transferee(s)
in exchange for this Warrant Certificate, subject to the limitations provided in
the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for tile purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.
IN WITNESS WHEREOF, iXl Enterprises, Inc. has caused this Warrant
Certificate to be signed by its [ ].
Dated: [ ], 1998
iXL ENTERPRISES, INC.
By ___________________________
Name:
Title:
By ___________________________
Name:
Title:
20
<PAGE>
FORM OF ELECTION TO PURCHASE
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _______shares of Common
Stock and herewith tenders payment for such shares to the Company in the form of
a certified or official bank check payable to the order of the Company in the
amount of $ ____, and Warrants to purchase Warrant Shares with an aggregate
Surrender Value (as defined in Section 5 of the Warrant Agreement) of $_______.
The undersigned requests that a certificate for such shares be registered
in the name of______________ whose address is ____________________________ and
that such shares be delivered to _________________, whose address is
If said number of shares is less than all of the shares of Common Stock
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of
________________________, whose address is _______________________________, and
that such Warrant Certificate be delivered to _______________, whose address is
____________________________.
[HOLDER]
___________________________
By:
Title:
Date: _________________
21
<PAGE>
FORM OF ASSIGNMENT
(To be signed only upon assignment of Warrant Certificate)
FOR VALUE RECEIVED, hereby sells, assigns and transfers unto
_______________________ whose address is _______________________ and whose
social security number or other identifying number is ___________________, the
within Warrant Certificate, together with all right, title and interest therein
and to the Warrants represented thereby, and does hereby irrevocably constitute
and appoint ___________________, attorney, to transfer said Warrant Certificate
on the books of the within-named Company, with full power of substitution in the
premises.
[HOLDER]
___________________________
By:
Title:
Date: _______________
22
<PAGE>
EXHIBIT 10.51
GUARANTEE AGREEMENT BY IXL HOLDINGS, INC.
WHEREAS, Consumer Financial Network, Inc. ("CFN" or "Licensor"), a wholly-
owned subsidiary of IXL Holdings, Inc.("IXL" or "Guarantor"), a Delaware
corporation, and Charter Federal Savings & Loan Association of West Point,
Georgia ("Charter Federal" or "Licensee") have on April 27, 1988 entered into a
License Agreement (the "Agreement") to provide to Charter Federal a non-
exclusive, non-transferable license (the "License") to, among other things,
operate the proprietary home mortgage shopping program (the "Program") as more
fully described therein; and
WHEREAS, the Agreement is conditioned upon CFN's various indemnification
obligations as Licensor set forth in Section 12.3 thereof, and
WHEREAS, Guarantor hereby agrees to guarantee the payment of any amount
determined or adjudged to be owing (an "Indemnified Amount") by CFN to Charter
Federal as Licensee under Section 12.3 of the Agreement
NOW, THEREFORE, in consideration of One Dollar ($1.00), and Charter
Federal's promise to dismiss and excuse any claim against, obligation of, or
other amount owing by CFN, its owners or affiliates or their officers,
directors, employees and agents that may arise directly or indirectly out of the
Agreement, upon receipt of such Indemnified Amount from Guarantor or CFN, the
parties agree as follows:
1. DEFENSE OF PROCEEDINGS INVOLVING INDEMNIFIED CLAIMS. If any action or
---------------------------------------------------
proceeding (including any governmental investigation or inquiry) shall be
brought or asserted against Charter Federal in respect of which it may be
entitled to indemnification from CFN under the provisions of Section 12.3
of the Agreement, Charter Federal will promptly notify both CFN and IXL in
writing, and CFN and IXL will then assume the defense thereof, including
the employment of counsel reasonably satisfactory to Charter Federal and
the payment of all expenses related thereto. Charter Federal will have the
right to employ separate counsel in any such action and to participate in
the defense thereof, but the fees and expenses of such counsel will be the
expense of Charter Federal unless (a) IXL has agreed to pay such fees and
expenses; (b) both CFN and IXL shall have failed to assume the defense of
such action or proceeding and to employ counsel reasonably satisfactory to
Charter Federal in any such action or proceeding; or (c) the named parties
to any such action or proceeding (including any impleaded parties) include
both Charter Federal and CFN and Charter Federal shall have been advised by
counsel that there may be one or more legal defenses available to it which
are different from or additional to, and which may conflict with, those
available to CFN (in which case, if Charter Federal notifies CFN and IXL in
writing that it elects to employ separate counsel at the expense of CFN and
IXL, neither CFN nor IXL will have the right to
<PAGE>
assume defense of such action or proceeding on behalf of Charter Federal).
Neither CFN nor IXL will be liable for any settlement of any such action or
proceeding effected without the prior written consent of both CFN and IXL,
but if settled with such consent or if there be a final judgment for the
plaintiff in any such action or proceeding CFN will indemnify and hold
harmless Charter Federal from and against any loss or liability by reason
of such settlement or judgment and IXL's guarantee hereunder shall extend
to such loss or liability. While CFN or IXL shall have the right to settle
any action against Charter Federal and/or CFN or IXL, neither CFN or IXL
shall have the right to place upon Charter Federal any obligations whether
remedial or to be done in the future without Charter Federal's express
written consent.
2. PAYMENT OF INDEMNIFIED AMOUNTS. After (a) there has been a final
------------------------------
determination in a governmental or regulatory enforcement action, a final
judgment in litigation, or a settlement with CFN's and IXL's consent as
described in Section 1 above that an Indemnified Amount is owed to a
government or regulatory body or to the parties to such litigation or
settlement; and (b) IXL has no further appeal rights or has determined not
to pursue any further appeal rights, Charter Federal will give notice to
CFN and IXL that an Indemnified Amount subject to this Guarantee is owed.
If CFN does not pay such Indemnified Amount in full within thirty days
after its receipt of such notice, Guarantor agrees to pay such Indemnified
Amount to Charter Federal.
Charter Federal, is not required to pursue judicial remedies against any
other party, including CFN, or to make any demand against any other such
party prior to making demand under this Guarantee Agreement as described in
the preceding paragraph. This Guarantee Agreement, together with the
Agreement, supersedes any and all other agreements either oral or in
writing, between CFN and Charter Federal with respect to the subject
matter hereof and contains all of the covenants and agreements between the
parties with respect to said Guarantee.
IXL HOLDINGS, INC., A DELAWARE
CORPORATION
By: /s/ James V. Sandry
---------------------------------------
Name: James V. Sandry
-------------------------------------
Title: Executive Vice President and
------------------------------------
Chief Financial Officer
------------------------------------
Date: 6/23/98
-----------------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
-------------------------------------
<PAGE>
[SIGNATURES CONTINUED FROM PRECEDING PAGE]
----------------------------------------
GUARANTEE BY IXL HOLDINGS, INC. AND
ABOVE TERMS ACCEPTED BY:
CHARTER FEDERAL SAYINGS & LOAN
ASSOCIATION OF WEST POINT, GEORGIA
By: /s/ William C. Gladden
------------------------------------
Name: William C. Gladden
----------------------------------
Title: Vice President
---------------------------------
Date: 6/23/98
----------------------------------
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES
------------
The following are wholly owned subsidiaries of the iXL Enterprises, Inc.
unless otherwise noted:
COMPANY STATE OF INCORPORATION
- ------- ----------------------
Consumer Financial Network, Inc./1/ Delaware
CFN Agency, Inc./2/ Delaware
CFN Finance, Inc./2/ Delaware
Creative Video Library, Inc. Georgia
iXL, Inc. Delaware
iXL-Boston, Inc. Delaware
iXL-Charlotte, Inc. Delaware
iXL-Chicago, Inc. Delaware
iXL-Connecticut, Inc. Delaware
iXL-DC, Inc. Delaware
iXL-Denver, Inc. Delaware
iXL-London, Ltd. United Kingdom
iXL-Los Angeles, Inc. Delaware
iVisit, Inc./3/ Delaware
iXL-Espana, S.A. Spain
Campana New Media, S.L./4/ Spain
The Other Media, S.L./4/ Spain
iXL-Memphis, Inc. Delaware
iXL-New York, Inc. Delaware
iXL-Richmond, Inc. Delaware
iXL-San Diego, Inc. Delaware
iXL-San Francisco, Inc. Delaware
LAVA Gesellschaft fur Digitale Medien Germany
Denovo New Media Limited
1. Consumer Financial Network, Inc. is owned 88% by iXL Enterprises, Inc., and
12% by General Electric Capital Corporation.
2. CFN Agency, Inc. and CFN Finance, Inc. are each a wholly-owned subsidiary of
Consumer Financial Network, Inc.
3. iVisit, Inc. is a wholly-owned subsidiary of iXL Los Angeles, Inc.
4. Campana New Media, S.L. and The Other Media, S.L. are wholly-owned
subsidiaries of iXL-Madrid, S.A.
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our reports as of the dates and relating
to the financial statements of the companies listed below.
Company Date of Report
------- --------------
iXL Enterprises, Inc. February 5, 1999
BoxTop Interactive, Inc. October 3, 1997
Green Room Productions, L.L.C. September 3, 1998
Digital Planet July 13, 1998
Micro Interactive, Inc. June 26, 1998
CommerceWAVE, Inc. August 21, 1998
Spinners Incorporated September 4, 1998
Tekna, Inc. September 24, 1998
Larry Miller Productions, Inc. November 10, 1998
We also consent to the application of our report on iXL Enterprises, Inc. to the
Financial Statement Schedules for the period from May 1, 1996 (commencement of
operations) through December 31, 1996 and the years ended December 31, 1997 and
1998 listed under Item 16(b) of this Registration Statement when such schedules
are read in conjunction with the financial statements referred to in our report.
The audits referred to in such report also included these schedules. We also
consent to the references to us under the heading "Experts" in such Prospectus.
PricewaterhouseCoopers LLP
Atlanta, Georgia
February 5, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 19,259 23,038
<SECURITIES> 0 0
<RECEIVABLES> 18,533 3,397
<ALLOWANCES> 796 138
<INVENTORY> 0 0
<CURRENT-ASSETS> 48,440 28,771
<PP&E> 36,925 11,135
<DEPRECIATION> 8,950 1,957
<TOTAL-ASSETS> 135,215 55,640
<CURRENT-LIABILITIES> 21,321 4,892
<BONDS> 20,552 840
75,518 29,930
2 2
<COMMON> 163 82
<OTHER-SE> 17,659 19,894
<TOTAL-LIABILITY-AND-EQUITY> 135,215 55,640
<SALES> 64,767 18,986
<TOTAL-REVENUES> 64,767 18,986
<CGS> 44,109 11,343
<TOTAL-COSTS> 44,109 11,343
<OTHER-EXPENSES> 4,408 4,820
<LOSS-PROVISION> 1,227 118
<INTEREST-EXPENSE> 770 238
<INCOME-PRETAX> (54,630) (18,562)
<INCOME-TAX> 0 (1,550)
<INCOME-CONTINUING> (54,630) (17,012)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (63,729) (17,012)
<EPS-PRIMARY> (5.41) (2.60)
<EPS-DILUTED> (5.41) (2.60)
</TABLE>
