<PAGE>
As filed with the Securities and Exchange Commission on June 28, 1999
Registration Statement No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
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
Minkin & Snyder
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, GA 30305
(404) 261-8000
Approximate date of commencement of proposed sale to the public: From
time to time 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. [X]
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(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. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Number of
Title of each Class of Securities Maximum Aggregate Amount of
Securities to be Registered Offered Offering Price(1) Registration Fee
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, par value $.01 per
share......................... 4,000,000 $72,000,000 $20,016
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) on the basis of an average of $18.00 of the high and low
prices reported on the consolidated reporting system on June 24, 1999.
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>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 June , 1999
P R O S P E C T U S
4,000,000 Shares
iXL ENTERPRISES, INC.
Common Stock
------------
This prospectus relates to 4,000,000 shares of common stock, $0.01 par
value per share, of iXL Enterprises, Inc. which may be issued by iXL
Enterprises, Inc. and offered for sale from time to time in connection with
business combination transactions or technology acquisitions in such amounts,
at such prices and on such terms as may be determined at the time of offering.
No period of time has been fixed within which the common stock offered by this
prospectus may be offered or sold.
All expenses of this offering will be paid by iXL Enterprises, Inc. No
underwriting discounts or commissions will be paid in connection with the
issuance of common stock by iXL in business combination transactions or
technology acquisitions, although finder's fees may be paid with respect to
specific acquisitions. Any person receiving a finder's fee may be deemed to be
an underwriter within the meaning of Section 2(11) of the Securities Act of
1933.
The common stock is traded 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 11 of this prospectus.
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.
------------
The date of this prospectus is , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 4
Risk Factors............................................................. 11
Forward-looking Statements............................................... 19
Trademarks............................................................... 19
Information in Prospectus................................................ 19
Use of Proceeds.......................................................... 20
Market Information....................................................... 20
Dividend Policy.......................................................... 20
Capitalization........................................................... 21
Pro Forma Consolidated Financial Information............................. 24
Selected Consolidated Financial Data..................................... 34
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 35
Business................................................................. 53
Management............................................................... 73
Certain Transactions..................................................... 83
Principal Stockholders................................................... 88
Description of Capital Stock............................................. 91
Shares Eligible for Future Sale.......................................... 95
Plan of Distribution..................................................... 96
Restrictions on Resale................................................... 96
Legal Matters............................................................ 97
Experts.................................................................. 97
Additional Information................................................... 97
Index to Financial Statements............................................ F-1
</TABLE>
3
<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.
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 and services;
. business information management systems;
. interactive learning environments;
. digital media services;
. traditional website 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 called iD5 which defines and
delineates business procedures and processes to take full advantage of best
practices developed throughout iXL. 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. E-commerce refers to the buying and selling of goods and
services on the Internet. 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 need to drive growth in the worldwide Internet development services
market, which according to International Data Corporation, 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. We have invested in our
management information systems to create a scalable organization capable of
maximizing the sharing of our knowledge base and the utilization of our staff.
As of April 30, 1999, we had approximately 1,475 employees. Our headquarters is
located in Atlanta, Georgia, and we have 17 regional offices located throughout
the United States and in England, Germany and Spain.
4
<PAGE>
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's equity is owned
77% by iXL and 23% by General Electric. CFN has contracted with competing
providers of various financial and other services to create a platform for
comparison shopping and purchase of these services. The CFN platform currently
offers the following 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.
CFN's platform is currently provided at no cost to large companies and
associations for distribution as a human resources benefit to their employees
or members. CFN also intends to make its platform available to the general
public. CFN service providers include Nationwide Mutual Insurance Co., Liberty
Mutual Insurance Co., and Chase Manhattan Mortgage Corporation. Member
companies include Nextel, Coca-Cola, Delta Air Lines and BellSouth. CFN
receives a fee from the service providers for each sale of their services
through the CFN network.
iXL's goal is to become the leading provider of strategic Internet
services and to become a leader in Internet-delivered financial services and
employee benefits. To achieve this goal, we intend 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.
Affiliates of General Electric Company have been iXL investors since
December 1997 and made a first investment in CFN in November 1998. In April
1999, this relationship expanded when iXL and an affiliate of General Electric
Company executed an agreement providing for the delivery of strategic Internet
services to General Electric. In connection with this agreement, iXL also
issued to an affiliate of General Electric Company warrants to purchase
1,000,000 shares of common stock at an exercise price of $15.00 per share. In
May 1999, iXL and an affiliate of General Electric also executed a marketing
agreement. In June 1999, iXL, CFN and affiliates of General Electric Company
expanded this relationship to include:
. the purchase by affiliates of General Electric Company of
2,000,000 shares of common stock at the initial public offering
price of $12.00 per share;
. a $50 million equity investment by affiliates of General Electric
Company in CFN; and
. the issuance by iXL to an affiliate of General Electric of
warrants to purchase 1,500,000 shares of common stock at an
exercise price equal to the initial public offering price of
$12.00 per share; this issuance was in connection with the
marketing agreement and a reasonable efforts agreement to provide
access to CFN's platform to employees of a General Electric
affiliate.
5
<PAGE>
iXL is a Delaware corporation. Our principal executive offices are
located at 1888 Emery St., NW, Atlanta, Georgia 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 mean we are incorporating by
reference the information contained at the site. In this prospectus, "iXL,"
"we," "us" and "our" refer to iXL Enterprises, Inc. and its subsidiaries. These
terms include the businesses we have acquired, unless the context otherwise
requires. "CFN" refers to iXL's subsidiary, Consumer Financial Network, Inc.,
and its subsidiaries.
Prospectus Assumptions
Except where otherwise indicated, all information in this prospectus
assumes iXL receives no cash proceeds from this offering and does not give
effect to the sale and issuance of the common stock offered hereby.
6
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered........ 4,000,000 shares to be issued in connection with proposed
acquisitions by iXL or one or more of its subsidiaries
Shares outstanding after
this offering.............. 68,456,900 shares
Use of proceeds............. iXL will receive no cash proceeds from this offering. 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>
The common stock outstanding after this offering excludes:
. 27,909,119 shares of common stock issuable upon exercise of stock
options outstanding as of June 25, 1999 at a weighted average
exercise price of $9.19 per share;
. 2,840,043 shares of common stock issuable upon exercise of stock
options reserved for grant; and
. 3,500,000 shares of common stock issuable upon exercise of warrants
with a weighted average exercise price of $12.29 per share.
See "Capitalization."
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 iXL'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 are derived
from and qualified by reference to iXL's audited Consolidated Financial
Statements, which appear elsewhere in this prospectus. The consolidated
statement of operations data for the three months ended March 31, 1998 and 1999
and the consolidated balance sheet data at March 31, 1999 are derived from and
are qualified by reference to, iXL's unaudited Consolidated Financial
Statements, which appear elsewhere in this prospectus and, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial data for such periods.
The results of operations for the three months ended March 31, 1999 are not
necessarily indicative of the results to be expected for the full year or for
any future period. All of iXL's acquisitions have been 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 these events had occurred at the dates indicated, nor does
this information purport to project our results for any future period.
We adjust our historical condensed consolidated statement of operations
for the year ended December 31, 1998 to arrive at the unaudited pro forma
condensed consolidated statement of operations for the year ended December 31,
1998 to reflect:
. the acquisitions we have made since January 1, 1998 as if they
occurred on January 1, 1998;
. a reduction in interest expense due to the repayment of $9.4
million of revolving debt from the proceeds of the issuance of
22,825 shares of Class A Convertible Preferred Stock in January
1999;
. a reduction in interest expense due to the repayment of $9.9
million of debt with the proceeds from iXL's initial public
offering; and
. accretion on CFN Series B Convertible Preferred Stock as if it
were outstanding for the full year.
We adjust our historical condensed consolidated statement of operations
for the three months ended March 31, 1999 to arrive at the unaudited pro forma
condensed consolidated statement of operations for the three months ended March
31, 1999 to reflect:
. a reduction in interest expense due to the repayment of $9.4
million of revolving debt from the proceeds of the issuance of
22,825 shares of Class A Convertible Preferred Stock in January
1999;
. a reduction in interest expense due to the repayment of $9.9
million of debt with the proceeds from iXL's initial public
offering; and
. accretion on the CFN Series B Convertible Preferred Stock as if
it were outstanding for the full three-month period.
8
<PAGE>
We adjust our historical condensed consolidated balance sheet as of March
31, 1999 to arrive at the unaudited pro forma condensed consolidated balance
sheet as of March 31, 1999 as if the following events occurred on March 31,
1999:
. the sale and issuance by CFN to General Electric of 16,190,475
shares of CFN's Series B Convertible Preferred Stock and the
application of the net proceeds of $49.3 million;
. the sale and issuance of 6,900,000 shares of common stock in
iXL's initial public offering at the initial public offering
price of $12.00 per share and the application of the resulting
net proceeds of $62.3 million, including the repayment of $9.9
million of debt;
. the sale and issuance to General Electric upon the closing of
iXL's initial public offering of an aggregate of 2,000,000
shares of common stock at the initial public offering price of
$12.00 per share and the application of the net proceeds of
$23.3 million;
. the exercise of warrants to purchase 1,246,000 shares of common
stock for cash consideration of $4.58 per share upon the closing
of iXL's initial public offering;
. the exercise of warrants to purchase 240,006 shares of common
stock which were mandatorily exercisable upon the closing of
iXL's initial public offering into 237,254 shares of common
stock; warrants to purchase 205,306 shares of common stock with
a weighted average exercise price of $2.12 per share were
exercised on a cash basis for aggregate cash consideration of
$434,936, and warrants to purchase 34,700 shares of common stock
with an exercise price of $0.9514 per share were exercised on a
cashless basis into 31,948 shares of common stock based on the
initial public offering price of $12.00 per share; the warrants
exercised for cash had the following exercise prices: 9,106 at
$0.0000439 per share, 150,000 at $2.50 per share, and 46,200 at
$1.2973 per share; and
. the reclassification of Class A, Class B and Class C Convertible
Preferred Stock, Class D Nonvoting Preferred Stock and Class A
and Class B Common Stock into common stock upon the closing of
iXL's initial public offering.
9
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31, Three Months Ended March 31,
------------------------------ -----------------------------------
1997 1998 1998 1998 1999 1999
Actual Actual Pro Forma Actual Actual Pro Forma
-------- -------- ---------- --------- ---------- ------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues................ $ 18,986 $ 64,767 $ 87,160 $ 6,864 $ 33,012 $ 33,012
Cost of revenues........ 11,343 44,242 58,563 4,899 19,583 19,583
-------- -------- -------- --------- ---------- ----------
Gross profit.......... 7,643 20,525 28,597 1,965 13,429 13,429
Sales and marketing
expenses............... 3,903 17,325 18,676 2,036 8,150 8,150
General and
administrative
expenses............... 9,114 30,163 39,648 2,956 15,725 15,725
Research and development
expenses............... 4,820 4,408 4,413 907 1,058 1,058
Depreciation............ 1,408 5,217 5,895 699 2,284 2,284
Amortization............ 5,191 10,590 17,668 1,182 4,351 4,351
-------- -------- -------- --------- ---------- ----------
Loss from operations.. (16,793) (47,178) (57,703) (5,815) (18,139) (18,139)
Other income (expense),
net.................... 116 (28) (138) 36 69 69
Loss on equity
investment............. (1,443) (1,640) (1,640) (395) (65) (65)
Interest income......... 136 750 777 264 216 216
Interest expense........ (238) (770) (1,705) (28) (336) (7)
-------- -------- -------- --------- ---------- ----------
Loss before income
taxes................ (18,222) (48,866) (60,409) (5,938) (18,255) (17,926)
Income tax benefit
(expense).............. 2,782 -- (8) -- -- --
-------- -------- -------- --------- ---------- ----------
Net loss.............. (15,440) (48,866) (60,417) (5,938) (18,255) (17,926)
Dividends and accretion
on mandatorily
redeemable preferred
stock.................. -- (9,099) (10,907) (725) (5,293) (452)
-------- -------- -------- --------- ---------- ----------
Net loss available to
common stockholders.. $(15,440) $(57,965) $(71,324) $ (6,663) $ (23,548) $(18,378)
======== ======== ======== ========= ========== ==========
Basic and diluted net
loss per common share.. $ (2.36) $ (4.92) $ (4.43) $ (0.78) $ (1.46) $ (0.29)
======== ======== ======== ========= ========== ==========
Weighted average common
shares outstanding..... 6,540 11,777 16,088 8,592 16,082 63,909
</TABLE>
<TABLE>
<CAPTION>
As of March 31,
1999
------------------
Actual Pro Forma
-------- ---------
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents.................................... $ 13,880 $156,894
Working capital.............................................. 24,715 169,579
Total assets................................................. 143,698 285,814
Debt, including current portion.............................. 12,000 2,100
Mandatorily redeemable preferred stock....................... 70,414 --
Mandatorily redeemable preferred stock of subsidiary......... 9,839 47,939
Stockholders' equity......................................... 26,645 211,425
</TABLE>
10
<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 exposed to risks inherent in
our business. The performance of your shares will reflect the performance of
our business relative to competition, industry conditions and general economic
and market 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 our common stock.
Risks Related to iXL's Business
Our limited operating history makes it difficult to evaluate our business.
We were founded in March 1996. As a result, we have a limited operating
history on which you can base your evaluation of our business and prospects.
Our business and prospects must be considered in light of the risks and
uncertainties frequently encountered by companies in their early stages of
development. These risks are further amplified by the fact that we are
operating in the new and rapidly evolving strategic Internet services market.
These risks and uncertainties include the following:
. our business model and strategy have evolved and are continually
being reviewed;
. we may not be able to successfully implement our business model
and strategy; and
. our management has not worked together for very long.
We cannot be sure that we will be successful in meeting these challenges
and addressing these risks and uncertainties. If we are unable to do so, our
business will not be successful and the value of your investment in iXL will
decline.
Potential fluctuations in our quarterly results make financial forecasting
difficult and could affect our common stock trading price.
As a result of our limited operating history, rapid growth, numerous
acquisitions 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. Also, it is difficult to
forecast our quarterly results due to the difficulty in predicting the amount
and timing of client expenditures, our acquisitions and our employee
utilization. Our 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. You should not rely on the results of any one quarter as an indication
of our future performance. Revenue in the fourth quarter of 1998 was favorably
impacted by several large engagements. We did not experience a comparable
increase in revenue growth during the first quarter of 1999. We may not
experience comparable increases in the remainder of 1999. If in some future
quarter our results of operations were to fall below the expectations of
securities analysts and investors, the trading price of our common stock would
likely decline. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
We have an accumulated deficit, are not currently profitable and expect to
incur future losses.
We have incurred substantial losses since our inception and we anticipate
continuing to incur substantial losses for the foreseeable future. As of March
31, 1999, we had an accumulated deficit of approximately $84 million.
Additionally, 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 website
development and implementation of our Solution SetsTM. Solution Sets are
templated Internet applications which we customize for our clients. To succeed,
we must take advantage of our existing relationships to substantially increase
our revenue derived from more comprehensive strategic Internet services. To
facilitate this increase in revenues, we intend to continue to invest heavily
in acquisitions,
11
<PAGE>
infrastructure, development and marketing. As a result, we may not be able to
achieve or sustain profitability. If we fail to achieve or sustain
profitability, the value of your investment in iXL will decline. See "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
We may be unable to continue to grow at our historical growth rates or to
effectively manage our growth.
Continued, planned growth is a key component of increasing the value of
our common stock. In the past two years our business has grown significantly,
and we anticipate future internal growth and growth through acquisitions. From
January 1, 1997 to April 30, 1999, our staff increased from approximately 90 to
approximately 1,475 employees. This rapid growth places a significant demand on
management and operational resources. In order to manage growth effectively, we
must implement and improve our operational systems and controls.
Our growth could also be adversely affected by many other factors,
including economic downturns, as clients would reduce or delay their
expenditures with us. As a result of these concerns, we cannot 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 continued growth is dependent on the successful completion of acquisitions.
Since our inception, we have made 34 acquisitions. We anticipate that a
large portion of our future growth will continue to be accomplished through
acquisitions. The success of this plan depends upon our ability to:
. identify suitable acquisition opportunities;
. effectively integrate acquired personnel, operations, products and
technologies into our organization;
. retain and motivate the personnel of acquired businesses;
. retain customers of acquired businesses; and
. obtain necessary financing on acceptable terms.
Additionally, in pursuing acquisition opportunities we may compete with
other companies with similar growth strategies, some of which may be larger
than we are and have greater financial and other resources than we do.
Competition for acquisition targets could also result in increased prices for
acquisition targets and a diminished pool of companies available for
acquisition.
We may not be able to keep up with the demand for services under our guaranteed
payment services agreements.
We have recently entered into multi-year services agreements with General
Electric and Delta Air Lines for the delivery of strategic Internet services.
These agreements guarantee minimum payments to iXL. We will be required to
commit significant resources to meet the demands of these contracts. If we are
unable to hire enough employees or deploy sufficient resources to meet these
demands, we may not be able to provide these clients with the services
requested by them. This could cause these clients to become dissatisfied with
us and reduce their future demand for our services. It could also harm our
reputation with other clients as well as decrease the resources available to
services those clients. These impacts could harm our financial condition. We
may execute additional agreements of this type in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Certain Transactions--Other Transactions."
12
<PAGE>
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. We assume greater financial risk on fixed-price
contracts than on time and materials engagements. We have a limited history in
estimating our costs for our fixed-price engagements. Further, the average size
of our contracts is currently increasing, resulting in a corresponding increase
in our exposure to the financial risks of fixed-price contracts. If we fail to
estimate costs accurately or encounter unexpected problems, our financial
performance will be adversely effected. To reduce this financial risk, on
larger contracts, we try to price these fixed-price contracts on a three-phase
basis--strategic review, design and implementation. Each phase is priced
separately, immediately prior to its commencement. We may not be able to price
a majority of 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 had to commit unanticipated resources to complete some of our projects,
resulting in lower gross margins. We may experience similar situations in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
If we fail to attract and retain employees, our growth could be limited and our
costs could increase.
Historically we have experienced significant employee turnover. 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. The competition in the strategic
Internet services industry for such personnel is intense, and we cannot be sure
that we will be successful in attracting, training and retaining such
personnel. Most of our employees and several of our executive officers have
joined us recently, either through acquisitions or otherwise. Our ability to
generate revenues is dependent upon the number and expertise of the personnel
we employ. Most of our employees are not subject to noncompetition agreements
or agreements which condition a portion of acquisition consideration on future
performance of an acquired company's management. High turnover resulting in
additional training expense would decrease our profitability. Also, we may have
difficulty retaining employees who received significant amounts of common stock
in connection with the acquisition by iXL of their previous employer once those
employees are able to sell their shares of common stock.
We depend on our key management personnel for our future success.
Our success depends largely on the skills of our key management and
technical personnel. The loss of one or more of our key management and
technical personnel may materially and adversely affect our business and
results of operations. Currently, our key management and technical personnel
are U. Bertram Ellis, our Chief Executive Officer, William C. Nussey, our
subsidiary iXL, Inc.'s President and Chief Operating Officer, C. Cathleen
Raffaeli, CFN's President and Chief Operating Officer, M. Wayne Boylston, our
Executive Vice President, Chief Financial Officer, Treasurer and Assistant
Secretary, Michael Chlan, CFN's Chief Information Officer, Barry Sikes, our
Executive Vice President for Worldwide Operations, David Clauson, iXL, Inc.'s
Executive Vice President for Worldwide Marketing, and Benjamin Chen, Chief
Information Officer of iXL, Inc. We do not maintain key man insurance for any
of our employees other than Mr. Ellis. We cannot guarantee that we will be able
to replace any of these individuals in the event their services become
unavailable. See "Management."
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 or may unilaterally reduce the
scope of, or terminate, existing projects. 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,
which could negatively affect our financial condition.
13
<PAGE>
Failure to raise necessary capital could restrict our growth, limit our
development of new products and services and hinder our ability to compete.
We may need to raise significant additional funds in order to achieve our
business objectives. Failure to raise these funds may:
. restrict our growth;
. limit our development of new products and services; and
. hinder our ability to compete.
Any of these consequences would have a material adverse effect on our business,
results of operations and financial condition.
We may be liable for defects or errors in the solutions we develop.
Many of the solutions we develop are critical to the operations of our
clients' businesses. Any defects or errors in these solutions could result in:
. delayed or lost client revenues;
. adverse customer reaction toward iXL;
. negative publicity;
. additional expenditures to correct the problem; and
. claims against us.
Our standard contracts limit our damages arising from our negligent
conduct in rendering our services. These contractual provisions may not protect
us from liability for damages. In addition, large claims may not be adequately
covered by insurance and may raise our insurance costs.
Year 2000 risks 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. The computer systems we currently rely on to conduct our business
are: programming software, graphics design software, accounting and billing
software, word processing, spreadsheet, project management and presentation
software, communications software, and network, server and personal computing
hardware.
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, harm to our reputation 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. 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."
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<PAGE>
Our ability to protect our intellectual property is important to our business.
We have a variety of copyrights, trademarks, trade secrets and other
intellectual property rights which are important to our business. Patent
applications have been filed for the CFN platform, which may or may not be
granted. If these applications are not granted, our competitors may be able to
copy our technology without compensating us. The steps we take to protect our
intellectual property may not be adequate. Effective protection may not be
available in every country. In addition, although we believe that our
intellectual property rights do not infringe on the intellectual property
rights of others, we cannot be sure that other parties will not assert claims
against us. We may expend significant financial and managerial resources on
these claims.
Our investments in iXL Ventures involve risk.
Through iXL Ventures, 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
businesses in which we invest are generally unproven, involve substantial risk
and may never be profitable. See "Business--iXL Ventures."
Our international operations and expansion involve financial and operational
risk.
Revenue from our three European offices was minimal in 1998. We have only
minimal experience in managing international offices and only limited
experience in marketing services to international clients. Revenues from our
international offices may prove inadequate to cover the expenses of
establishing and maintaining our international offices and marketing to
international clients. In addition, there are risks inherent in doing business
on an international level, such as fluctuations in currency exchange rates and
potentially adverse tax consequences, any of which could adversely affect our
international operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Risks Related to the Strategic Internet Services Industry
The developing market for strategic Internet services and the level of
acceptance of the Internet as a business medium will affect our business.
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 Internet;
. companies adopting Internet-based business models; and
. the development of technologies that facilitate two-way
communication between companies and targeted audiences.
Significant issues concerning the commercial use of these technologies
include security, reliability, cost, ease of use and quality of service. These
issues remain unresolved and may inhibit the growth of Internet business
solutions that utilize these technologies.
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<PAGE>
Industry analysts and others have made many predictions concerning the
growth of the Internet as a business medium. These predictions should not be
relied upon. 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 will not succeed and the value of your investment in
our common stock will decline.
We may not be able to keep up with the continuous technological change in our
market which could harm our business.
Our success will depend, in part, on our ability to respond to
technological advances. 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 technological advances, we will not be able to compete effectively. In
addition, employee time allocated to responding to technological advances will
not be available for client engagements.
We operate in a highly competitive market with low barriers to entry which
could limit our market share and harm our financial performance.
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. In addition, 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 strategic Internet
services market. We believe that due to the low cost of entering our markets,
competition will intensify and increase in the future. This intense competition
may limit our ability to become profitable or result in the loss of market
share. As a result, our competitors may be better positioned to address
developments in the industry or may react more effectively to industry changes,
which could adversely affect our business.
Most of our employees are not subject to noncompetition agreements. As a
result, we are subject to the risk that our employees may leave us and may
start competing businesses. The emergence of these enterprises will further
increase the level of competition in our markets and could adversely affect our
growth and financial performance. See "Business--Competition."
Risks Related to Our CFN Subsidiary
CFN's business model is new and unproven.
CFN, our 77%-owned subsidiary, generated losses of approximately $13.5
million in 1998 and is expected to generate significant losses for the
foreseeable future. CFN's business model is new and unproven, and its success
will depend on:
. the willingness of consumers to purchase financial and other
services through the CFN platform rather than through traditional
distribution methods;
. CFN's services becoming available to a large number of consumers;
and
. whether providers of services will view participation on the CFN
platform as an attractive opportunity.
To date, the volume of transactions through the CFN platform has been
limited and, accordingly, the revenue recognized by CFN has been minimal. CFN
also intends to make its platform available to the general public over the
Internet and through its telesales center. This expansion is in its early
stages of planning and development. CFN has no experience selling to the
general public. CFN may not be able to expand its agreements with its existing
services providers to include the provision of services to the general public.
Also, none of the providers of services on the CFN platform has a long-term
contract with CFN. The failure of CFN
16
<PAGE>
to successfully implement its business plan could adversely affect our business
results and financial condition. See "Business--Consumer Financial Network."
CFN must expend significant resources to grow its infrastructure.
CFN's performance will depend in large part upon its ability to estimate
accurately its resource requirements. CFN has expended, and will continue to
expend, significant resources:
. to build electronic data interchange interfaces with its provider
network;
. to grow its technology infrastructure;
. to add participating companies and employees to its platform; and
. to establish access to the CFN platform for participating
companies' employees.
CFN incurs these expenses in advance of any recognition of revenue.
CFN has no control over the prices or other aspects of the services
offered through its platform. We do not know if customers will find these
services more attractive than other alternatives available.
CFN's numerous established competitors could harm its prospects.
CFN competes with other Internet-based providers of financial and other
services, as well as traditional providers of these services. We expect CFN to
face competition from an increasing number of sources in the marketplace. If
CFN fails to compete successfully against current or future competitors, it may
not become profitable and our financial condition may be adversely affected.
See "Business--Competition."
Government regulation and legal uncertainties related to CFN could adversely
affect our business.
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 these 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. Moreover, the regulatory agencies governing CFN's activities have
substantial discretion in evaluating the permissibility of CFN's current and
future activities. Many aspects of CFN's operations, however, have not been
subject to federal or state regulatory interpretation. Regulatory requirements
are subject to change from time to time and may in the future further restrict
CFN's ability to conduct its business. See "Business--Consumer Financial
Network--Government Regulation of Insurance, Auto Finance and Mortgages."
Risks Related to the Offering
You may encounter volatility in the market price for our common stock.
The stock market has recently experienced significant price and volume
fluctuations that have particularly affected the market 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 these companies. 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 market 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. These types of litigation,
regardless of the outcome, could result in substantial costs and a diversion of
management's attention and resources, which could adversely affect our
business, results of operations and financial condition.
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<PAGE>
Kelso and CB Capital Investors will continue to have significant influence over
us.
The Kelso funds, through Kelso Investment Associates V, L.P. and Kelso
Equity Partners V, L.P., and CB Capital Investors, L.P., beneficially own
approximately 24.3% and 12.3%, respectively, of the outstanding common stock.
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 Capital
Investors 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 our directors. 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 iXL. See
"Management--Amended Stockholders Agreement," "Principal Stockholders,"
"Certain Transactions" and "Description of Capital Stock--Certain Antitakeover
Effects of Provisions of iXL's Certificate of Incorporation and Bylaws and
Delaware Law."
Our common stock has been publicly traded only for a brief time.
Prior to iXL's initial public offering in June 1999, you could not buy or
sell our common stock publicly. An active public market for our common stock
may not develop or be sustained. 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.
Antitakeover provisions of our Certificate of Incorporation and Bylaws and
Delaware law could prevent or delay a change of control.
Our Board of Directors may issue up to 5,000,000 shares of our 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, provisions of Delaware law, our Certificate of
Incorporation and our Bylaws could delay or impede a merger, tender offer or
proxy contest involving iXL. For example, Section 203 of the Delaware General
Corporation Law could prohibit us from engaging in a business transaction with
large 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 iXL's Certificate of Incorporation and
Bylaws and Delaware Law."
Future sales into the public market could cause the market price of our common
stock to decline.
Our current stockholders hold a substantial number of shares of our
common stock which they will be able to sell in the public market in the near
future. Sales of a substantial number of shares of our common stock in the
public market could adversely affect the market price of our common stock. For
a description of the availability for sale of shares of our common stock that
are already outstanding or that are sold in this offering, see "Description of
Capital Stock" and "Shares Eligible for Future Sale."
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<PAGE>
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 e-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 those identified under "Risk Factors."
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."
TRADEMARKS
iXLTM, the iXL logo, Interactive ExcellenceTM, Internet ExcellenceTM, the
CFN logo, CFNTM, Consumer Financial NetworkTM, CFN.comTM, iD5TM and the names
of products and services offered by iXL and CFN are trademarks, registered
trademarks, service marks or registered service marks of iXL and CFN. This
prospectus also includes product names, trade names and trademarks of other
companies.
INFORMATION IN PROSPECTUS
You should rely only on the information contained in this prospectus. We
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 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.
19
<PAGE>
USE OF PROCEEDS
iXL will not receive any proceeds from this offering other than the value
of the businesses or properties acquired by iXL or one or more of its
subsidiaries in the proposed acquisitions.
MARKET INFORMATION
iXL's common stock is traded on the Nasdaq National Market under the
symbol "IIXL."
DIVIDEND POLICY
iXL has never declared or paid any cash dividends on the common stock.
iXL does not expect to pay any cash dividends in the foreseeable future. Under
the terms of its credit agreement, iXL is restricted from paying dividends to
its stockholders. iXL may in the future issue shares of preferred stock which
may have different or superior dividend rights than the common stock. Upon the
closing of iXL's initial public offering, all outstanding shares of Class D
Nonvoting Preferred Stock, which previously accrued dividends at a rate of 12%
per annum, were reclassified as 6,986,619 shares of common stock.
20
<PAGE>
CAPITALIZATION
The following table sets forth our actual capitalization as of March 31,
1999 pro forma as if the following events that occurred after March 31, 1999
occurred on March 31, 1999:
. the sale and issuance by CFN to General Electric of 16,190,475
shares of CFN's Series B Convertible Preferred Stock and the
application of the net proceeds of $49.3 million;
. the sale and issuance of 6,900,000 shares of common stock in
iXL's initial public offering at the initial public offering
price of $12.00 per share and the application of the resulting
net proceeds of $62.3 million including the repayment of $9.9
million of debt;
. the sale and issuance to General Electric upon the closing of
iXL's initial public offering of an aggregate of 2,000,000
shares of common stock at the initial public offering price of
$12.00 per share and the application of the net proceeds of
$23.3 million;
. the exercise of warrants to purchase 1,246,000 shares of common
stock for cash consideration of $4.58 per share upon the
closing of iXL's initial public offering;
. the exercise of warrants to purchase 240,006 shares of common
stock which were mandatorily exercisable upon the closing of
iXL's initial public offering into 237,254 shares of common
stock; warrants to purchase 205,306 shares of common stock with
a weighted average exercise price of $2.12 per share were
exercised on a cash basis for aggregate cash consideration of
$434,936, and warrants to purchase 34,700 shares of common
stock with an exercise price of $0.9514 per share were
exercised on a cashless basis into 31,948 shares of common
stock based on the initial public offering price of $12.00 per
share; and
. the reclassification of Class A, Class B and Class C
Convertible Preferred Stock, Class D Nonvoting Preferred Stock
and Class A and Class B Common Stock into common stock upon the
closing of iXL's initial public offering.
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<PAGE>
The information in the following table does not give effect to the sale
and issuance of common stock offered hereby.
You should read this capitalization table together with "Selected
Consolidated Financial Data," "Pro Forma Consolidated Financial Information"
and our consolidated financial statements and notes included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
March 31, 1999
----------------------------
Actual Pro Forma
------------ --------------
(in thousands except
share and per share data)
<S> <C> <C>
Cash and cash equivalents.......................... $ 13,880 $ 156,894
============ ============
Current portion of long-term debt.................. $ 815 $ 815
============ ============
Long-term debt..................................... $ 11,185 $ 1,285
Mandatorily redeemable preferred stock:
Class D Nonvoting Preferred Stock................. 26,017 --
Class B Convertible Preferred Stock............... 40,602 --
Class C Convertible Preferred Stock............... 3,795 --
Series A Convertible Preferred Stock of CFN....... 9,839 9,839
Series B Convertible Preferred Stock of CFN....... -- 38,100
Stockholders' equity:
Class A Convertible Preferred Stock............... 2 --
Class A Common Stock.............................. -- --
Common stock...................................... 163 644
Additional paid-in capital........................ 114,859 299,160
Accumulated deficit............................... (84,142) (84,142)
Treasury stock.................................... (888) (888)
Note receivable from stockholder.................. (900) (900)
Unearned compensation............................. (2,449) (2,449)
------------ ------------
Total stockholders' equity...................... 26,645 211,425
------------ ------------
Total capitalization............................ $ 118,083 $ 260,649
============ ============
</TABLE>
The following provides further information regarding iXL's securities
described in the above table:
. Class D Nonvoting Preferred Stock, $.01 par value, includes:
50,000 shares (at March 31, 1999) and 0 shares (Pro Forma)
authorized, respectively; 35,700 shares (at March 31, 1999) and
0 shares (Pro Forma) issued and outstanding, respectively.
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.
. Class B Convertible Preferred Stock, $.01 par value, includes:
200,000 shares (at March 31, 1999) and 0 shares (Pro Forma)
authorized, respectively; 98,767 shares (at March 31, 1999) and
0 shares (Pro Forma) issued and outstanding, respectively.
. Class C Convertible Preferred Stock, $.01 par value, includes:
15,000 shares (at March 31, 1999) and 0 shares (Pro Forma)
authorized, respectively; 9,232 (at March 31, 1999) and 0 shares
(Pro Forma) issued and outstanding, respectively.
. CFN's Series A Convertible Preferred Stock, $.01 par value,
includes: 24,900,000 shares (at March 31, 1999) and 13,333,334
shares (Pro Forma) authorized, respectively; 13,333,334 shares
(at March 31, 1999 and Pro Forma) issued and outstanding,
respectively.
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<PAGE>
. CFN's Series B Convertible Preferred Stock, $.01 per share,
includes: 0 shares (at March 31, 1999) and 16,190,475 shares
(Pro Forma), authorized, respectively; 0 shares (at March 31,
1999) and 16,190,475 shares (Pro Forma), issued and
outstanding, respectively.
. Class A Convertible Preferred Stock, $.01 par value, includes:
250,000 shares (at March 31, 1999) and 0 shares (Pro Forma),
authorized, respectively; 200,116 shares (at March 31, 1999),
and 0 shares (Pro Forma) issued and outstanding, respectively.
. Class A Common Stock, $.01 par value, includes: 75,000,000
shares (at March 31, 1999) and 0 shares (Pro Forma) authorized,
respectively; 0 shares (at March 31, 1999 and Pro Forma) issued
and outstanding, respectively. Excludes 1,500,000 shares of
Class A Common Stock subject to outstanding warrants at a
weighted average exercise price of $13.33 per share, which will
convert into warrants to purchase 1,500,000 shares of common
stock at a weighted average exercise price of $13.33 per share
upon the closing of iXL's initial public offering.
. Common stock, $.01 par value, was previously designated as the
"Class B Common Stock" and includes: 200,000,000 (at March 31,
1999 and Pro Forma) authorized, respectively; 16,082,489 shares
(at March 31, 1999), and 64,263,862 shares (Pro Forma) issued
and outstanding, respectively. Excludes 2,000,000 shares of
common stock subject to outstanding warrants at a weighted
average exercise price of $11.50 per share, 27,909,119 shares
of common stock reserved for options granted under iXL's stock
option plans at a weighted average exercise price of $9.19 per
share, and 2,840,043 shares of common stock reserved for
options to be granted under iXL's stock option plans.
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<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
Our consolidated financial statements and the historical audited
financial statements of some of the companies we acquired are included
elsewhere in this prospectus. The unaudited pro forma consolidated financial
information presented here should be read together with those financial
statements and related notes.
We adjust our historical condensed consolidated statement of operations
for the year ended December 31, 1998 to arrive at the unaudited pro forma
condensed consolidated statement of operations for the year ended December 31,
1998 to reflect:
. the acquisitions we have made since January 1, 1998 as if they
occurred on January 1, 1998;
. a reduction in interest expense due to the repayment of $9.4
million of revolving debt from the proceeds of the issuance of
22,825 shares of Class A Convertible Preferred Stock in January
1999;
. accretion of the CFN Series B Convertible Preferred Stock as if
it were outstanding for the full year;
. a reduction in interest expense due to the repayment of $9.9
million of debt from the proceeds from the sale of shares of
common stock in iXL's initial public offering; and
. the reclassification of Class A, Class B and Class C
Convertible Preferred Stock, Class D Nonvoting Preferred Stock
and Class A and Class B Common Stock into common stock upon the
closing of iXL's initial public offering.
We adjust our historical condensed consolidated statement of operations
for the three months ended March 31, 1999 to arrive at the unaudited pro forma
condensed consolidated statement of operations for the three months ended March
31, 1999 to reflect:
. a reduction in interest expense due to the repayment of $9.4
million of revolving debt from the proceeds of the issuance of
22,825 shares of Class A Convertible Preferred Stock in January
1999;
. accretion on the CFN Series B Convertible Preferred Stock as if
it were outstanding for the full three month period;
. a reduction of interest expense due to the repayment of $9.9
million of debt from the proceeds from the sale of shares of
common stock in iXL's initial public offering; and
. the reclassification of Class A, Class B and Class C
Convertible Preferred Stock, Class D Nonvoting Preferred Stock
and Class A and Class B Common Stock into common stock upon the
closing of iXL's initial public offering.
We adjust our historical condensed consolidated balance sheet as of March
31, 1999 to arrive at the unaudited pro forma condensed consolidated balance
sheet as of March 31, 1999 as if the following events that occurred after March
31, 1999 occurred on March 31, 1999:
. the sale and issuance by CFN to General Electric of 16,190,475
shares of CFN's Series B Convertible Preferred Stock and the
application of the net proceeds of $49.3 million;
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<PAGE>
. the sale and issuance of 6,900,000 shares of common stock in
iXL's initial public offering at the initial public offering
price of $12.00 per share and the application of the resulting
net proceeds of $62.3 million, including the repayment of $9.9
million of debt;
. the sale and issuance to General Electric upon the closing of
iXL's initial public offering of an aggregate of 2,000,000
shares of common stock at the initial public offering price of
$12.00 per share and the application of the resulting net
proceeds of $23.3 million;
. the exercise of warrants to purchase 1,246,000 shares of common
stock for cash consideration of $4.58 per share upon the
closing of iXL's initial public offering;
. the exercise of warrants to purchase 240,006 shares of common
stock which were mandatorily exercisable upon the closing of
iXL's initial public offering into 237,254 shares of common
stock; warrants to purchase 205,306 shares of common stock with
a weighted average exercise price of $2.12 per share were
exercised on a cash basis for aggregate cash consideration of
$434,936, and warrants to purchase 34,700 shares of common
stock with an exercise price of $0.9514 per share were
exercised on a cashless basis into 31,948 shares of common
stock based on the initial public offering price of $12.00 per
share; the warrants exercised for cash have the following
exercise prices: 9,106 at $0.0000439 per share, 150,000 at
$2.50 per share, and 46,200 at $1.2973 per share; and
. the reclassification of Class A, Class B and Class C
Convertible Preferred Stock, Class D Nonvoting Preferred Stock
and Class A and Class B Common Stock into common stock upon the
closing of iXL's initial public offering.
All of iXL's acquisitions 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 and the purchase price in excess of identified
tangible and intangible net assets acquired allocated to goodwill are being
amortized over their estimated useful lives. Identifiable intangible assets
consist primarily of assembled workforce, which is being amortized over a
period of three years. Goodwill is being amortized primarily over five years.
The fair value of the common stock issued as consideration for the
companies acquired by iXL since January 1, 1998 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 occurred on January 1, 1998 and should not be
construed as being representative of future results of operations. Upon
consummation of iXL's initial public offering, the reclassification of the
Class D Nonvoting Preferred Stock resulted in a charge to net loss available to
common stockholders equal to the difference between $35.7 million plus accrued
dividends and the carrying value of the Class D Nonvoting Preferred Stock.
25
<PAGE>
Pro Forma Condensed Consolidated Statement of Operations
for the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Companies
Acquired
Historical in Pro Forma
Company 1998(2)(3) Adjustments Pro Forma
---------- ---------- ----------- ---------
(in thousands except per share data)
<S> <C> <C> <C> <C>
Revenues........................ $ 64,767 $ 22,393 $ -- $ 87,160
Cost of revenues................ 44,242 14,321 -- 58,563
-------- -------- ------ --------
Gross profit.................. 20,525 8,072 -- 28,597
Sales and marketing expenses.... 17,325 1,351 -- 18,676
General and administrative
expenses....................... 30,163 9,485 -- 39,648
Research and development
expenses....................... 4,408 5 -- 4,413
Depreciation.................... 5,217 678 -- 5,895
Amortization.................... 10,590 -- 7,078 (4) 17,668
-------- -------- ------ --------
Loss from operations.......... (47,178) (3,447) (7,078) (57,703)
Other expense, net.............. (28) (110) -- (138)
Loss on equity investment....... (1,640) -- -- (1,640)
Interest income................. 750 27 -- 777
Interest expense................ (770) (332) (153)(5) (1,255)
-------- -------- ------ --------
Loss before income taxes...... (48,866) (3,862) (7,231) (59,959)
Income tax expense.............. -- (8) -- (8)
-------- -------- ------ --------
Net loss...................... (48,866) (3,870) (7,231) (59,967)
-------- -------- ------ --------
Dividends and accretion on
mandatorily redeemable
preferred stock................ (9,099) -- 7,291 (6) (1,808)
-------- -------- ------ --------
Net loss available to common
stockholders................. $(57,965) $ (3,870) $ 60 $(61,775)
======== ======== ====== ========
Basic and diluted net loss per
common share(1)................ $ (4.92) $ (1.09)
======== ========
Weighted average common shares
outstanding(1)................. 11,777 56,814
</TABLE>
26
<PAGE>
Pro Forma Condensed Consolidated Statement of Operations
for the Three Months Ended March 31, 1999
<TABLE>
<CAPTION>
Historical Pro Forma
Company Adjustments Pro Forma
------------ ------------- ------------
(in thousands except per share data)
<S> <C> <C> <C>
Revenues....................... $ 33,012 $ -- $ 33,012
Cost of revenues............... 19,583 -- 19,583
------------ ---------- ------------
Gross profit................. 13,429 -- 13,429
Sales and marketing expenses... 8,150 -- 8,150
General and administrative
expenses...................... 15,725 -- 15,725
Research and development
expenses...................... 1,058 -- 1,058
Depreciation................... 2,284 -- 2,284
Amortization................... 4,351 4,351
------------ ---------- ------------
Loss from operations......... (18,139) (18,139)
Other expense, net............. 69 -- 69
Loss on equity investment...... (65) -- (65)
Interest income................ 216 -- 216
Interest expense............... (336) 329 (8) (7)
------------ ---------- ------------
Loss before income taxes..... (18,255) 329 (17,926)
Income tax expense............. -- -- --
------------ ---------- ------------
Net loss..................... (18,255) 329 (17,926)
------------ ---------- ------------
Dividends and accretion on
mandatorily redeemable
preferred stock............... (5,293) 4,841 (9) (452)
------------ ---------- ------------
Net loss available to common
stockholders................ $ (23,548) $ 5,170 $ (18,378)
============ ========== ============
Basic and diluted net loss per
common share(1)............... $ (1.46) $ (0.29)
============ ============
Weighted average common shares
outstanding(1)................ 16,082 63,909
</TABLE>
27
<PAGE>
Pro Forma Condensed Consolidated Balance Sheet
As of March 31, 1999
<TABLE>
<CAPTION>
Historical Pro Forma
Company Adjustments(7) Pro Forma
---------- -------------- ---------
(in thousands)
<S> <C> <C> <C>
Assets:
Cash and cash equivalents.................. $ 13,880 $143,014 $156,894
Accounts receivable (net).................. 20,957 -- 20,957
Unbilled revenues.......................... 11,736 -- 11,736
Prepaid expenses and other assets.......... 3,757 1,400 5,157
-------- -------- --------
Total current assets................... 50,330 144,414 194,744
Property and equipment, net................ 32,296 -- 32,296
Intangible assets, net..................... 58,102 -- 58,102
Other non-current assets................... 2,970 (2,298) 672
-------- -------- --------
Total assets........................... $143,698 $142,116 $285,814
======== ======== ========
Liabilities and Stockholders' Equity:
Accounts payable........................... $ 4,783 $ (450) $ 4,333
Deferred revenues.......................... 8,904 -- 8,904
Accrued liabilities........................ 11,113 -- 11,113
Current portion of long-term debt.......... 815 -- 815
-------- -------- --------
Total current liabilities.............. 25,615 (450) 25,165
Long-term debt............................. 11,185 (9,900) 1,285
-------- -------- --------
Total liabilities...................... 36,800 (10,350) 26,450
Mandatorily redeemable preferred stock..... 70,414 (70,414) --
Mandatorily redeemable preferred stock of
subsidiary................................ 9,839 38,100 47,939
Stockholders' equity
Class A Convertible Preferred Stock...... 2 (2) --
Common stock............................. 163 481 644
Additional paid-in capital............... 114,859 184,301 299,160
Accumulated deficit...................... (84,142) -- (84,142)
Treasury stock at cost................... (888) -- (888)
Note receivable from stockholder......... (900) -- (900)
Unearned compensation.................... (2,449) -- (2,449)
-------- -------- --------
Total stockholders' equity............. 26,645 184,780 211,425
-------- -------- --------
Total liabilities, mandatorily
redeemable preferred stock and
stockholders' equity.................. $143,698 $142,116 $285,814
======== ======== ========
</TABLE>
28
<PAGE>
Notes to Pro Forma Condensed Consolidated Financial Information
The following adjustments were applied to iXL's Consolidated Financial
Statements and the financial data of the companies acquired by iXL since
January 1, 1998 to arrive at the unaudited Pro Forma Consolidated Financial
Information.
(1) Potential common shares consist of Class A, Class B, and Class C
Convertible Preferred Stock using the as-converted method, and stock
options and warrants using the treasury stock method and contingently
issuable shares held in escrow, which are excluded from the computation as
their effect is antidilutive.
(2) During 1998, iXL acquired 24 companies and accounted for them using the
purchase method. The companies acquired and purchase price, including the
shares of common stock and related warrants and options issued, are
presented in the table below individually for those acquisitions with a
purchase price greater than $2.0 million and in the aggregate for those
with a purchase price of less than $2.0 million. The per share fair value
of common stock for each acquisition was determined based upon independent
appraisals obtained by iXL.
<TABLE>
<CAPTION>
Fair Value
Per Share of Net Excess of
Fair Value Shares of Cash Used for Tangible Cost Over
of iXL Common Warrants/ Acquisitions, Total Assets/ Fair Value of
Common Stock Options Net of Cash Purchase (Liabilities) Assembled Net Assets
Business Acquired Stock Issued Issued Acquired Price Acquired Workforce Acquired
----------------- ---------- --------- --------- ------------- -------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Digital Planet, Inc. ... $5.50 259,584 -- $ 1,962 $ 3,550 $ (39) $ 1,012 $ 2,577
Micro Interactive,
Inc. .................. 5.50 740,000 19,500 1,718 5,809 281 999 4,529
CommerceWAVE, Inc. ..... 5.82 877,898 64,434 117 5,459 (1,037) 662 5,134
Image Communications,
Inc. .................. 5.82 378,999 125,054 753 3,324 381 1,213 1,730
Spinners Incorporated
....................... 5.82 674,132 66,495 1,383 5,543 499 1,129 3,915
Tekna, Inc. ............ 4.50 712,622 125,757 611 4,758 527 820 3,411
Larry Miller
Productions, Inc. .... 4.50 113,823 248,135 1,812 3,490 (143) 963 2,670
NetResponse ........... 4.50 701,375 73,625 1,719 5,307 1,312 1,168 2,827
Ionix Development
Corp. ................. 4.50 358,551 -- 1,059 3,013 231 778 2,004
Pequot Systems, Inc. ... 4.50 378,066 -- 792 2,501 154 357 1,990
TwoWay Communications
LLC ................... 4.50 269,421 -- 1,246 2,469 335 713 1,421
Other Acquisitions...... -- 2,295,530 57,215 3,430 14,188 795 6,075 7,318
--------- ------- ------- ------- ------- ------- -------
Total.................. 7,760,001 780,215 $16,602 $59,411 $ 3,296 $15,889 $39,526
========= ======= ======= ======= ======= ======= =======
</TABLE>
29
<PAGE>
(3) For those companies acquired during 1998 that had a purchase price of
greater than $2.0 million, the following table presents the income
statements for the period January 1, 1998 through the date of acquisition.
Acquisitions with a purchase price less than $2.0 million are aggregated in
the Other Acquisitions column.
<TABLE>
<CAPTION>
Micro Image Larry
Inter- Commun- Spinners Miller
Digital active, Commerce- ications, Incorp- Tekna Product-
Planet Inc. WAVE Inc. Inc. orated Inc. ions, Inc.
------- ------- --------- --------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.............. $1,262 $ 956 $ 563 $ 847 $1,369 $1,990 $2,040
Cost of revenues...... 748 536 458 601 871 1,058 2,114
------ ----- ----- ----- ------ ------ -------
Gross profit.......... 514 420 105 246 498 932 (74)
Sales and marketing
expenses............. 168 38 159 61 20 271 314
General and
administrative
expenses............. 397 702 457 564 405 983 1,550
Research and
development
expenses............. -- -- 5 -- -- -- --
Depreciation.......... 30 75 34 65 37 80 47
Amortization.......... -- -- -- -- -- -- --
------ ----- ----- ----- ------ ------ -------
Loss from operations.. (81) (395) (550) (444) 36 (402) (1,985)
Other (expense),
income............... -- 1 -- 50 -- (179) 2
Interest income....... -- 6 4 -- -- 5 6
Interest expense...... (35) (17) (26) (37) (6) (8) (36)
------ ----- ----- ----- ------ ------ -------
Loss before income
taxes................ (116) (405) (572) (431) 30 (584) (2,013)
Income tax expense.... -- -- (1) -- -- -- --
------ ----- ----- ----- ------ ------ -------
Net loss.............. $(116) $(405) $(573) $(431) $ 30 $ (584) $(2,013)
====== ===== ===== ===== ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
Two Way Total for all
Pequot Net- Commun- Ionix companies
Systems, Response, ications, Development Other acquired in
Inc. L.L.C. L.L.C. Corporation Acquisitions 1998
-------- --------- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues.............. $1,354 $3,293 $1,400 $1,484 $5,835 $22,393
Cost of revenues...... 1,100 1,560 718 1,007 3,550 14,321
------ ------ ------ ------ ------ -------
Gross profit.......... 254 1,733 682 477 2,285 8,072
Sales and marketing
expenses............. 26 4 -- 2 288 1,351
General and
administrative
expenses............. 549 1,540 667 267 1,404 9,485
Research and
development
expenses............. -- -- -- -- -- 5
Depreciation.......... 19 96 8 10 177 678
Amortization.......... -- -- -- -- -- --
------ ------ ------ ------ ------ -------
Loss from operations.. (340) 93 7 198 416 (3,447)
Other (expense),
income............... -- (2) -- 1 17 (110)
Interest income....... 1 -- -- 5 -- 27
Interest expense...... -- (98) (34) (6) (29) (332)
------ ------ ------ ------ ------ -------
Loss before income
taxes................ (339) (7) (27) 198 404 (3,862)
Income tax expense.... (6) -- -- -- (1) (8)
------ ------ ------ ------ ------ -------
Net loss.............. $ (345) $ (7) $ (27) $ 198 $ 403 $(3,870)
====== ====== ====== ====== ====== =======
</TABLE>
(4) 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 companies by iXL since January 1, 1998. Such
amounts are amortized over the estimated useful life of each asset.
Identifiable intangible assets consist primarily of assembled workforce,
which is being amortized over a period of three years. Goodwill is being
amortized over five years. Some of the shares issuable at the acquisition
dates were placed in escrow. These shares will either be issued to the
previous owners of these companies or returned to iXL based upon whether or
not performance targets of the respective acquired company are achieved. As
of December 31, 1998, iXL has excluded 237,304 shares of common stock that
had not been earned
30
<PAGE>
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 companies
will be recognized as adjustments to goodwill and will be amortized over
the remaining period of the expected benefit. See Note 3 to iXL's
Consolidated Financial Statements as of and for the year ended December 31,
1998. 50,000 of these shares have since been earned and have been released
from escrow since December 31, 1998. 100,000 of these shares have reverted
back to iXL, since the performance target was not achieved. These shares
have not yet been released from escrow as the procedures for release of
these shares have not been completed. The remaining 137,304 shares are to
remain in escrow until October 1999, the deadline for meeting the relevant
performance target.
(5) To reflect the following adjustments to interest expense:
. In connection with the acquisition of 14 of the companies acquired
by iXL since January 1, 1998, iXL repaid approximately $7.3
million in debt. Interest expense was reduced by $371,000,
representing the reversal of the interest expense recorded by the
acquired companies as if the repayments had occurred on January 1,
1998. The amount was calculated based upon the actual interest
expense recorded by the acquired companies on the related debt
from January 1, 1998 to the respective acquisition date.
. In connection with the acquisition of 17 of the companies acquired
by iXL since January 1, 1998, iXL paid approximately $16.9 million
in cash which was used for a combination of repayment of acquired
company debt and as a component of the purchase price. Interest
expense was increased by $1.0 million, representing the interest
expense iXL would have recorded had the acquisition occurred on
January 1, 1998. This interest expense adjustment was calculated
by applying iXL's incremental borrowing rate to the amount of cash
paid for each acquisition from January 1, 1998 to the respective
acquisition date. The interest rate used was prime plus 2%, which
is the interest rate on iXL's current credit agreement which was
entered into during 1998.
. A decrease in interest expense of $43,000 due to the repayment of
$9.4 million of revolving debt from the proceeds of the issuance
of 22,825 shares of Class A Convertible Preferred Stock in January
1999. This debt was outstanding for a period of 17 days in 1998
(from December 14, 1998 through December 31, 1998). The interest
expense adjustment was calculated based on the actual interest
expense incurred by iXL on the revolving debt during the period
noted.
. A decrease in interest expense of $450,000 due to the repayment of
$9.9 million of debt with the proceeds from iXL's initial public
offering. This debt was outstanding for 153 days during the year
ended December 31, 1998. This adjustment was calculated based upon
the actual interest expense incurred by iXL on this debt during
the period noted.
(6) To record accretion on the CFN Series B Convertible Preferred Stock as if
it were outstanding for the full year. The difference between the carrying
value of $38.1 million and the redemption value of $50.0 million will be
accreted on a straight-line basis up through the mandatory redemption date
of December 31, 2005.
(7) Reflects:
(a) the sale by iXL of 6,900,000 shares of common stock in iXL's
initial public offering at the initial public offering price of
$12.00 per share after deducting the underwriting discounts and
commissions and offering expenses payable by iXL;
(b) the sale and issuance to General Electric upon the closing of
iXL's initial public offering of an aggregate of 2,000,000 shares
of common stock at the initial public offering price of $12.00
per share;
(c) the exercise of warrants to purchase 1,246,000 shares of common
stock for cash consideration of $4.58 per share upon the closing
of iXL's initial public offering;
31
<PAGE>
(d) the exercise of warrants to purchase 240,006 shares of common
stock which were mandatorily exercisable upon the closing of
iXL's initial public offering into 237,254 shares of common
stock; warrants to purchase 205,306 shares of common stock with
a weighted average exercise price of $2.12 per share were
exercised on a cash basis for aggregate cash consideration of
$434,936, and warrants to purchase 34,700 shares of common stock
with an exercise price of $0.9514 per share were exercised on a
cashless basis into 31,948 shares of common stock based on the
initial public offering price of $12.00 per share; the warrants
exercised for cash had the following exercise prices: 9,106 at
$0.0000439 per share, 150,000 at $2.50 per share, and 46,200 at
$1.2973 per share;
(e) the repayment of $9.9 million of debt upon the closing of iXL's
initial public offering; and
(f) the reclassification of Class A, Class B, and Class C
Convertible Preferred Stock, Class D Nonvoting Preferred Stock
and Class A and Class B Common Stock into common stock and the
related reduction in the dividends and accretion on mandatorily
redeemable preferred stock.
(g) (1) the sale and issuance by CFN to General Electric of
16,190,475 shares of CFN's Series B Convertible Preferred
Stock for a purchase price of approximately $50 million, net
of issuance costs of $700,000. The net proceeds have been
reflected as an adjustment to cash. These proceeds have been
recorded as mandatorily redeemable preferred stock of
subsidiary and additional paid-in capital; and
(2) the issuance to GE Capital Equity Investments, Inc. of
warrants to purchase 1,500,000 shares of iXL common stock in
consideration for General Electric implementing a mutually
acceptable marketing campaign to advertise its relationships
with iXL and CFN, and entering into an agreement to use
reasonable efforts to provide access to CFN's platform to
employees of GE Capital Equity Investments, Inc. This
issuance occurred contemporaneously with an investment by
General Electric in CFN. These warrants were 100% vested as
of the date of grant and are exercisable one year from the
grant date.
The fair value of these warrants of $12.6 million has been
calculated using the Black-Scholes option pricing model. The
assumptions utilized in determining this fair value are
as follows: life of warrant = five years; expected volatility =
85%; dividend yield = 0%; risk-free rate = 5%; fair market
value of underlying stock on date of grant = $12.00 (based on
the initial public offering price); exercise price = $12.00.
The fair value of these warrants has been allocated as follows:
(i) $200,000 of the value of the warrants has been allocated
to the agreement by GE Capital Equity Investments, Inc. to
provide access to CFN's platform to its employees. Such
amount has been reflected in the pro forma adjustments in
prepaid expenses and other assets and will be expensed
when GE Capital Equity Investments, Inc. performs its
duties under the agreement.
(ii) $1.2 million of the value of the warrants has been
allocated to the agreement by General Electric to provide
marketing services to iXL and CFN. Such amount has been
reflected in the pro forma adjustments in prepaid
expenses and other assets and will be expensed when
General Electric performs the marketing services
(primarily placement of advertising) under the agreement.
(iii) The remaining $11.2 million of value of the warrants has
been allocated to and recorded as a reduction of
mandatorily redeemable preferred stock of subsidiary and
an increase in additional paid-in capital. This amount
will be accreted over the redemption period to increase
the carrying value of the CFN Series B Convertible
Preferred Stock to its redemption value of $50 million.
This accretion will impact net loss available to common
stockholders. An independent valuation of CFN obtained
by iXL for the purpose of allocating the value of the
warrants supports the allocation of this portion of the
warrant value to the investment in CFN.
32
<PAGE>
As a result of the above transactions, the following adjustments were
made in the pro forma condensed consolidated balance sheet. The column headings
on the table below correspond to the paragraphs above.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g) Total
------- ------- ------ ---- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents
gross proceeds......... $82,800 $24,000 $5,707 $435 $(9,900) $ -- $50,000 $153,042
offering expenses, net
of amounts paid....... (8,628) (700) -- -- -- -- (700) (10,028)
------- ------- ------ ---- ------- -------- ------- --------
net adjustment......... $74,172 $23,300 $5,707 $435 $(9,900) $ -- $49,300 $143,014
Prepaid expenses and
other assets.......... $ 1,400
Other non-current
assets................. $(2,298) $ -- $ -- $-- $ -- $ -- -- $ (2,298)
Accounts payable........ $ (450) $ -- $ -- $-- $ -- $ -- -- $ (450)
Long-term debt.......... $ -- $ -- $ -- $-- $(9,900) $ -- -- $ (9,900)
Mandatorily redeemable
preferred stock
Class B Convertible
Preferred Stock....... -- -- -- -- -- $(40,602) -- $(40,602)
Class C Convertible
Preferred Stock....... -- -- -- -- -- (3,795) -- (3,795)
Class D Nonvoting
Preferred Stock....... -- -- -- -- -- (26,017) -- (26,017)
------- ------- ------ ---- ------- -------- ------- --------
net adjustment......... $ -- $ -- $ -- $-- $ -- $(70,414) $ -- $(70,414)
Mandatorily redeemable
preferred stock of
subsidiary............. $ -- $ -- $ -- $-- $ -- $ -- $38,100 $ 38,100
Class A Convertible
Preferred Stock........ -- -- -- -- -- (2) -- (2)
Common stock
the initial public
offering.............. $ 69 -- -- -- -- -- -- $ 69
General Electric
private placement..... -- $ 20 -- -- -- -- -- $ 20
warrants exercised..... -- -- $ 13 $ 2 -- -- -- $ 15
Class A Convertible
Preferred Stock....... -- -- -- -- -- $ 200 -- $ 200
Class B Convertible
Preferred Stock....... -- -- -- -- -- 98 -- 98
Class C Convertible
Preferred Stock....... -- -- -- -- -- 9 -- 9
Class D Nonvoting
Preferred Stock....... -- -- -- -- -- 70 -- 70
------- ------- ------ ---- ------- -------- ------- --------
net adjustment......... $ 69 $ 20 $ 13 $ 2 $ -- $ 377 $ -- $ 481
Additional paid-in
capital
the initial public
offering.............. $72,255 -- -- -- -- -- -- $ 72,255
General Electric
private placement..... -- $23,280 -- -- -- -- -- 23,280
General Electric
warrant issuance...... 12,600
warrants exercised..... -- -- $5,694 $433 -- -- -- 6,127
Class A Convertible
Preferred Stock....... -- -- -- -- -- (198) -- (198)
Class B Convertible
Preferred Stock....... -- -- -- -- -- 40,504 -- 40,504
Class C Convertible
Preferred Stock....... -- -- -- -- -- 3,786 -- 3,786
Class D Nonvoting
Preferred Stock....... -- -- -- -- -- 25,947 -- 25,947
------- ------- ------ ---- ------- -------- ------- --------
net adjustment......... $72,255 $23,280 $5,694 $433 $ -- $ 70,039 $12,600 $184,301
</TABLE>
(8) To reflect the following adjustments to interest expense:
. A decrease of $50,000 due to the repayment of $9.4 million of revolving
debt. This amount of debt was outstanding for a period of 19 days in
1999 (from January 1, 1999 through January 20, 1999). This adjustment
was calculated based upon the actual interest expense incurred by iXL on
the revolving debt during the period noted.
. A decrease in interest expense of $279,000 due to the repayment of $9.9
million of debt with the proceeds from iXL's initial public offering.
This debt was outstanding for 90 days in the three months ended March
31, 1999. This adjustment was calculated based upon the actual interest
expense incurred by iXL on this debt for the period noted.
(9) To record accretion on the CFN Series B Convertible Preferred Stock as if
it were outstanding for the full three-month period ended March 31, 1999.
33
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected Consolidated Financial Data with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and iXL's audited Consolidated Financial Statements included
elsewhere in this prospectus. iXL commenced operations effective May 1, 1996.
All of iXL's acquisitions have been accounted for using the purchase method,
and accordingly, the statement of operations data of iXL 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
iXL's audited Consolidated Financial Statements, which appear elsewhere in this
prospectus. The consolidated statement of operations data for the three months
ended March 31, 1998 and 1999 and the consolidated balance sheet data at
March 31, 1999 are derived from and are qualified by reference to, iXL's
unaudited Consolidated Financial Statements, which appear elsewhere in this
prospectus and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly
the financial data for such periods. The results of operations for the three
months ended March 31, 1999 are not necessarily indicative of the results to be
expected for the full year or for any future period.
<TABLE>
<CAPTION>
Three Months
Eight Months Years Ended Ended
Ended December 31, March 31,
December 31, ------------------ -----------------
1996 1997 1998 1998 1999
------------ -------- -------- ------- --------
Consolidated Statement of
Operations Data: (in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues................... $ 5,379 $ 18,986 $ 64,767 $ 6,864 $ 33,012
Cost of revenues........... 3,577 11,343 44,242 4,899 19,583
------- -------- -------- ------- --------
Gross profit............. 1,802 7,643 20,525 1,965 13,429
Sales and marketing
expenses.................. 812 3,903 17,325 2,036 8,150
General and administrative
expenses.................. 1,247 9,114 30,163 2,956 15,725
Research and development
expenses.................. -- 4,820 4,408 907 1,058
Depreciation............... 372 1,408 5,217 699 2,284
Amortization............... 928 5,191 10,590 1,182 4,351
------- -------- -------- ------- --------
Loss from operations..... (1,557) (16,793) (47,178) (5,815) (18,139)
Other income (expense),
net....................... 48 116 (28) 36 69
Loss on equity investment.. (249) (1,443) (1,640) (395) (65)
Interest income............ 32 136 750 264 216
Interest expense........... (30) (238) (770) (28) (336)
------- -------- -------- ------- --------
Loss before income
taxes................... (1,756) (18,222) (48,866) (5,938) (18,255)
Income tax benefit......... 302 2,782 -- -- --
------- -------- -------- ------- --------
Net loss................. (1,454) (15,440) (48,866) (5,938) (18,255)
Dividends and accretion on
mandatorily redeemable
preferred stock........... -- -- (9,099) (725) (5,293)
------- -------- -------- ------- --------
Net loss available to
common stockholders..... $(1,454) $(15,440) $(57,965) $(6,663) $(23,548)
======= ======== ======== ======= ========
Basic and diluted net loss
per common share.......... $ (0.37) $ (2.36) $ (4.92) $ (0.78) $ (1.46)
======= ======== ======== ======= ========
Weighted average common
shares outstanding........ 3,972 6,540 11,777 8,592 16,082
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of
------------------------- March 31,
1996 1997 1998 1999
------- -------- -------- ---------
Consolidated Balance Sheet Data: (in thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents................. $ 409 $ 23,038 $ 19,259 $ 13,880
Working capital........................... 217 23,879 27,119 24,715
Total assets.............................. 16,472 57,612 142,951 143,698
Debt, including current portion........... 691 1,273 21,420 12,000
Mandatorily redeemable preferred stock.... -- 29,930 65,679 70,414
Mandatorily redeemable preferred stock of
subsidiary............................... -- -- 9,839 9,839
Stockholders' equity...................... 12,989 21,950 25,560 26,645
</TABLE>
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion of the financial condition and
results of operations of iXL with "Selected Consolidated Financial Data," "Pro
Forma Consolidated Financial Information" and iXL's Consolidated Financial
Statements, including the Notes included elsewhere in this prospectus.
Overview
iXL 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. iXL 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.
iXL was founded in March 1996, and since that time has acquired a total
of 34 companies. All of iXL's acquisitions have been accounted for using the
purchase method. Therefore, the historical financial data include the results
of operations of companies acquired from their respective acquisition dates.
iXL has incurred substantial losses since its inception and anticipates
continuing to incur substantial losses for the foreseeable future. As of March
31, 1999, iXL had an accumulated deficit of approximately $84 million. Although
iXL has experienced revenue growth, this growth may not be sustainable or
indicative of future results of operations.
iXL's customers generally retain iXL on a project-by-project basis. iXL
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. iXL'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. iXL 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. We
believe that the standardization of pricing throughout our network of offices
will decrease project pricing risk. iXL attempts to price larger, fixed-price
contracts on a three-phase basis--strategic review, design and implementation.
Each phase is priced separately, immediately prior to its commencement. Less
than a third of iXL's revenues are currently derived from contracts priced on a
three-phase basis. See "Risk Factors--Risks Related to iXL's Business--Our
fixed-price contracts involve financial risk."
Through both acquisitions and its directed marketing efforts, iXL has
established a diversified base of clients in a wide range of industries,
including the industries targeted by iXL's marketing efforts.
iXL's revenues are comprised of fees from Internet strategy consulting,
Internet-based business solutions and iXL Solution Sets. iXL's revenue
composition has changed substantially from inception, and iXL expects further
change as its business develops. Historically, a substantial majority of iXL's
revenues have been derived from traditional website development and the
implementation of iXL's Solution Sets. To succeed, iXL must leverage its
existing relationships and establish new relationships in order to
substantially increase the revenues derived from more comprehensive strategic
Internet services.
35
<PAGE>
We have recently entered into multi-year services agreements with General
Electric and Delta Air Lines under which we have agreed to provide strategic
Internet services. These agreements guarantee minimum payments to iXL for
services provided by iXL. In connection with these agreements, we have issued
warrants to General Electric and Delta Air Lines which will result in non-cash
charges that will reduce our reported revenue. For Delta Air Lines, this charge
will be approximately $1.2 million, reducing the $10 million of guaranteed
revenue from Delta in 1999 and early 2000 to $8.8 million, and for General
Electric this charge will be approximately $4.8 million, reducing the $20
million of guaranteed revenue from General Electric in 1999 and early 2000 to
$15.2 million.
iXL'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, 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. iXL's expenses also include non-cash charges
related to option grants and warrant issuances.
In connection with (1) the reasonable efforts of GE Capital Equity
Investments, Inc. to provide the CFN platform to its employees and (2) the
marketing agreement among iXL and General Electric, iXL issued warrants to
purchase 1,500,000 shares of common stock to General Electric. iXL believes the
value of these marketing services to be $1.2 million and accordingly this
marketing campaign is expected to result in $1.2 million of marketing expenses
to be recorded in the 12 month period subsequent to the date of iXL's initial
public offering. However, if the value ultimately ascribed to the marketing
campaign exceeds this amount, the value allocated to the marketing agreement
would be increased appropriately up to a maximum of the full value of the
warrants. Such an increase would result in a corresponding increase in
mandatorily redeemable preferred stock of subsidiary and prepaid expenses and
other assets, as well as a decrease in the accretion of the mandatorily
redeemable preferred stock of subsidiary over a seven-year period until
redemption. Net loss available to common stockholders and stockholders' equity
will also be impacted by non-cash charges related to this warrant issuance. For
more information on the accounting treatment of these warrants and the
marketing campaign, see note 10 to the Pro Forma Condensed Consolidated
Financial Information.
iXL'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 iXL is unsure that it will be successful in
attracting, training and retaining such personnel. Historically iXL 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 technology infrastructure, to add additional participating
companies and employees to the platform and to establish access to the CFN
platform for participating companies' employees. These expenditures must be
incurred in advance of the recognition of revenue. None of these expenses is
incurred under long-term vendor contracts. As a result, these expenses are
expensed as incurred, except for fixed asset purchases which are depreciated
over their expected useful lives. 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, iXL may not be able to achieve or
sustain profitability. CFN incurred an operating loss of $13.5 million for the
year ended December 31, 1998 and $4.0 million for the three months ended March
31, 1999. See "Risk Factors--Risks Related to Our CFN Subsidiary--CFN's
business model is new and unproven" and "--CFN must expend significant
resources to grow its infrastructure."
36
<PAGE>
iXL incurred non-cash stock compensation expense related to its option
grants for the year ended December 31, 1998, totaling $1.6 million and for the
three months ended March 31, 1999, totaling $1.5 million. iXL expects to
recognize approximately $2.1 million in 1999, $850,000 in 2000, $600,000 in
2001 and $330,000 in 2002 in stock compensation expense relating to the grant
of options in 1998 and 1999.
Acquisition Program
iXL has acquired a total of 34 businesses since its inception and intends
to continue acquiring similar businesses. iXL 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 iXL for prior acquisitions has been in the form of common
stock. iXL anticipates that common stock and options to acquire common stock
will continue to constitute most of the consideration used to make future
acquisitions. iXL's acquisition program will result in additional ownership
dilution to investors participating in this offering.
All of iXL's acquisitions have been accounted for using the purchase
method. The results of operations of the acquired entities are consolidated
with those of iXL 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 is primarily five years. Identifiable
intangible assets consist primarily of assembled workforce and are being
amortized over a period of three years. For the year ended December 31, 1998,
amortization expense was $10.6 million. iXL expects additional acquisition-
related amortization expense as a result of its acquisition program.
We believe our acquisitions have contributed to our growth by rapidly
expanding our employee base, geographic coverage, client base, industry
expertise and technical skills. Our acquisitions with a purchase price
exceeding $5 million are as follows:
In May 1997, we acquired BoxTop Interactive, Inc., a Los Angeles creative
design firm, for a purchase price of $10 million and the assumption of $1.5
million of debt, which was subsequently repaid. The acquisition of BoxTop
provided media and entertainment industry expertise and geographic presence in
California, and expanded our workforce by approximately 60 skilled employees.
In May 1998, we acquired Micro Interactive, Inc., a New York interactive
media firm, for a purchase price of $5.8 million including the repayment of
$426,000 of debt. The acquisition of Micro Interactive provided interactive
multimedia technical skills and expanded our workforce by approximately 35
skilled employees.
In July 1998, we acquired CommerceWAVE, Inc., a San Diego e-commerce
firm, for a purchase price of $5.5 million and the assumption of $450,000 of
debt, which was subsequently repaid. The acquisition of CommerceWAVE provided
e-commerce strategy consulting expertise and engineering capabilities and
geographic presence in San Diego, and expanded our workforce by approximately
22 skilled employees.
In July 1998, we also acquired Spinners Incorporated, a Boston,
Massachusetts software engineering and creative design firm, for a purchase
price of $5.5 million. The acquisition provided software engineering and
creative design expertise, financial service industry knowledge and added to
iXL's client base. The acquisition also added 31 skilled employees.
37
<PAGE>
In September 1998, we acquired NetResponse L.L.C., an Arlington, Virginia
strategy consulting, software engineering and creative design firm, for a
purchase price of $5.3 million including the repayment of $1.8 million of debt.
The acquisition provided strategy consulting expertise, software engineering
skills and 36 skilled employees, and added to iXL's client base.
iXL anticipates that a material portion of its future growth will be
accomplished by acquiring existing businesses. Most of iXL's growth in
personnel has been through acquisitions. The success of this plan depends upon,
among other things, iXL'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. iXL cannot guarantee 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--Risks Related
to iXL's Business--We may be unable to continue to grow at our historical
growth rates or to effectively manage our growth" and "--Our continued growth
is dependent on the successful completion of acquisitions."
Quarterly Historical Results of Operations
The following table presents the unaudited historical quarterly results
of operations. We believe that our historical financial statements are not
necessarily indicative of future results of operations. You should read these
quarterly historical results of operations with the historical audited
financial statements of iXL and certain of the companies acquired by iXL since
January 1, 1998 and related Notes.
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------
March 31, June 30, September 30, December 31, March 31,
1998 1998 1998 1998 1999
--------- -------- ------------- ------------ ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 6,864 $ 10,520 $ 18,123 $ 29,260 $33,012
Cost of revenues........ 4,899 8,086 12,628 18,629 19,583
------- -------- -------- -------- --------
Gross profit............ 1,965 2,434 5,495 10,631 13,429
Sales and marketing
expenses............... 2,036 2,887 4,573 7,829 8,150
General and administra-
tive expenses.......... 2,956 5,862 7,021 14,324 15,725
Research and development
expenses............... 907 1,322 1,244 935 1,058
Depreciation............ 699 955 1,261 2,302 2,284
Amortization............ 1,182 1,709 3,101 4,598 4,351
------- -------- -------- -------- --------
Loss from operations.... $(5,815) $(10,301) $(11,705) $(19,357) $(18,139)
======= ======== ======== ======== ========
</TABLE>
Comparison of Three Months Ended March 31, 1999 and March 31, 1998
Revenues. Revenues increased $26.1 million, or 381% to $33.0 million for
the quarter ended March 31, 1999 from $6.9 million for the quarter ended March
31, 1998. The majority of the increase was attributable to our acquisition
program which expanded our headcount and client base. The increase was also
attributable to an increase in the size of client engagements and the
development and growth of industry practice groups.
Cost of revenues. Cost of revenues increased $14.7 million, or 300% to
$19.6 million for the quarter ended March 31, 1999 from $4.9 million for the
quarter ended March 31, 1998. As a percentage of revenues, cost of revenues
decreased from 71% for the quarter ended March 31, 1998 to 59% for the quarter
ended March 31, 1999. As a percentage of revenue, the decrease in cost of sales
was primarily attributable to the growth of our industry practice groups and
strategy consulting practice. The dollar increase was primarily attributable to
the increase in headcount due to the integration of the companies acquired by
iXL since
38
<PAGE>
January 1, 1998, as well as to employee training and the development of the CFN
platform. Also included in this increase was $78,000 of non-cash expense
related to stock compensation charges.
Sales and marketing expenses. Sales and marketing expenses increased $6.1
million, or 300% to $8.1 million for the quarter ended March 31, 1999 from $2.0
million for the quarter ended March 31, 1998. As a percentage of revenues,
sales and marketing expenses decreased from 30% for the quarter ended March 31,
1998 to 25% for the quarter ended March 31, 1999. The dollar increase was
primarily attributable to the increase in headcount due to the integration of
the companies acquired by iXL since January 1, 1998, as well as the development
of iXL's sales and marketing infrastructure and staff. Also included in this
increase was $418,000 of non-cash expense related to stock compensation
charges.
General and administrative expenses. General and administrative expenses
increased $12.7 million, or 432% to $15.7 million for the quarter ended March
31, 1999 from $3.0 million for the quarter ended March 31, 1998. As a
percentage of revenues, general and administrative expenses increased from 43%
for the quarter ended March 31, 1998 to 48% for the quarter ended March 31,
1999. The increase in dollar and percentage terms was primarily attributable to
the increase in headcount due to the integration of the companies acquired by
iXL since January 1, 1998, as well as the expansion of management
infrastructure to support the growth in iXL's operations, the general and
administrative costs of the companies acquired by iXL since January 1, 1998 and
associated integration costs. Additionally, this increase included a donation
of $1.0 million to fund the iXL Center for Electronic Commerce in the DuPree
College of Management at Georgia Tech and $978,000 of non-cash expense related
to stock compensation charges. iXL expects its general and administrative
expenses to increase as it continues to grow.
Research and development expenses. Research and development expenses
increased $151,000, or 17% to $1.1 million for the quarter ended March 31, 1999
from $907,000 for the quarter ended March 31, 1998. As a percentage of
revenues, research and development expenses decreased from 13% for the quarter
ended March 31, 1998 to 3% for the quarter ended March 31, 1999.
Depreciation. Depreciation expenses increased $1.6 million to $2.3
million for the quarter ended March 31, 1999 from $700,000 for the quarter
ended March 31, 1998. The increase related to the depreciation of assets of the
companies acquired by iXL since January 1, 1998 and the investments in physical
infrastructure at these companies after acquisition.
Amortization. Amortization expense increased $3.2 million to $4.4 million
for the quarter ended March 31, 1999 from $1.2 million for the quarter ended
March 31, 1998. The increase was a result of the goodwill and assembled
workforce recorded in connection with the acquisitions which took place during
1998.
Comparison of Three Months Ended March 31, 1999 and December 31, 1998
Revenues. Revenues increased $3.7 million, or 13% to $33.0 million for
the quarter ended March 31, 1999 from $29.3 million for the quarter ended
December 31, 1998. This increase was primarily attributable to an increased
number of engagements for existing and new customers, as well as an increased
engagement size. The percentage increase was lower than in prior quarters
because revenues in the fourth quarter of 1998 were favorably impacted by
several large engagements during this period. Annualized revenue for our top
100 clients increased from 62% of total revenue in the quarter ended December
31, 1998 to 71% for the quarter ended March 31, 1999. iXL may not experience
comparable increases in the remainder of 1999.
Cost of revenues. Cost of revenues increased $1.0 million, or 5% to $19.6
million for the quarter ended March 31, 1999 from $18.6 million for the quarter
ended December 31, 1998. As a percentage of revenues, cost of revenues
decreased from 64% for the quarter ended December 31, 1998 to 59% for the
quarter ended March 31, 1999. The percentage decrease in the first quarter of
1999 to 59% was primarily attributable to iXL's emphasis on obtaining contracts
with higher gross margins. The first quarter of 1999
39
<PAGE>
included in cost of revenues $78,000 of non-cash stock option expense whereas
the fourth quarter of 1998 included $133,000 of non-cash stock option expense.
Sales and marketing expenses. Sales and marketing expenses increased by
$321,000, or 4% to $8.1 million for the quarter ended March 31, 1999 from $7.8
million for the quarter ended December 31, 1998. As a percentage of revenues,
sales and marketing expenses decreased from 27% for the quarter ended
December 31, 1998 to 25% for the quarter ended March 31, 1999. This dollar
increase was primarily attributable to an increase in our sales and marketing
headcount by over 25 professionals during the three months ended March 31,
1999. The first quarter of 1999 included in sales and marketing expenses
$418,000 of non-cash stock option expense and the fourth quarter of 1998
included $115,000 of non-cash stock option expense. Additionally, the fourth
quarter of 1998 included in sales and marketing expenses $813,000 of non-cash
expense related to warrant issuances.
General and administrative expenses. General and administrative expenses
increased $1.4 million, or 10% to $15.7 million for the quarter ended March 31,
1999 from $14.3 million for the quarter ended December 31, 1998. As a
percentage of revenues, general and administrative expenses decreased from 49%
for the quarter ended December 31, 1998 to 48% for the quarter ended March 31,
1999. The dollar increase was primarily attributable to a donation of $1.0
million to fund the iXL Center for Electronic Commerce in the DuPree College of
Management at Georgia Tech as well as the expansion of management
infrastructure to support the growth in iXL's operations, including the
development of CFN. We increased our general and administrative headcount by
over 30 professionals during the three months ended March 31, 1999. The first
quarter of 1999 included in general and administration expenses $978,000 of
non-cash stock option expense and the fourth quarter of 1998 included $1.4
million of non-cash stock option expense.
Research and development expenses. Research and development expenses
increased $123,000, or 13% to $1.1 million for the quarter ended March 31, 1999
from $935,000 for the quarter ended December 31, 1998. As a percentage of
revenues, research and development expenses remained constant for the quarters
ended March 31, 1999 and December 31, 1998, respectively.
Depreciation. Depreciation expenses decreased $18,000 in the quarter
ending March 31, 1999 from the previous quarter.
Amortization. Amortization expense decreased slightly to $4.4 million for
the quarter ended March 31, 1999 from $4.6 million for the quarter ended
December 31, 1998. The decrease was a result of the sale of certain intangible
assets.
Comparison of Three Months Ended December 31, 1998 and September 30, 1998
Revenues. Revenues increased $11.2 million, or 61% to $29.3 million for
the quarter ended December 31, 1998 from $18.1 million for the quarter ended
September 30, 1998. The majority of the increase was attributable to iXL's
acquisition program which expanded our headcount and client base. The increase
was also attributable to an increase in the size of client engagements and the
development and growth of industry practice groups.
Cost of revenues. Cost of revenues increased $6.0 million, or 48% to
$18.6 million for the quarter ended December 31, 1998 from $12.6 million for
the quarter ended September 30, 1998. As a percentage of revenues, cost of
revenues decreased from 70% for the quarter ended September 30, 1998 to 64% for
the quarter ended December 31, 1998. The dollar increase was primarily
attributable to the integration of the companies acquired by iXL since January
1, 1998, as well as to employee training and the increased operating expenses
of CFN.
Sales and marketing expenses. Sales and marketing expenses increased $3.2
million, or 71% to $7.8 million for the quarter ended December 31, 1998 from
$4.6 million for the quarter ended September 30, 1998.
40
<PAGE>
As a percentage of revenues, sales and marketing expenses increased from 25%
for the quarter ended September 30, 1998 to 27% for the quarter ended December
31, 1998. The increase in dollar and percentage terms was primarily
attributable to the development of iXL's sales and marketing infrastructure and
staff. We increased our sales and marketing headcount by approximately 3
professionals during the three months ended December 31, 1998. Also included in
this increase was $813,000 of non-cash expense related to warrant issuances.
General and administrative expenses. General and administrative expenses
increased $7.3 million, or 104% to $14.3 million for the quarter ended December
31, 1998 from $7.0 million for the quarter ended September 30, 1998. As a
percentage of revenues, general and administrative expenses increased from 39%
for the quarter ended September 30, 1998 to 49% for the quarter ended December
31, 1998. The increase in dollar and percentage terms was primarily
attributable to the expansion of management infrastructure to support the
growth in iXL's operations, the general and administrative costs of the
companies acquired by iXL since January 1, 1998 and associated integration
costs. Also included in this increase was $1.4 million of non-cash stock option
expense.
Research and development expenses. Research and development expenses
decreased $309,000, or 25% to $935,000 for the quarter ended December 31, 1998
from $1.2 million for the quarter ended September 30, 1998. As a percentage of
revenues, research and development expenses decreased from 7% for the quarter
ended September 30, 1998 to 3% for the quarter ended December 31, 1998. The
decrease in dollar and percentage terms was primarily due to the completion of
the final phases of development of Solution Set products.
Depreciation. Depreciation expenses increased $1.0 million to $2.3
million for the quarter ended December 31, 1998 from $1.3 million for the
quarter ended September 30, 1998. The increase related to the depreciation of
assets of the companies acquired by iXL since January 1, 1998 and investments
in physical infrastructure at these companies after acquisition.
Amortization. Amortization expenses increased $1.5 million to $4.6
million for the quarter ended December 31, 1998 from $3.1 million for the
quarter ended September 30, 1998. The increase was a result of the goodwill and
assembled workforce recorded in connection with the 17 acquisitions which took
place during the third quarter of 1998.
Comparison of Three Months Ended September 30, 1998 and June 30, 1998
Revenues. Revenues increased $7.6 million, or 72% to $18.1 million for
the quarter ended September 30, 1998 from $10.5 million for the quarter ended
June 30, 1998. The majority of the increase was attributable to iXL's
acquisition program which expanded our headcount and client base. The increase
was also attributable to an increase in the size of client engagements.
Cost of revenues. Cost of revenues increased $4.5 million, or 56% to
$12.6 million for the quarter ended September 30, 1998 from $8.1 million for
the quarter ended June 30, 1998. As a percentage of revenues, cost of revenues
decreased from 77% for the quarter ended June 30, 1998 to 70% from the quarter
ended September 30, 1998. The dollar increase was primarily attributable to the
integration of the companies acquired by iXL since January 1, 1998, as well as
to the increased operating expenses of CFN.
Sales and marketing expenses. Sales and marketing expenses increased $1.7
million, or 58% to $4.6 million for the quarter ended September 30, 1998 from
$2.9 million for the quarter ended June 30, 1998. As a percentage of revenues,
sales and marketing expenses decreased from 27% for the quarter ended June 30,
1998 to 25% for the quarter ended September 30, 1998. The dollar increase was
primarily attributable to the development of iXL's sales and marketing
infrastructure and staff.
41
<PAGE>
General and administrative expenses. General and administrative expenses
increased $1.1 million, or 20% to $7.0 million for the quarter ended September
30, 1998 from $5.9 million for the quarter ended June 30, 1998. As a percentage
of revenues, general and administrative expenses decreased from 56% for the
quarter ended June 30, 1998 to 39% for the quarter ended September 30, 1998.
The dollar increase was primarily attributable to the expansion of management
infrastructure to support the growth in iXL's operations, the general and
administrative costs of the companies acquired by iXL since January 1, 1998 and
associated integration costs.
Research and development expenses. Research and development expenses
decreased $78,000, or 6% to $1.2 million for the quarter ended September 30,
1998 from $1.3 million for the quarter ended June 30, 1998. As a percentage of
revenues, research and development expenses decreased from 13% for the quarter
ended June 30, 1998 to 7% for the quarter ended September 30, 1998.
Depreciation. Depreciation expenses increased $306,000 to $1.3 million
for the quarter ended September 30, 1998 from $955,000 for the quarter ended
June 30, 1998. The increase related to the depreciation of assets of the
companies acquired by iXL since January 1, 1998 and the investments in physical
infrastructure at these companies after acquisition.
Amortization. Amortization expense increased $1.4 million to $3.1 million
for the quarter ended September 30, 1998 from $1.7 million for the quarter
ended June 30, 1998. The increase was a result of the goodwill and assembled
workforce recorded in connection with the 17 acquisitions which took place
during the third quarter of 1998.
Comparison of Three Months Ended June 30, 1998 and March 31, 1998
Revenues. Revenues increased $3.6 million, or 53% to $10.5 million for
the quarter ended June 30, 1998 from $6.9 million for the quarter ended March
31, 1998. The majority of the increase was attributable to iXL's acquisition
program which expanded our headcount and client base. The increase was also
attributable to an increase in the size of client engagements.
Cost of revenues. Cost of revenues increased $3.2 million, or 65% to $8.1
million for the quarter ended June 30, 1998 from $4.9 million for the quarter
ended March 31, 1998. As a percentage of revenues, cost of revenues increased
from 71% for the quarter ended March 31, 1998 to 77% from the quarter ended
June 30, 1998. The increase in dollar and percentage terms was primarily
attributable to the integration of the companies acquired by iXL since January
1, 1998, as well as to the increased operating expenses of CFN.
Sales and marketing expenses. Sales and marketing expenses increased
$851,000, or 42% to $2.9 million for the quarter ended June 30, 1998 from $2.0
million for the quarter ended March 31, 1998. As a percentage of revenues,
sales and marketing expenses decreased from 30% for the quarter ended March 31,
1998 to 27% for the quarter ended June 30, 1998. The dollar increase was
primarily attributable to the development of iXL's sales and marketing
infrastructure and staff.
General and administrative expenses. General and administrative expenses
increased $2.9 million, or 98% to $5.9 million for the quarter ended June 30,
1998 from $3.0 million for the quarter ended March 31, 1998. As a percentage of
revenues, general and administrative expenses increased from 43% for the
quarter ended March 31, 1998 to 56% for the quarter ended June 30, 1998. The
increase in dollar and percentage terms was primarily attributable to the
expansion of management infrastructure to support the growth in iXL's
operations, the general and administrative costs of the companies acquired by
iXL since January 1, 1998 and associated integration costs. Approximately
$800,000 of the increase (representing 8% of second quarter of 1998 revenues)
related to the expansion of CFN's infrastructure.
42
<PAGE>
Research and development expenses. Research and development expenses
increased $415,000, or 46% to $1.3 million for the quarter ended June 30, 1998
from $907,000 for the quarter ended March 31, 1998. As a percentage of
revenues, research and development expenses remained constant at 13% for the
quarters ended March 31, 1998 and June 30, 1998. The dollar increase primarily
relates to the costs of developing Solution Sets and the CFN platform.
Depreciation. Depreciation expenses increased $256,000 to $955,000 for
the quarter ended June 30, 1998 from $699,000 for the quarter ended March 31,
1998. The increase related to the depreciation of assets of the companies
acquired by iXL since January 1, 1998 and the investments in physical
infrastructure at these companies after acquisition.
Amortization. Amortization expense increased $527,000 to $1.7 million for
the quarter ended June 30, 1998 from $1.2 million for the quarter ended March
31, 1998. The increase was a result of the goodwill and assembled workforce
recorded in connection with the four acquisitions which took place during the
second quarter of 1998.
Quarterly Pro Forma Results of Operations
The following table presents the unaudited pro forma quarterly results of
operations, which include adjustments to give effect to the acquisitions of
companies by iXL since January 1, 1998 as if they had occurred on January 1,
1998. Primarily because of iXL's large number of acquisitions in 1998, iXL has
included its quarterly results of operations on a pro forma basis to facilitate
the understanding of the effects of business acquisitions on iXL's operations.
Management believes that the pro forma quarterly results of operations may be
useful to investors in evaluating the financial performance of iXL. The pro
forma quarterly results of operations are not necessarily indicative of the
results of operations that would have been achieved had the transactions
occurred at the beginning of the periods presented and should not be construed
as being representative of future results of operations. These pro forma
amounts include the same adjustments that are reflected in the pro forma
consolidated statement of operations. You should read these pro forma quarterly
results of operations with the unaudited pro forma condensed consolidated
statement of operations and the historical audited financial statements of iXL
and some of the companies acquired by iXL and related notes included elsewhere
in this prospectus. See "Pro Forma Consolidated Financial Information."
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------
March 31, June 30, September 30, December 31, March 31,
1998 1998 1998 1998 1999
--------- -------- ------------- ------------ ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenues................ $15,437 $ 18,663 $ 23,800 $ 29,260 $ 33,012
Cost of revenues........ 10,116 13,251 16,567 18,629 19,583
------- -------- -------- -------- --------
Gross profit.......... 5,321 5,412 7,233 10,631 13,429
Sales and marketing ex-
penses................. 2,537 3,377 4,933 7,829 8,150
General and administra-
tive expenses.......... 6,147 8,835 10,342 14,324 15,725
Research and development
expenses............... 907 1,327 1,244 935 1,058
Depreciation............ 982 1,190 1,421 2,302 2,284
Amortization............ 4,332 4,330 4,408 4,598 4,351
------- -------- -------- -------- --------
Loss from operations.. $(9,584) $(13,647) $(15,115) $(19,357) $(18,139)
======= ======== ======== ======== ========
</TABLE>
Comparison of Three Months Ended March 31, 1999 and March 31, 1998
Revenues. Revenues increased $17.6 million, or 114% to $33.0 million for
the quarter ended March 31, 1999 from $15.4 million for the quarter ended March
31, 1998. This increase was primarily attributable to an increased number of
engagements for existing and new customers, as well as an increased
43
<PAGE>
engagement size. In particular, revenues in the first quarter of 1999 were
favorably impacted by several large engagements during this period. Annualized
revenue for our top 100 clients increased from 44% of total pro forma revenue
in the quarter ended March 31, 1998 to 71% for the quarter ended March 31,
1999.
Cost of revenues. Cost of revenues increased $9.5 million, or 94% to
$19.6 million for the quarter ended March 31, 1999 from $10.1 million for the
quarter ended March 31, 1998. As a percentage of revenues, cost of revenues
decreased from 66% for the quarter ended March 31, 1998 to 59% from the quarter
ended March 31, 1999. The first quarter of 1999 percentage decrease to 59% was
primarily attributable to iXL's emphasis on obtaining contracts with higher
gross margins. Also included in this increase in cost of revenues was $78,000
of non-cash stock option expense.
Sales and marketing expenses. Sales and marketing expenses increased $5.6
million, or 221% to $8.1 million for the quarter ended March 31, 1999 from $2.5
million for the quarter ended March 31, 1998. As a percentage of revenues,
sales and marketing expenses increased from 16% for the quarter ended March 31,
1998 to 25% for the quarter ended March 31, 1999. We increased our sales and
marketing headcount by over 25 professionals during the quarter ended March 31,
1999. Also included in this increase in sales and marketing expenses was
$418,000 of non-cash stock option expense.
General and administrative expenses. General and administrative expenses
increased $9.6 million, or 156% to $15.7 million for the quarter ended March
31, 1999 from $6.1 million for the quarter ended March 31, 1998. As a
percentage of revenues, general and administrative expenses increased from 40%
for the quarter ended March 31, 1998 to 48% for the quarter ended March 31,
1999. The increase in dollar and percentage terms was primarily attributable to
the expansion of management infrastructure to support the growth in iXL's
operations, including the development of CFN. We increased our general and
administrative headcount by over 30 professionals during the three months ended
March 31, 1999. Additionally, this increase included a donation of $1.0 million
to fund the iXL Center for Electronic Commerce in the DuPree College of
Management at Georgia Tech and $978,000 of non-cash expense related to stock
compensation charges. iXL expects its general and administrative expenses to
increase as it continues to grow.
Research and development expenses. Research and development expenses
increased $151,000, or 17% to $1.1 million for the quarter ended March 31, 1999
from $907,000 for the quarter ended March 31, 1998. As a percentage of
revenues, research and development expenses decreased from 6% for the quarter
ended March 31, 1998 to 3% for the quarter ended March 31, 1999.
Depreciation. Depreciation expenses increased $1.3 million to $2.3
million for the quarter ended March 31, 1999 from $982,000 for the quarter
ended March 31, 1998. The increase related to the depreciation of assets of the
companies acquired by iXL since January 1, 1998 and the investments in physical
infrastructure at these companies after acquisition.
Amortization. Amortization expense remained relatively constant for the
quarters ended March 31, 1999 and March 31, 1998.
Comparison of Three Months Ended March 31, 1999 and December 31, 1998
iXL did not complete any acquisitions in the fourth quarter of 1998 or
the first quarter of 1999. As a result, iXL's pro forma operating results do
not differ from its historical operating results during these time periods.
Please refer to "--Quarterly Historical Results of Operations--Comparison of
Three Months Ending March 31, 1999 and December 31, 1998" for a comparative
analysis of these quarters.
Comparison of Three Months Ended December 31, 1998 and September 30, 1998
Revenues. Revenues increased $5.5 million, or 23% to $29.3 million for
the quarter ended December 31, 1998 from $23.8 million for the quarter ended
September 30, 1998. This increase was primarily
44
<PAGE>
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. Annualized revenue for our top 100 clients increased from 55% of
total pro forma revenue in the quarter ended September 30, 1998 to 62% for the
quarter ended December 31, 1998. iXL may not experience comparable increases in
the remainder of 1999.
Cost of revenues. Cost of revenues increased $2.0 million, or 12% to
$18.6 million for the quarter ended December 31, 1998 from $16.6 million for
the quarter ended September 30, 1998. As a percentage of revenues, costs of
revenues decreased from 70% for the quarter ended September 30, 1998 to 64% for
the quarter ended December 31, 1998. The percentage decrease to 64% was
primarily attributable to iXL's emphasis on obtaining contracts with higher
gross margins and the absence of any acquisitions in this period. The fourth
quarter of 1998 included in cost of revenues $133,000 of non-cash stock option
expense and the third quarter of 1998 included $532,000 of non-cash stock
option expense.
Sales and marketing expenses. Sales and marketing expenses increased $2.9
million, or 59% to $7.8 million for the quarter ended December 31, 1998 from
$4.9 million for the quarter ended September 30, 1998. As a percentage of
revenues, sales and marketing expenses increased from 21% for the quarter ended
September 30, 1998 to 27% for the quarter ended December 31, 1998. The increase
in dollar and percentage terms was primarily attributable to the development of
infrastructure and the creation and expansion of iXL's sales and product
management staffs. We increased our sales and marketing headcount by
approximately 3 professionals during the three months ended December 31, 1998.
Also included in this increase was $813,000 of non-cash expense related to
warrant issuances. Additionally, the fourth quarter of 1998 included in sales
and marketing expenses $115,000 of non-cash stock option expense and the third
quarter of 1998 included $133,000 of non-cash stock option expense. iXL expects
its sales and marketing expenses to increase as it continues to grow.
General and administrative expenses. General and administrative expenses
increased $4.0 million, or 39% to $14.3 million for the quarter ended December
31, 1998 from $10.3 million for the quarter ended September 30, 1998. As a
percentage of revenues, general and administrative expenses increased from 43%
for the quarter ended September 30, 1998 to 49% for the quarter ended December
31, 1998. The increase in dollar and percentage terms was primarily
attributable to the expansion of management infrastructure necessary to support
the growth in iXL's operations, including the development of CFN. We increased
our general and administrative headcount by over 18 professionals during the
quarter ended December 31, 1998. The fourth quarter of 1998 included in general
and administrative expenses $1.4 million of non-cash stock option expense and
the third quarter of 1998 included $835,000 of non-cash stock option expense.
Research and development expenses. Research and development expenses
decreased $309,000, or 25% to $935,000 for the quarter ended December 31, 1998
from $1.2 million for the quarter ended September 30, 1998. As a percentage of
revenues, research and development expenses decreased from 5% for the quarter
ended September 30, 1998 to 3% for the quarter ended December 31, 1998. The
decrease in dollar and percentage terms was primarily due to the completion of
the final phases of development of Solution Set products.
Depreciation. Depreciation expenses increased $881,000 to $2.3 million
for the quarter ended December 31, 1998 from $1.4 million for the quarter ended
September 30, 1998. The increase was primarily attributable to investments in
physical infrastructure at the acquired companies after acquisition.
Amortization. Amortization expenses increased $190,000 to $4.6 million
for the quarter ended December 31, 1998 from $4.4 million for the quarter ended
September 30, 1998. The increase was attributable to the goodwill and assembled
workforce recorded in connection with the twenty-four acquisitions which took
place during 1998. See "--Acquisition Program."
45
<PAGE>
Comparison of Three Months Ended September 30, 1998 and June 30, 1998
Revenues. Revenues increased $5.1 million, or 28% to $23.8 million for
the quarter ended September 30, 1998 from $18.7 million for the quarter ended
June 30, 1998. This increase was primarily attributable to an increased number
of engagements for existing and new customers, as well as an increased
engagement size. Annualized revenue for our top 100 clients remained relatively
constant for the quarter ended September 30, 1998 as compared to the quarter
ended June 30, 1998.
Cost of revenues. Cost of revenues increased $3.3 million, or 25% to
$16.6 million for the quarter ended September 30, 1998 from $13.3 million for
the quarter ended June 30, 1998. As a percentage of revenues, cost of revenues
decreased from 71% for the quarter ended June 30, 1998 to 70% from the quarter
ended September 30, 1998. The dollar increase was primarily attributable to the
related increase in revenue, and to a lesser extent, a non-cash charge for
stock compensation expense. The third quarter of 1998 included in cost of
revenues $532,000 of non-cash stock option expense and the second quarter of
1998 included $107,000 of non-cash stock option expense.
Sales and marketing expenses. Sales and marketing expenses increased $1.5
million, or 46% to $4.9 million for the quarter ended September 30, 1998 from
$3.4 million for the quarter ended June 30, 1998. As a percentage of revenues,
sales and marketing expenses increased from 18% for the quarter ended June 30,
1998 to 21% for the quarter ended September 30, 1998. The increase in dollar
and percentage terms was primarily attributable to the development of iXL's
sales and product management infrastructure and staff. The third quarter of
1998 included in sales and marketing expenses $133,000 of non-cash stock option
expense and the second quarter of 1998 included $97,000 of non-cash stock
option expense.
General and administrative expenses. General and administrative expenses
increased $1.5 million, or 17% to $10.3 million for the quarter ended September
30, 1998 from $8.8 million for the quarter ended June 30, 1998. As a percentage
of revenues, general and administrative expenses decreased from 47% for the
quarter ended June 30, 1998 to 43% for the quarter ended September 30, 1998.
The dollar increase was primarily attributable to the expansion of management
infrastructure to support the growth in iXL's operations, associated
integration costs and the development of CFN. The third quarter of 1998
included in general and administrative expenses $835,000 of non-cash stock
option expense and the second quarter of 1998 included $141,000 of non-cash
stock option expense.
Research and development expenses. Research and development expenses
decreased $83,000, or 6% to $1.2 million for the quarter ended September 30,
1998 from $1.3 million for the quarter ended June 30, 1998. As a percentage of
revenues, research and development expenses decreased from 7% for the quarter
ended June 30, 1998 to 5% for the quarter ended September 30, 1998.
Depreciation. Depreciation expenses increased $231,000 to $1.4 million
for the quarter ended September 30, 1998 from $1.2 million for the quarter
ended June 30, 1998. The increase was primarily attributable to the investments
in physical infrastructure at the acquired companies after acquisition.
Amortization. Amortization expense remained relatively constant for the
quarter ended September 30, 1998 as compared to the quarter ended June 30,
1998.
Comparison of Three Months Ended June 30, 1998 and March 31, 1998
Revenues. Revenues increased $3.3 million, or 21% to $18.7 million for
the quarter ended June 30, 1998 from $15.4 million for the quarter ended March
31, 1998. This increase was primarily attributable to an increased number of
engagements for existing and new customers, as well as an increased engagement
size. Annualized revenue for our top 100 clients increased to 57% of annualized
revenue for the quarter ended June 30, 1998 from 44% of annualized revenue for
the quarter ended March 31, 1998.
46
<PAGE>
Cost of revenues. Cost of revenues increased $3.2 million, or 31% to
$13.3 million for the quarter ended June 30, 1998 from $10.1 million for the
quarter ended March 31, 1998. As a percentage of revenues, cost of revenues
increased from 66% for the quarter ended March 31, 1998 to 71% from the quarter
ended June 30, 1998. The increase in dollar and percentage terms was primarily
attributable to the related increase in revenue and integration of the
companies acquired by iXL since January 1, 1998. The first and second quarters
included $476,000 and $726,000 for the increased operating expenses of CFN,
respectively. Additionally, the second quarter included $107,000 of non-cash
stock option expense.
Sales and marketing expenses. Sales and marketing expenses increased
$840,000, or 33% to $3.4 million for the quarter ended June 30, 1998 from $2.5
million for the quarter ended March 31, 1998. As a percentage of revenues,
sales and marketing expenses increased from 16% for the quarter ended March 31,
1998 to 18% for the quarter ended June 30, 1998. The increase in dollar and
percentage terms was primarily attributable to the development of iXL's sales
and product management infrastructure and staff. The second quarter of 1998
included $97,000 of non-cash stock option expense.
General and administrative expenses. General and administrative expenses
increased $2.7 million, or 44% to $8.8 million for the quarter ended June 30,
1998 from $6.1 million for the quarter ended March 31, 1998. As a percentage of
revenues, general and administrative expenses increased from 40% for the
quarter ended March 31, 1998 to 47% for the quarter ended June 30, 1998. The
increase in dollar and percentage terms was primarily attributable to the
expansion of management infrastructure to support the growth in iXL's
operations, associated integration costs and the development of CFN. The second
quarter of 1998 included $1.9 million and the first quarter of 1998 included
$1.9 million for the development CFN infrastructure. The second quarter
included $141,000 of non-cash stock option expense.
Research and development expenses. Research and development expenses
increased $420,000, or 46% to $1.3 million for the quarter ended June 30, 1998
from $907,000 for the quarter ended March 31, 1998. As a percentage of
revenues, research and development expenses increased from 6% for the quarter
ended March 31, 1998 to 7% for the quarter ended June 30, 1998.
Depreciation. Depreciation expenses increased $208,000 to $1.2 million
for the quarter ended June 30, 1998 from $982,000 for the quarter ended March
31, 1998. The increase was primarily attributable to the investments in
physical infrastructure at the acquired companies after acquisition.
Amortization. Amortization expense remained relatively constant for the
quarter ended June 30, 1998 as compared to the quarter ended March 31, 1998.
Annual Historical Results of Operations
Years Ended December 31, 1998 and December 31, 1997
The following discussion relates to iXL's actual operating results for
the periods noted. These operating results include the operations of the
companies acquired by iXL during the periods referenced from the date of
acquisition only. As a result, we believe 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, or 241% 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 iXL'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 had no revenue in
1997 and accounted for $251,000 of iXL's 1998 revenues.
47
<PAGE>
Cost of revenues. Cost of revenues increased $32.9 million, or 290% to
$44.2 million for the year ended December 31, 1998 from $11.3 million for the
year ended December 31, 1997. As a percentage of revenues, cost of revenues
increased from 60% for the year ended December 31, 1997 to 68% for the year
ended December 31, 1998. The increase in dollar and percentage terms was
primarily attributable to the integration of the companies acquired by iXL
since January 1, 1998 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
$13.4 million, or 344% to $17.3 million for the year ended December 31, 1998
from $3.9 million for the year ended December 31, 1997. As a percentage of
revenues, sales and marketing expenses increased from 21% for the year ended
December 31, 1997 to 27% for the year ended December 31, 1998. This increase in
dollar and percentage terms was primarily attributable to the continued
development and expansion of iXL's sales and marketing infrastructure and
staff. Through acquisition and internal growth, iXL's sales staff increased
from 40 employees at the end of 1997 to 105 employees at the end of 1998. In
addition, we hired the Executive Vice President for Worldwide Marketing of iXL,
Inc. During 1998 we expanded the corporate sales and marketing departments and
related support staff to provide corporate oversight and additional support for
the iXL offices. We also hired specialized salespeople in iXL's key industry
groups. Also included in this increase was $813,000 of non-cash expense related
to warrant issuances.
General and administrative expenses. General and administrative expenses
increased $21.1 million, or 231% to $30.2 million for the year ended December
31, 1998 from $9.1 million for the year ended December 31, 1997. As a
percentage of revenues, general and administrative expenses decreased from 48%
for the year ended December 31, 1997 to 47% for year ended December 31, 1998.
The dollar increase was primarily attributable to the companies acquired by iXL
since January 1, 1998, associated integration costs and the expansion of
management infrastructure to support the growth in iXL's operations. Also
included in this increase was $1.4 million of non-cash stock option expense.
Research and development expenses. Research and development expenses
decreased $412,000, or 9% to $4.4 million for the year ended December 31, 1998
from $4.8 million for the year ended December 31, 1997. As a percentage of
revenues, research and development expenses decreased from 25% for the year
ended December 31, 1997 to 7% for the year ended December 31, 1998. 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 videoconferencing
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 present value
of the projected net cash flows to be generated by the development efforts
completed as of the acquisition. Revenue, expenses, and other cash flow items
associated with commercialization of the product were estimated for a discrete
projection period. 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, a stage of completion factor was applied
to the sum of the present values of the cash flows in the discrete projection
period. Application of the stage of completion factor correctly excludes from
the value of in-process technology that value associated with remaining
development tasks (which are not in-process). The stage of completion factor
was calculated giving consideration to the costs incurred to date on the in-
process technology relative to the total anticipated costs for the project.
Additionally, consideration of the level of difficulty of completed development
tasks relative to those remaining was also made. 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.
48
<PAGE>
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 companies acquired by iXL since January 1, 1997 and investments in physical
infrastructure at these companies after acquisition.
Amortization. Amortization expenses increased $5.4 million to $10.6
million for the year ended December 31, 1998 from $5.2 million for the year
ended December 31, 1997. The increase was a result of the goodwill and
assembled workforce recorded in connection with the 24 acquisitions which took
place during 1998 and the four acquisitions which took place during 1997.
Interest expense. Interest expense increased $500,000 to approximately
$800,000 in 1998 primarily due to borrowings under the iXL's credit facility.
Years Ended December 31, 1997 and Eight Months Ended December 31, 1996
The operating results for the eight months ended December 31, 1996 date
from iXL's inception in March 1996. Due to this shorter operating period, iXL's
early stage of development during this period, and the numerous acquisitions
effected during 1996 and 1997, iXL 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.
Revenues. Revenues increased $13.6 million, or 253% to $19.0 million for
the year ended December 31, 1997 from $5.4 million for the eight months ended
December 31, 1996. The acquisitions of BoxTop Interactive, Inc., Swan
Interactive Media, Inc. and The Whitley Group, Inc. during 1997 accounted for
$5.1 million of the increase in revenues. A full year of operations and growth
in iXL's Atlanta and Memphis offices accounted for the remaining increase.
Cost of revenues. Cost of revenues increased $7.7 million, or 217% to
$11.3 million for the year ended December 31, 1997 from $3.6 million for the
eight months ended December 31, 1996. As a percentage of revenues, cost of
revenues decreased from 66% for the eight months ended December 31, 1996 to 60%
for the year ended December 31, 1997. The acquisitions of BoxTop Interactive,
Inc., Swan Interactive Media, Inc. and The Whitley Group, Inc. during 1997
accounted for $2.9 million of the increase in cost of revenues. A full year of
operations and growth in iXL's Atlanta and Memphis offices accounted for the
remaining dollar increase.
Sales and marketing expenses. Sales and marketing expenses increased $3.1
million, or 381% to $3.9 million for the year ended December 31, 1997 from
$812,000 for the eight months ended December 31, 1996. As a percentage of
revenues, sales and marketing expenses increased from 15% for the eight months
ended December 31, 1996 to 21% for the year ended December 31, 1997. The
acquisitions of BoxTop Interactive, Inc., Swan Interactive Media, Inc. and The
Whitley Group, Inc. during 1997 and CFN in late 1996 accounted for $2.3 million
of the increase in sales and marketing expenses. A full year of operations and
growth in iXL's Atlanta and Memphis offices accounted for the remaining
increase in dollar and percentage terms.
General and administrative expenses. General and administrative expenses
increased $7.9 million, or 631% to $9.1 million for the year ended December 31,
1997 from $1.2 million for the eight months ended December 31, 1996. As a
percentage of revenues, general and administrative expenses increased from 23%
for the eight months ended December 31, 1996 to 48% for the year ended December
31, 1997. The acquisitions of BoxTop Interactive, Swan Media, The Whitley Group
and CFN during 1997 accounted for $5.5 million of the increase in general and
administrative expenses. A full year of operations and growth in iXL's Atlanta
and Memphis offices accounted for the remaining increase in dollar and
percentage terms.
Research and development expenses. Research and development expenses were
$4.8 million for the year ended December 31, 1997 and zero for the eight months
ended December 31, 1996. This included $2.4
49
<PAGE>
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 companies acquired by iXL since January 1, 1997 and investments in
physical infrastructure at the companies acquired by iXL since January 1, 1997
after acquisition. iXL made significant investments in the acquired companies
after their acquisition to expand and improve office space and combine multiple
acquisitions within metropolitan areas. We also invested in computer and
telecommunications equipment at the newly acquired offices to provide
interoffice connectivity.
Amortization. Amortization expenses increased $4.3 million to $5.2
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 and assembled workforce 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. In connection with the
acquisition of BoxTop Interactive, Inc., in May 1997, $2.1 million of the
purchase price was allocated to a brand name. In December 1998, iXL
discontinued use of this brand name and wrote off the remaining unamortized
balance of $1.7 million.
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 $2.8 million for
1997 is due to the net operating losses incurred by iXL which were utilized to
offset certain long-term deferred tax liabilities acquired in the acquisitions.
As of December 31, 1997 and 1998, iXL had net operating loss
carryforwards for federal income tax purposes of approximately $11.2 million
and $46.6 million, respectively. iXL acquired loss carryforwards of
approximately $1.6 million in 1997 and $3.5 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 iXL's net deferred
tax asset as management believes it is more likely than not that they will not
be realized. See Note 10 to iXL's Consolidated Financial Statements.
Liquidity and Capital Resources
Prior to its initial public offering, iXL financed its operations
primarily through private sales of capital stock, which totaled approximately
$132.2 million in aggregate net proceeds through April 30, 1999, including
approximately $22.7 million from the sale of 22,825 shares of Class A
Convertible Preferred Stock in January 1999. CFN received net proceeds of
approximately $49.3 million from the sale of 16,190,475 shares of CFN's Series
B Convertible Preferred Stock in June 1999. On July 29, 1998, iXL entered into
a credit facility with Chase Manhattan Bank providing for borrowings of up to
$20 million. At December 31, 1998, approximately $20 million of borrowings were
outstanding under this credit facility. In January 1999, iXL repaid all of the
approximately $9.4 million then outstanding under the revolving facility of the
credit facility. Additionally, iXL repaid all of the approximately $10 million
outstanding under the term facility of the credit facility with a portion of
the net proceeds of its initial public offering. The $10 million term facility
commitment terminated upon this payment, and only the revolving commitment of
$10 million remains available under the credit facility. iXL's obligations
under the credit facility are secured by substantially all of the assets of iXL
and its domestic subsidiaries other than CFN and CFN's subsidiaries. These
obligations are also secured by all of the stock of iXL's domestic
subsidiaries, other than CFN's subsidiaries, and 65% of the stock of iXL's
foreign subsidiaries. Borrowings under the credit facility accrue interest at a
rate of 2% plus the greater of Chase Manhattan Bank's prime rate or .5% plus
the weighted average of the rates on overnight Federal funds transactions. As
of April 30, 1999, the interest rate on the outstanding balance was 9.75%.
50
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At March 31, 1999, iXL had approximately $13.9 million in cash and cash
equivalents. For the period from inception to March 31, 1999, iXL used
approximately $62.9 million, $27.9 million and $34.1 million to fund operating
activities, acquisition activities, and capital expenditures, respectively.
These expenditures were financed primarily with proceeds of sales of iXL's
capital stock.
In addition, at March 31, 1999, iXL had outstanding commitments for
capital expenditures totaling approximately $3.2 million, primarily related to
the expansion and improvement of its Atlanta, New York and Boston offices. The
remainder of iXL's significant commitments consist of obligations outstanding
under operating leases.
At December 31, 1998, the approximate future minimum lease payments for
noncancelable operating leases are:
<TABLE>
<CAPTION>
Year Amount
---- ------
(in thousands)
<S> <C>
1999....................................................... $ 6,586
2000....................................................... 5,862
2001....................................................... 5,485
2002....................................................... 5,264
2003....................................................... 4,112
Thereafter................................................. 15,832
-------
$43,141
=======
</TABLE>
iXL believes its available cash resources and credit facilities will be
sufficient to meet its anticipated working capital and capital expenditure
requirements for at least the next 12 months. However, iXL 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--Risks Related to iXL's Business--Failure to
raise necessary capital could restrict our growth, limit our development of new
products and services and hinder our ability to compete."
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 iXL and
iXL's customers, potential customers, vendors and strategic partners, may need
to upgrade their systems to comply with applicable "Year 2000" requirements.
Because iXL 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
iXL's business, results of operations and financial condition. Additionally,
iXL's failure to provide Year 2000 compliant products and services to our
clients could result in financial loss, reputation harm and legal liability.
In 1998, iXL formed a Year 2000 Assessment and Contingency Planning
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. 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 iXL's iD5 engagement
methodology, has divided iXL's Year 2000 efforts into five phases: discovery
(complete), definition (complete), design (complete), development (95%
complete) and deployment (complete). Each of
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<PAGE>
these phases is scheduled to be complete by the end of June 1999. iXL believes
it has identified its mission critical systems. iXL has obtained confirmations
from the providers of these systems that they are Year 2000 compliant. iXL
expects to conduct internal tests of such systems as part of its Year 2000
efforts.
iXL is researching Year 2000 compliance of all existing iXL systems
supplied by third party providers. Where Year 2000 compliance documentation is
not publicly available, iXL is issuing written requests to these providers to
certify Year 2000 compliance. iXL has already obtained written certification
regarding the critical hardware and software systems used to assemble client
solutions or to support iXL's internal electronic infrastructure. iXL has not
yet obtained written certification regarding facilities items such as elevators
and other non-standard applications and systems that are not prevalent
throughout all iXL offices.
iXL is testing all of its other systems internally. Although iXL has not
yet completed this testing, iXL has not yet identified any older systems of the
varieties more likely susceptible to Year 2000 problems. Consequently, iXL
believes its greatest potential exposure will be presented by the failure of
external systems such as utilities and telecommunications. Further, if iXL's
clients experience Year 2000 problems, iXL may be precluded from continuing to
provide services for these clients until the problems are resolved. Internally,
iXL believes its greatest potential exposure would be presented by its
accounting systems, although these functions can be handled manually without
interrupting iXL's business.
iXL does not intend to examine third party readiness, although CFN is
examining the readiness of third parties that provide date sensitive
information critical to CFN's business. iXL is also not researching its
clients' readiness, except to the extent clients request iXL to examine
solutions delivered by iXL.
iXL 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 iXL's Year 2000
program. Management currently believes that the Year 2000 risk will not pose
significant operational problems for iXL's computer systems. However, there is
no guarantee that iXL's Year 2000 program, including consulting with third
parties, will avoid any material adverse effect on iXL's operations, customer
relations or financial condition. iXL estimates the total cost of its Year 2000
program to be approximately $165,000, $146,000 of which has been incurred as of
April 30, 1999. However, there is no guarantee that the actual costs incurred
will not be materially higher than this estimate. See "Risk Factors--Risks
Related to iXL's Business--Year 2000 risks 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. iXL will be required to adopt FAS 133 for the quarter ended March
31, 2000. iXL has not entered into any derivative financial instruments.
52
<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.
iXL was founded in March 1996 and in May 1996 made its first acquisitions
through the consolidation of four complimentary multimedia and interactive
services companies. Later in 1996, to implement iXL's move into the Internet
services industry, iXL acquired its first Internet-related business. iXL
acquired four additional complimentary services companies in 1997 and 24 more
in 1998. These acquisitions, as well as substantial hiring of new employees,
resulted in iXL's current composition. iXL is a Delaware corporation.
In late 1996, iXL also acquired CFN, which at that time resembled a
traditional insurance agency that allowed corporate executives to comparison
shop for insurance and mortgages. Under iXL's direction, CFN quickly adopted
Internet strategies which have resulted in CFN's current composition as an e-
commerce platform for marketing financial services via corporate intranets and
the Internet.
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, 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 and extranets 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. Intranets are secure websites accessible only within a
given company, and extranets are intranets also available to select outsiders.
Growth of E-Commerce
The initial commercial use of the Internet was as an informational and
advertising medium, commonly referred to as "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 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 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. 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.
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
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<PAGE>
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, websites 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 International Data Corporation
estimates will grow from $7 billion in 1998 to $44 billion in 2002. See "Risk
Factors--Risks Related to the Strategic Internet Services Industry--The
developing market for strategic Internet services and the level of acceptance
of the Internet as a business medium will affect our business."
Companies increasingly are discovering that many traditional service
providers lack the requisite expertise to implement comprehensive Internet-
based solutions. Many information technology services 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 systems integration expertise 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.
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--Risks Related to
the Strategic Internet Services Industry--We operate in a highly competitive
market with low barriers to entry which could limit our market share and harm
our financial performance" and "--The developing market for strategic Internet
services and the level of acceptance of the Internet as a business medium will
affect our business."
We believe 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. We believe 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 services 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. We provide 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. We believe our
advantage lies in our 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 our client's
existing systems. We
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<PAGE>
believe that the breadth and focus of our service offerings allow
us to meet our clients' Internet needs from strategy to deployment
in an efficient and cohesive manner.
. Sophisticated Technology Solutions. We use our extensive
engineering capabilities to deliver complex Internet-based
business solutions. Our 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 our client's
existing systems and databases, and building sophisticated e-
commerce platforms. During 1998, to support our growing technology
development capability, we substantially increased our engineering
staff from approximately 50 to over 300 individuals through
acquisitions and new hires. We have also established strategic
affiliations with leading technology vendors such as Microsoft,
Intel, Sun, and Oracle. These affiliations typically allow us
early access to training, product support and technology developed
by these companies.
. Geographic Coverage and Benefits of Scale. We believe our
geographic coverage allows us to better serve our clients on a
local basis, helping to forge strong, long-term client
relationships and service the widespread offices of its clients
and their customers and vendors. As of April 30, 1999, iXL had
offices in Atlanta, Georgia; New York, New York; Los Angeles, San
Francisco, San Diego, and Santa Clara, California; Washington,
D.C.; Chicago, Illinois; Boston, Massachusetts; Denver, Colorado;
Charlotte, North Carolina; Richmond, Virginia; Memphis, Tennessee;
Norwalk, Connecticut; London, England; Berlin and Hamburg,
Germany; and Madrid, Spain. Our internal information technology
infrastructure links our various offices and leverages the
expertise of our professionals throughout the organization. Our
scale enables us to handle larger, more complex engagements,
expand our 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. We
utilize an engagement methodology known as iD5 which has five
stages: 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 iXL. 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, we believe iD5 helps us achieve
on-time and on-budget solutions, capture our best practices and
integrate acquired businesses.
. Multidisciplined Team Approach. We staff 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, we
believe that we provide comprehensive Internet-based solutions to
clients.
. Experienced Senior Executives. Our senior management team is
highly experienced in a variety of disciplines relevant to our
ability to grow and to service the needs of our clients. Our
senior executives have managed both emerging and mature businesses
in a variety of industries, including media and entertainment,
technology, travel and financial services. Our management also
includes an experienced acquisition team that has successfully
acquired and integrated a large number of businesses in various
industries.
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iXL Strategy
iXL'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, we are pursuing the following
strategies:
. Leverage and Expand Industry Expertise. We have assembled industry
practice groups including experienced professionals with expertise
in the business practices and
processes of specific industries. We believe our industry
expertise enables us to provide effective Internet strategy
consulting and services tailored to the special needs of our
clients in these industries. In addition, industry expertise
reduces the learning curve on new engagements, improving
efficiency of implementation and reducing project delivery times.
Our strategy is to expand our existing industry practice groups by
recruiting senior professionals from major consulting firms and
companies in the relevant industries. We also acquire companies
with specific industry expertise. We have established practice
groups, which are in varying stages of development and staffing,
in the Banking & Financial Services, Media & Entertainment,
Travel, Telecommunications and Healthcare industries. We believe
that these industries have been leaders in the utilization of
Internet-enabled technologies. See "--iXL Industry Practice
Groups."
. Continue to Develop Technology Capabilities. We have significant
capabilities in systems engineering and applications development
which we use to deliver complex Internet-based business solutions.
We intend to hire additional software engineers and develop new
technology skill-sets to deliver the best possible solutions and
meet the evolving needs of clients. Our research and development
team is dedicated to identifying, testing and defining new
Internet-based technologies. We have developed software
applications that can be re-used for more than one client or for
more than one engagement. This library of reusable applications
continues to grow as projects are completed. We intend to use
these software applications to deliver solutions rapidly and cost-
effectively. We believe this will be a significant advantage when
providing services under fixed-price contracts.
. Expand Geographic Coverage. Since our inception, we have expanded
our geographic presence aggressively through a combination of
acquisitions and internal growth. iXL has 18 offices located
throughout the United States and in England, Germany and Spain. We
believe our broad geographic coverage allows us to serve our
clients on a local basis, helping to forge strong, long-term
client relationships, and to serve the widespread offices of our
clients and their customers and vendors. Our strategy is to
continue our geographic expansion through additional acquisitions
and external hiring.
. Capture and Disseminate Knowledge and Best Practices. Our
employees have developed a broad base of knowledge and best
practices through numerous strategic Internet services engagements
and from prior experience. Our strategy is to capture this broad
range of knowledge and best practices for dissemination throughout
iXL, and to continue to expand these capabilities through
acquisitions and external hiring. During the course of its client
engagements, we also identify distinct solutions which can be
developed into and distributed as new iXL Solution Sets. We
accomplish this dissemination in part through frequent iXL
Summits, where employees within a given discipline meet in person
to receive education and share best practices. Our Technical
Operations Center also plays a critical role in the dissemination
process, linking all of our local offices via a comprehensive
Internet protocol-based network combined with a centralized
knowledge management system.
. Expand Client Relationships. We have established business
relationships with a diverse base of clients. Our strategy is to
leverage our industry expertise, technology skills, and scale by
expanding the scope of existing client relationships into broader
engagements, including
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Internet strategy consulting, creative design, systems engineering
and application development services.
. Attract, Train and Retain Experienced Professionals. Our growth
and our ability to provide strategic Internet services are based
in large part on our ability to attract, train and retain
experienced professionals. Our strategy is to expand our 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.
We maintain an informal, team-driven and results-oriented culture
that is attractive to energetic, talented professionals and
provides incentives for our employees through a competitive
compensation plan, equity ownership and our stock option plans. We
provide training on a continuing basis for our employees through
our iXL University programs, which are designed to address the
rapidly changing technological environment in which our employees
are engaged.
. Pursue Strategic Acquisitions. We intend 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)
We have 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 our 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 us to effectively serve our clients by:
. clarifying client expectations;
. promoting consistent and efficient service;
. combining strategic, creative and technical capabilities;
. minimizing the time it takes to deliver our services; and
. establishing best practices to be followed throughout iXL.
iD5 is periodically revised and improved to assimilate and deploy new
tools and new best practices developed in the course of iXL's many engagements
throughout all of our offices. Through this process, all iXL offices benefit
from the knowledge gained in the course of engagements by any iXL office.
iXL Services
We believe we offer 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.
Our services include Internet strategy consulting, Internet-based business
solutions, and our iXL Solution Sets.
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Internet Strategy Consulting
We offer consulting services to our clients with the objective of
developing Internet solutions that augment a client's overall business
strategy. We offer Internet strategy consulting that combines our knowledge of
industry dynamics and business processes with an understanding of the client's
specific needs. We have established practice groups, which are in varying
stages of development and staffing, in the Banking & Financial Services, Media
& Entertainment, Travel, Telecommunications and Healthcare industries. We also
employ strategy consultants with general business and Internet expertise. We
presently employ approximately 70 professionals who provide strategy
consulting services.
While Internet strategy consulting directly generates only a small
percentage of our revenues, we believe that Internet strategy consulting will
be an important service offering which will differentiate iXL from many of our
competitors. By offering strategy consulting services, we believe we can
leverage the consulting and strategy planning expertise of our various
industry experts into engagements which will utilize the services provided by
other iXL practice groups.
Internet-Based Business Solutions
Our 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 existing computer
systems. These solutions can incorporate multiple capabilities including
Internet strategy consulting, creative design, information architecture,
software engineering, project management, and audio, video and animation
production.
Among our Internet-based business solutions, we offer e-commerce systems
and services, business information management systems, interactive learning
environments, digital media services, and website development and hosting
services.
. E-Commerce Systems and Services. We design, develop and deploy
sophisticated e-commerce applications for bringing buyers and
sellers together via the Internet. In 1998, we created over 60
different e-commerce applications on behalf of our clients,
ranging from online retail sites to electronic procurement
systems. Our strength in e-commerce lies in our 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. Our
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.
We have created our own e-commerce applications for specific
client needs. We also work with many third-party software
companies, such as CyberCash, Accipiter and NetGravity which have
developed more general applications for conducting different
aspects of e-commerce ranging from security to online transaction
payments processing.
. Business Information Management Systems. We design and develop
sophisticated computer based business information management
systems. These include database-driven websites that help clients
manage their customer, supplier, and vendor relationships more
effectively and provide secure database access. Some of these
websites 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 our Business Information Management Systems
capability, we develop intranets and extranets which
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enable our clients to communicate with employees, customers,
suppliers and vendors, as well as track and store critical
business data and other information.
. Interactive Learning Environments. We have developed expertise in
providing education and training using interactive multimedia and
Web technology. We employ 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. We have developed several
customized solutions to meet the needs of our clients and are
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. We have 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. We possess expertise in numerous
post-production editing technologies. These technologies are used
for the assembly of video and audio content used in many of our
clients' Internet applications. We also provide video production
services including the design, scripting, production, testing and
distribution of audio and video clips and full broadcast-quality
presentations. In addition, we own the worldwide perpetual rights
to a comprehensive stock video library of over 500,000 clips.
Examples of our work in this area include the development of new
capabilities for delivering audio and video content via the
Internet for Real Networks, developing specialized data management
software for Object Design and the delivery of high resolution
imagery via the Internet for Live Pictures. We also have an
Enhanced Television (E-TV) group that is developing technology,
applications, content and expertise for use in the emerging
industry of digitally delivered Internet Protocol-based
information and entertainment. Currently, we are working with
media, technology and telecommunications companies to design and
build the navigational infrastructures, business models and
strategic relationships required for success in the E-TV
marketplace.
. Traditional Websites and Hosting. To provide complete Internet
solutions, we offer development of traditional websites and state-
of-the-art website hosting services through our Memphis,
Tennessee, and San Jose, California, hosting facilities. Our
hosting capabilities are offered primarily to clients who require
unique and specific hosting technology.
iXL Solution Sets
iXL 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. We believe that our iXL Solution Sets meet the needs of clients
for fast, replicable and easily implemented solutions for computer-based
presentations and multiple website 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. We have 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 websites that share a
common style and similar look. Siteman allows novice users to
quickly design and build custom websites by selecting from a
library of templates
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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.
We developed Siteman as part of our iXL Solution Sets strategy.
Recently we sold Siteman to a software manufacturer, retaining a
perpetual, worldwide, royalty-free license on a non-transferable,
non-exclusive basis. This license permits us to continue to offer
Siteman as one of our Solution Sets. Siteman clients have included
AutoConnect, Carlson Wagonlit Travel and WebMD.
. We are also developing an additional iXL Solution Set designed to
facilitate the creation and publication of interactive training
courses.
iXL Industry Practice Groups
iXL 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. We
are also in the process of developing practice groups for the Technology and
Retail industries. To build our industry practice group expertise, we leverage
the experience of our employees who have previously worked for major
consulting firms or companies in the relevant industries. We have utilized its
industry expertise in serving the clients listed below. These clients,
included for illustrative purposes, are not intended to be representative of
our 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 iXL'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 our website, and also engineers and oversees
central marketing and communications programs for use by each of our local
offices. At the local level, each office also has a marketing representative
responsible for building
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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.
As part of its continuing relationship with iXL and CFN, General Electric
has agreed to implement a mutually satisfactory marketing campaign regarding
iXL and CFN. This campaign is expected to emphasize General Electric's
relationships with iXL and CFN and to improve awareness of iXL and CFN's
services. General Electric will also use its reasonable efforts to provide
access to CFN's platform to its employees and to employees of its affiliates.
iXL's sales force totals approximately 155 sales representatives. Each of
iXL's offices has its own sales representatives who sell all services offered
by iXL 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 iXL having overall
responsibility and oversight.
Examples of iXL Internet Solutions
iXL is capable of providing a wide range of services tailored to each of
our clients' individual needs and concerns. The following examples illustrate
our diverse strategic Internet service capabilities:
Budget Rent a Car
Budget Rent a Car 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 began with a single
project in the second quarter of 1998, and has expanded to include projects for
four of Chase Manhattan Bank's six largest divisions and for the bank's
investment company, Chase Capital Partners. We believe our Banking and
Financial Services practice group's industry expertise has enabled iXL to
broaden the scope of its relationship with Chase Manhattan Bank.
Among its current projects for Chase Manhattan Bank, iXL is building an
electronic bill presentment and payment system which will allow Chase Manhattan
Bank customers to view banking statements and pay bills online. The data from
this online system will also drive Chase Manhattan Bank's Value-Added Online
Marketing system, designed by iXL, which profiles Chase Manhattan Bank
customers by the banking services they utilize, their credit profile, and their
Chase Manhattan Bank website browsing habits.
Additionally, iXL is providing Internet services to Chase Manhattan
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
Manhattan Bank to overhaul the Chase.com website to make the site more
responsive and effective for Chase Manhattan Bank
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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 Manhattan Bank's online portfolio
of products and services.
WebMD
WebMD provides Internet-based services to healthcare professionals and
consumers through its webmd.com website. Since WebMD's inception, iXL has
provided it with a full range of strategic Internet services, including initial
definition of WebMD's Internet-based healthcare services product to be offered
via the webmd.com website. 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. WebMD has a limited operating history and
has minimal revenues at this time.
The webmd.com website 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 access to electronic data
interchange services, enhanced communications services, healthcare-related
information and other Internet-based services that are useful to healthcare
professionals. WebMD's website is designed to simplify healthcare practices by
integrating multiple administrative, communications and research functions into
a single easy to use Internet-based solution. WebMD's free consumer website
includes access to premium, branded healthcare-related information,
personalized, targeted information about specific health conditions and
content-specific online communities that allow consumers to participate in
real-time discussions and support networks through the Internet. The webmd.com
website is designed to assist consumers in making informed healthcare
decisions.
iXL 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. Our
strategy has been to augment our growth through acquisitions of small, regional
strategic Internet services companies. By obtaining critical mass in a
particular regional market, we believe we are 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 us to compete more effectively for
national accounts. Our post-acquisition strategy is to enhance the
competitiveness and profitability of each acquired company.
We identify acquisition candidates through our ongoing industry searches,
through our 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 detailed audit and operating assessment is initiated;
. acquisition pricing models are carefully evaluated;
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. specific technology skills and capabilities are ascertained; and
. management qualifications and compatibility are appraised.
Our 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. Our Technical Operations Center plays a critical role in
this process, connecting the acquired business's systems to our central
systems. Our goal is to provide each of our offices with all tools and
resources needed to attain the maximum possible growth and profitability.
Accordingly, we have rarely based the purchase price for a company we acquired
on the post-acquisition performance of that company because we believe such
arrangements can impede the integration of multiple acquired businesses in the
same city by motivating them to compete against one another.
Historically, we have used our common stock for substantially all of the
consideration for our acquisitions. We anticipate that this will continue in
the future. By maximizing the use of stock as acquisition consideration, we
believe that the acquired companies' management has a greater incentive to
focus on iXL's long-term growth through the appreciation of its stock price. We
also generally grant stock options to employees of newly acquired companies as
a means of increasing employee and management retention.
We began our acquisitions in May 1996 when we 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, we acquired CFN, which at such time, was a
traditional insurance agent that allowed corporate executives to comparison
shop for insurance and mortgages. 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--Risks Related to iXL's
Business--Our continued growth is dependent on the successful completion of
acquisitions" and "--We may be unable to continue to grow at our historical
growth rates or to effectively manage our growth."
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The following table summarizes iXL's other acquisitions since June 1996,
listed in chronological order. This information includes 137,304 shares of
common stock held in escrow that have not been earned under the terms of the
relevant acquisition agreements. See Note 4 to the Pro Forma Consolidated
Financial Information.
<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 26, 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......... Creative design and May 8, 1998 20 155,200
Los Angeles, CA software engineering
Digital Planet................... Creative design and May 12, 1998 31 259,584
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>
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Strategic Alliances and Affiliations
We have entered into, and intend to continue entering into, strategic
alliances and affiliations with a select group of technology service providers.
The primary goals of our strategic alliances and affiliations are:
. to enhance iXL's overall service offerings;
. to create or identify new revenue opportunities through referrals
and the creation of new service offerings; and
. to increase iXL's credibility and visibility in the marketplace
through collaboration in joint marketing.
We have established strategic affiliations with, among others, Microsoft,
Intel, Sun and Oracle. These strategic affiliations provide us early access to
training, product support and technology.
We have 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. Our strategic alliances include alliances with
RealNetworks and @radical.media, Inc. Through our strategic alliance with
RealNetworks, a leading provider of media streaming technologies, we will be
presented as a preferred provider of content for events streamed via
RealNetworks technologies. Through our alliance with @radical.media, which
specializes in production and broadcast of high-end commercial advertising
campaigns, we expect to gain access to @radical.media's clients seeking
complementary Internet solutions.
The contracts governing the strategic affiliations and alliances
generally do not have long durations or minimum requirements. In addition, they
are generally terminable by iXL or the other party at will.
Technology
Our Technical Operations Center is our computer systems center which
links all of our local offices with a centralized knowledge management system.
The Technical Operations Center enables us to integrate operations of local
offices into all facets of iXL, 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 iXL 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,
Tennessee, and co-location facilities in San Jose, California. The Technical
Operations Center manages our 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. We view the Technical
Operations Center as a key strategic asset, providing a platform to permit
rapid growth and a working model of the solutions we can design for our
clients. See "Risk Factors--Risks Related to iXL's Business--We may be unable
to continue to grow at our historical growth rates or to effectively manage our
growth."
While readily available third-party technologies are used to develop
nearly all iXL solutions, iXL does not believe it is not dependent on any given
technology to deliver its solutions. Typically, iXL chooses among multiple
software products to select the most appropriate product for a given use. If
any one product ceased to be available to iXL, other similar products are
generally available. Further, the third-party providers generally license their
products directly to iXL's clients. Consequently, iXL is not at risk of loss of
individual licenses.
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Consumer Financial Network
Consumer Financial Network, Inc., or CFN, 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's equity
is owned 77% by iXL and 23% by General Electric. 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, many 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.
We believe CFN is an attractive offering for consumers because CFN
enables consumers 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 CFN
aggregates employees of multiple major companies and members of associations,
and aggregates a nationwide network of services providers who compete for each
individual member's business, CFN is often able to negotiate discounted pricing
for its customers. Consumers can access CFN online, by telephone or by fax.
We believe the CFN platform is attractive to services providers, because
it is designed to:
. provide access to employed consumers, a highly desirable market
segment;
. allow each provider to directly access its preferred target market
by including multiple providers of similar services;
. 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;
. allow providers to expand geographically; and
. 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 its online and
telesales platforms. Currently, the significant majority of consumer inquiries
to CFN for services offered by CFN's providers are made through CFN's telesales
center. Our goal is for the relative volume of online inquiries as well as the
automation of the
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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. We believe 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--Risks Related to Our CFN Subsidiary--CFN's
business model is new and unproven" and "--CFN must expend significant
resources to grow its infrastructure."
Member Companies
We believe 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
Amerigas Ryder Corporation
BellSouth Society for Human Resource Management
Coca-Cola Company Texas A&M University
Delta Air Lines 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., Electric Insurance Company, 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
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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 CFN is
currently not so licensed, CFN provides mortgages through one of its
appropriately licensed providers.
Market Expansion
CFN intends to expand its business beyond its existing corporate employee
market to make its platform available to the general public over the Internet
and through its telesales center. This expansion will likely be effected
primarily by entering into agreements with selected Internet portals and other
retail and informational sites to expand awareness of the CFN platform. This
expansion into the general public arena would broaden the prospective customer
base for both CFN and its services providers.
CFN intends to expand its agreements with its existing services providers
to include the provision of services to the general public. Many of CFN's
corporate providers may elect to not be included in the platform that will be
made available to the general public. The service offerings and the
corresponding prices offered to the general public will likely be different
from those offered to CFN's corporate participants. See "Risk Factors--Risks
Related to Our CFN Subsidiary--CFN's business model is new and unproven."
Technology
CFN's e-commerce platform consists of three component layers. The first,
or top, layer is the Internet website accessed by the consumer which gathers
and displays information. The second component layer is decision software
which takes the employee information and chooses applicable services from the
provider information maintained in this second layer. The third component
layer stores consumer information and integrates the CFN platform with CFN
providers' systems.
The e-commerce technology developed by CFN, for which CFN has two utility
patents pending, is a flexible multi-function comparative quoting system.
While the current application is for the dissemination of information about
financial services and employee benefits, the quoting system has uses in many
industries. CFN believes this technology could be applied to other situations
to allow consumers to compare multiple products from different providers.
For a discussion of risks related to CFN, see "Risk Factors--Risks
Related to Our CFN Subsidiary."
Government Regulation of Insurance, Auto Finance and Mortgages
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, 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
is individually licensed as a nonresident insurance agent in all 50 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 45 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 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 those states as a nonresident insurance
agent and the
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CFN employee agent transacts the business of CFN Agency where permitted. If any
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 that 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.
It is not guaranteed 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 is no guarantee 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, that 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 that state.
CFN Agency operates a telephone call center located in Duluth, Georgia.
Some of the CFN employee agents work in this telephone call center. These 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 website. 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 licensed as an insurance agent in all 50
states. There is no guarantee 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 website in the 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 that state, both CFN Agency and such call
center agent could be subject to fines and prohibited from doing insurance
business in that state.
CFN operates its residential mortgage and auto finance business through
its wholly owned subsidiary, CFN Finance, Inc., a Delaware corporation. There
are numerous federal and state statutes and regulations affecting these
activities including licensing requirements and laws that prohibit
discrimination, unfair and deceptive trade practices, and require disclosure of
basic information to consumers concerning credit terms and settlement costs,
limit fees and charges paid by consumers and lenders, and otherwise regulate
terms and conditions of credit and the procedures by which credit is offered
and administered and that impose fiduciary duties on a person acting as a
broker. 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 these licenses are granted,
CFN Finance has entered into a licensing agreement with a Federal savings and
loan association to operate CFN Finance's residential mortgage finance program
in those states which require licenses. CFN
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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 a Federal savings bank to
operate CFN Finance's auto finance program pursuant to the authority granted
under a Federal charter. Federal law governing federal savings banks preempts
the ability of states to require that a Federal savings bank be licensed under
state law in order to conduct a finance broker business. There is no guarantee
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 and that CFN Finance will have acquired
the appropriate license or that CFN Finance will be able to find another way to
conduct its business in any state that requires a license if the license
agreement terminates in that state. There also is no guarantee that a state
regulatory agency or a consumer will not challenge the operation of the
business under the license agreement. See "Risk Factors--Risks Related to Our
CFN Subsidiary--Government regulation and legal uncertainties related to CFN
could adversely affect our business."
iXL Ventures
As a complement to its core business, iXL has occasionally, on an
opportunistic basis, participated in the development of other Internet-related
businesses through iXL Ventures. iXL seeks to combine its management
experience, technical expertise and financial capital to develop new ideas.
When these new ideas warrant further development, iXL 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 owned by University Netcasting, Inc., which is a series
of commercial Internet sites for leading colleges and
universities;
. Kinzan, Inc., a software and services company that develops,
distributes and hosts Siteman;
. Enhanced Television (E-TV), which is digital interactive
television delivered via the Internet; and
. Last Minute Travel, an online 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 iXL. 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, iXL'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 iXL's business, results
of operations and financial condition. iXL 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. 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.
iXL'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.
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<PAGE>
iXL 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 iXL's target
markets, which could adversely affect our business, results of operations and
financial condition. Many of iXL'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 iXL. 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 iXL's
penetration into their client accounts. We believe that our 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 strategic Internet
services industry. iXL has no patented or other proprietary technology that
would preclude or inhibit competitors from entering the Internet professional
services market. Therefore, iXL 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, iXL expects that it will continually face
additional competition from new entrants into the market in the future, and iXL
is subject to the risk that its employees may leave iXL and start competing
businesses. The emergence of these enterprises could have a material adverse
effect on our business, results of operations and financial condition. See
"Risk Factors--Risks Related to the Strategic Internet Services Industry--We
operate in a highly competitive market with low barriers to entry which could
limit our market share and harm our financial performance."
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--Risks Related to Our CFN Subsidiary--
CFN's numerous established competitors could harm its prospects".
Employees
As of April 30, 1999, iXL had approximately 1,475 employees, including
approximately 70 strategy consultants, 360 engineers and 275 creative
designers. None of iXL's employees is represented by a labor union. iXL has
experienced no work stoppages and believes its relationship with its employees
is good.
In an ongoing effort to train and develop its professionals, iXL has
established iXL University, a forum to educate its employees on issues ranging
from new technologies to office protocol. Employees may attend iXL University
by attending live presentations in Atlanta, by viewing the live webcast of such
presentations, or by viewing at any time archived versions of presentations
through the iXL University website. In addition, iXL holds regular company-wide
meetings among leaders in specific practice areas. iXL also takes advantage of
its corporate intranet to foster company-wide communications and knowledge
management. See
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<PAGE>
"Risk Factors--Risks Related to iXL's Business--If we fail to attract and
retain employees our growth could be limited and our costs could increase."
Properties and Facilities
iXL'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, iXL 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; and Madrid, Spain. CFN leases space for its executive offices in
Duluth, Georgia.
Legal Proceedings
iXL currently and from time to time is involved in litigation incidental
to the conduct of its business. iXL is not a party to any lawsuit or proceeding
that, in the opinion of management of iXL, is likely to have a material adverse
effect on iXL.
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<PAGE>
MANAGEMENT
Executive Officers and Directors
Certain information regarding the executive officers and directors of iXL
as of June 25, 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 47 Vice Chairman and Director
James R. Rocco 44 Vice Chairman
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 of iXL, Inc.
M. Wayne Boylston 41 Executive Vice President, Chief Financial
Officer, Treasurer, and Assistant Secretary
David E. Clauson 44 Executive Vice President for Worldwide
Marketing of iXL, Inc.
Thomas R. Wall, IV(2) 41 Director
Frank K. Bynum, Jr.(1)(2)(3) 36 Director
I. Robert Greene(1)(2)(4) 39 Director
Jerome D. Colonna 35 Director
Thomas G. Rosencrants(3) 49 Director
Jeffrey T. Arnold 29 Director
Gary C. Wendt 57 Director
Jeffrey C. Walker(1)(2)(4) 43 Director
</TABLE>
- --------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
(4) Mr. Greene has submitted his resignation from iXL's Board of Directors,
effective July 1, 1999. Mr. Greene will be replaced on the Board of
Directors and all indicated committees by Mr. Jeffrey C. Walker.
U. Bertram (Bert) Ellis, Jr. founded iXL in March 1996 and has served as
Chairman of the Board of Directors and Chief Executive Officer since that time.
Prior to founding iXL, 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 an MBA 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 iXL in May 1997 upon the acquisition
by iXL 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. Mr. Rocco
previously served as a director from April 1996 to February 1999 and as the
President and Chief Operating Officer from April 1996 until August 1998. Mr.
Rocco founded Creative Video, Inc. and served as its President from July 1986
until it
73
<PAGE>
was acquired by iXL 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.
William C. Nussey has served as a Director of iXL since December 1997,
and as the President and Chief Operating Officer of iXL, Inc. since joining iXL
in May 1998. From 1996 to May 1998 Mr. Nussey served as an associate with
Greylock Ventures, a private investment firm. From 1994 to 1996, Mr. Nussey
attended Harvard Business School. 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 its 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 an MBA 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 an MBA 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 iXL in August 1998.
From 1990 to 1995, Mr. Boylston served as Vice President and Corporate
Controller of Healthdyne, Inc. and from 1995 until February 1998, Mr. Boylston
served as Vice President--Finance, Chief Financial Officer and Treasurer of
Healthdyne Technologies, Inc. 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 E. Clauson has served as Executive Vice President for Worldwide
Marketing of iXL, Inc. since joining iXL 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 iXL 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 iXL 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.
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<PAGE>
I. Robert Greene has served as a Director of iXL since December 1997 but
has submitted his resignation effective July 1, 1999. Mr. Greene has served as
a principal of Flatiron Partners, LLC since June 1, 1999. From January 1999
through May 1999, Mr. Greene 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 from 1994 through 1998. From
1988 to 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 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 an MBA 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 iXL since December 1997.
Mr. Colonna co-founded Flatiron Partners, LLC in August 1996 and has served as
a partner in Flatiron since its founding. Previously, Mr. Colonna co-founded
CMG @ Ventures L.P. in February 1995 and served as a partner 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 iXL 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 an MBA from the Roosevelt University in Chicago and a
Bachelor of Arts degree from the University of Dayton.
Jeffrey T. Arnold has served as a Director since February 1999. Mr.
Arnold founded and has served as Chairman of the Board and Chief Executive
Officer of WebMD, Inc. since its inception in October 1996. In addition, Mr.
Arnold served as the President of WebMD, Inc. from its inception until
September 1997. From April 1994 until Endeavor Technologies, Inc.'s merger with
WebMD, Inc. in March 1997, Mr. Arnold served in various capacities at Endeavor
Technologies, Inc., including as Chairman and Chief Executive Officer.
Mr. Arnold received a Bachelor of Arts degree from the University of Georgia.
Gary C. Wendt has served as a Director since June 1999. From 1986 to
1998, Mr. Wendt served as Chairman, Chief Executive Officer and President of
General Electric Capital Services, Inc. and will continue to serve as a
consultant through July 1, 1999. Mr. Wendt received a Bachelor of Science
degree from the University of Wisconsin and an MBA from Harvard Business
School.
Jeffrey C. Walker will become a director on July 1, 1999 upon the
resignation of Mr. Greene. Mr. Walker has been Managing Partner of Chase
Capital Partners, the private equity investment arm of The Chase Manhattan
Corporation, since 1988, and a General Partner thereof since 1984. Mr. Walker
is a director of the Monet Group, Inc., 800 Flowers, Guitar Center, House of
Blues and Domaine. Mr. Walker received a Bachelor of Science degree from the
University of Virginia and an MBA from the Harvard Business School.
iXL believes retention of its management is critical to its success. See
"Risk Factors--Risks Related to iXL's Business--We depend on our key management
personnel for our future success" and "Risk Factors--Risks Related to iXL's
Business--If we fail to attract and retain employees our growth could be
limited and our costs could increase."
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 (Mr. Walker upon Mr.
Greene's resignation), is empowered to exercise all powers and authority of the
Board as determined by the Board in the authorizing resolution. The
Compensation Committee, consisting of Mr. Thomas R. Wall, IV, Mr. Bynum, and
Mr. Greene (Mr. Walker upon Mr. Greene's resignation), administers iXL's stock
option plans, including approval of all options granted. The Audit Committee,
consisting of Mr. Bynum and
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<PAGE>
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 iXL's independent accountants, and review iXL's accounting
practices and its systems of internal accounting controls.
Director Compensation
iXL reimburses its directors for all out-of-pocket expenses incurred in
the performance of their duties as directors of iXL. iXL currently does not pay
fees to its directors for attendance at meetings.
Amended Stockholders Agreement
The Third Amended Stockholders Agreement entitles certain stockholders to
designate nominees to iXL's board of directors as follows. The Third Amended
Stockholders Agreement entitles Kelso Investment Associates V, L.P. and Kelso
Equity Partners V, L.P. to jointly designate two individuals to be included as
nominees on the board of directors' slate of nominees so long as Kelso
Investment Associates V, L.P. and Kelso Equity Partners V, L.P. together hold
5% or more of our outstanding common stock. CB Capital Investors, L.P. has the
right to designate as a nominee one member so long as it owns at least 5% of
our outstanding common stock. The Third Amended Stockholders Agreement does not
obligate any stockholder to vote its common stock in favor of any nominated
directors.
Compensation Committee Interlocks and Insider Participation
No member of iXL's Compensation Committee 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 iXL's Board of Directors or
Compensation Committee. See "Certain Transactions" for a description of
transactions between iXL and entities affiliated with members of the
Compensation Committee.
Employment Agreements
iXL 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 iXL in April 1998. This agreement has a
four-year term expiring July 31, 2000. Under this agreement, Mr. Kevin Wall's
base annual salary shall be $302,500 for the one-year period from August 1,
1998 through July 31, 1999, and $332,750 for the one-year period from August 1,
1999 through July 31, 2000. Under this agreement, Mr. Kevin Wall is entitled to
an automobile allowance of $1,000 per month and has received grants of options
to purchase 635,900 shares of common stock.
iXL, Inc. has entered into an employment agreement with Mr. Nussey.
Pursuant to this employment agreement, if iXL, Inc. terminates Mr. Nussey's
employment without cause at any time or if Mr. Nussey resigns for good cause,
(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 agreement 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 iXL, Inc. for a period of one
year following the termination of his employment.
76
<PAGE>
Limitation on Liability and Indemnification Matters
Section 145 of the Delaware General Corporation Law permits the
indemnification of directors, officers, employees and agents of Delaware
corporations. iXL's Certificate of Incorporation and By-Laws provide that iXL
shall indemnify its directors and officers to the fullest extent permitted by
the Delaware General Corporation Law. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling iXL 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 Securities Act and
is therefore unenforceable.
As permitted by the Delaware General Corporation Law, iXL's Certificate
of Incorporation also limits the liability of directors of iXL for damages in
derivative and third party lawsuits for breach of a director's fiduciary duty
except for liability:
. for any breach of the director's duty of loyalty to iXL or its
stockholders;
. for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
. for unlawful payments of dividends or unlawful stock purchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or
. 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 iXL or to any liabilities imposed under federal
securities laws.
iXL intends to obtain directors' and officers' insurance providing
indemnification for certain of iXL's directors, officers, affiliates, partners
or employees for certain liabilities.
iXL has entered into agreements to indemnify its directors and executive
officers, in addition to indemnification provided for in iXL's Bylaws. These
agreements, among other things, indemnify iXL'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 iXL, arising out of such person's
services as a director or executive officer of iXL, any subsidiary of iXL or
any other company or enterprise to which the person provides services at the
request of iXL. iXL 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 iXL where indemnification is expected
to be required or permitted. iXL is not aware of any threatened litigation or
proceeding that might result in a claim for such indemnification.
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<PAGE>
Executive Compensation
The following table sets forth information concerning the compensation
paid by iXL during the fiscal years ended December 31, 1996, 1997 and 1998 to
iXL's Chief Executive Officer and each of iXL's four other highest paid
executive officers in 1998:
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
------------ -------------
Name and Options
Principal Position Year 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 -- -- 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 25,000 297,900
1996 105,600 -- --
William C. Nussey......................... 1998 166,500 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 -- 255,000
</TABLE>
The above table excludes certain executive officers of iXL whose annual
base salaries exceed salaries reported in the table, but who were hired during
1998, and consequently during 1998 earned less than the officers reported in
the table above. The 1996 figures are for the eight months ended December 31,
1996. 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. 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.
Bonuses are determined at the discretion of the Compensation Committee.
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<PAGE>
Option Grants and Exercises During Fiscal Year 1998
No stock options were exercised by the Chief Executive Officer or the
four other highest paid 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 Chief Executive Officer and the four other
highest paid executive officers:
<TABLE>
<CAPTION>
Potential
Annual Compensation Realizable Value at
----------------------------- Assumed Annual
Number of Rates of Stock
Securities % of Total Options Price Appreciation
Underlying Granted to Exercise or for Option Term
Named Executive Officer Options Employees in Base Price Expiration -------------------
and Principal Position Granted Fiscal Year 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 02/26/08 2,717 4,623
Executive Vice President
for 100,000 .8% 3.50 02/26/08 293,413 674,528
Worldwide Operations 40,000 .3% 10.00 11/25/08 -- 118,748
--------- ----
140,500 1.1%
========= ====
</TABLE>
The options described in the above table were granted under iXL's 1996
Stock Option Plan and generally provide for vesting over either four or five
years. The columns headed "Potential Realizable Value at Assumed Annual Rates
of Stock Price Appreciation for Option Term" show the hypothetical gains or
option spreads of options granted based on 5% or 10% assumed annual rates of
compounded stock price appreciation and do not represent iXL's estimates or
projections of iXL's future common stock prices.
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<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 Chief Executive
Officer and the four other highest paid 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
------------------------- -------------------------
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 ............... 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>
In the above table, the value of unexercised in-the-money options at
December 31, 1998 are calculated by determining the difference between the
deemed fair market value of the securities on December 31, 1998 underlying the
options and the exercise price. The fair market value of the securities as of
December 31, 1998 was based on preliminary valuations of iXL performed by
independent appraisers at the request of iXL. Information for Mr. Kevin Wall
includes 635,900 options granted to him 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. iXL's 1996 Stock Option Plan was established to promote the
success of iXL 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 iXL. The 1996
Stock Option Plan authorizes the granting of options for up to an aggregate
maximum of 25 million shares of iXL's common stock to employees of iXL. 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 (Mr. Walker upon Mr. Greene's
resignation). The Compensation Committee may delegate administrative functions
to individuals who are officers or employees of iXL.
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<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 iXL and eligible employees 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 iXL Enterprises,
Inc. and its subsidiaries. Members of the Board of Directors who are not iXL
employees are not eligible to receive awards. Options may be granted to
employees by action of the Compensation Committee. The Compensation Committee
determines the terms of each option and the number of shares of common stock
subject to each option. The terms of each option need not be identical. 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.
iXL expects that most options granted pursuant to the 1996 Stock Option
Plan will be subject to vesting 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 iXL 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 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 iXL and an
eligible employee and thereafter shall remain exercisable until the expiration
or earlier termination of the 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
iXL's 1998 Non-Employee Stock Option Plan contains essentially the same
terms as the 1996 Stock Option Plan, except that the 1998 Non-Employee Stock
Option Plan was established for grants to persons who are not employees of the
Company. Persons who may receive grants under the 1998 Non-Employee Stock
Option Plan include outside consultants and members of the Board of Directors
who are not employees of iXL and other non-employees who the Compensation
Committee determines have provided services to iXL. The 1998 Non-Employee Stock
Option Plan authorizes the granting of options for up to an aggregate maximum
of 1 million shares of iXL's common stock.
1999 Employee Stock Option Plan
The Board of Directors has adopted and the stockholders of iXL have
approved the 1999 iXL Enterprises, Inc. Stock Option Plan. The 1999 Stock
Option Plan provides for the grant of stock options, including incentive stock
options.
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<PAGE>
Grant of Options. Stock options may be granted to key employees,
including executive officers of iXL, its subsidiaries and affiliates as
determined by the Compensation Committee. 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 iXL's
capitalization.
If shares subject to an option under the 1999 Stock Option Plan cease to
be subject to the option, such shares will again be available for future grant
under the 1999 Stock Option Plan. In the event of certain changes in iXL'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 Internal Revenue 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. 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 iXL where payment of the exercise price is accomplished with the
proceeds of the sale of common stock, or by a combination of the foregoing.
Exercise of Options. 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 iXL as a result of the holder's
death, disability or retirement, the holder, or his or her beneficiary or legal
representative, may exercise any then exercisable option for a period of one
year, or a 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 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.
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<PAGE>
CERTAIN TRANSACTIONS
iXL Equity Investments
The following table sets forth the purchases of iXL's capital stock by
iXL's executive officers, directors, five percent stockholders and their
respective affiliates and certain related parties:
<TABLE>
<CAPTION>
Aggregate
Date of Purchase
Purchaser Transaction Securities Purchased Price
--------- ----------- -------------------- ---------
<S> <C> <C> <C>
CB Capital Investors, December 17, 1997 46,153 shares of Class B Convertible $14,999,725
L.P. Preferred Stock, and warrants to
purchase 6,390 shares of Class B
Convertible Preferred Stock
December 17, 1997 9,232 shares of Class C Convertible 3,000,400
Preferred Stock
August 14, 1998 9,000 shares of Class D Nonvoting 9,000,000
Preferred Stock
General Electric Capital December 23, 1997 15,384 shares of Class B Convertible 4,999,800
Corporation Preferred Stock, and warrants to
purchase 1,775 shares of Class B
Convertible Preferred Stock
August 31, 1998 2,500 shares of Class D Nonvoting 2,500,000
Preferred Stock
General Electric Capital January 15, 1999 5,000 shares of Class A Convertible 5,000,000
Assurance Company Preferred Stock
(affiliate
of General Electric
Capital
Corporation)
GE Capital Equity June 8, 1998 1,500,000 shares of common stock 18,000,000
Investments,
Inc. (affiliate of
General
Electric Capital
Corporation)
General Electric Pension June 8, 1998 500,000 shares of common stock 6,000,000
Trust (affiliate of
General
Electric Capital
Corporation)
Greystone Capital January 15, 1999 10,000 shares of Class A Convertible 10,000,000
Partners I, Preferred Stock
L.P. (affiliate of
Thomas G.
Rosencrants, director of
iXL)
Kelso Equity Partners V, April 30, 1996 5,955 shares of Class A Convertible 595,500
L.P. Preferred Stock
(affiliate of Kelso
Investment
Associates V, L.P.)
April 4, 1997 3,302 shares of Class A Convertible 825,500
Preferred Stock
August 14, 1998 1,000 shares of Class D Nonvoting 1,000,000
Preferred Stock
</TABLE>
- --------
table continued on following page
83
<PAGE>
<TABLE>
<CAPTION>
Aggregate
Date of Purchase
Purchaser Transaction Securities Purchased Price
--------- ----------- -------------------- ---------
<S> <C> <C> <C>
Kelso Investment April 30, 1996 93,295 shares of Class A Convertible $ 9,329,500
Associates V,
L.P. Preferred Stock
April 4, 1997 35,818 shares of Class A Convertible 8,954,500
Preferred Stock
August 14, 1998 9,000 shares of Class D Nonvoting 9,000,000
Preferred Stock
David E. Clauson September 18, 1998 1,000 shares of Class A Convertible 1,000,000
Preferred Stock
U. Bertram Ellis, Jr. April 30, 1996 1,000 shares of Class A Convertible 100,000
Preferred Stock
September 30, 1996 9,000 shares of Class A Convertible 900,000
Preferred Stock
April 4, 1997 4,000 shares of Class A Convertible 1,000,000
Preferred Stock
August 28, 1998 1,000 shares of Class D Nonvoting 1,000,000
Preferred Stock
William C. Nussey August 25, 1998 100 shares of Class A Convertible 100,000
Preferred Stock
John Rocco (brother of February 20, 1998 615 shares of Class A Convertible 199,875
James R.
Rocco) Preferred Stock
</TABLE>
In connection with each of the issuances described above, the purchasers
listed above were required to execute iXL's stockholders' agreement and
registration rights agreement. Each issuance described above was valued based
on iXL's estimate of its fair market value at the time of each issuance. In the
case of the sales of common stock to GE Capital Equity Investments, Inc. and
General Electric Pension Fund, the purchase occurred simultaneous with the
closing of iXL's initial public offering at a purchase price equal to the
initial public offering price of $12.00 per share. The business purpose of each
issuance was to raise working capital, except for the issuance to Mr. Clauson,
which was made as a condition to his employment with iXL. As payment of a
portion of the purchase price for his shares, Mr. Clauson executed in favor of
iXL a promissory note in the original principal amount of $900,000. This note
is a non-recourse note secured by a pledge of the 1,000 shares of Class A
Convertible Preferred Stock held by Mr. Clauson. This note accrues simple
interest at a rate of 5.48% per annum, and matures on the earlier of September
18, 2001 or the date on which Mr. Clauson transfers any of the 1,000 shares of
Class A Convertible Preferred Stock held by him.
Each of the issuances described above, other than the issuance to Mr.
Clauson, was made contemporaneous with, and on identical terms as, issuances to
unaffiliated persons. The issuance to Mr. Clauson was also made at about the
same time and on identical terms as issuances made to unaffiliated persons,
with the sole exception that Mr. Clauson, as a condition of the initiation of
his employment, was permitted to pay a portion of the purchase price through
execution of the promissory note described above. This 5.48% interest rate of
the promissory note was determined with reference to the standard federal rate
in effect at the time of the execution of the note. For a description of the
securities issued in these transactions, see "Description of Capital Stock--
Description of Reclassified Securities."
CFN Equity Investments
On November 3, 1998, General Electric purchased 13,333,334 shares of
CFN's Series A Convertible Preferred Stock for an aggregate purchase price of
$10,000,000. In connection with this issuance, CFN, iXL, and General Electric
executed a Stockholders Agreement and a Registration Rights Agreement with
respect to CFN capital stock. This issuance was valued based on CFN's estimate
of its fair market value at the time of such issuance. The business purpose of
this issuance was to raise working capital for CFN and to establish a
relationship between General Electric and CFN. iXL believes that this issuance
was negotiated at arm's length
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<PAGE>
and was made on terms no less favorable to iXL and CFN than could have been
obtained from unaffiliated third parties. At the time of this transaction,
General Electric beneficially owned less than 5% of the outstanding common
stock of iXL, on an as-converted basis.
On June 8, 1999, GE Capital Equity Investments, Inc. purchased 16,190,475
shares of CFN's Series B Convertible Preferred Stock for an aggregate purchase
price of $50 million. In connection with this issuance, CFN, iXL, and General
Electric executed amendments to the existing CFN Stockholders Agreement and to
the existing CFN Registration Rights Agreement, and an Investor Agreement with
CFN. Under the Registration Rights Agreement, iXL and General Electric have the
right to force a registration of CFN's capital stock. The business purpose of
this issuance was to raise working capital and to expand the relationship
between General Electric and CFN. This issuance was valued based on a
negotiated estimate of CFN's fair market value. iXL believes that this issuance
was negotiated at arm's length and was made on terms no less favorable to iXL
and CFN than could have been obtained from unaffiliated third parties.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
Acquisitions
In May 1996, iXL acquired Creative Video, Inc., Creative Video Library,
Inc., and Entrepreneur Television, Inc. In connection with that transaction,
Mr. Rocco received $2,478,800 in cash and 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
$518,775 in cash and 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. Mr. Rocco held 46% of the equity of Creative Video,
Inc., 49% of the equity of Creative Video Library, Inc., and 50% of the equity
of Entrepreneur Television, Inc., and served as the Secretary, President, and
President of each company, respectively. Mr. Rocco also served as a Director of
each company. Mr. Sikes held 10% of the equity of Creative Video, Inc., 7% of
the equity of Creative Video Library, Inc., and 6% of the equity of
Entrepreneur Television, Inc., and served as a Director of each company. Mr.
Sikes also served as the President of Creative Video, Inc. and as the Treasurer
of Creative Video Library, Inc. In May 1997, iXL 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., which represented 52% of the equity.Mr. Wall served as the Chairman of
the Board and Chief Executive Officer of BoxTop Interactive, Inc. The valuation
of the shares issued to Mr. Rocco, Mr. Sikes, and Mr. Wall was determined by
negotiation.
Loans
From February 1997 to August 1998, Mr. Ellis and/or his wife made nine
separate loans to iXL 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 iXL $300,000. These loans accrued
interest at a rate of 12% per annum, and have been repaid in full with accrued
interest. The purpose of each of the loans described in this paragraph was to
provide working capital to iXL.
From May 30, 1997 to March 30, 1998, Mr. Kevin Wall borrowed, from time
to time, amounts never exceeding $268,753 under a revolving line of credit from
iXL, at an interest rate of 8% per annum. The purpose of this loan was to
provide personal funds to Mr. Wall. This loan was repaid on March 30, 1998 from
the proceeds of the sale by Mr. Kevin Wall to iXL of 184,616 shares of common
stock for a purchase price of $3.25 per share. The valuation of these shares
was determined by negotiation.
Chase Manhattan Bank is the Administrative Agent and sole lender under
iXL's credit facility. Chase Manhattan Bank is a limited partner of CB Capital
Investors, L.P. For a description of the material terms of iXL's credit
facility, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
85
<PAGE>
Other Transactions
In April 1996, iXL 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, iXL agreed to
pay Kelso & Company an annual fee of $15,000 for continuing financial advisory
services and to reimburse Kelso & Company for out-of-pocket expenses incurred,
which in 1996, 1997 and 1998 totaled approximately $13,000, $75,000 and
$85,000, respectively. iXL 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 & Company
has, other than with respect to such indemnification and expenses provisions,
terminated its annual financial services agreement. In connection with
consulting services regarding iXL's initial public offering, iXL paid Kelso &
Company a fee equal to $750,000 upon the closing of the initial public
offering, payable in 62,500 shares of common stock (based on the gross offering
price prior to underwriting and other selling discounts). The business purpose
of these transactions was to secure the advisory services of Kelso & Company.
iXL 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 marketing services. The business purpose of this
transaction was to promote awareness of iXL's services.
On June 8, 1999, iXL issued to GE Capital Equity Investments, Inc.
warrants to purchase 1,500,000 shares of common stock at an exercise price per
share equal to the initial public offering price of $12.00 per share. These
warrants were issued in exchange for the implementation of a mutually
satisfactory marketing campaign and as an incentive to make CFN's platform
available to GE Capital Equity Investments, Inc. employees. The marketing
campaign is governed by a marketing agreement which provides for the delivery
by General Electric of marketing services expected to advertise General
Electric's relationships with iXL and CFN and to improve awareness of iXL's and
CFN's services. iXL believes these services to be valued at $1.2 million. The
business purpose of this transaction was to promote awareness of iXL's services
and to secure additional eligible employees to CFN's member base. CFN and
General Electric are also discussing other expansions of this relationship,
including co-marketing, data sharing, cross selling, technology licensing and
other similar arrangements.
The stockholders of iXL Interactive Excellence, Inc. were parties to a
Stock Option Agreement, dated October 24, 1994, pursuant to which Ellis
Communications, Inc. had an option to acquire 100% of the capital stock of iXL
Interactive Excellence, Inc. from such stockholders. In connection with the
proposed sale of Ellis Communications, Ellis Communications and the iXL
Interactive Excellence, Inc. stockholders desired to terminate this Stock
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 this Stock Option Agreement. Ellis Communications, at such time,
was controlled by affiliates of Kelso & Company, and Mr. Ellis was the
President, Chief Executive Officer and Chairman of the Board of Directors of
Ellis Communications.
Mr. Ellis is a limited partner in the partnership that owns the building
in which iXL began leasing space in May 1997. Pursuant to the terms of the
lease, iXL currently pays rent of approximately $93,000 per month, and the
lease expires December 31, 2008. In 1996, 1997 and 1998, iXL paid total annual
rent of approximately $6,000, $347,000 and $628,000, respectively. iXL believes
its lease of such space is at fair market value and was negotiated on an arm's-
length basis. iXL's effective lease rate is $14.64 per square foot, compared to
a range of $12.50 to $16.50 per square foot for comparable space.
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)
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<PAGE>
of Permit.Com, Inc. to iXL as the sole shareholder of iXL, Inc. On June 26,
1998, the Board of Directors of iXL approved and declared a dividend of the
common stock of Permit.Com, Inc. payable to stockholders of iXL of record as of
June 1, 1998. The aggregate value of this dividend was approximately $420,000,
based on an independent appraisal of the Permit.Com assets.
Each of iXL and CFN provides services in the ordinary course of business
to WebMD, Inc., for which Mr. Jeffrey T. Arnold serves as Chairman and Chief
Executive Officer and Mr. Ellis serves as a Director and is also a shareholder,
CB Capital Investors, L.P., General Electric Capital Corporation, and Kelso &
Company, or their respective affiliates. In 1998 iXL recognized revenues of
approximately $1.4 million and $200,000, respectively, from CB Capital
Investors, L.P., and General Electric Capital Corporation or their respective
affiliates. In 1997 and 1998 iXL recognized revenues from WebMD, Inc. of
approximately $53,000 and $5.5 million, respectively. In 1997 and 1998, iXL
recognized revenues from Kelso & Company or its affiliates of approximately
$100,000 and $300,000, respectively.
iXL-New York, Inc., a wholly owned subsidiary of iXL, and General
Electric have executed a Master Services Agreement under which iXL will provide
services in the ordinary course of business to General Electric. Under this
agreement, General Electric will be obligated to pay to iXL, for the first year
of the term of the contract, the greater of $20 million or the actual billed
value of the services provided by iXL. If at the end of the first year, General
Electric has not used $20 million worth of services, it will have an additional
three months to use the remaining balance. There are no guaranteed minimum
payments after this initial period. This contract has a five-year term and is
terminable by General Electric after the first anniversary of the contract. In
partial consideration of this contract, iXL issued to GE Capital Equity
Investments, Inc. warrants to purchase 1,000,000 shares of common stock for an
exercise price of $15.00 per share. The business purpose of this transaction
was to help solidify and expand its relationship with General Electric. The
terms of this arrangement are similar to the terms of iXL's arrangement with
Delta Air Lines, Inc.
iXL has entered into a Stockholders' Agreement with some of its
stockholders. iXL has also entered into a Registration Rights Agreement with
some of its stockholders. See "Management--Amended Stockholders Agreement" and
"Description of Capital Stock--Registration Rights Agreement."
iXL believes that all of the transactions set forth above were negotiated
at arm's length and were made on terms no less favorable to iXL than could have
been obtained from unaffiliated third parties.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to iXL with
respect to the beneficial ownership of the common stock as of June 8, 1999, for
each stockholder who is known by iXL to beneficially own more than 5% of the
common stock, each of iXL's directors, as its Chief Executive Officer and the
other four highest paid executive officers and all directors and executive
officers of iXL as a group:
<TABLE>
<CAPTION>
Shares of Percentage
Common Stock Ownership
Beneficially Prior to the
Stockholder Owned Offering
----------- ------------ ------------
<S> <C> <C>
Kelso Investment Associates V, L.P. and
Kelso Equity Partners V, L.P. ...................... 15,656,096 24.6%
Joseph S. Schuchert................................ -- --
Frank T. Nickell................................... -- --
Thomas R. Wall, IV................................. -- --
George E. Matelich................................. -- --
Michael B. Goldberg................................ -- --
David I. Wahrhaftig................................ -- --
Frank K. Bynum, Jr. ............................... -- --
Philip E. Berney................................... 10,000 *
c/o Kelso & Company
320 Park Avenue
24th Floor
New York, NY 10022
CB Capital Investors, L.P. .......................... 7,939,427 12.5%
CB Capital Investors, Inc.......................... -- --
I. Robert Greene................................... -- --
Jeffrey C. Walker.................................. -- --
380 Madison Avenue
12th Floor
New York, NY 10017-2591
General Electric Capital Corporation, General
Electric Capital Assurance Company, GE Capital
Equity Investments, Inc. and General Electric
Pension Trust ...................................... 5,204,159 8.1%
120 Long Ridge Road
Stamford, CT
U. Bertram Ellis, Jr. ............................... 2,929,486 4.5%
Kevin M. Wall........................................ 2,292,884 3.6%
James R. Rocco....................................... 1,207,040 1.9%
William C. Nussey.................................... 692,384 1.1%
Barry T. Sikes....................................... 473,100 *
Thomas G. Rosencrants................................ 1,000,000 1.6%
All Directors and Executive Officers as a Group
(11 persons)........................................ 32,628,149 48.7%
</TABLE>
- --------
* Less than 1% of the outstanding shares of the class of securities.
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. The 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 June 8, 1999. Percentage of
beneficial ownership is based on 63,547,800 shares of common stock outstanding
as of June 8, 1999.
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<PAGE>
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.
Information for Kelso Investment Associates V, L.P. and Kelso Equity
Partners V, L.P. includes 14,673,227 shares held by Kelso Investment Associates
V, L.P. and 982,869 shares held by Kelso Equity Partners V, L.P. 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. 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. 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.
CB Capital Investors, Inc. is the general partner of CB Capital
Investors, L.P., and accordingly may be deemed to beneficially own the shares
owned by CB Capital Investors, L.P. Mr. Walker is currently and prior to May
31, 1999, Mr. Greene was, a general partner of Chase Capital Partners, a New
York general partnership, which is the sole limited partner and investment
advisor of CB Capital Investors, L.P. Accordingly, Mr. Walker and Mr. Greene
could be deemed to beneficially own the shares beneficially owned by CB Capital
Investors, L.P. However, Mr. Walker and Mr. Greene disclaim beneficial
ownership of all common stock owned by CB Capital Investors, L.P., except an
indeterminate number thereof in which they each have a continuing pecuniary
interest as a current and former (respectively) general partner of Chase
Capital Partners. The Chase Manhattan Bank is the sole stockholder of CB
Capital Investors, Inc., and accordingly may be deemed to beneficially own the
shares owned by CB Capital Investors, L.P. However, The Chase Manhattan Bank
disclaims this beneficial ownership. The Chase Manhattan Corporation is the
sole stockholder of The Chase Manhattan Bank, and accordingly may be deemed to
beneficially own the shares owned by CB Capital Investors, L.P. However, The
Chase Manhattan Corporation disclaims this beneficial ownership.
Information for General Electric Capital Corporation, General Electric
Capital Assurance Company, GE Capital Equity Investments, Inc. and General
Electric Pension Trust includes (a) for General Electric Capital Corporation:
2,204,159 shares of common stock currently held and 500,000 shares of common
stock issuable upon the exercise of warrants exercisable within 60 days of the
date hereof, (b) for General Electric Capital Assurance Company: 500,000 shares
of common stock currently held, (c) for GE Capital Equity Investments, Inc.:
1,500,000 shares of common stock currently held, and (d) for General Electric
Pension Trust: 500,000 shares of common stock currently held. Excludes
2,500,000 shares of common stock issuable to GE Capital Equity Investments,
Inc. upon the exercise of warrants which are not exercisable within 60 days
from the date hereof.
Information for U. Bertram Ellis, Jr. includes 1,330,000 shares of common
stock issuable upon exercise of options exercisable within 60 days from the
date hereof. Excludes 2,058,889 shares of common stock issuable upon exercise
of options which are not exercisable within 60 days from the date hereof.
Information for Kevin M. Wall 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.
Information for James R. Rocco includes 178,740 shares of common stock
issuable upon exercise of options exercisable within 60 days from the date
hereof. Excludes 296,260 shares of common stock issuable upon exercise of
options which are not exercisable within 60 days from the date hereof.
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Information for William C. Nussey includes 746,934 shares of common stock
issuable upon exercise of options exercisable within 60 days from the date
hereof. Excludes 1,097,342 shares of common stock issuable upon exercise of
options which are not exercisable within 60 days from the date hereof.
Information for Barry T. Sikes includes 252,000 shares of common stock
issuable upon exercise of options exercisable within 60 days from the date
hereof. Excludes 333,500 shares of common stock issuable upon exercise of
options which are not exercisable within 60 days from the date hereof.
Thomas G. 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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DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of iXL and material
provisions of iXL's Certificate of Incorporation and Bylaws is a summary and is
qualified by reference to the provisions of the Certificate of Incorporation
and Bylaws, which have been filed as exhibits to iXL's Registration Statement
of which this prospectus is a part.
The authorized capital stock of iXL is 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 June 25, 1999, there were 64,456,900 shares of common stock
outstanding.
Common stock is entitled to one vote per share on all matters on which
stockholders are entitled to vote. Common stock does not have cumulative voting
rights or other preemptive or subscription rights, and is not redeemable by
iXL. 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 iXL, after required payments to
creditors, the assets of iXL will be divided pro rata on a per share basis
among the holders of the common stock.
Description of Reclassified Securities
Class A, Class B, and Class C Convertible Preferred Stock and Class D
Nonvoting Preferred Stock were reclassified as common stock upon the closing of
iXL's initial public offering. No Preferred Stock is outstanding after iXL's
initial public offering. The following descriptions of these classes of
preferred stock are based upon the provisions in effect immediately prior to
reclassification.
Based on the conversion mechanics in effect immediately prior to the
reclassification of iXL's preferred stock into common stock upon the closing of
iXL's initial public offering:
. each share of Class A, Class B, and Class C Convertible Preferred
Stock was convertible into 100 shares of Class A Common Stock,
each share of which was in turn convertible into one share of
Class B Common Stock; and
. each share of Class A and Class B Convertible Preferred Stock was
entitled to 1,000 votes; Class C Convertible Preferred Stock is
not entitled to any voting rights.
Class A, Class B, and Class C Convertible Preferred Stock were entitled to
receive dividends pro rata with dividends properly declared and paid with
respect to the common stock, on a basis as if the Class A, Class B, and Class C
Convertible Preferred Stock were converted into Class A Common Stock. Upon a
voluntary or involuntary dissolution, liquidation or winding-up of iXL, after
payments to creditors but prior to any payments in respect of any common stock,
holders of Class A, Class B, and Class C Convertible Preferred Stock were
entitled to receive a liquidation preference equal to the price at which the
stock was originally issued by iXL, subject to proportional adjustment upon any
subdivision or combination of such class of preferred stock occurring after
December 17, 1997. iXL could redeem all outstanding Class A, Class B, and Class
C Convertible Preferred Stock upon a change of control. Holders of Class B and
Class C Convertible Preferred Stock had the right at their option to require
iXL to redeem such stock held by them at any time on or after
December 31, 2004.
Class D Nonvoting Preferred Stock had no voting rights. The Class D
Nonvoting Preferred Stock was entitled to receive dividends which accrued on a
daily basis at the rate of 12% per annum. Dividends were not required to be
paid until the earlier of the date occurring three years and six months after
August 14, 1998, or upon the initial public offering of the common stock. Upon
a voluntary or involuntary dissolution, liquidation or winding-up of iXL, after
payments to creditors but prior to any payments in respect of any other
preferred stock or common stock, holders of Class D Nonvoting Preferred Stock
were entitled to receive a liquidation preference equal to $1,000 per share
plus any accrued but unpaid dividends to the date of
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payment. Holders of Class D Nonvoting Preferred Stock had the right at their
option to require iXL to redeem Class D Nonvoting Preferred Stock held by them
at any time after August 14, 2005, or at any time after one of the following
redemption events, if earlier:
. a breach of the dividend payment provisions of the Class D
Nonvoting Preferred Stock;
. a bankruptcy of iXL or any of its subsidiaries;
. a judgment for payment of money in an amount exceeding
$5,000,000;
. the acceleration of indebtedness in an amount exceeding
$5,000,000;
. a breach of the documents governing the issuance of the Class D
Nonvoting Preferred Stock; and
. a change of control.
iXL could, at its option, redeem all or less than all of the outstanding Class
D Nonvoting Preferred Stock at any time. Upon redemption, the holders of Class
D Nonvoting Preferred Stock would receive $1,000 per share plus any accrued but
unpaid dividends to the date of payment, and assuming the initial public
offering of the common stock occurred prior to August 14, 1999, approximately
104.27 shares of common stock for each share of Class D Nonvoting Preferred
Stock redeemed.
Blank Check Preferred Stock
The Board of Directors 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. No shares of preferred stock are
currently outstanding. 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 iXL without any further action
by the stockholders. iXL has no present plans to issue any shares of preferred
stock.
Registration Rights Agreement
iXL, Kelso Investment Associates V, L.P., Kelso Equity Partners V, L.P.
and CB Capital Investors, L.P. and most other stockholders of iXL prior to
iXL's initial public offering are parties to a Registration Rights Agreement,
dated as of April 30, 1996. All shares of common stock outstanding prior to
iXL's initial public offering, as well as (1) all shares of common stock
issuable upon exercise of warrants outstanding prior to iXL's initial public
offering, (2) all shares of common stock issuable upon the reclassification of
the iXL's preferred stock upon the closing of iXL's initial public offering,
and (3) all shares of common stock to be held by Kelso Equity Partners V, L.P.
that are issuable in connection with the fee payable to Kelso & Company upon
the closing of iXL's initial public offering, are subject to the Registration
Rights Agreement. The Registration Rights Agreement, at any time and from time
to time after May 1, 1997, the holder or holders of 50% or more of the common
stock may request that iXL effect a demand registration under the Securities
Act of the common stock held by the majority stockholders. After this request,
iXL must use its best efforts to effect such a registration of all common stock
held by the majority stockholders and all other holders of common stock.
In addition to the demand registration, if iXL at any time proposes to
effect a registration of its equity securities and the type of registration
permits, all holders of common stock may include their shares in that
registration. The number of shares to be registered under 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
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in a non-underwritten offering advises iXL that the number of shares requested
to be so included exceeds the number which can be sold in the offering. The
registration rights agreement provides for cross-indemnification by iXL and the
sellers of common stock 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 Rights Agreement will be paid by iXL. Additionally, pursuant to
the Registration Rights Agreement, all stockholders who purchased iXL's capital
stock prior to iXL's initial public offering have agreed not to effect any
public sale or distribution of their stock during the 180 days after the
closing of iXL's initial public offering. For a description of the fee payable
to Kelso & Company described above, see "Certain Transactions."
Certain Antitakeover Effects of Provisions of iXL's Certificate of
Incorporation and Bylawsand Delaware Law
General. Provisions of the Delaware General Corporation Law and iXL'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 iXL. These provisions could limit the price that investors
might be willing to pay in the future for shares of iXL's common stock. These
provisions of Delaware law and iXL'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 iXL,
including unsolicited takeover attempts, even though such a transaction may
offer iXL's stockholders the opportunity to sell their stock at a price above
the prevailing market price. iXL's Certificate of Incorporation allows iXL 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
some circumstances, this type of issuance could have the effect of decreasing
the market price of the common stock, as well as having the antitakeover effect
discussed above. See "Risk Factors--Risks Related to the Offering--Antitakeover
provisions of our Certificate of Incorporation and Bylaws, and Delaware law
could prevent or delay a change of control."
Delaware Takeover Statute. iXL is subject to Section 203 of the Delaware
General Corporation Law, which prohibits a Delaware corporation from engaging
in a "business combination" with some persons for three years following the
date any of these persons becomes an interested stockholder. Interested
stockholders generally include persons who are the beneficial owners of 15% or
more of the outstanding voting stock of the corporation and 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 that person's status as an interested stockholder is
determined. A business combination includes:
. a merger or consolidation;
. 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;
. any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested
stockholder, except in a transaction that effects a pro rata
distribution to all stockholders of the corporation;
. 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
. any receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
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Section 203 of the Delaware General Corporation Law does not apply to a
business combination if 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 upon completion 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. iXL's Bylaws also require that
special meetings of the stockholders of iXL may be called only by the Board of
Directors, the Chairman of the Board or the Chief Executive Officer of iXL or
by any person or persons holding shares representing at least 20% of the
outstanding capital stock. iXL's Bylaws also require advance written notice,
which must be received by the Secretary of iXL 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. iXL'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 iXL.
iXL's Bylaws provide that the authorized number of directors may be
changed only by a resolution adopted by a majority of the entire Board of
Directors. Vacancies in the Board of Directors may be filled by a majority of
directors in office, although less than a quorum. See "Risk Factors--Risks
Related to the Offering--Anti-takeover provisions of our Certificate of
Incorporation and Bylaws, and Delaware law could prevent or delay a change of
control."
No Shareholder Action by Written Consent. The Certificate of
Incorporation prohibits stockholders from taking action by written consent in
lieu of an annual or special meeting, and thus stockholders are only able to
take action at an annual or special meeting called in accordance with the
Bylaws.
Transfer Agent and Registrar
SunTrust Bank, Atlanta acts as transfer agent and registrar for the
common stock.
Listing
The common stock is quoted on the Nasdaq National Market under the
trading symbol "IIXL."
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SHARES ELIGIBLE FOR FUTURE SALE
The shares of common stock issuable pursuant to this offering (up to
4,000,000 shares) will be freely tradable after their issuance by persons not
affiliated with iXL, unless iXL contractually restricts their sale. iXL
anticipates that the agreements entered into in connection with the issuance of
shares in this offering will restrict the resale of all or a portion of the
shares issued for varying periods of time.
On June 25, 1999, 64,456,900 shares of common stock were outstanding. Of
these shares, all of the 6,900,000 shares sold in iXL's initial public offering
will be freely tradeable, other than 600,000 shares sold to purchasers
designated by iXL which are subject to a lockup period of 180 days after the
closing of iXL's initial public offering (until December 6, 1999), or are
purchased by affiliates of iXL, as that term is defined in Rule 144 under the
Securities Act of 1933. The remaining 57,556,900 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 Rule 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:
. no restricted securities will be eligible for immediate sale on
the date of this prospectus;
. 111,828 restricted securities issuable pursuant to stock options
will be eligible for sale 90 days after the closing of iXL's
initial public offering (until September 7, 1999);
. 56,908,400 restricted securities--plus 11,232,603 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 closing of iXL's initial public offering (until
December 6, 1999); and
. 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, including an
affiliate, who has beneficially owned restricted shares for at least one year
from the later of the date the restricted securities were acquired from iXL 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 1% of the then-outstanding shares of common stock or
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 requirements as
to the manner and notice of sale and the availability of public information
about iXL.
Restricted securities held by affiliates of iXL 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 iXL or
from an affiliate of iXL or the date on which they were fully paid, a holder of
restricted securities who is not an affiliate of iXL at the time of sale, and
has not been an affiliate of iXL 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 iXL's initial public offering, there had 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 the market price of our common stock and iXL's ability to raise
additional capital.
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In general, under Rule 701 of the Securities Act as currently in effect,
any employee, officer, director, consultant or advisor of iXL who purchased
shares from iXL 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 iXL's initial public offering in reliance on Rule 144,
but without compliance with certain restrictions, including the holding period,
contained in Rule 144.
iXL 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 after iXL's initial public offering, 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 June 25, 1999, options to purchase approximately 27,909,119 shares of common
stock were outstanding under iXL's stock option plans.
The holders of approximately 60,547,800 shares of common stock, including
approximately 3,000,000 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
iXL have agreed that for a period of 180 days after iXL's initial public
offering 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 & Co. as the lead underwriter in iXL's initial public offering, 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 iXL's initial public 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. iXL may also file a Registration Statement on Form S-8 after 180 days
after iXL's initial public offering 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.
PLAN OF DISTRIBUTION
iXL will issue the common stock from time to time in connection with the
acquisition by iXL of other businesses, assets or securities. It is expected
that the terms of the acquisitions involving the issuance of securities covered
by this prospectus will be determined by direct negotiations with the owners or
controlling persons of the businesses, assets or securities to be acquired by
iXL. No underwriting discounts or commissions will be paid in connection with
the issuance of the common stock by iXL, although finder's fees may be paid
from time to time with respect to specific mergers or acquisitions. Any person
receiving such fees may be deemed to be an underwriter within the meaning of
the Securities Act of 1933.
RESTRICTIONS ON RESALE
The common stock offered hereby is registered under the Securities Act of
1933, but this registration does not cover resale or distribution by the person
who receives common stock issued by iXL in its acquisitions. Affiliates of
entities acquired by iXL who do not become affiliates of iXL may not resell
common stock registered under the Registration Statement to which this
prospectus relates except pursuant to an effective registration statement under
the Securities Act covering such shares, or in compliance with Rule 145
promulgated under the Securities Act or another applicable exemption from the
registration requirements of the
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Securities Act. Generally, Rule 145 permits such affiliates to sell such shares
immediately following the acquisition in compliance with certain volume
limitations and manner of sale requirements. Under Rule 145, sales by such
affiliates during any three-month period cannot exceed the greater of (1) 1% of
the shares of common stock of iXL outstanding and (2) the average weekly
reported volume of trading of such shares of common stock on all national
securities exchanges during the four calendar weeks preceding the proposed
sale. These restrictions will cease to apply under most other circumstances if
the affiliate has held the common stock for at least two years, provided that
the person or entity is not then an affiliate of iXL. Individuals who are not
affiliates of the entity being acquired and do not become affiliates of iXL
will not be subject to resale restrictions under Rule 145 and, unless otherwise
contractually restricted, may resell common stock immediately following the
acquisition without an effective registration statement under the Securities
Act. The ability of affiliates to resell shares of the common stock under Rule
145 will be subject to iXL having satisfied its reporting requirements under
the Securities Exchange Act of 1934, as amended, for specified periods prior to
the time of sale.
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 iXL by Minkin &
Snyder, a Professional Corporation, Atlanta, Georgia. As of June 25, 1999,
attorneys employed by Minkin & Snyder hold 148,378 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 iXL at an interest rate of 12% per annum. Mr. Altenbach currently
serves as Secretary of iXL and its subsidiaries including CFN.
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
iXL has filed with the Securities and Exchange Commission a Registration
Statement on Form S-4 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 iXL 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. 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 qualified by reference to the full text of the
relevant contract or document.
iXL 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.
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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-31
Balance Sheet.............................................................. F-32
Statement of Operations.................................................... F-33
Statement of Shareholders' Deficit......................................... F-34
Statement of Cash Flows.................................................... F-35
Notes to Financial Statements.............................................. F-36
GREEN ROOM PRODUCTIONS L.L.C.
Report of Independent Accountants.......................................... F-43
Balance Sheet.............................................................. F-44
Statement of Operations and Change in Members' Deficit..................... F-45
Statement of Cash Flows.................................................... F-46
Notes to Financial Statements.............................................. F-47
DIGITAL PLANET
Report of Independent Accountants.......................................... F-51
Balance Sheet.............................................................. F-52
Statement of Operations.................................................... F-53
Statement of Changes in Shareholders' Deficit.............................. F-54
Statement of Cash Flows.................................................... F-55
Notes to Financial Statements.............................................. F-56
MICRO INTERACTIVE, INC.
Report of Independent Accountants.......................................... F-63
Balance Sheet.............................................................. F-64
Statement of Operations.................................................... F-65
Statement of Changes in Shareholders' Deficit.............................. F-66
Statement of Cash Flows.................................................... F-67
Notes to Financial Statements.............................................. F-68
COMMERCEWAVE, INC.
Report of Independent Accountants.......................................... F-73
Balance Sheet.............................................................. F-74
Statement of Operations.................................................... F-75
Statement of Changes in Shareholders' Equity (Deficit)..................... F-76
Statement of Cash Flows.................................................... F-77
Notes to Financial Statements.............................................. F-78
</TABLE>
F-1
<PAGE>
iXL ENTERPRISES, INC.
INDEX TO FINANCIAL STATEMENTS
(Continued)
<TABLE>
<S> <C>
SPINNERS INCORPORATED
Report of Independent Accountants......................................... F-85
Balance Sheet............................................................. F-86
Statement of Operations................................................... F-87
Statement of Changes in Shareholders' Equity.............................. F-88
Statement of Cash Flows................................................... F-89
Notes to Financial Statements............................................. F-90
TEKNA, INC.
Report of Independent Accountants......................................... F-96
Balance Sheet............................................................. F-97
Statement of Operations................................................... F-98
Statement of Changes in Shareholders' Equity.............................. F-99
Statement of Cash Flows................................................... F-100
Notes to Financial Statements............................................. F-101
LARRY MILLER PRODUCTIONS, INC.
Report of Independent Accountants......................................... F-105
Balance Sheets............................................................ F-106
Statement of Operations................................................... F-107
Statement of Changes in Shareholders' Equity (Deficit).................... F-108
Statement of Cash Flows................................................... F-109
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>
December 31, March 31, 1999
----------------- -------------------
Pro Forma
1997 1998 Actual (Note 1)
------- -------- -------- ---------
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents............. $23,038 $ 19,259 $ 13,880 $156,894
Accounts receivable less allowance for
doubtful accounts of $138, $796, $998
and $998............................. 3,259 17,737 20,957 20,957
Unbilled revenues..................... 1,858 8,089 11,736 11,736
Prepaid expenses and other assets..... 616 3,355 3,757 5,157
------- -------- -------- --------
Total current assets................ 28,771 48,440 50,330 194,744
Property and equipment, net........... 9,178 27,975 32,296 32,296
Intangible assets, net................ 18,205 64,217 58,102 58,102
Equity investment in affiliate, net... 1,115 -- -- --
Other non-current assets.............. 343 2,319 2,970 672
------- -------- -------- --------
Total assets........................ $57,612 $142,951 $143,698 $285,814
======= ======== ======== ========
LIABILITIES, MANDATORILY REDEEMABLE PRE-
FERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable...................... $ 2,242 $ 6,438 $ 4,783 $ 4,333
Deferred revenues..................... 471 6,072 8,904 8,904
Accrued liabilities................... 1,746 7,943 11,113 11,113
Current portion of long-term debt..... 433 868 815 815
------- -------- -------- --------
Total current liabilities........... 4,892 21,321 25,615 25,615
Long-term debt.......................... 840 20,552 11,185 1,285
------- -------- -------- --------
Total liabilities..................... 5,732 41,873 36,800 26,450
------- -------- -------- --------
Mandatorily redeemable preferred stock.. 29,930 65,679 70,414 --
Mandatorily redeemable preferred stock
of subsidiary.......................... -- 9,839 9,839 47,939
------- -------- -------- --------
29,930 75,518 80,253 47,939
------- -------- -------- --------
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, 200,116 and 0;
aggregate liquidation preference of
$25,590, $31,103, $53,928 and $0..... 2 2 2 --
Class A Common Stock, par value $.01,
75,000,000 shares authorized; issued
and outstanding 0, 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, 16,334,905 and 64,447,800
(including 0, 252,416, 252,416 and
252,416 shares held in treasury)..... 82 163 163 644
Additional paid-in capital............ 38,760 94,820 114,859 299,160
Accumulated deficit................... (16,894) (65,760) (84,015) (84,015)
Accumulated other comprehensive
income............................... -- (10) (127) (127)
Note receivable from stockholder...... -- (900) (900) (900)
Unearned compensation................. -- (1,867) (2,449) (2,449)
Treasury stock at cost; 0, 252,416,
252,416 and 252,416 shares........... -- (888) (888) (888)
------- -------- -------- --------
Total stockholders' equity.......... 21,950 25,560 26,645 211,425
------- -------- -------- --------
Total liabilities, mandatorily
redeemable preferred stock and
stockholders' equity............... $57,612 $142,951 $143,698 $285,814
======= ======== ======== ========
</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 Three Months
May 1, 1996 Years ended ended
through December 31, March 31,
December 31, ------------------ -----------------
1996 1997 1998 1998 1999
-------------- -------- -------- ------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 5,379 $ 18,986 $ 64,767 $ 6,864 $ 33,012
Cost of revenues........ 3,577 11,343 44,242 4,899 19,583
------- -------- -------- ------- --------
Gross profit.......... 1,802 7,643 20,525 1,965 13,429
Sales and marketing
expenses............... 812 3,903 17,325 2,036 8,150
General and
administrative
expenses............... 1,247 9,114 30,163 2,956 15,725
Research and development
expenses............... -- 4,820 4,408 907 1,058
Depreciation............ 372 1,408 5,217 699 2,284
Amortization............ 928 5,191 10,590 1,182 4,351
------- -------- -------- ------- --------
Loss from operations.. (1,557) (16,793) (47,178) (5,815) (18,139)
Other income (expense),
net.................... 48 116 (28) 36 69
Loss on equity
investment............. (249) (1,443) (1,640) (395) (65)
Interest income......... 32 136 750 264 216
Interest expense........ (30) (238) (770) (28) (336)
------- -------- -------- ------- --------
Loss before income
taxes................ (1,756) (18,222) (48,866) (5,938) (18,255)
Income tax benefit...... 302 2,782 -- -- --
------- -------- -------- ------- --------
Net loss.............. (1,454) (15,440) (48,866) (5,938) (18,255)
Dividends and accretion
on mandatorily
redeemable preferred
stock.................. -- -- (9,099) (725) (5,293)
------- -------- -------- ------- --------
Net loss available to
common stockholders.. $(1,454) $(15,440) $(57,965) $(6,663) $(23,548)
======= ======== ======== ======= ========
Basic and diluted net
loss per common
share................ $ (0.37) $ (2.36) $ (4.92) $ (0.78) $ (1.46)
======= ======== ======== ======= ========
Weighted average
common shares
outstanding.......... 3,972 6,540 11,777 8,592 16,082
======= ======== ======== ======= ========
</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 10,739 -- -- -- -- --
Net loss......... -- -- -- -- -- (15,440) -- -- -- --
--------- ----- ---------- ---- -------- -------- ------- ----- ------ -------
Balance, December
31, 1997......... 169,260 2 8,229,800 82 38,760 (16,894) -- -- -- --
--------- ----- ---------- ---- -------- -------- ------- ----- ------ -------
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........ -- -- -- -- -- (48,866) (48,866) -- -- --
Foreign currency
translation ad-
justment........ -- -- -- -- -- -- (10) (10) -- --
-------
Other comprehen-
sive income..... -- -- -- -- -- -- (10) -- -- --
-------
Comprehensive in-
come............. (48,876)
--------- ----- ---------- ---- -------- -------- ------- ----- ------ -------
Balance, December
31, 1998......... 177,291 2 16,082,489 163 94,820 (65,760) (10) (900) (1,867)
--------- ----- ---------- ---- -------- -------- ------- ----- ------ -------
Stock issuance... 22,825 -- -- -- 22,718 -- -- -- -- --
Dividends and ac-
cretion on
mandatorily re-
deemable pre-
ferred stock..... -- -- -- -- (4,735) -- -- -- -- --
Issuance of stock
options.......... -- -- -- -- 2,056 -- -- -- -- (2,056)
Stock compensa-
tion and warrant
expenses......... -- -- -- -- -- -- -- -- -- 1,474
Comprehensive in-
come:
Net loss........ -- -- -- -- -- (18,255) (18,255) -- -- --
Foreign currency
translation ad-
justment........ -- -- -- -- -- -- (117) (117) -- --
-------
Other comprehen-
sive income..... -- -- -- -- -- -- (117) -- -- --
-------
Comprehensive in-
come............. -- -- -- -- -- -- (18,372) -- --
--------- ----- ---------- ---- -------- -------- ------- ----- ------ -------
Balance, March
31, 1999......... 200,116 $2 16,082,489 $163 $114,859 $(84,015) $(127) $(900) $(2,449)
========= ===== ========== ==== ======== ======== ===== ====== =======
<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..... -- 10,781
Net loss......... -- (15,440)
-------- -------------
Balance, December
31, 1997......... -- 21,950
-------- -------------
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........ -- (48,866)
Foreign currency
translation ad-
justment........ -- (10)
Other comprehen-
sive income..... -- --
Comprehensive in-
come.............
-------- -------------
Balance, December
31, 1998......... (888) 25,560
-------- -------------
Stock issuance... -- 22,718
Dividends and ac-
cretion on
mandatorily re-
deemable pre-
ferred stock..... -- (4,735)
Issuance of stock
options.......... -- --
Stock compensa-
tion and warrant
expenses......... -- 1,474
Comprehensive in-
come:
Net loss........ -- (18,255)
Foreign currency
translation ad-
justment........ -- (117)
Other comprehen-
sive income..... -- --
Comprehensive in-
come.............
-------- -------------
Balance, March
31, 1999......... $(888) $26,645
======== =============
</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 Three Months ended
through December 31, March 31,
December 31, ------------------ -------------------
1996 1997 1998 1998 1999
-------------- -------- -------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities
Net loss................ $(1,454) $(15,440) $(48,866) $ (5,938) $ (18,255)
Adjustments to reconcile
net loss to net cash
used in operating ac-
tivities
Depreciation ......... 372 1,408 5,217 699 2,284
Amortization.......... 928 5,191 10,590 1,182 4,351
Provision for bad
debts................ 134 118 1,227 93 202
Acquired in-process
technology........... -- 2,400 -- -- --
Deferred income tax-
es................... (344) (2,782) -- -- --
Non-cash investment
and losses in equity
affiliate and amorti-
zation............... (168) 807 1,365 307 64
Stock option and war-
rant expense......... -- -- 2,454 -- 1,474
Changes in assets and
liabilities, net of
effects from purchase
of subsidiaries
Accounts receiv-
able............... (249) (1,538) (9,840) (935) (3,422)
Unbilled revenues... (112) (1,597) (5,328) (420) (3,647)
Prepaid expenses and
other assets....... (5) (684) (4,669) (1,519) (1,075)
Accounts payable and
accrued liabili-
ties............... (332) 1,534 5,523 (766) 1,515
Deferred revenues... 195 (156) 4,888 641 2,832
------- -------- -------- -------- ---------
Net cash used in op-
erating activi-
ties............... (1,035) (10,739) (37,439) (6,656) (13,677)
------- -------- -------- -------- ---------
Cash flows from invest-
ing activities
Purchases of property
and equipment........ (666) (6,704) (20,304) (3,123) (6,463)
Purchases of subsidi-
aries, net of cash
acquired............. (7,833) (3,433) (16,602) (1,489) --
Investment in equity
affiliate............ (1,129) (625) -- -- --
Loan to equity affili-
ate.................. -- (250) -- -- --
Gain on sale of fixed
and intangible as-
sets................. -- -- -- -- 1,892
------- -------- -------- -------- ---------
Net cash used in in-
vesting activi-
ties............... (9,628) (11,012) (36,906) (4,612) (4,571)
------- -------- -------- -------- ---------
Cash flows from financ-
ing activities
Proceeds from
borrowings........... 250 6,849 23,428 -- --
Repayment of
borrowings........... (119) (6,259) (6,729) (200) (9,732)
Proceeds from issuance
of mandatorily
redeemable preferred
stock................ -- 29,930 40,314 5,021 --
Proceeds from issuance
of stock............. 10,941 13,860 4,612 1,038 22,718
Proceeds from issuance
of mandatorily
redeemable preferred
stock of subsidiary.. -- -- 9,839 -- --
Acquisition of trea-
sury stock........... -- -- (888) (788) --
------- -------- -------- -------- ---------
Net cash provided by
financing activi-
ties 11,072 44,380 70,576 5,071 12,986
------- -------- -------- -------- ---------
Effect of exchange rate
changes on cash and
cash equivalents....... -- -- (10) -- (117)
Net increase (de-
crease) in cash and
cash equivalents... 409 22,629 (3,779) (6,197) (5,379)
Cash and cash equiva-
lents at beginning of
period................. -- 409 23,038 23,038 19,259
------- -------- -------- -------- ---------
Cash and cash equiva-
lents at end of peri-
od..................... $ 409 $ 23,038 $ 19,259 $ 16,841 $ 13,880
======= ======== ======== ======== =========
Supplemental disclosure
of cash flow informa-
tion
Cash paid for inter-
est.................. $ 29 $ 168 $ 797 $ 98 $ 347
======= ======== ======== ======== =========
Non-cash investing and
financing activities
Acquisition of equip-
ment through capital
leases............... $ 112 $ 289 $ 569 $ -- $ 312
======= ======== ======== ======== =========
</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. In addition to its Internet services offerings, the
Company operates Consumer Financial Network, Inc. ("CFN"), 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.
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 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. As the Company owns 100% of the common stock of CFN, it will continue to
reflect in its consolidated financial statements all of the operating results
of CFN until such time the CFN mandatorily redeemable convertible preferred
stock is converted into CFN common stock.
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. CFN recognizes revenues upon
completion of an end-user transaction through the CFN operating network.
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 consist primarily of assembled workforce and excess of
cost over fair value of net assets acquired ("goodwill") and are stated at cost
less accumulated amortization. Identifiable intangible assets consist primarily
of assembled workforce, which is being amortized over its estimated future life
of three years. Goodwill is being amortized over its estimated future life of
five to fifteen years, primarily five 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 information
The interim financial information as of and for the three months ended
March 31, 1999 and 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 all adjustments, consisting solely of normal recurring
adjustments, necessary for a fair presentation of the financial position and
results of operations for the periods presented. The interim results, however,
are not necessarily indicative of results for any future period.
The pro forma consolidated balance sheet as of March 31, 1999 is
unaudited. However, in the opinion of management, such information has been
prepared on the same basis as the audited financial statements and includes
subsequent adjustments as described in Note 16.
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
Per Share of Net
Fair Value Shares of Cash Used for Tangible
of iXL Common Warrants/ Acquisitions, Total Assets
Date Common Stock Options Net of Cash Purchase (Liabilities) Assembled Other
Acquired Stock Issued Issued(1) Acquired Price Acquired Workforce Intangibles (2)
Business Acquired -------------- ---------- --------- --------- ------------- -------- ------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BoxTop
Interactive,
Inc.-- Los
Angeles, CA(4).. May 1997 $2.10 3,416,700 1,236,800 $ 1,182 $10,044 $(1,635) $ 1,946 $3,562
Other
Acquisitions
(aggregated
1997)........... Various 778,300 179,800 2,251 2,804 (447) 1,213 --
============== ===== ========= ========= ======= ======= ======= ======= ======
Total of 1997
Acquisitions... 4,195,000 1,416,600 $ 3,433 $12,848 $(2,082) $ 3,159 $3,562
============== ===== ========= ========= ======= ======= ======= ======= ======
Digital Planet,
Inc.--
Los Angeles,
CA(4)(5)........ May 1998 5.50 259,584 -- $ 1,962 $ 3,550 $ (39) $ 1,012 --
Micro
Interactive,
Inc.--
New York,
NY(3)........... May 1998 5.50 740,000 19,500 1,718 5,809 281 999 --
CommerceWAVE,
Inc.-- San
Diego, CA(7).... July 1998 5.82 877,898 64,434 117 5,459 (1,037) 662 700
Image
Communications,
Inc.--
Vienna, VA(4)... July 1998 5.82 378,999 125,054 753 3,324 381 1,213 --
Spinners
Incorporated--
Boston,
MA(4)(5)(9)..... July 1998 5.82 674,132 66,495 1,383 5,543 499 1,129 --
Tekna, Inc.--
Richmond,
VA(4)(5)........ September 1998 4.50 712,622 125,757 611 4,758 527 820 --
Larry Miller
Productions,
Inc.--
Boston, MA(4)... September 1998 4.50 113,823 248,135 1,812 3,490 (143) 963 --
NetResponse--
Arlington,
VA(4)(5)(11).... September 1998 4.50 701,375 73,625 1,719 5,307 1,312 1,168 --
Ionix Development
Corp.
-- Chicago,
IL(5)........... September 1998 4.50 358,551 -- 1,059 3,013 231 778 --
Pequot Systems,
Inc.--
Norwalk,
CT(5)(9)........ September 1998 4.50 378,066 -- 792 2,501 154 357 --
TwoWay
Communications
LLC--Chicago,
IL(4)(10) September 1998 4.50 269,421 -- 1,246 2,469 335 713 --
Other
Acquisitions
(aggregated
1998)........... Various 2,295,530 57,215 3,430 14,188 795 6,075 --
-------------- ----- --------- --------- ------- ------- ------- ------- ------
Total of 1998
acquisitions... 7,760,001 780,215 $16,602 $59,411 $ 3,296 $15,889 $ 700
============== ===== ========= ========= ======= ======= ======= ======= ======
<CAPTION>
Excess of
Cost Over
Fair Value of
Net Assets
Acquired
Business Acquired -------------
<S> <C>
BoxTop
Interactive,
Inc.-- Los
Angeles, CA(4).. 6,171
Other
Acquisitions
(aggregated
1997)........... 2,038
=============
Total of 1997
Acquisitions... $ 8,209
=============
Digital Planet,
Inc.--
Los Angeles,
CA(4)(5)........ $ 2,577
Micro
Interactive,
Inc.--
New York,
NY(3)........... 4,529
CommerceWAVE,
Inc.-- San
Diego, CA(7).... 5,134
Image
Communications,
Inc.--
Vienna, VA(4)... 1,730
Spinners
Incorporated--
Boston,
MA(4)(5)(9)..... 3,915
Tekna, Inc.--
Richmond,
VA(4)(5)........ 3,411
Larry Miller
Productions,
Inc.--
Boston, MA(4)... 2,670
NetResponse--
Arlington,
VA(4)(5)(11).... 2,827
Ionix Development
Corp.
-- Chicago,
IL(5)........... 2,004
Pequot Systems,
Inc.--
Norwalk,
CT(5)(9)........ 1,990
TwoWay
Communications
LLC--Chicago,
IL(4)(10) 1,421
Other
Acquisitions
(aggregated
1998)........... 7,318
-------------
Total of 1998
acquisitions... $39,526
=============
</TABLE>
- --------
(1) Amounts equal the number of Class B Common Stock shares to be issued upon
exercise of the warrants and options.
(2) Other intangibles include in-process research and development at BoxTop,
the BoxTop brandname and non-compete agreements.
Primary capabilities: (3)Interactive multimedia; (4)Creative design;
(5)Software engineering; (6)Travel expertise; (7)E-Commerce; (8)Video
production; (9)Financial Services Consulting; (10)Healthcare expertise;
(11)Strategy consulting.
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>
Per Share
Fair Value
of iXL
Date Common
Business Acquired Acquired Stock
- ----------------- -------------- ----------
<S> <C> <C>
Webbed Feet, LLC--Atlanta, GA(3).................... February 1997 $2.00
The Whitley Group, Inc.--Charlotte, NC(2)........... April 1997 2.00
Swan Interactive Media, Inc.--Atlanta, GA(4)........ July 1997 2.25
Small World Software, Inc.--New York, NY(3)(4)...... January 1998 3.23
Green Room Productions, L.L.C.--San Francisco,
CA(3)(4)(5)........................................ February 1998 3.23
CCG Online--Denver, CO(3)(4)(5)..................... March 1998 4.60
Spin Cycle Entertainment, Inc.--Los Angeles,
CA(3)(4)........................................... May 1998 5.50
InTouch Interactive, Inc.--Charlotte, NC(4)......... May 1998 5.50
Campana New Media, S.L. and The Other Media, S.L.--
Madrid, Spain(3)................................... July 1998 5.82
601 Design, Inc.--New York, NY(7)................... July 1998 5.82
Wissing & Laurence, Inc.--New York, NY(7)........... July 1998 5.82
LAVA--Hamburg, Germany(4)........................... September 1998 4.50
Denovo New Media, Ltd.--London, England(3).......... September 1998 4.50
Exchange Place Solutions, Inc.--Atlanta, GA(8)...... September 1998 4.50
Pantheon Interactive, Inc.--Santa Clara, CA(4)...... September 1998 4.50
</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. Since the date of acquisition, the results of operations
of the acquired companies have been included in the Consolidated Statement of
Operations.
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. Such charge has been included
in research and development expenses in the Consolidated Statement of
Operations. 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 present
value of the projected net cash flows to be generated by the development
efforts completed as of the acquisition. Revenue, expenses, and other cash flow
items associated with commercialization of the product were estimated for a
discrete projection period. 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, a stage of
completion factor was applied to the sum of the present values of the cash
flows in the discrete projection period. Application of the stage of completion
factor correctly excludes from the value of in-process technology that value
associated with remaining development tasks (which are not in-process). The
stage of completion factor was calculated giving consideration to the costs
incurred to date on the in-process technology relative to the total anticipated
costs for the project. Additionally, consideration of the level of difficulty
of completed development tasks relative to those remaining was also made. 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
$8,209 and $39,526, respectively, was allocated to goodwill and is being
amortized over estimated useful lives of five years. Approximately $3,159 and
$15,889 of the aggregate purchase price was allocated to assembled workforce in
place for acquisitions made in 1997 and 1998, respectively, and is being
amortized over its estimated useful life of three 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 fair value of options and warrants issued in
connection with the 1997 and 1998 acquisitions was determined using the Black-
Scholes option pricing model using the following assumptions: dividend yield of
0%, expected volatility 60%, risk free interest rate of 5.00% and an expected
life of 2 to 5 years, depending on the terms of the specific acquisition.
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
two 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 are 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.............................................. $(31,364) $(60,417)
======== ========
Net loss available to common stockholders............. $(31,364) $(71,130)
======== ========
Basic and diluted net loss per common share........... $ (1.93) $ (4.42)
======== ========
</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................. $15,540 $55,066
Assembled work force.... 4,027 19,916
Other................... 2,629 3,816
------- -------
22,196 78,798
Less--accumulated amor-
tization............... (3,991) (14,581)
------- -------
$18,205 $64,217
======= =======
</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 websites 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 $20,552
===== =======
</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. The assumptions
utilized by the Company in determining the fair value of these warrants were as
follows: dividend yield 0%, risk-free interest rate 5.0%, expected volatility
72%, and expected life of 3 years.
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 of $1,200 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 over the next twelve to eighteen
months. The assumptions utilized by the Company in determining the fair value
of these warrants were as follows: dividend yield 0%, risk free interest rate
5.0%, expected volatility 82%, and expected life of 18 months.
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 the
Class D Preferred (included in mandatorily redeemable preferred stock) and
Class B Common Stock to be issued (included in additional paid-in-capital),
based on the relative fair values of the securities as of the date of issuance.
Of the approximately $35,400 total proceeds from the issuance of the Class D
Preferred, $22,165 was allocated to the Class D Preferred and the remaining
$13,235 was allocated to Class B Common Stock to be issued. The amount
allocated to the Class B Common Stock to be issued was based on the fair value
of the guaranteed minimum number of shares (3,722,502) to be issued. The number
of shares of Class B Common Stock to be issued increases depending on the
timing of a Qualified Public Offering, up to a maximum of 5,279,293 shares. The
fair value of the additional 1,556,791 potentially issuable shares of Class B
Common Stock is determined at the end of each reporting period and is ratably
charged to net loss available to common stockholders, over the 7-year
redemption 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 7-year 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.
F-19
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
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.
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. Holders of Class D Preferred have the
right at their option to require the Company to redeem the Class D Preferred
held by them at any time after August 2005, or at any time after one of the
following redemption events, if earlier: a breach of the dividend payment
provisions of the Class D Preferred; a bankruptcy of the Company or any of its
subsidiaries; a judgment for payment of money in an amount exceeding $5,000;
the acceleration of indebtedness in an amount exceeding $5,000; a breach of the
documents governing the issuance of the Class D Preferred; or a change of
control. 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.
F-20
<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 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>
Class B Preferred............... $27,000 $26,937 $93,829 $37,683
Class C Preferred............... 3,000 2,993 8,770 3,523
Class D Preferred............... -- -- 50,552 24,473
------- -------
$29,930 $65,679
======= =======
</TABLE>
The rights, preferences and privileges with respect to the mandatorily
redeemable preferred stock of subsidiary, CFN Mandatorily Redeemable Preferred,
are as follows:
Authorized number of shares
As of December 31, 1998, there were 24,900,000, 13,333,334 and 13,333,334
shares of CFN Mandatorily Redeemable Preferred shares authorized, issued and
outstanding, respectively. There were no shares authorized, issued or
outstanding as of December 31, 1997.
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 at the
option of the holder and is also 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.
F-21
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
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 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.
F-22
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
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.
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.
F-23
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
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 2,782 --
---- ------- -----
344 2,782 --
---- ------- -----
$302 $ 2,782 $ --
==== ======= =====
</TABLE>
As of December 31, 1997 and 1998, the Company had net operating loss
carryforwards for federal income tax purposes of approximately $11,200 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 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 $ 6,195 $ 16,614
Nondeductible amortization............. (315) (1,684) (2,667)
State income tax....................... 24 252 743
Losses of foreign subsidiaries......... -- -- (860)
Change in valuation allowance,
including effect of acquisitions...... (312) (2,159) (13,427)
Other.................................. 308 178 (403)
----- ------- --------
$ 302 $ 2,782 $ --
===== ======= ========
</TABLE>
F-24
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
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.................................. 2,711 11,400
------- --------
$(2,290) $ (7,589)
======= ========
Gross deferred tax liabilities
Property and equipment............................... 242 842
Intangible assets.................................... 1,832 6,570
Conversion from S Corporation to C Corporation....... 116 77
Other................................................ 100 100
------- --------
2,290 7,589
------- --------
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.
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.
F-25
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
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) $ (15,440) $ (48,866)
Pro forma......................... $(1,481) $(15,501) $(50,388)
Basic and diluted net loss per
common share
As reported....................... $ (0.37) $ (2.36) $ (4.92)
Pro forma......................... $ (0.37) $ (2.37) $ (5.05)
</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 1996, 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.
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 $ 9.91 $ --
Option price=fair market
value -- -- $ 2.50 $2.50 $ 5.00 $0.91
Option price<fair market
value -- -- $ 2.13 $0.90 $ 3.49 $2.10
</TABLE>
F-26
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
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 9.30 $ 0.19 531,460 $ 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>
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.
F-27
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
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.
iXL's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
segment requires different technology, strategic competencies, and marketing
strategies.
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........................... (33,636) (13,542) (47,178)
Loss on equity investment...................... (1,640) -- (1,640)
Interest income................................ 713 37 750
Interest expense............................... 750 20 770
Amortization................................... 10,534 56 10,590
Depreciation................................... 4,542 675 5,217
Identifiable assets............................ 86,207 9,696 95,903
Capital expenditures........................... 18,082 2,222 20,304
<CAPTION>
1997
----
<S> <C> <C> <C>
Revenues....................................... $18,986 $ -- $18,986
Loss from operations........................... (12,126) (4,667) (16,793)
Loss on equity investment...................... (1,443) -- (1,443)
Interest income................................ 136 -- 136
Interest expense............................... 238 -- 238
Amortization................................... 5,135 56 5,191
Depreciation................................... 1,328 80 1,408
Identifiable assets............................ 42,795 1,454 44,249
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 $347 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.
F-28
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
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.
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 $2,177, respectively.
16. Subsequent Events
In January 1999, for net consideration of $22,718, the Company issued
22,825 shares of Class A Preferred. A portion of the proceeds were used to
repay approximately $9,430 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 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.
Prior to the closing of the Company's initial public offering, the
Company's shareholders will approve an amendment to the Company's Certificate
of Incorporation which will take effect upon such closing. Pursuant to such
amendment, upon the closing of the initial public offering, all outstanding
shares of Class A, Class B and Class C Convertible Preferred Stock, Class D
Nonvoting Preferred Stock, and Class A and Class B Common Stock will be
reclassified as common stock. This reclassification will preclude the automatic
conversion feature of the Class A, Class B and Class C Convertible Preferred
Stock.
The Class D Preferred Stockholders will, as a result of the
reclassification, receive in the aggregate 3,722,502 shares of common stock
plus a number of shares equal to the Class D Preferred Stock liquidation value
of $35,700 plus accrued dividends divided by the gross initial public offering
price of common stock before deducting any underwriting or other selling
discounts. This transaction 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.
Subsequent Event (unaudited)
Transaction with General Electric
In April 1999, the Company entered into several agreements with
affiliates of the General Electric Company ("GE") whereby (1) GE committed to
purchase 16,190,475 shares of CFN series B mandatorily redeemable convertible
preferred stock (12.5% of CFN, on an as converted basis) for a purchase price
of approximately $50,000 payable upon the earlier of the initial public
offering date or August 31, 1999 (2) GE entered into a services agreement that
provides that GE will purchase $20,000 of services from the Company
F-29
<PAGE>
iXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share and per share data)
and in exchange for entering into such agreement the Company will grant GE
warrants to purchase 1 million shares of the Company's common stock at an
exercise price of $15 per share (3) GE committed to purchase 2 million shares
of the Company's common stock at a price per share equal to the initial public
offering price in a private placement that will be concurrent with the initial
public offering and (4) the Company will grant GE warrants to purchase 1.5
million shares of the Company's common stock at an exercise price equal to the
initial public offering price in consideration for GE (a) implementing a
mutually acceptable marketing campaign to advertise its relationships with the
Company and CFN, and (b) entering into an agreement to use reasonable efforts
to provide access to CFN's platform to employees of GE Capital Equity
Investments, Inc.
All the warrants issued in connection with the April 1999 transactions
with GE are 100% vested on the date of grant, nonforfeitable, and are
exercisable after one year subsequent to the date of grant. The fair value of
the warrants to purchase 1 million shares of common stock issued in connection
with the $20 million services agreement is $4.8 million. The related charge
will be recorded as contra-revenue as the services are provided to GE. The fair
value of the warrants was determined using the Black-Scholes option pricing
model. The assumptions utilized in determining the fair value are as follows:
life of warrant=three years; expected volatility=85%; dividend yield=0%; risk
free rate=5%; fair market value of underlying stock on date of grant=$10.00.
The fair value of the warrants to purchase 1.5 million shares of common
stock of $12.6 million has been calculated using the Black Scholes option
pricing model. The assumptions utilized in determining this fair value are as
follows: life of warrant=five years; expected volatility=85%; dividend
yield=0%; risk free rate=5%; fair market value of underlying stock on date of
grant=$12.00 (based on the initial public offering price); exercise
price=$12.00.
In conjunction with the above agreements, the exchangeability feature of
the CFN Mandatorily Redeemable Preferred, as described in Note 8, was
eliminated. In addition, the commitment of the Company to purchase additional
shares of CFN Mandatorily Redeemable Preferred, as described in Note 8, was
also eliminated.
Pro forma financial information
The pro forma consolidated balance sheet as of March 31, 1999 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 $49,300 from the issuance of
16,190,475 shares of CFN Series B mandatorily redeemable convertible preferred
stock on June 8, 1999; (ii) the reclassification 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; (iii) the issuance of Common Stock
issuable upon the reclassification of the Class D Mandatorily Redeemable
Preferred Stock ("Class D Preferred") which includes the Common Stock issuable
in lieu of cash for the liquidation value and accrued dividends; (iv) the
exercise of warrants to purchase 240,006 shares of common stock which were
mandatorily exercisable upon the closing of iXL's initial public offering into
237,254 shares of common stock; (v) the exercise of warrants to purchase
1,246,000 shares of common stock for cash consideration of $4.58 per share upon
the closing of iXL's initial public offering; (vi) the repayment of
$9.9 million of debt upon the closing of iXL's initial public offering; (vii)
the sale by iXL of 6,000,000 shares of common stock offered at the initial
public offering price of $12 per share after deducting the estimated
underwriting discounts and commissions and offering expenses payable by iXL;
(viii) the sale and issuance to General Electric upon the closing of iXL's
initial public offering of an aggregate of 2,000,000 shares of common stock at
the initial public offering price of $12 per share; and (ix) the sale by iXL of
900,000 shares of common stock at $12 per share upon the underwriter's exercise
of the over-allotment option.
F-30
<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-31
<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-32
<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 1,113,615
Selling, general and administrative........ 1,935,205 2,231,895
Depreciation and amortization.............. 74,234 114,467
---------- ----------
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-33
<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-34
<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-35
<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 customers representing 10%
or more of revenues for the eight months ended May 31, 1997 are as follows:
customer A--$900,000 and customer B--$451,000. Sales to customers representing
10% or more of revenues for the eleven months ended September 30, 1996 are as
follows: customer C--$262,000, customer D--$175,000, customer E--$248,000, and
customer F--$168,000.
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-36
<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-37
<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 Enterprises, 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-38
<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>
In June 1997, the Company was acquired by iXL Enterprises, Inc. (see Note
12). A portion of the proceeds from the acquisition was used to repay the
Company's outstanding debt and accrued interest of approximately $1,600,000 at
the date of acquisition.
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. The
Company estimated the fair value of its stock at the date it was issued to
employees and consultants taking into consideration the Company's results of
operations, a stock repurchase, the sale of the Company to iXL and certain
other transactions.
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. The fair value of the warrants at the date of grant was estimated to be
less than $1,000 and accordingly no amounts were allocated to them.
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. The fair
value of the warrants at the date of grant was estimated to be less than $1,000
and accordingly no amounts were allocated to them.
F-39
<PAGE>
BOXTOP INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The fair value of each warrant issued during the period October 1, 1996
through May 31, 1997 was estimated on the date of the grant using the Black-
Scholes option pricing model with the following weighted-average assumptions:
dividend yield of 0%; expected volatility of 20%; risk free interest rate of
6%; expected life of 3 years.
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.
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-40
<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-41
<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-42
<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-43
<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-44
<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-45
<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-46
<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 websites 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-47
<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-48
<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-49
<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-50
<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-51
<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-52
<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-53
<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-54
<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-55
<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). 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-56
<PAGE>
DIGITAL PLANET
NOTES TO FINANCIAL STATEMENTS--(Continued)
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>
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.
F-57
<PAGE>
DIGITAL PLANET
NOTES TO FINANCIAL STATEMENTS--(Continued)
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-58
<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-59
<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.
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-60
<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.
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.
F-61
<PAGE>
DIGITAL PLANET
NOTES TO FINANCIAL STATEMENTS--(Continued)
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-62
<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-63
<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-64
<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-65
<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-66
<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-67
<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-68
<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-69
<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-70
<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................................................... $(146,824)
</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 0% for the period; average risk free interest rate 6.4%;
expected life of 4.5 years for the period.
F-71
<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-72
<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-73
<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-74
<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-75
<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-76
<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-77
<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 actual time
incurred which is billed at an agreed-upon hourly rate. 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-78
<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-79
<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
======== ========
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:
<CAPTION>
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-80
<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-81
<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 0% 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 $0.05 and $0.13, respectively.
F-82
<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-83
<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-84
<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-85
<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-86
<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-87
<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-88
<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-89
<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-90
<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-91
<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
======== ========
At December 31, 1997 and June 30, 1998, the Company had property and
equipment under capital lease as follows:
<CAPTION>
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
======== ========
3. Borrowings
Borrowings consist of the following:
<CAPTION>
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-92
<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-93
<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 0% 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-94
<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-95
<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-96
<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-97
<PAGE>
TEKNA, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the year For the six
ended months
December 31, ended June 30,
1997 1997 1998
------------ ----- ----------
(unaudited)
<S> <C> <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 $ 426 29,513
-------- ----- ----------
Loss from operations......................... (18,719) (426) (73,290)
Interest income, net........................... 2,167 -- 4,315
-------- ----- ----------
Net loss..................................... $(16,552) $(426) $ (68,975)
======== ===== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-98
<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-99
<PAGE>
TEKNA, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the year For the six
ended months ended
December 31, June 30,
1997 1997 1998
------------ ------ ---------
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net loss...................................... $ (16,552) $ (426) $ (68,975)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization................ 17,397 426 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-100
<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-101
<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, 1997 and 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 June
30, 1997 and 1998. 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-102
<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-103
<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-104
<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-105
<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-106
<PAGE>
LARRY MILLER PRODUCTIONS, INC.
STATEMENT 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-107
<PAGE>
LARRY MILLER PRODUCTIONS, INC.
STATEMENT 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> <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-108
<PAGE>
LARRY MILLER PRODUCTIONS, INC.
STATEMENT 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> <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-109
<PAGE>
LARRY MILLER PRODUCTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
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, multimedia presentation design,
evaluation, management, and website 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. Website
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-110
<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. The refundable income taxes
at December 31, 1997 of $96,454 is the result of estimated tax payments made in
excess of amount owed and the carryback of net operating losses. The Company
received this refund in cash in 1998.
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-111
<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-112
<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-113
<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-114
<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-115
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Through and including , 1999 (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.
4,000,000 Shares
[LOGO OF IXL ENTERPRISES, INC. APPEARS HERE]
iXL ENTERPRISES, INC.
Common Stock
----------------
PROSPECTUS
----------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
Item 20. Indemnification of Directors and Officers.
iXL's Certificate of Incorporation and 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 iXL or is or was serving at the request
of iXL 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 iXL to the fullest extent authorized by the Delaware General
Corporation Law, 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 iXL
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 iXL 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 iXL 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 Delaware General Corporation Law for officers and directors.
Section 145 of the Delaware General Corporation Law provides, among other
things, that iXL 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 iXL) by reason
of the fact that the person is or was a director, officer, agent or employee of
iXL or is or was serving at the iXL's request as a director, officer, agent, or
employee of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding. The power to indemnify applies
if such person is successful on the merits or otherwise in defense of any
action, suit or proceeding, or 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 iXL, 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 iXL 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 indemnification shall be made in the
event of any adjudication of negligence or misconduct in the performance of his
duties to iXL, unless the court believes that in light of all the circumstances
indemnification should apply.
The indemnification provisions contained in iXL's Certificate of
Incorporation and 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, iXL 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.
II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules.
a. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
2.1 Exchange Agreement, dated April 30, 1996, between iXL Enterprises,
Inc., 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 iXL Enterprises,
Inc., 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 iXL Enterprises,
Inc., 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 iXL Enterprises,
Inc., 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 iXL Enterprises, Inc., 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 iXL Enterprises, Inc., 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
iXL Enterprises, Inc., 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 iXL Enterprises, Inc., 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 iXL Enterprises, Inc., 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
iXL Enterprises, Inc., 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
iXL Enterprises, Inc., 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
iXL Enterprises, Inc., 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
iXL Enterprises, Inc., iXL-Los Angeles, Inc., Spin Cycle Entertainment
and the SCE Shareholders.+
2.16 Agreement and Plan of Merger, dated as of May 12, 1998, by and between
iXL Enterprises, Inc., iXL-Los Angeles, Inc., Digital Planet and the
Digital Shareholders.+
2.17 Agreement and Plan of Merger, dated as of May 12, 1998, by and between
InTouch Interactive, Inc., iXL Enterprises, Inc., iXL-Charlotte, Inc.,
and the InTouch Shareholders.+
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
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., iXL Enterprises, Inc., iXL-San Diego, Inc., and
the CommerceWAVE shareholders.+
2.20 Agreement and Plan of Merger, dated as of July 8, 1998, by and between
iXL Enterprises, Inc., 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, iXL Enterprises, Inc. and iXL-New York,
Inc.+
2.22 Agreement and Plan of Merger, dated as of July 22, 1998, by and
between Image Communications, Inc., iXL Enterprises, Inc., iXL-DC,
Inc., and the Image Shareholders.+
2.23 Share Purchase Agreement, dated as of July 28, 1998, by and among iXL
Enterprises, Inc., 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, iXL Enterprises, Inc., iXL-Boston, Inc. and the
Spinners Shareholders.+
2.25 Agreement and Plan of Merger, dated as of September 4, 1998, by and
among iXL Enterprises, Inc., 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 iXL Enterprises, Inc., Jens Bley, Manfred Otterbreit,
Stephan Balzerand Matthias Oelmann.+
2.27 Agreement and Plan of Merger dated as of September 9, 1998 by and
among iXL Enterprises, Inc., 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 iXL Enterprises, Inc., 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 iXL Enterprises, Inc., 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 iXL Enterprises, Inc., 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 iXL Enterprises, Inc., 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 iXL Enterprises, Inc., 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 iXL Enterprises, Inc., iXL-Connecticut, Inc., Pequot Systems,
Inc. and the Pequot Shareholders.+
3.1 Amended and Restated Certificate of Incorporation.
3.2 Amended and Restated Bylaws.
4.1 Form of Common Stock Certificate.+
4.2 Form of Mandatorily Exercisable Common Stock Warrant Agreement.+
4.3 Form of Class B Convertible Preferred Stock Warrant Agreement.+
4.4 Form of Class A Common Stock Warrant Agreement.+
4.5 Form of Class B Common Stock Warrant Agreement.+
4.6 Investor Stockholders Agreement, dated as of April 30, 1996, as
amended.+
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.7 Third Amended and Restated Stockholders' Agreement dated June 8, 1999
by and among iXL Enterprises, Inc., Kelso Investment
Associates V, L.P., Kelso Equity Partners V, L.P., CB Capital
Investors, L.P. and the other stockholders listed therein.
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 Employment Agreement dated November 28, 1999 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.+
10.8 Advisory Agreement dated as of April 30, 1996 by and between IXL
Holdings, Inc. and Kelso & Company, together with form of amendment.+
10.9 Consulting Agreement dated as of February 5, 1999 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 iXL
Enterprises, Inc.+
10.13 Promissory Note, dated as of September 18, 1997, in the principal
aggregate amount of $300,000 in favor of James Rocco from iXL
Enterprises, Inc.+
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 iXL
Enterprises, Inc.+
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
iXL Enterprises, Inc.+
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
iXL Enterprises, Inc.+
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
iXL Enterprises, Inc.+
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
iXL Enterprises, Inc.+
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 iXL
Enterprises, Inc. 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 iXL
Enterprises, Inc.+
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 thereto and The Chase Manhattan Bank as Administrative Agent and
related agreements.+
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.22 Promissory Note, dated as of September 18, 1998, between David Clauson
(as Maker) and iXL Enterprises, Inc. together with Stock Pledge
Agreement.+
10.23 Subscription Agreement for Common Stock dated April 12, 1996 between
iXL Enterprises, Inc. and U. Bertram Ellis, Jr.+
10.24 Subscription Agreement for Common Stock dated April 12, 1996 between
iXL Enterprises, Inc. and James S. Altenbach.+
10.25 Subscription Agreement for Class A Convertible Preferred Stock dated
April 30, 1996 between iXL Enterprises, Inc. and U. Bertram Ellis,
Jr.+
10.26 Subscription Agreement for Class A Convertible Preferred Stock dated
April 30, 1996 between iXL Enterprises, Inc. 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 iXL Enterprises, Inc. and James S. Altenbach.+
10.28 Subscription Agreement for Class A Convertible Preferred Stock dated
April 4, 1997 between iXL Enterprises, Inc. and Kelso Investment
Associates V, L.P.+
10.29 Subscription Agreement for Class A Convertible Preferred Stock dated
April 4, 1997 between iXL Enterprises, Inc. and Kelso Equity Partners
V, L.P.+
10.30 Subscription Agreement for Class A Convertible Preferred Stock dated
April 4, 1997 between iXL Enterprises, Inc. and U. Bertram Ellis, Jr.+
10.31 Subscription Agreement for Class A Convertible Preferred Stock dated
April 4, 1997 between iXL Enterprises, Inc. and James S. Altenbach.+
10.32 Intentionally Omitted.
10.33 Subscription Agreement for Class A Convertible Preferred Stock dated
August 25, 1998 between iXL Enterprises, Inc. and William C. Nussey.+
10.34 Subscription Agreement for Class A Convertible Preferred Stock dated
September 18, 1998 between iXL Enterprises, Inc. and David Clauson.+
10.35 Exchange Agreement, dated April 30, 1996, between iXL Enterprises,
Inc., 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 iXL Enterprises,
Inc., 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 iXL Enterprises,
Inc., 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 iXL
Enterprises, Inc., 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 iXL
Enterprises, Inc. and General Electric Capital Corporation.+
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.42 Warrant Award Agreement dated as of December 23, 1997 by and between
iXL Enterprises, Inc. and General Electric Capital Corporation.+
10.43 Warrant Agreement, dated as of December 23, 1997, by and between iXL
Enterprises, Inc. and General Electric Capital Corporation.+
10.44 Warrant Award Agreement dated as of March 12, 1998 by and between iXL
Enterprises, Inc. and Chase Venture Capital Associates, L.P., and
related agreement.+
10.45 Securities Purchase Agreement, dated March 30, 1998, between iXL
Enterprises, Inc. and Kevin Wall for the purchase of shares of iXL
Enterprises, Inc.'s Common Stock.+
10.46 Securities Purchase Agreement, dated August 14, 1998, among iXL
Enterprises, Inc. 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 iXL
Enterprises, Inc. and the Purchasers listed therein for the purchase
of shares of iXL Enterprises, Inc.'s Class A Convertible 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 iXL
Enterprises, Inc. and General Electric Capital Corporation.+
10.50 Stockholders' Agreement dated November 3, 1999 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 iXL
Enterprises, Inc. and Kelso Investment Associates V, L.P., Kelso
Equity Partners V, L.P., and certain other stockholders of iXL
Enterprises, Inc.+
10.54 Indemnification Agreement dated June 8, 1999 by and among iXL
Enterprises, Inc. and the Indemnitees named therein.
10.55 Amended and Restated Registration Rights Agreement by and among iXL
Enterprises, Inc., Consumer Financial Network, Inc., GE Capital Equity
Investments, Inc., General Electric Pension Trust and General Electric
Capital Corporation.
10.56 Master Services Agreement dated April 7, 1999 by and between iXL-New
York, Inc. and General Electric Capital Corporation.+
10.57 Warrant Agreement dated April 7, 1999 by and between iXL Enterprises,
Inc. and GE Capital Equity Investments, Inc.+
10.58 Stock Purchase Agreement dated April 7, 1999 by and between Consumer
Financial Network, Inc., GE Capital Equity Investments, Inc., and
General Electric Pension Trust.+
10.59 Securities Purchase Agreement dated April 7, 1999 by and among iXL
Enterprises, Inc., GE Capital Equity Investments, Inc., and the
General Electric Pension Trust.+
10.60 Warrant Agreement dated June 8, 1999 by and between iXL Enterprises,
Inc. and GE Capital Equity Investments, Inc.
10.61 Investor Agreement dated June 8, 1999 by and between GE Capital Equity
Investments, Inc., the General Electric Pension Trust, iXL
Enterprises, Inc. and Consumer Financial Network, Inc.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.62 Amended and Restated Stockholders' Agreement among Consumer Financial
Network, Inc., iXL Enterprises, Inc., GE Capital Equity Investments,
Inc., the General Electric Pension Trust and General Electric Capital
Corporation, as amended.
10.63 Information Services Agreement dated June 30, 1997 among Consumer
Financial Network, Inc., CFN Agency, Inc. and Electric Insurance
Company.+
10.64 Master Service Agreement dated as of December 31, 1998 by and between
iXL, Inc. and Delta Air Lines, Inc.+
10.65 Warrant Agreement dated December 31, 1998 by and between iXL
Enterprises, Inc. and Delta Air Lines, Inc.+
10.66 Letter Agreement for Marketing Services dated May 11, 1999 by and
between iXL Enterprises, Inc. and GE Capital Equity Investments, Inc.+
10.67 U.S. Purchase Agreement dated as of June 2, 1999 by and among iXL
Enterprises, Inc. and the underwriters listed therein.
10.68 International Purchase Agreement dated as of June 2, 1999 by and among
iXL Enterprises, Inc. and the underwriters listed therein.
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.
99.1 Consent to be named in Registration Statement.
</TABLE>
- --------
+ Incorporated by reference from iXL's Registration Statement on Form S-1 (No.
333-71937).
* To be filed by amendment.
** Included on signature pages hereto.
b. Financial Statement Schedules
Not applicable.
Item 22. Undertakings.
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:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i)to include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which,
II-7
<PAGE>
individually or in the aggregate, represent a fundamental change
in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424 (b)
if, in the aggregate, the changes in volume and price represent
no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed 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;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b) 11 or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-8
<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 June 28, 1999.
iXL Enterprises, Inc.,
a Delaware corporation
/s/ M. Wayne Boylston
By: _________________________________
Name:M. Wayne Boylston
Title:Chief Financial 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 June 28, 1999
______________________________________ (Principal Executive
U. Bertram Ellis, Jr. Officer)
/s/ M. Wayne Boylston Chief Financial Officer June 28, 1999
______________________________________ (Principal Financial
M. Wayne Boylston Officer)
/s/ Jeffrey T. Arnold Director June 28, 1999
______________________________________
Jeffrey T. Arnold
/s/ Frank K. Bynum, Jr. Director June 28, 1999
______________________________________
Frank K. Bynum, Jr.
/s/ Jerome D. Colonna Director June 28, 1999
______________________________________
Jerome D. Colonna
/s/ I. Robert Greene Director June 28, 1999
______________________________________
I. Robert Greene
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William C. Nussey Director June 28, 1999
______________________________________
William C. Nussey
/s/ Thomas G. Rosencrants Director June 28, 1999
______________________________________
Thomas G. Rosencrants
/s/ Kevin M. Wall Director June 28, 1999
______________________________________
Kevin M. Wall
/s/ Thomas R. Wall, IV Director June 28, 1999
______________________________________
Thomas R. Wall, IV
/s/ Gary C. Wendt Director June 28, 1999
______________________________________
Gary C. Wendt
</TABLE>
II-10
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
iXL ENTERPRISES, INC.
iXL ENTERPRISES, INC., a corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is iXL Enterprises, Inc. (the
"Corporation").
2. The Corporation was originally incorporated in Delaware under the name
of IXL Holdings, Inc. pursuant to a Certificate of Incorporation filed with the
Delaware Secretary of State on March 21, 1996.
3. This Restated Certificate of Incorporation was duly adopted in
accordance with the requirements of Sections 242 and 245 (and Section 228, by a
written consent given in accordance with said section) of the General
Corporation Law of the State of Delaware and restates and integrates and further
amends the provisions of the existing Certificate of Incorporation of the
Corporation.
4. The Corporation's Certificate of Incorporation is hereby amended and
restated so as to read in its entirety in the form attached hereto as Exhibit A
and incorporated herein by this reference (Exhibit A and this Certificate
collectively constituting the Corporation's Restated Certificate of
Incorporation).
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 8th
day of June, 1999 and hereby affirm and acknowledge under penalty of perjury
that the filing of the Restated Certificate of Incorporation is the act and deed
of the Corporation.
/s/ M. Wayne Boylston
________________________________________
M. Wayne Boylston
Executive Vice President
-1-
<PAGE>
EXHIBIT A
---------
RESTATED CERTIFICATE OF INCORPORATION
OF
iXL ENTERPRISES, INC.
---------------------
ARTICLE I
NAME
The name of the Corporation is iXL Enterprises, Inc.
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The registered agent at this address is the Corporation
Trust Company.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
CAPITAL STOCK
4.1 Authorized Capital Stock. The total number of shares of capital stock
------------------------
of all classes which the Corporation has authority to issue is two hundred and
five million (205,000,000), two hundred million (200,000,000) shares of which
shall be Common Stock, par value one cent ($.01) per share, and five million
(5,000,000) shares of which shall be Preferred Stock, par value one cent ($.01)
per share.
4.2 Preferred Stock. (a) The Preferred Stock may be issued at any time
---------------
and from time to time, in one or more series. The Board of Directors is hereby
authorized to provide for the issuance of shares of Preferred Stock in series
and, by filing a certificate of designation pursuant to the applicable
provisions of the General Corporation Law of the State of Delaware (hereinafter
referred to as a "Preferred Stock Certificate of Designation"), to establish
------------------------------------------
from time to time the number of shares to be included in each such series, and
to fix the designation, powers, preferences and rights of shares of each such
series and the qualifications, limitations and restrictions thereof.
-1-
<PAGE>
(b) The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of the
following:
(i) the designation of the series, which may be by distinguishing
number, letter or title;
(ii) the number of shares of the series, which number the Board of
Directors may thereafter (except where otherwise provided in the applicable
Preferred Stock Certificate of Designation) increase or decrease (but not
below the number of shares thereof then outstanding);
(iii) whether dividends, if any, shall be cumulative or noncumulative
and the dividend rate of the series;
(iv) whether dividends, if any, shall be payable in cash, in kind
or otherwise;
(v) the dates on which dividends, if any, shall be payable;
(vi) the redemption rights and price or prices, if any, for shares
of the series;
(vii) the terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series;
(viii) the amounts payable on shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation;
(ix) whether the shares of the series shall be convertible or
exchangeable into shares of any other class or series, or any other
security, of the Corporation or any other corporation, and, if so, the
specification of such other class or series or such other security, the
conversion or exchange price or prices or rate or rates, any adjustments
thereof, the date or dates as of which such shares shall be convertible or
exchangeable and all other terms and conditions upon which such conversion
or exchange may be made;
(x) restrictions on the issuance of shares of the same series or of
any other class or series; and
(xi) whether or not the holders of the shares of such series shall
have voting rights, in addition to the voting rights provided by law, and
if so, the terms of such voting rights, which may provide, among other
things and subject to the other provisions of this Certificate of
Incorporation, that each share of such series shall carry one vote or more
or less than one vote per share, that the holders of such series shall be
entitled to vote on certain matters as a separate class (which
-2-
<PAGE>
for such purpose may be comprised solely of such series or of such
series and one or more other series or classes of stock of the
Corporation) and that all the shares of such series entitled to vote
on a particular matter shall be deemed to be voted on such matter in
the manner that a specified portion of the voting power of the shares
of such series or separate class are voted on such matter.
(c) The Common Stock shall be subject to the express terms of the
Preferred Stock and any series thereof.
4.3 Conversion, Reclassification and Modification of Outstanding Capital
--------------------------------------------------------------------
Stock. The capital stock of the Corporation outstanding on the date hereof is
- -----
modified or converted as follows:
(a) The Class B Common Stock, par value $.01 per share, is hereby
renamed "Common Stock," which such Common Stock is the same Common Stock defined
in Section 4.1, above.
(b) Upon this Restated Certificate of Incorporation of the
Corporation becoming effective in accordance with the General Corporation Law of
the State of Delaware (the "Effective Time"):
(i) each share of Class A Common Stock, par value $.01 per
share, of the Corporation ("Class A Common Stock"), Class A
Convertible Preferred Stock, par value $.01 per share, of the
Corporation ("Class A Preferred"), Class B Convertible Preferred
Stock, par value $.01 per share, of the Corporation ("Class B
Preferred"), and Class C Convertible Preferred Stock, par value $.01
per share, of the Corporation ("Class C Preferred") issued and
outstanding (or held in the treasury of the Corporation) immediately
prior to the Effective Time shall be automatically reclassified as 1,
100, 100, and 100, respectively, validly issued, fully paid and
nonassessable shares of Common Stock, par value $.01 per share, of the
Corporation ("Common Stock"); and
(ii) each share of Class D Nonvoting Preferred Stock, par value
$.01 per share, of the Corporation ("Class D Preferred") issued and
outstanding (or held in the treasury of the Corporation) immediately
prior to the Effective Time shall be automatically reclassified as
such number of validly issued, fully paid and nonassessable shares of
Common Stock as results from the formula set forth below:
N = (D + $1000) + 104.271982377686
-----------
P
where
N = the number of shares of Common Stock into which each
issued and outstanding (or treasury) share of
-3-
<PAGE>
Class D Preferred shall be automatically reclassified
as at the Effective Time
D = the dollar amount of the accrued but unpaid dividends
with respect to each share of Class D Preferred Stock
as of the Effective Time
P = the initial public offering price, prior to any
underwriting or other selling discounts, of the Common
Stock in the initial public offering of the Common
Stock occurring contemporaneously with the Effective
Time.
Each stock certificate that, immediately prior to the Effective Time,
represented shares of Class A Common Stock, Class A Preferred, Class B
Preferred, Class C Preferred or Class D Preferred shall, from and after the
Effective Time, automatically and without the necessity of presenting the same
for exchange, represent that number of shares of Common Stock into which the
shares formerly represented by such certificate shall have been reclassified,
provided, however, that each person holding of record a certificate that
represented shares of capital stock so reclassified shall receive, upon
surrender of such certificate, a new certificate evidencing and representing the
number of shares of Common Stock into which the shares formerly represented by
such certificate shall have been reclassified.
4.4 Designation of Director Nominees.
--------------------------------
(a) Definitions. "Affiliate" shall mean, with respect to any Person,
any other Person directly or indirectly, through one or more intermediaries,
controlling, controlled by, or under common control with such Person. "Person"
shall mean an individual, corporation, partnership, limited liability company,
association, trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
(b) For so long as Kelso Investment Associates V, L.P. ("KIA V"),
-----
Kelso Equity Partners V, L.P. ("KEP V", and together with KIA V, "Kelso") or
-----
their respective Affiliates, hold 5% or more in the aggregate of the outstanding
Common Stock of the Corporation, Kelso shall (i) have the right to designate two
individuals as Board of Directors nominees for election to the Board of
Directors of the Corporation, and (ii) have the exclusive right to designate for
election an individual to fill any vacancy created by the removal or death of or
resignation by a director originally designated for election by Kelso.
(c) For so long as CB Capital Investors, L.P. ("CB") or its
Affiliates, hold 5% or more in the aggregate of the outstanding Common Stock of
the Corporation, CB shall (i) have the right to designate one individual as a
Board of Directors nominee for election to the Board of Directors of the
Corporation, and (ii) have the exclusive right to designate for election an
individual to fill any vacancy created by the removal or death of or resignation
by a director originally designated for election by CB.
-4-
<PAGE>
(d) If Kelso transfers 100% of the shares of Common Stock owned by it
as of the date hereof (immediately after the reclassification of capital stock
effectuated by Section 4.3 of this Restated Certificate of Incorporation) to one
Person or a group of Affiliates, its transferees shall be deemed to be Kelso for
purposes of this Section 4.4. If Kelso transfers 50% or more, but less than
100%, of the shares of Common Stock owned by it as of the date hereof
(immediately after the reclassification of capital stock effectuated by Section
4.3 of this Restated Certificate of Incorporation) to one Person or a group of
Affiliates, then such transferees shall have the rights and obligations of Kelso
under this Section 4.4 to the extent set forth in an instrument executed by
Kelso and such transferees. If CB transfers 100% of the shares of Common Stock
owned by it as of the date hereof (immediately after the reclassification of
capital stock effectuated by Section 4.3 of this Restated Certificate of
Incorporation) to one Person or a group of Affiliates, its transferees shall be
deemed to be CB for purposes of this Section 4.4.
ARTICLE V
BOARD OF DIRECTORS:
MANAGEMENT OF THE CORPORATION
The following provisions are inserted for the management of the business
and for the conduct of the affairs of the Corporation and for the purpose of
creating, defining, limiting and regulating the powers of the Corporation and
its directors and stockholders:
5.1 Notice for Nomination. Advance notice of nominations for the election
---------------------
of directors shall be given in the manner and to the extent provided in the By-
laws of the Corporation.
5.2 Election. The election of directors need not be by written ballot.
--------
5.3 Management of Business. (a) All corporate powers and authority of the
----------------------
Corporation (except as at the time otherwise provided by law or by this Restated
Certificate of Incorporation) shall be vested in and exercised by or under the
direction of the Board of Directors.
(b) The Board of Directors shall have the power without the assent or
vote of the stockholders to adopt, amend, alter or repeal the By-Laws of the
Corporation.
5.4 Liability. A director of the Corporation shall not be liable to the
---------
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any
amendment, modification or repeal of the foregoing sentence shall not adversely
affect any right or protection of a director of the Corporation hereunder in
respect of any act or omission occurring prior to the time of such amendment,
modification or repeal.
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<PAGE>
5.5 Indemnification. The Corporation shall indemnify to the full extent
---------------
possible under its Bylaws, as amended from time to time, any person who is or
was a director, officer, employee or agent of the Corporation.
5.6 No Stockholder Action by Written Consent. Except as otherwise
----------------------------------------
provided for or fixed pursuant to the provisions of Section 4.2 of this Restated
Certificate of Incorporation relating to the rights of holders of any series of
Preferred Stock, no action required to be taken or which may be taken at any
annual or special meeting of stockholders of the corporation may be taken
without a meeting, and the power of stockholders to consent in writing, without
a meeting, to the taking of any action is specifically denied.
ARTICLE VI
NO PREEMPTIVE RIGHTS
No stockholder shall have any statutory preemptive right to acquire
unissued shares of capital stock of the Corporation.
ARTICLE VII
AMENDMENT
The Corporation reserves the right to amend or repeal any provision
contained in this Restated Certificate of Incorporation in the manner now or
hereafter prescribed by the laws of the State of Delaware, and all rights herein
conferred upon stockholders or directors (in the present form of this Restated
Certificate of Incorporation or as hereinafter amended) are granted subject to
this reservation; provided, however, that any amendment or repeal of Section 5.4
or 5.5 of Article V of this Restated Certificate of Incorporation shall not
adversely affect any right or protection existing hereunder immediately prior to
such amendment or repeal.
-6-
<PAGE>
EXHIBIT 3.2
- --------------------------------------------------------------------------------
iXL ENTERPRISES, INC.
AMENDED AND RESTATED BYLAWS
---------------------------
As Adopted on June 8, 1999
- --------------------------------------------------------------------------------
<PAGE>
iXL ENTERPRISES, INC.
AMENDED AND RESTATED BYLAWS
---------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I STOCKHOLDERS
Section 1.01. Annual Meetings.............................................. 1
Section 1.02. Special Meetings............................................. 1
Section 1.03. Notice of Meetings; Waiver................................... 2
Section 1.04. Quorum....................................................... 2
Section 1.05. Voting....................................................... 3
Section 1.06. Voting by Ballot............................................. 3
Section 1.07. Adjournment.................................................. 3
Section 1.08. Proxies...................................................... 3
Section 1.09. Organization; Procedure...................................... 4
Section 1.10. Notice of Nominations and Stockholder Business............... 5
Section 1.11. Inspectors of Elections...................................... 8
Section 1.12. Opening and Closing of Polls................................. 9
ARTICLE II BOARD OF DIRECTORS
Section 2.01. General Powers............................................... 9
Section 2.02. Number of Directors.......................................... 9
Section 2.03. Term......................................................... 9
Section 2.04. Annual and Regular Meetings.................................. 9
Section 2.05. Special Meetings; Notice..................................... 10
Section 2.06. Quorum; Voting............................................... 10
Section 2.07. Adjournment.................................................. 10
Section 2.08. Action Without a Meeting..................................... 11
Section 2.09. Regulations; Manner of Acting................................ 11
</TABLE>
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<TABLE>
<S> <C>
Section 2.10. Action by Telephonic Communications.......................... 11
Section 2.11. Resignations................................................. 11
Section 2.12. Designation of Director Nominees............................. 11
Section 2.13. Removal of Directors......................................... 12
Section 2.14. Vacancies and Newly Created Directorships.................... 13
Section 2.15. Compensation................................................. 13
Section 2.16. Reliance on Accounts and Reports, etc........................ 13
ARTICLE III EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01. How Constituted.............................................. 13
Section 3.02. Powers....................................................... 14
Section 3.03. Proceedings.................................................. 14
Section 3.04. Quorum and Manner of Acting.................................. 14
Section 3.05. Action by Telephonic Communications.......................... 14
Section 3.06. Absent or Disqualified Members............................... 15
Section 3.07. Resignations................................................. 15
Section 3.08. Removal...................................................... 15
Section 3.09. Vacancies.................................................... 15
ARTICLE IV OFFICERS
Section 4.01. Number....................................................... 15
Section 4.02. Election..................................................... 15
Section 4.03. Salaries..................................................... 16
Section 4.04. Removal and Resignation; Vacancies........................... 16
Section 4.05. Authority and Duties of Officers............................. 16
Section 4.06. The Chairman................................................. 16
Section 4.07. The Vice Chairman............................................ 16
Section 4.08. The Chief Executive Officer.................................. 16
Section 4.09. The President................................................ 17
Section 4.10. The Executive Vice President................................. 17
Section 4.11. The Secretary................................................ 18
</TABLE>
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<TABLE>
<S> <C>
Section 4.12. The Chief Financial Officer.................................. 19
Section 4.13. The Treasurer................................................ 20
Section 4.14. Additional Officers.......................................... 20
Section 4.15. Security..................................................... 20
ARTICLE V CAPITAL STOCK
Section 5.01. Certificates of Stock, Uncertificated Shares................. 20
Section 5.02. Signatures; Facsimile........................................ 21
Section 5.03. Lost, Stolen or Destroyed Certificates....................... 21
Section 5.04. Transfer of Stock............................................ 21
Section 5.05. Record Date.................................................. 22
Section 5.06. Registered Stockholders...................................... 22
Section 5.07. Transfer Agent and Registrar................................. 22
ARTICLE VI INDEMNIFICATION
Section 6.01. Nature of Indemnity.......................................... 23
Section 6.02. Determination that Indemnification is Proper................. 24
Section 6.03. Advance Payment of Expenses.................................. 24
Section 6.04. Procedure for Indemnification of Directors and Officers...... 24
Section 6.05. Survival; Preservation of Other Rights....................... 25
Section 6.06. Insurance.................................................... 26
Section 6.07. Severability................................................. 26
ARTICLE VII OFFICES
Section 7.01. Registered Office............................................ 26
Section 7.02. Other Offices................................................ 26
ARTICLE VIII GENERAL PROVISIONS
Section 8.01. Dividends.................................................... 27
Section 8.02. Reserves..................................................... 27
Section 8.03. Execution of Instruments..................................... 27
</TABLE>
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<TABLE>
<S> <C>
Section 8.04. Corporate Indebtedness................................... 27
Section 8.05. Deposits................................................. 28
Section 8.06. Checks................................................... 28
Section 8.07. Sale, Transfer, etc. of Securities....................... 28
Section 8.08. Voting as Stockholder.................................... 28
Section 8.09. Fiscal Year.............................................. 29
Section 8.10. Seal..................................................... 29
Section 8.11. Books and Records; Inspection............................ 29
ARTICLE IX AMENDMENT OF BYLAWS
Section 9.01. Amendment................................................ 29
ARTICLE X CONSTRUCTION
Section 10.01. Construction............................................. 30
</TABLE>
<PAGE>
iXL ENTERPRISES, INC.
AMENDED AND RESTATED BYLAWS
---------------------------
As adopted on June 8, 1999
ARTICLE I
---------
STOCKHOLDERS
------------
Section I.1 Annual Meetings. If an annual meeting is required by
---------------
applicable law, the annual meeting of the stockholders of the Corporation for
the election of Directors and for the transaction of such other business as
properly may come before such meeting shall be held at such place, either within
or without the State of Delaware, and on such date and at such time, as may be
fixed from time to time by resolution of the Board of Directors and set forth in
the notice or waiver of notice of the meeting.
Section I.2 Special Meetings. Special meetings of the stockholders may
----------------
be called at any time by the Chairman of the Board or the Chief Executive
Officer or, in the event of the Chief Executive Officer's absence or disability,
by the President or any Director who is also an officer (hereafter, an "Officer
-------
Director"). In addition, a special meeting shall be called by the Chief
- --------
Executive Officer (or, in the event of his or her absence or disability, by the
President or any Officer Director), or by the Secretary (i) pursuant to a
resolution approved by a majority of the entire Board of Directors, (ii) subject
to the procedures set forth in the second paragraph of this Section 1.02, upon
receipt of a written request therefor by stockholders holding in the aggregate
not less than twenty percent (20%) of the outstanding shares of the Corporation
at the time entitled to vote at any meeting of the stockholders or (iii) so long
as the Third Amended and Restated Stockholders' Agreement, dated as of
___________ ___, 1999, by and among the Corporation and the parties listed on
the signature pages thereto (as such may be amended from time to time, the
"Stockholders' Agreement") shall remain in effect, and
<PAGE>
2
subject to the procedures set forth in the second paragraph of this Section
1.02, at the request of Kelso Investment Associates V, L.P. ("KIA V"), Kelso
Equity Partners V, L.P. ("KEP V", and together with KIA V, "Kelso") or CB
Capital Investors, L.P. ("CB") for the purpose of voting on directors designated
for election by Kelso or CB, as the case may be, pursuant to Section 2.12
hereof. If such officers shall fail to call such meeting within one hundred
(100) days after receipt of such stockholder request, the stockholder executing
such request may call such meeting. Special meetings of the stockholders shall
be held at such places, within or without the State of Delaware, as shall be
specified in the respective notices or waivers of notice thereof.
Upon request in writing sent by registered mail to the Chief Executive
Officer or the Secretary by any stockholder or stockholders entitled to call a
special meeting of stockholders pursuant to this Section 1.02, the Board of
Directors shall determine a place and time for such meeting, which time shall be
not less than ninety (90) nor more than one hundred (100) days after the receipt
and determination of the validity of such request, and a record date for the
determination of stockholders entitled to vote at such meeting in the manner set
forth in Section 5.05 hereof. Following such receipt and determination, it shall
be the duty of the Secretary or any Assistant Secretary to cause notice to be
given to the stockholders entitled to vote at such meeting, in the manner set
forth in Section 1.03 hereof, that a meeting will be held at the time and place
so determined.
Section I.3 Notice of Meetings; Waiver. The Secretary or any Assistant
--------------------------
Secretary shall cause written notice of the place, date and hour of each meeting
of the stockholders, and, in the case of a special meeting, the purpose or
purposes for which such meeting is called, to be given personally or by mail,
not less than ten (10) nor more than sixty (60) days prior to the meeting, to
each stockholder of record entitled to vote at such meeting. If such notice is
mailed, it shall be deemed to have been given to a stockholder when deposited in
the United States mail, postage prepaid, directed to the stockholder at his or
her address as it appears on the record of stockholders of the Corporation, or,
if he or she shall have filed with the Secretary of the Corporation a
<PAGE>
3
written request that notices to him or her be mailed to some other address, then
directed to him or her at such other address. Such further notice shall be given
as may be required by law.
A written waiver of any notice of any annual or special meeting signed
by the person entitled thereto shall be deemed equivalent to notice. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in a written waiver of notice. Attendance
of a stockholder at a meeting of stockholders shall constitute a waiver of
notice of such meeting, except when the stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
Section I.4 Quorum. Except as otherwise required by law or by the
------
Certificate of Incorporation, the presence in person or by proxy of the holders
of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting.
Section I.5 Voting. At all meetings of stockholders for the election
------
of directors a plurality of the votes cast shall be sufficient to elect
directors. Except as otherwise required by the Restated Certificate of
Incorporation, these Bylaws, the rules or regulations of any stock exchange
applicable to the Corporation, or applicable law or pursuant to any regulation
applicable to the Corporation or its securities, the vote of a majority of the
shares represented in person or by proxy at any meeting at which a quorum is
present shall be sufficient for the transaction of any business at such meeting.
Section I.6 Voting by Ballot. No vote of the stockholders need be
----------------
taken by written ballot unless otherwise required by law. Any vote not required
to be taken by ballot may be conducted in any manner approved at the meeting at
which such vote is taken.
<PAGE>
4
Section I.7 Adjournment. If a quorum is not present at any meeting of
-----------
the stockholders, the stockholders present in person or by proxy shall have the
power to adjourn any such meeting from time to time until a quorum is present.
Notice of any adjourned meeting of the stockholders of the Corporation need not
be given if the place, date and hour thereof are announced at the meeting at
which the adjournment is taken, provided, however, that if the adjournment is
for more than thirty days, or if after the adjournment a new record date for the
adjourned meeting is fixed pursuant to Section 5.05 of these Bylaws, a notice of
the adjourned meeting, conforming to the requirements of Section 1.03 hereof,
shall be given to each stockholder of record entitled to vote at such meeting.
At any adjourned meeting at which a quorum is present, any business may be
transacted that might have been transacted at the original meeting.
Section I.8 Proxies. Any stockholder entitled to vote at any meeting
-------
of the stockholders may authorize another person or persons to vote at any such
meeting for him or her by proxy. A stockholder may authorize a valid proxy by
executing a written instrument or by causing his or her signature to be affixed
to such writing by any reasonable means including, but not limited to, by
facsimile signature, or by transmitting or authorizing the transmission of a
telegram, cablegram, electronic mail or other means of electronic transmission
to the person designated as the holder of the proxy, a proxy solicitation firm
or a like authorized agent. No such proxy shall be voted or acted upon after the
expiration of three (3) years from the date of such proxy, unless such proxy
provides for a longer period. Every proxy shall be revocable at the pleasure of
the stockholder executing it, except in those cases where applicable law
provides that a proxy shall be irrevocable. A stockholder may revoke any proxy
which is not irrevocable by attending the meeting and voting in person or by
filing an instrument in writing revoking the proxy or by submitting another
proxy bearing a later date to the Secretary. Proxies by telegram, cablegram,
electronic mail or other electronic transmission must either set forth or be
submitted with information from which it can be determined that such telegram,
cablegram, electronic mail or other electronic transmission was authorized by
the stockholder. Any copy, facsimile telecommunication or other reliable
reproduction of a writing or transmission created pursuant to this section may
be substituted or used in lieu
<PAGE>
5
of the original writing or transmission for any and all purposes for which the
original writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
Section I.9 Organization; Procedure. (a) At every meeting of
-----------------------
stockholders the presiding officer shall be the Chairman or, in the event of his
or her absence or disability, the Chief Executive Officer or, in the event of
their absences or disabilities, the President or any Executive Vice President
chosen by resolution of the Board of Directors. The Secretary, or in the event
of his or her absence or disability, any Assistant Secretary designated by the
presiding officer, if any, or if there be no Assistant Secretary, in the absence
of the Secretary, an appointee of the presiding officer, shall act as Secretary
of the meeting.
(2) Conduct of Meetings. The date and time of the opening and the
-------------------
closing of the polls for each matter upon which the stockholders will vote at a
meeting shall be announced at the meeting by the person presiding over the
meeting. The Board of Directors may adopt by resolution such rules and
regulations for the conduct of the meeting of stockholders as it shall deem
appropriate. Except to the extent inconsistent with such rules and regulations
as adopted by the Board of Directors, the chairman of any meeting of
stockholders shall have the right and authority to convene and to adjourn the
meeting, to prescribe such rules, regulations and procedures and to all such
acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) rules and procedures for maintaining
order at the meeting and the safety of those present; (iii) limitations on
attendance at or participation in the meeting to stockholders of record of the
Corporation, their duly authorized and constituted proxies or such other persons
as the chairman of the meeting shall determine; (iv) restrictions on entry to
the meeting after the time fixed for the commencement thereof; and (v)
limitations on the time allotted to questions or
<PAGE>
6
comments by participants. Unless and to the extent determined by the Board of
Directors or the chairman of the meeting, meetings of stockholders shall not be
required to be held in accordance with the rules of parliamentary procedure.
Section I.10. Notice of Nominations and Stockholder Business.
----------------------------------------------
(1) Annual Meetings of Stockholders. (i) Nominations of persons for
-------------------------------
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (A) by or at the direction of the Board of Directors or the
-
Chairman, (B) by any stockholder of the Corporation who is entitled to vote at
-
the meeting, who complies with the notice procedures set forth in clauses (ii)
and (iii) of this paragraph and who was a stockholder of record at the time such
notice is delivered to the Secretary of the Corporation or (C) so long as the
-
Stockholders' Agreement shall remain in effect, by Kelso or CB pursuant to the
rights granted to them under such Stockholders' Agreement.
(ii) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (B) of paragraph (a)(i) of
this Section 1.10, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and any such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
ninetieth (90th) day nor earlier than the close of business on the one hundred
twentieth (120th) day prior to the first anniversary of the preceding year's
annual meeting (provided, however, that in the event that the date of the annual
meeting is more than thirty (30) days before or more than seventy (70) days
after such anniversary date, notice by the stockholder must be so delivered not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such annual meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such annual meeting or the tenth
(10th) day following the day on which public announcement of the date of such
meeting is first made by the Corporation). In no event shall an adjournment or
<PAGE>
7
postponement of an annual meeting (or the public announcement thereof) commence
a new time period (or extend any time period) for the giving of a stockholder's
notice as described above. Such stockholder's notice shall set forth in writing
(A) as to each person whom the stockholder proposes to nominate for election or
-
reelection as a Director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of Directors,
or is otherwise required, in each case pursuant to Regulation 14A under the Se
curities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14A-11
------------
thereunder, including such person's written consent to being named in the proxy
statement as a nominee and to serving as a Director if elected; (B) as to any
-
other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
text of the proposal or business (including the text of any resolutions proposed
for consideration and in the event that such business includes a proposal to
amend the Bylaws of the Corporation, the language of the proposed amendment),
the reasons for conducting such business at the meeting and any material
interest in such business of such stockholder and of any beneficial owner on
whose behalf the proposal is made; and (C) as to the stockholder giving the
-
notice and any beneficial owner on whose behalf the nomination or proposal is
made, (1) the name and address of such stockholder, as it appears on the
-
Corporation's books, and of such beneficial owner, (2) the class and number of
-
shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner, (3) a representation that the stockholde
-
is a holder of record of stock of the Corporation entitled to vote at such a
meeting and intends to appear in person or by proxy at the meeting to propose
such business or nomination, and (4) a representation whether the stockholder or
-
the beneficial owner, if any, intends or is part of a group which intends to (a)
-
deliver a proxy statement and/or form of proxy to holders of at least the
percent of the Corporation's outstanding capital stock required to approve or
adopt the proposal or elect the nominee and/or (b) otherwise solicit proxies
-
from stockholders in support of such proposal or nomination. The Corporation may
require any proposed nominee to furnish such other information as it may
reasonably require to determine the eligibility of such proposed nominee to
serve as a director of the Corporation.
<PAGE>
8
(iii) Notwithstanding anything in the second sentence of paragraph
(a)(ii) of this Section 1.10 to the contrary, in the event that the number of
Directors to be elected to the Board of Directors of the Corporation at an
annual meeting is increased and there is no public announcement naming all of
the nominees for Director or specifying the size of the increased Board of
Directors made by the Corporation at least one hundred (100) days prior to the
first anniversary of the preceding year's annual meeting, a stockholder's notice
under this paragraph shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices of the Corporation
not later than the close of business on the tenth (10th) day following the day
on which such public announcement is first made by the Corporation.
(2) Special Meetings of Stockholders. Only such business as shall
--------------------------------
have been brought before the special meeting of the stockholders pursuant to the
Corporation's notice of meeting pursuant to Section 1.03 of these Bylaws shall
be conducted at such meeting. Nominations of persons for election to the Board
of Directors may be made at a special meeting of stockholders at which Directors
are to be elected pursuant to the Corporation's notice of meeting (1) by or at
-
the direction of the Board of Directors, (2) by any stockholder of the
-
Corporation who is entitled to vote at the meeting, who complies with the notice
procedures set forth in this Section 1.10 and who is a stockholder of record at
the time such notice is delivered to the Secretary of the Corporation or (3) so
-
long as the Stockholders' Agreement shall remain in effect with respect to
either Kelso or CB, by Kelso or CB to the extent such right exists under the
terms of the Stockholders' Agreement. Nominations by stockholders of persons for
election to the Board of Directors may be made at such special meeting of
stockholders if the stockholder's notice as required by paragraph (a)(ii) of
this Section 1.10 shall be delivered to the Secretary at the principal executive
offices of the Corporation not earlier than the close of business on the one
hundred twentieth (120th ) day prior to such special meeting and not later than
the close of business on the later of (x) ninety (90) days prior to such special
-
meeting and (y) or the tenth (10th) day following the day on which public
-
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to
<PAGE>
9
be elected at such meeting; provided that no advance notice shall be required
--------
for any nominations made to clause (3) of the second sentence of this paragraph.
In no event shall the adjournment or postponement of a special meeting (or the
public announcement thereof) commence a new time period for the giving of a
stockholder's notice as described above.
(3) General. (i) Only persons who are nominated in accordance with
-------
the procedures set forth in this Section 1.10 shall be eligible to serve as
Directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 1.10. Except as otherwise provided by law, the
Restated Certificate of Incorporation or these Bylaws, the presiding officer of
the meeting shall have the power and duty to determine whether a nomination or
any business proposed to be brought before the meeting was made or proposed in
accordance with the procedures set forth in this Section 1.10 and, if any
proposed nomination or business is not in compliance with this Section 1.10, to
declare that such defective proposal or nomination shall be disregarded.
(ii) For purposes of this Section 1.10, "public announcement" shall
-------------------
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14, or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section 1.10, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 1.10. Nothing in this Section 1.10 shall be deemed to
affect any rights (A) of stockholders to request inclusion of proposals in the
-
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act, (B)
-
of the holders of any class or series of preferred stock, if any, to elect
Directors if so provided under any applicable preferred
<PAGE>
10
stock certificate of designation, or (C) so long as the Stockholders' Agreement
-
shall remain in effect, of Kelso or CB thereunder.
Section I.11. Inspectors of Elections. (a) If required by applicable
-----------------------
law, preceding any meeting of the stockholders, the Board of Directors shall
appoint one or more persons to act as Inspectors of Elections, and may designate
one or more alternate inspectors. In the event no inspector or alternate is able
to act, the person presiding at the meeting shall appoint one or more inspectors
to act at the meeting. Each inspector, before entering upon the discharge of the
duties of an inspector, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his or
her ability. The inspector shall:
(i) ascertain the number of shares outstanding and the voting power
of each;
(ii) determine the shares represented at the meeting and the validity
of proxies and ballots;
(iii) count all votes and ballots;
(iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors;
and
(v) certify his or her determination of the number of shares
represented at the meeting, and his or her count of all votes and ballots.
(b) The inspector may appoint or retain other persons or entities to
assist in the performance of the duties of inspector.
(c) When determining the shares represented and the validity of
proxies and ballots, the inspector shall be limited to an examination of the
proxies, any envelopes submitted with those proxies, any proxies or other
information provided in accordance with Section 1.08 of these Bylaws, ballots
and the regular books and records of the Corporation. The inspector may consider
other reliable information for the limited purpose of reconciling proxies and
ballots submitted by or on behalf of banks, brokers or
<PAGE>
11
their nominees or a similar person which represent more votes than the holder of
a proxy is authorized by the record owner to cast or more votes than the
stockholder holds of record. If the inspector considers other reliable
information as outlined in this section, the inspector, at the time of his or
her certification pursuant to (a)(v) of this Section 1.11, shall specify the
precise information considered, the person or persons from whom the information
was obtained, when this information was obtained, the means by which the
information was obtained, and the basis for the inspector's belief that such
information is accurate and reliable.
Section I.12. Opening and Closing of Polls. The date and time for
----------------------------
the opening and the closing of the polls for each matter to be voted upon at a
stockholder meeting shall be announced at the meeting. The inspector of the
election shall be prohibited from accepting any ballots, proxies or votes or any
revocations thereof or changes thereto after the closing of the polls, unless
the Delaware Court of Chancery upon application by a stockholder shall determine
otherwise.
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
Section II.1. General Powers. Except as may otherwise be provided by
--------------
law or by the Restated Certificate of Incorporation, the property, affairs and
business of the Corporation shall be managed by or under the direction of the
Board of Directors and the Board of Directors may exercise all the powers of the
Corporation.
Section II.2. Number of Directors. Subject to the rights of the
-------------------
holders of any class or series of preferred stock, if any, the number of
Directors shall be fixed from time to time exclusively pursuant to a resolution
adopted by a majority of the entire Board, provided that the Board shall at no
--------
time consist of fewer than three (3) Directors.
<PAGE>
12
Section II.3. Term. Each director shall hold office for a term
----
expiring at the annual meeting of stockholders held in the [year] following the
year of his or her election.
Section II.4. Annual and Regular Meetings. The annual meeting of the
---------------------------
Board of Directors for the purpose of electing officers and for the transaction
of such other business as may come before the meeting shall be held as soon as
possible following adjournment of the annual meeting of the stockholders at the
place of such annual meeting of the stockholders. Notice of such annual meeting
of the Board of Directors need not be given. The Board of Directors from time
to time may by resolution provide for the holding of regular meetings and fix
the place (which may be within or without the State of Delaware) and the date
and hour of such meetings. Notice of regular meetings need not be given;
provided, however, that if the Board of Directors shall fix or change the time
- -------- -------
or place of any regular meeting, notice of such action shall be mailed promptly,
or sent by telephone, including a voice messaging system or other system or
technology designed to record and communicate messages, telegraph, facsimile,
electronic mail or other means of electronic transmission, to each Director who
shall not have been present at the meeting at which such action was taken,
addressed or transmitted to him or her at his or her usual place of business, or
shall be delivered or transmitted to him or her personally. Notice of such
action need not be given to any Director who attends the first regular meeting
after such action is taken without protesting the lack of notice to him or her,
prior to or at the commencement of such meeting, or to any Director who submits
a signed waiver of notice, whether before or after such meeting.
Section II.5. Special Meetings; Notice. Special meetings of the
------------------------
Board of Directors shall be held whenever called by the Chief Executive Officer
(or, in the event of his or her absence or disability, by the President) or by
any Officer Director or by the Chairman, at such place (within or without the
State of Delaware), date and hour as may be specified in the respective notices
or waivers of notice of such meetings. Special meetings of the Board of
Directors may be called on twenty-four (24) hours' notice, if notice is given to
each Director personally or by telephone, including a voice messaging
<PAGE>
13
system or other system or technology designed to record and communicate
messages, telegraph, facsimile, electronic mail or other means of electronic
transmission, or on five (5) days' notice, if notice is mailed to each Director,
addressed or transmitted to him or her at his or her usual place of business or
other designated location. Notice of any special meeting need not be given to
any Director who attends such meeting without protesting the lack of notice to
him or her, prior to or at the commencement of such meeting, or to any Director
who submits a signed waiver of notice, whether before or after such meeting, and
any business may be transacted thereat.
Section II.6. Quorum; Voting. At all meetings of the Board of
--------------
Directors, the presence of a majority of the total authorized number of
Directors shall constitute a quorum for the transaction of business. Except as
otherwise required by law, the vote of a majority of the Directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors.
Section II.7. Adjournment. A majority of the Directors present,
-----------
whether or not a quorum is present, may adjourn any meeting of the Board of
Directors to another time or place. No notice need be given of any adjourned
meeting unless the time and place of the adjourned meeting are not announced at
the time of adjournment, in which case notice conforming to the requirements of
Section 2.05 of these Bylaws shall be given to each Director.
Section II.8. Action Without a Meeting. Any action required or
------------------------
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board of Directors.
Section II.9. Regulations; Manner of Acting. To the extent
-----------------------------
consistent with applicable law, the Restated Certificate of Incorporation and
these Bylaws, the Board of Directors may adopt such rules and regulations for
the conduct of meetings of the Board of Directors and for the management of the
property, affairs and business of the
<PAGE>
14
Corporation as the Board of Directors may deem appropriate. The Directors shall
act only as a Board, and the individual Directors shall have no power as such.
Section II.10. Action by Telephonic Communications. Members of the
-----------------------------------
Board of Directors may participate in any meeting of the Board of Directors by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in any meeting pursuant to this provision shall constitute
presence in person at such meeting.
Section II.11. Resignations. Any Director may resign at any time by
------------
delivering a written notice of resignation, signed by such Director, to the
Chairman or the Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section II.12. Designation of Director Nominees. (a) Definitions.
-------------------------------- -----------
"Affiliate" shall mean, with respect to any Person, any other Person directly or
indirectly, through one or more intermediaries, controlling, controlled by, or
under common control with such Person. "Person" shall mean an individual,
corporation, partnership, limited liability company, association, trust, or
other entity or organization, including a government or political subdivision or
an agency or instrumentality thereof.
(2) For so long as Kelso or its Affiliates hold 5% or more in the
aggregate of the outstanding Common Stock of the Corporation, Kelso shall have
(A) the right to designate two individuals as Board of Directors nominees for
election to the Board of Directors of the Corporation, and (B) the exclusive
right to designate for election an individual to fill any vacancy created by the
removal or death of or resignation by a director originally designated for
election by Kelso.
(3) For so long as CB or its Affiliates hold 5% or more in the
aggregate of the outstanding Common Stock of the Corporation, CB shall have (A)
the right to designate two individuals as Board of Directors nominees for
election to the Board of
<PAGE>
15
Directors of the Corporation, and (B) the exclusive right to designate for
election an individual to fill any vacancy created by the removal or death of or
resignation by a director originally designated for election by CB.
(4) If Kelso transfers 100% of the shares of common stock owned by it
as of the date of the filing of the Restated Certificate of Incorporation of the
Corporation (immediately after the reclassification of capital stock effectuated
by the Restated Certificate of Incorporation of the Corporation) to one Person
or a group of Affiliates, its transferees shall be deemed to be Kelso for
purposes of this Section 2.12. If Kelso transfers 50% or more, but not less
than 100 %, of the shares of Common Stock owned by it as of the date of filing
of the Restated Certificate of Incorporation of the Corporation (immediately
after the reclassification of capital stock effectuated by the Restated
Certificate of Incorporation of the Corporation) to one Person or a group of
Affiliates, then such transferees shall have the rights and obligations of Kelso
under this Section 2.12 to the extent set forth in an instrument executed by
Kelso and such transferees. If CB transfers 100% of the shares of common stock
owned by it as of the date of the filing of the Restated Certificate of
Incorporation of the Corporation (immediately after the reclassification of
capital stock effectuated by the Restated Certificate of Incorporation of the
Corporation), to one Person or a group of Affiliates, its transferees shall be
deemed to be CB for purposes of this Section 2.12.
Section II.13. Removal of Directors. Subject to the rights of the
--------------------
holders of any class or series of preferred stock, if any, to elect additional
Directors under specified circumstances, any Director may be removed at any
time, either for or without cause, upon the affirmative vote of the holders of a
majority of the outstanding shares of stock of the Corporation entitled to vote
generally in the election of Directors; provided that for so long as the
--------
Stockholders' Agreement shall remain in effect with respect to either Kelso or
CB, as the case may be, no director originally designated by Kelso or CB, as the
case may be, pursuant to the Stockholders' Agreement, may be removed from office
without cause without the prior written consent of Kelso or CB, as the case may
be. Any vacancy in the Board of Directors caused by any such removal may be
filled at such
<PAGE>
16
meeting by the stockholders entitled to vote for the election of the Director so
removed; provided that for so long as the Stockholders' Agreement shall remain
--------
in effect with respect to either Kelso or CB, as the case may be, Kelso or CB,
as the case may be, shall have the exclusive right to designate for election an
individual to fill any vacancy created by the removal or death of or resignation
by a director originally designated for election by Kelso or CB, as the case may
be. A Director filling any such vacancy shall hold office until his or her
successor shall have been elected and qualified or until his or her earlier
death, resignation or removal. If such stockholders do not fill such vacancy at
such meeting, such vacancy may be filled in the manner provided in Section 2.14
of these Bylaws.
Section II.14. Vacancies and Newly Created Directorships. Subject
-----------------------------------------
to: (i) the rights of the holders of any class or series of preferred stock, if
any, to elect additional Directors under specified circumstances and (ii) to the
rights of Kelso and CB as set forth in Section 2.12, and except as provided in
Section 2.13, if any vacancies shall occur in the Board of Directors, by reason
of death, resignation, removal or otherwise, or if the authorized number of
Directors shall be increased, the Directors then in office shall continue to
act, and such vacancies and newly created directorships may be filled by a
majority of the Directors then in office, although less than a quorum. A
Director elected to fill a vacancy or a newly created directorship shall hold
office until his or her successor has been elected and qualified or until his or
her earlier death, resignation or removal.
Section II.15. Compensation. The amount, if any, which each Director
------------
shall be entitled to receive as compensation for his or her services as such
shall be fixed from time to time by resolution of the Board of Directors.
Section II.16. Reliance on Accounts and Reports, etc. A Director,
-------------------------------------
and any member of any committee designated by the Board of Directors shall, in
the performance of such Director's duties, be fully protected in relying in good
faith upon the records of the Corporation and upon information, opinions,
reports or statements presented to the Corporation by any of the Corporation's
officers or employees, or
<PAGE>
17
Committees designated by the Board of Directors, or by any other person as to
the matters the member reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Corporation.
ARTICLE III
-----------
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
----------------------------------------
Section III.1. How Constituted. The Board of Directors may, by
---------------
resolution adopted by a majority of the whole Board, designate one or more
committees, including an Executive Committee, each such committee to consist of
such number of Directors as from time to time may be fixed by the Board of
Directors. The Board of Directors may designate one or more Directors as
alternate members of any such committee, who may replace any absent or
disqualified member or members at any meeting of such committee. Thereafter,
members (and alternate members, if any) of each such committee may be designated
at the annual meeting of the Board of Directors. Any such committee may be
abolished or re-designated from time to time by the Board of Directors. Each
member (and each alternate member) of any such committee (whether designated at
an annual meeting of the Board of Directors or to fill a vacancy or otherwise)
shall hold office until his or her successor shall have been designated or until
he or she shall cease to be a Director, or until his or her earlier death,
resignation or removal.
Section III.2. Powers. Each committee, except as otherwise provided
------
by the General Corporation Law, shall have and may exercise such powers of the
Board of Directors as may be provided by resolution or resolutions of the Board
of Directors establishing such committee.
<PAGE>
18
Section III.3. Proceedings. Each committee may fix its own rules of
-----------
procedure and may meet at such place (within or without the State of Delaware),
at such time and upon such notice, if any, as it shall determine from time to
time. Each committee shall keep minutes of its proceedings and shall report
such proceedings to the Board of Directors at the meeting of the Board of
Directors next following any such proceedings.
Section III.4. Quorum and Manner of Acting. Except as may be
---------------------------
otherwise provided in the resolution creating such committee, at all meetings of
any committee the presence of members (or alternate members) constituting a
majority of the total authorized membership of such committee shall constitute a
quorum for the transaction of business. The act of the majority of the members
present at any meeting at which a quorum is present shall be the act of such
committee. Any action required or permitted to be taken at any meeting of any
such committee may be taken without a meeting, if all members of such committee
shall consent to such action in writing and such writing or writings are filed
with the minutes of the proceedings of the committee. The members of any such
committee shall act only as a committee, and the individual members of such
committee shall have no power as such.
Section III.5. Action by Telephonic Communications. Members of any
-----------------------------------
committee designated by the Board of Directors may participate in a meeting of
such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting.
Section III.6. Absent or Disqualified Members. In the absence or
------------------------------
disqualification of a member of any committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member.
<PAGE>
19
Section III.7. Resignations. Any member (and any alternate member)
------------
of any committee may resign at any time by delivering a written notice of
resignation, signed by such member, to the Chairman, the Chief Executive Officer
or the President. Unless otherwise specified therein, such resignation shall
take effect upon delivery.
Section III.8. Removal. Any member (and any alternate member) of any
-------
committee may be removed from his or her position as a member (or alternate
member, as the case may be) of such committee at any time, either for or without
cause, by resolution adopted by a majority of the whole Board of Directors.
Section III.9. Vacancies. If any vacancy shall occur in any
---------
committee, by reason of disqualification, death, resignation, removal or
otherwise, the remaining members (and any alternate members) shall continue to
act, and any such vacancy may be filled by the Board of Directors.
ARTICLE IV
----------
OFFICERS
--------
Section IV.1. Number. The officers of the Corporation shall be
------
elected by the Board of Directors and shall be a Chairman, one or more Vice
Chairmen, a Chief Executive Officer, a President, one or more Executive Vice
Presidents, a Chief Financial Officer, a Secretary and a Treasurer. The Board of
Directors also may elect one or more Assistant Secretaries and Assistant
Treasurers in such numbers as the Board of Directors may determine. Any number
of offices may be held by the same person. No officer need be a Director of the
Corporation.
Section IV.2. Election. Unless otherwise determined by the Board of
--------
Directors, the officers of the Corporation shall be elected by the Board of
Directors at the annual meeting of the Board of Directors, and shall be elected
to hold office until the next
<PAGE>
20
succeeding annual meeting of the Board of Directors. In the event of the failure
to elect officers at such annual meeting, officers may be elected at any regular
or special meeting of the Board of Directors. Each Officer shall hold office
until his or her successor has been elected and qualified, or until his or her
earlier death, resignation or removal at any regular or special meeting of the
Board of Directors. Each officer shall hold office until his or her successor
has been elected and qualified, or until his or her earlier death, resignation
or removal.
Section IV.3. Salaries. The salaries of all officers of the
--------
Corporation shall be fixed by the Board of Directors, provided that the Board of
--------
Directors may authorize the President, the Chief Executive Officer, any other
officer or a Committee of the Board of Directors to fix the salaries of some or
all of the officers of the Corporation.
Section IV.4. Removal and Resignation; Vacancies. Any officer may be
----------------------------------
removed for or without cause at any time by the Board of Directors, but such
removal shall be without prejudice to the contractual rights of such officer, if
any, with the Corporation. Any officer may resign at any time by delivering a
written notice of resignation, signed by such officer, to the Board of Directors
or the Chief Executive Officer. Unless otherwise specified therein, such
resignation shall take effect upon delivery. Any vacancy occurring in any
office of the Corporation by death, resignation, removal or otherwise, shall be
filled by the Board of Directors.
Section IV.5. Authority and Duties of Officers. The officers of the
--------------------------------
Corporation shall have such authority and shall exercise such powers and perform
such duties as may be specified in these Bylaws, except that in any event each
officer shall exercise such powers and perform such duties as may be required by
law.
Section IV.6. The Chairman. The Directors shall elect from among the
------------
members of the Board a Chairman of the Board. The Chairman shall have such
duties and powers as set forth in these Bylaws or as shall otherwise be
conferred upon the
<PAGE>
21
Chairman from time to time by the Board. The Chairman shall preside over all
meetings of the stockholders and the Board.
Section IV.7. The Vice Chairman. Each Vice Chairman shall have such
-----------------
duties and powers as shall be conferred upon such Vice Chairman from time to
time by the Chairman. No Vice Chairman need be a Director of the Corporation.
Section IV.8. The Chief Executive Officer. The Chief Executive
---------------------------
Officer shall have general control and supervision of the policies and
operations of the Corporation and shall see that all orders and resolutions of
the Board of Directors are carried into effect. He or she shall manage and
administer the Corporation's business and affairs and shall also perform all
duties and exercise all powers usually pertaining to the office of a chief
executive officer of a corporation. He or she shall have the authority to sign,
in the name and on behalf of the Corporation, checks, orders, contracts, leases,
notes, drafts and other documents and instruments in connection with the
business of the Corporation. He or she shall have the authority to cause the
employment or appointment of such employees and agents of the Corporation as the
conduct of the business of the Corporation may require, to fix their
compensation, and to remove or suspend any employee or agent elected or
appointed by the Chief Executive Officer or the Board of Directors. The Chief
Executive Officer shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe. In the event the office
of the President is vacant, the Chief Executive Officer shall carry out the
duties of the President described herein.
Section IV.9. The President. The President, subject to the authority
-------------
of the Chief Executive Officer, shall be the Chief Operating Officer of the
Corporation and shall have primary responsibility for, and authority with
respect to, the management of the day-to-day business and affairs of the
Corporation. The President shall have the authority to sign, in the name and on
behalf of the Corporation, checks, orders, contracts, leases, notes, drafts and
other documents and instruments. The President shall have the authority to
cause the employment or appointment of such employees and agents of the
<PAGE>
22
Corporation as the conduct of the business of the Corporation may require, to
fix their compensation, and to remove or suspend any employee or agent elected
or appointed by the President.
Section IV.10. The Executive Vice President. In the absence of the
----------------------------
Chief Executive Officer and the President or in the event of the Chief Executive
Officer and the President's inability to act, the Executive Vice President, if
any (or in the event there be more than one Executive Vice President, the
Executive Vice Presidents in the order designated by the Board, or in the
absence of any designation, then in the order of their election), shall perform
the duties of the Chief Executive Officer and the President, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
Chief Executive Officer and the President. The Executive Vice Presidents, if
any, shall have such designations and shall perform such other duties and have
such other powers as the Board or the Chief Executive Officer or President may
from time to time prescribe.
Section IV.11. The Secretary. The Secretary shall have the following
-------------
powers and duties:
(1) he or she shall keep or cause to be kept a record of all the
proceedings of the meetings of the stockholders and of the Board of
Directors in books provided for that purpose;
(2) he or she shall cause all notices to be duly given in accordance
with the provisions of these Bylaws and as required by law;
(3) whenever any committee shall be appointed pursuant to a
resolution of the Board of Directors, he or she shall furnish a copy of
such resolution to the members of such committee;
(4) he or she shall be the custodian of the records and of the seal
of the Corporation and cause such seal (or a facsimile thereof) to be
affixed to all
<PAGE>
23
certificates representing shares of the Corporation prior to the issuance
thereof and to all instruments the execution of which on behalf of the
Corporation under its seal shall have been duly authorized in accordance
with these Bylaws, and when so affixed he or she may attest the same;
(5) he or she shall properly maintain and file all books, reports,
statements, certificates and all other documents and records required by
law, the Restated Certificate of Incorporation or these Bylaws;
(6) he or she shall have charge of the stock books and ledgers of the
Corporation and shall cause the stock and transfer books to be kept in such
manner as to show at any time the number of shares of stock of the
Corporation of each class issued and outstanding, the names and the
addresses of the holders of record of such shares, the number of shares
held by each holder and the date as of which each became such holder of
record;
(7) he or she shall sign (unless the Chief Financial Officer, the
Treasurer, an Assistant Treasurer or an Assistant Secretary shall have
signed) certificates representing shares of the Corporation, the issuance
of which shall have been authorized by the Board of Directors; and
(8) he or she shall perform, in general, all duties incident to the
office of secretary and such other duties as may be specified in these
Bylaws or as may be assigned to him or her from time to time by the Board
of Directors, or the President.
Section IV.12. The Chief Financial Officer. The Chief Financial
---------------------------
Officer of the Corporation shall have the following powers and duties:
(1) he or she shall have charge and supervision over and be
responsible for the moneys, securities, receipts and disbursements of the
Corporation, and
<PAGE>
24
shall keep or cause to be kept full and accurate records of all receipts of
the Corporation;
(2) he or she shall cause the moneys and other valuable effects of
the Corporation to be deposited in the name and to the credit of the
Corporation in such bank companies or with such bankers or other
depositaries as shall be selected in accordance with Section 8.05 of these
Bylaws;
(3) he or she shall cause the moneys of the Corporation to be
disbursed by checks or drafts (signed as provided in Section 8.06 of these
Bylaws) upon the authorized depositaries of the Corporation and cause to be
taken and preserved proper vouchers for all moneys disbursed;
(4) he or she shall render to the Board of Directors, the Chief
Executive Officer or the President, whenever requested, a statement of the
financial condition of the Corporation and of all his or her transactions
as Chief Financial Officer, and render a full financial report at the
annual meeting of the stockholders, if called upon to do so;
(5) he or she shall be empowered from time to time to require from
all officers or agents or employees of the Corporation reports or
statements giving such information as he or she may desire with respect to
any and all financial transactions of the Corporation;
(6) he or she shall sign (unless the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary shall have signed)
certificates representing stock of the Corporation, the issuance of which
shall have been authorized by the Board of Directors; and
(7) he or she shall perform, in general, all duties incident to the
office of treasurer and such other duties as may be specified in these
Bylaws or as may be
<PAGE>
25
assigned to him or her from time to time by the Board of Directors or the
Chief Executive Officer.
Section IV.13. The Treasurer. The Treasurer shall perform such duties
-------------
and exercise such powers as may be assigned to him or her from time to time by
the Chief Financial Officer. In the absence of the Chief Financial Officer, the
duties of the Chief Financial Officer shall be performed and his or her powers
may be exercised by the Treasurer, subject in any case to review and superseding
action by the Board of Directors or the Chief Executive Officer.
Section IV.14. Additional Officers. The Board of Directors may
-------------------
appoint such other officers and agents as it may deem appropriate, and such
other officers and agents shall hold their offices for such terms and shall
exercise such powers and perform such duties as may be determined from time to
time by the Board of Directors. The Board of Directors from time to time may
delegate to any officer or agent the power to appoint subordinate officers or
agents and to prescribe their respective rights, terms of office, authorities
and duties. Any such officer or agent may remove any such subordinate officer or
agent appointed by him or her, for or without cause, but such removal shall be
without prejudice to the contractual rights of such subordinate officer or
agent, if any, with the Corporation.
Section IV.15. Security. The Board of Directors may require any
--------
officer, agent or employee of the Corporation to provide security for the
faithful performance of his or her duties, in such amount and of such character
as may be determined from time to time by the Board of Directors.
ARTICLE V
---------
CAPITAL STOCK
-------------
<PAGE>
26
Section V.1. Certificates of Stock, Uncertificated Shares. The
--------------------------------------------
shares of the Corporation shall be represented by certificates, provided that
the Board of Directors may provide by resolution or resolutions that some or all
of any or all classes or series of the stock of the Corporation shall be
uncertificated shares. Any such resolution shall not apply to shares represented
by a certificate until each certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock in the Corporation represented by certificates, and upon
request every holder of uncertificated shares shall be entitled to have a
certificate signed by, or in the name of, the Corporation, by the Chief
Executive Officer, the President or an Executive Vice President, and by the
Chief Financial Officer, the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary, representing the number of shares
registered in certificate form. Such certificate shall be in such form as the
Board of Directors may determine, to the extent consistent with applicable law,
the Restated Certificate of Incorporation and these Bylaws.
Section V.2. Signatures; Facsimile. All of such signatures on the
---------------------
certificate referred to in Section 5.01 of these Bylaws may be a facsimile,
engraved or printed, to the extent permitted by law. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon a certificate representing shares of the Corporation shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he or
she were such officer, transfer agent or registrar at the date of issue.
Section V.3. Lost, Stolen or Destroyed Certificates. The Board of
--------------------------------------
Directors may direct that a new certificate be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon delivery to the Board of Directors of an affidavit of
the owner or owners of such certificate, setting forth such allegation. The
Board of Directors may require the owner of such lost, stolen or destroyed
certificate, or his or her legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the
<PAGE>
27
alleged loss, theft or destruction of any such certificate or the issuance of
any such new certificate.
Section V.4. Transfer of Stock. Upon surrender to the Corporation
-----------------
or the transfer agent of the Corporation of a certificate for shares, duly
endorsed or accompanied by appropriate evidence of succession, assignment or
authority to transfer, the Corporation shall issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books. Within a reasonable time after the transfer of uncertificated
stock, the Corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the General
Corporation Law of the State of Delaware. Subject to the provisions of the
Restated Certificate of Incorporation and these Bylaws, the Board of Directors
may prescribe such additional rules and regulations as it may deem appropriate
relating to the issue, transfer and registration of shares of the Corporation.
Section V.5. Record Date. In order to determine the stockholders
-----------
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date on which the resolution fixing the
record date is adopted by the Board of Directors, and which shall not be more
than sixty (60) nor less than ten (10) days before the date of such meeting. If
no record date is fixed the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
-------- -------
fix a new record date for the adjourned meeting.
<PAGE>
28
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights of the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section V.6. Registered Stockholders. Prior to due surrender of a
-----------------------
certificate for registration of transfer, the Corporation may treat the
registered owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such
certificate, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person,
whether or not the Corporation shall have notice of such claim or interests,
except as otherwise required by applicable law. Whenever any transfer of shares
shall be made for collateral security, and not absolutely, it shall be so
expressed in the entry of the transfer if, when the certificates are presented
to the Corporation for transfer or uncertificated shares are requested to be
transferred, both the transferor and transferee request the Corporation to do
so.
Section V.7. Transfer Agent and Registrar. The Board of Directors
----------------------------
may appoint one or more transfer agents and one or more registrars, and may
require all certificates representing shares to bear the signature of any such
transfer agents or registrars.
ARTICLE VI
----------
<PAGE>
29
INDEMNIFICATION
---------------
Section VI.1. Nature of Indemnity. The Corporation shall indemnify
-------------------
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (a "Proceeding"),
----------
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was or has agreed to become a director or officer of the
Corporation, or is or was serving or has agreed to serve at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other entity or enterprise, including
service with respect to employee benefit plans, or by reason of any action
alleged to have been taken or omitted in such capacity, against costs, charges,
expenses, liabilities and losses (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
actually and reasonably incurred by him or her or on his or her behalf in
connection with such Proceeding and any appeal therefrom, if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the Corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe that his or her conduct
was unlawful; except that in the case of an action or suit by or in the name of
the Corporation to procure a judgment in its favor (1) such indemnification
-
shall be limited to expenses (including attorneys' fees) actually and reasonably
incurred by such person in the defense or settlement of such action or suit, and
(2) no indemnification shall be made in respect of any claim, issue or matter as
-
to which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper. Notwithstanding the foregoing, but subject to Section 6.04 of these
Bylaws, the Corporation shall not be obligated to indemnify a director or
officer of the Corporation in respect of a Proceeding (or such part thereof)
instituted by such director or officer, unless such Proceeding (or such part
thereof) has been authorized by the Board of Directors. The Corporation may,
<PAGE>
30
by action of its Board of Directors, provide indemnification to employees and
agents of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
---- ----------
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
Section VI.2. Determination that Indemnification is Proper. Unless
--------------------------------------------
ordered by a court, no indemnification of a present or former director or
officer of the Corporation under Section 6.01 hereof shall be made by the
Corporation if a determination is made by the Corporation that indemnification
of the present or former director or officer is not proper in the circumstances
because he or she has not met a the applicable standard of conduct set forth in
Section 6.01 hereof.
Section VI.3. Advance Payment of Expenses. Expenses (including
---------------------------
attorneys' fees) incurred by a present or former director or officer in
defending any Proceeding shall be paid by the Corporation in advance of the
final disposition of such Proceeding upon receipt of an undertaking by or on
behalf of the director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the Corporation
as authorized in this Article. Such expenses (including attorneys' fees)
incurred by former directors and officers may be so paid upon such terms and
conditions, if any, as the Corporation deems appropriate. If the director or
officer agrees to such representation, the Board of Directors may authorize the
Corporation's counsel to represent such director or officer in any Proceeding,
whether or not the Corporation is a party to such Proceeding.
<PAGE>
31
Section VI.4. Procedure for Indemnification of Directors and Officers.
-------------------------------------------------------
Any indemnification of a director or officer of the Corporation under Section
6.01, or advance of costs, charges and expenses to a director or officer under
Section 6.03 of these Bylaws, shall be made promptly, and in any event within
thirty (30) days, upon the written request of the director or officer. If a
determination by the Corporation that the director or officer is entitled to
indemnification pursuant to this Article VI is required, and the Corporation
fails to respond within sixty (60) days to a written request for indemnity, the
Corporation shall be deemed to have approved such request. If the Corporation
denies a written request for indemnity or advancement of expenses, in whole or
in part, or if payment in full pursuant to such request is not made within
thirty (30) days, the right to indemnification or advances as granted by this
Article VI shall be enforceable by the director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his or her right to indemnification or advances,
in whole or in part, in any such action shall also be indemnified by the
Corporation. It shall be a defense to any such action (other than an action
brought to enforce a claim for the advance of costs, charges and expenses under
Section 6.03 of these Bylaws where the required undertaking, if any, has been
tendered to the Corporation) that the claimant has not met the standard of
conduct set forth in Section 6.01 of these Bylaws, but the burden of proving
such defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, its independent legal counsel, and its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
Section 6.01 of these Bylaws, nor the fact that there has been an actual
determination by the Corporation (including its Board of Directors, its
independent legal counsel, and its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
Section VI.5. Survival; Preservation of Other Rights. The foregoing
--------------------------------------
indemnification and advancement provisions shall be deemed to be a contract
between
<PAGE>
32
the Corporation and each director or officer who serves in any such capacity at
any time while these provisions as well as the relevant provisions of the
General Corporation Law of the State of Delaware are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing with
respect to any state of facts then or previously existing or any action, suit or
proceeding previously or thereafter brought or threatened based in whole or in
part upon any such state of facts. Such a "contract right" may not be modified
retroactively without the consent of such director or officer.
The indemnification and advancement provided by this Article VI shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any by-law, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office, and, once an event
has occurred with respect to which a Director or Officer is or may be entitled
to indemnification under this Article, such entitlement shall continue as to a
person who has ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators of such a person.
Section VI.6. Insurance. The Corporation may purchase and maintain
---------
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture or other entity against any liability asserted against such person
and incurred by such person or on such person's behalf in any such capacity, or
arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify him or her against such liability under the
provisions of this Article VI; provided that such insurance is available on
--------
acceptable terms, which determination shall be made by a vote of a majority of
the entire Board of Directors.
Section VI.7. Severability. If this Article VI or any portion hereof
------------
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless advance expenses and indemnify each director
or officer as to costs,
<PAGE>
33
charges and expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement with respect to any Proceeding to the fullest extent
permitted by any applicable portion of this Article VI that shall not have been
invalidated and to the fullest extent permitted by applicable law.
ARTICLE VII
-----------
OFFICES
-------
Section VII.1. Registered Office. The registered office of the
-----------------
Corporation in the State of Delaware shall be located at Corporation Center,
1209 Orange Street in the City of Wilmington, County of New Castle.
Section VII.2. Other Offices. The Corporation may maintain offices or
-------------
places of business at such other locations within or without the State of
Delaware as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE VIII
------------
GENERAL PROVISIONS
------------------
Section VIII.1. Dividends. Subject to any applicable provisions of law
---------
and the Restated Certificate of Incorporation, dividends upon the shares of
capital stock of the Corporation may be declared by the Board of Directors at
any regular or special meeting of the Board of Directors and any such dividend
may be paid in cash, property or shares of the Corporation's capital stock.
<PAGE>
34
A member of the Board of Directors, or a member of any committee
designated by the Board of Directors shall be fully protected in relying in good
faith upon the records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors, or by any other person as to
matters the Director reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Corporation, as to the value and amount of the assets,
liabilities and/or net profits of the Corporation, or any other facts pertinent
to the existence and amount of surplus or other funds from which dividends might
properly be declared and paid.
Section VIII.2. Reserves. There may be set aside out of any funds of
--------
the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, thinks proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall think conducive to the interests of the
Corporation, and the Board of Directors may similarly modify or abolish any such
reserve.
Section VIII.3. Execution of Instruments. The Chief Executive Officer,
------------------------
the President, any Executive Vice President, the Secretary, the Chief Financial
Officer or the Treasurer may enter into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation. The Board of Directors
or the Chief Executive Officer may authorize any other officer or agent to enter
into any contract or execute and deliver any instrument in the name and on
behalf of the Corporation. Any such authorization may be general or limited to
specific contracts or instruments.
Section VIII.4. Corporate Indebtedness. No loan shall be contracted on
----------------------
behalf of the Corporation, and no evidence of indebtedness shall be issued in
its name, unless (i) authorized by the Board of Directors, the Executive
Committee or the Chief Executive Officer, or (ii) entered into in the ordinary
course of business and for an
<PAGE>
35
amount less than $20,000. Such authorization may be general or confined to
specific instances. Loans so authorized may be effected at any time for the
Corporation from any bank company or other institution, or from any firm,
corporation or individual. All bonds, debentures, notes and other obligations or
evidences of indebtedness of the Corporation issued for such loans shall be
made, executed and delivered as the Board of Directors, the Executive Committee
or the Chief Executive Officer shall authorize. When so authorized by the Board
of Directors or the Chief Executive Officer, any part of or all the properties,
including contract rights, assets, business or good will of the Corporation,
whether then owned or thereafter acquired, may be mortgaged, pledged,
hypothecated or conveyed or assigned as security for the payment of such bonds,
debentures, notes and other obligations or evidences of indebtedness of the
Corporation, and of the interest thereon, by instruments executed and delivered
in the name of the Corporation.
Section VIII.5. Deposits. Any funds of the Corporation may be
--------
deposited from time to time in such bank companies or with such bankers or other
depositaries as may be determined by the Board of Directors, the Chief Executive
Officer, the Treasurer or the Chief Financial Officer or by such officers or
agents as may be authorized by the Board of Directors or the Chief Executive
Officer, the Treasurer or the Chief Financial Officer to make such
determination.
Section VIII.6. Checks. All checks or demands for money and notes of
------
the Corporation shall be signed by such officer or officers or such agent or
agents of the Corporation, and in such manner, as the Board of Directors or the
Chief Executive Officer from time to time may determine.
Section VIII.7. Sale, Transfer, etc. of Securities. To the extent
----------------------------------
authorized by the Board of Directors or by the Chief Executive Officer, the
President, any Executive Vice President, the Secretary, the Chief Financial
Officer or the Treasurer or any other officers designated by the Board of
Directors or the Chief Executive Officer may sell, transfer, endorse, and assign
any shares of stock, bonds or other securities owned by or held in the name of
the Corporation, and may make, execute and deliver in the name of
<PAGE>
36
the Corporation, under its corporate seal (if required), any instruments that
may be appropriate to effect any such sale, transfer, endorsement or assignment.
Section VIII.8. Voting as Stockholder. Unless otherwise determined by
---------------------
resolution of the Board of Directors, the Chief Executive Officer, the President
or any Executive Vice President shall have full power and authority on behalf of
the Corporation to attend any meeting of stockholders of any corporation in
which the Corporation may hold stock, and to act, vote (or execute proxies to
vote) and exercise in person or by proxy all other rights, powers and privileges
incident to the ownership of such stock. Such officers acting on behalf of the
Corporation shall have full power and authority to execute any instrument
expressing consent to or dissent from any action of any such corporation without
a meeting. The Board of Directors may by resolution from time to time confer
such power and authority upon any other person or persons.
Section VIII.9. Fiscal Year. The fiscal year of the Corporation shall
-----------
commence on the first day of January of each year (except for the Corporation's
first fiscal year which shall commence on the date of incorporation) and shall
terminate in each case on December 31.
Section VIII.10. Seal. The seal of the Corporation shall be circular
----
in form and shall contain the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware." The form of such
seal shall be subject to alteration by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed, affixed or
reproduced, or may be used in any other lawful manner.
Section VIII.11. Books and Records; Inspection. Except to the extent
-----------------------------
otherwise required by law, the books and records of the Corporation shall be
kept at such place or places within or without the State of Delaware as may be
determined from time to time by the Board of Directors.
<PAGE>
37
ARTICLE IX
----------
AMENDMENT OF BYLAWS
-------------------
Section IX.1. Amendment. Subject to the provisions of the Restated
---------
Certificate of Incorporation, these Bylaws may be amended, altered or repealed:
(1) by resolution adopted by a majority of the Board of Directors at
any special or regular meeting of the Board if, in the case of such special
meeting only, notice of such amendment, alteration or repeal is contained
in the notice or waiver of notice of such meeting; or
(2) at any regular or special meeting of the stockholders upon the
affirmative vote of the holders of a majority of the combined voting power
of the outstanding shares of the Corporation entitled to vote generally in
the election of Directors if, in the case of such special meeting only,
notice of such amendment, alteration or repeal is contained in the notice
or waiver of notice of such meeting.
ARTICLE X
---------
CONSTRUCTION
------------
Section X.1. Construction. In the event of any conflict between the
------------
provisions of these Bylaws as in effect from time to time and the provisions of
the Restated Certificate of Incorporation of the Corporation as in effect from
time to time, the provisions of such Restated Certificate of Incorporation shall
be controlling.
<PAGE>
EXHIBIT 4.7
THIRD AMENDED AND RESTATED
--------------------------
STOCKHOLDERS' AGREEMENT
-----------------------
THIRD AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (the "Agreement"), dated
as of June 8, 1999, among iXL Enterprises, Inc., a Delaware corporation (the
"Company") (formerly named IXL Holdings, Inc.), Kelso Investment Associates V,
- --------
L.P. ("KIA V"), Kelso Equity Partners V, L.P. ("KEP V", and together with KIA V,
----- -----
"Kelso"), CB Capital Investors, L.P. ("CB") and the other stockholders of the
-----
Company (other than those stockholders who became stockholders by purchasing
shares of the Company's Common Stock in the Company's initial public offering).
Capitalized terms used herein shall have the meaning ascribed thereto in Section
6.
WHEREAS, the Company, Kelso, certain management stockholders and certain
outside investors entered into a Second Amended and Restated Stockholders'
Agreement, dated as of December 17, 1997, as amended as of March 30, 1998 and
August 14, 1998 (the "Second Amended and Restated Stockholders' Agreement");
WHEREAS, the Second Amended and Restated Stockholders' Agreement may be
amended in accordance with Section 12 thereof;
WHEREAS, the Company, Kelso, those stockholders of the Company other than
Kelso owning at least 51% of all shares of Preferred Stock owned by all such
stockholders other than Kelso, those stockholders of the Company owning at least
51% of all shares of Class B Common Stock, U. Bertram Ellis, Jr., Kevin Wall,
William C. Whitley, David Wyler, CB Capital Investors, L.P., Flatiron Partners,
LLC, Greylock IX Limited Partnership, Mellon Ventures II, L.P. and Thomson U.S.
Inc. believe it to be in their best interests that they amend and restate the
Second Amended and Restated Stockholders' Agreement;
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and obligations set forth in this Agreement, the parties hereto agree
as follows:
1. Second Amended and Restated Stockholders' Agreement. The Second
---------------------------------------------------
Amended and Restated Stockholders' Agreement is hereby amended and restated in
its entirety as provided for herein.
2. Board of Directors.
------------------
2.1. Designation of Director Nominees.
--------------------------------
(i) Kelso. For so long as Kelso or its Affiliates hold 5% or
-----
more in the aggregate of the outstanding Common Stock of the Company, Kelso
shall have (A) the right to designate two individuals as Board of Directors
nominees for election to the Board of Directors of the Company, and (B) the
exclusive right to designate for election an individual to fill any vacancy
created by the removal or death of or
-Page 1 of 14-
<PAGE>
resignation by a director originally designated for election by Kelso. Such
right shall terminate when Kelso or its Affiliates hold less than 5% of the
outstanding Common Stock of the Company.
(ii) CB. For so long as CB or its Affiliates hold 5% or more of
--
the outstanding Common Stock of the Company, CB shall have (A) the right to
designate one individual as a Board of Directors nominee for election to
the Board of Directors of the Company, and (B) the exclusive right to
designate for election an individual to fill any vacancy created by the
removal or death of or resignation by a director originally designated for
election by CB. Such right shall terminate when CB or its Affiliates hold
less than 5% of the outstanding Common Stock of the Company. All
calculations pursuant to this Section 2.1 shall be made on a primary basis.
(iii) If Kelso transfers 100% of the shares of Common Stock
owned by it as of the date of the filing of the Restated Certificate of
Incorporation of the Company (immediately after the reclassification of
capital stock effectuated by the Restated Certificate of Incorporation of
the Company) to one Person or a group of Affiliates, its transferees shall
be deemed to be Kelso for purposes of this Section 2.1. If Kelso transfers
50% or more, but less than 100%, of the shares of Common Stock owned by it
as of the date of the filing of the Restated Certificate of Incorporation
of the Company (immediately after the reclassification of capital stock
effectuated by the Restated Certificate of Incorporation of the Company) to
one Person or a group of Affiliates, then such transferees shall have the
rights and obligations of Kelso under this Section 2.1 to the extent set
forth in an instrument executed by Kelso and such transferees. If CB
transfers 100% of the shares of Common Stock owned by it as of the date of
the filing of the Restated Certificate of Incorporation of the Company
(immediately after the reclassification of capital stock effectuated by the
Restated Certificate of Incorporation of the Company) to one Person or a
group of Affiliates, its transferees shall be deemed to be CB for purposes
of this Section 2.1.
2.2. Method of Designation. All designations made pursuant to Section
---------------------
2.1 shall be made in writing to the Chairman of the Board of Directors of the
Company (the "Chairman"), and any designation may be changed from time to time
by Kelso or CB, as the case may be, by providing written notice thereof to the
Chairman.
2.3. Effect of Designation. Any designation made pursuant to this
---------------------
Section 2 shall be included as Board of Directors' nominations of persons for
election to the Board of Directors of the Company pursuant to Section 1.10 of
the Amended and Restated Bylaws of the Company.
2.4. Vacancies. So long as this Agreement shall remain in effect, the
---------
Bylaws shall provide that Kelso or CB, as the case may be, shall have the
exclusive right, in accordance with Section 2.1, to designate for election an
individual to fill any vacancy created by the removal or death of or resignation
by a director originally designated for election by Kelso or CB, as the case may
be, pursuant to Section 2.1.
-Page 2 of 14-
<PAGE>
2.5. Restated Certificate of Incorporation; Bylaws. So long as this
---------------------------------------------
Agreement shall remain in effect, the Restated Certificate of Incorporation and
the Bylaws shall provide (i) that Kelso and CB shall have the right to designate
director nominees pursuant to Section 2.1 and (ii) the rights set forth in
Section 2.4 shall be an exception to the provisions set forth in the Bylaws
governing vacancies on the Board of Directors, and the Bylaws shall provide
that: (i) Kelso or CB shall have the right to call a special meeting of
stockholders for the purpose of voting on directors designated for election by
Kelso or CB, as the case may be, pursuant to Section 2.1 and (ii) the rights set
forth in Section 2.1 shall be an exception to the requirements set forth in the
Bylaws governing advance notice requirements for stockholder proposals and
director nominations.
2.6. Further Assurances of the Company. The Company will take all
---------------------------------
such actions and execute and deliver such documents as Kelso or CB may
reasonably request in order to effectuate the intent and purposes of this
Section 2.
3. Amendment and Modification. This Agreement may be amended, modified
--------------------------
or supplemented only by written agreement of the Company, Kelso and CB.
4. Termination; Nonrenewability. All rights and obligations pursuant to
----------------------------
this Agreement with respect to Kelso shall terminate as provided for in Section
2.1(i). All rights and obligations pursuant to this Agreement with respect to
CB shall terminate as provided in Section 2.1(ii). From and after the date
hereof, no party hereto other than the Company, Kelso and CB shall have any
obligations under this Agreement. All rights and obligations terminated
pursuant to this Section 4 may not be renewed or reinstated.
5. Definitions. As used in this Agreement, the following terms shall
-----------
have the meanings ascribed to them below:
(a) Affiliate. The term "Affiliate" shall mean, with respect to any
--------- ---------
Person, any other Person directly or indirectly, through one or
more intermediaries, controlling, controlled by, or under common
control with such Person.
(b) Person. The term "Person" means an individual, corporation,
------ ------
partnership, limited liability company, association, trust or
other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
(c) Stock. The term "Stock" shall mean all classes of the capital
----- -----
stock of the Company, including the following classes of stock:
(i) "Class A Common Stock" shall mean the Class A voting common
--------------------
stock of the Company, par value $.01 per share, and shall
include any capital stock of the Company into which such
Class A common stock is converted, reclassified or
exchanged.
-Page 3 of 14-
<PAGE>
(iii) "Class B Common Stock" shall mean the Class B voting
---------------------
common stock of the Company, par value $.01 per share, and
shall include any capital stock of the Company into which
such Class B common stock is converted, reclassified or
exchanged.
(iii) "Common Stock" shall mean the Class A Common Stock and
------------
the Class B Common Stock and shall include any capital
stock of the Company into which the Class A Common Stock
and the Class B Common Stock are converted, reclassified
or exchanged.
(iv) "Class A Preferred Stock" shall mean the Class A
-----------------------
convertible preferred stock of the Company, par value
$.01 per share, and shall include any capital stock of
the Company into which such Class A convertible preferred
stock is converted, reclassified or exchanged.
(v) "Class B Preferred Stock" shall mean the Class B
-----------------------
convertible preferred stock of the Company, par value $.01
per share, and shall include any capital stock of the
Company into which such Class B convertible preferred
stock is converted, reclassified or exchanged.
(vi) "Class C Preferred Stock" shall mean the Class C nonvoting
-----------------------
convertible preferred stock of the Company, par value $.01
per share, and shall include any capital stock of the
Company into which such Class C convertible preferred
stock is converted, reclassified or exchanged.
(vii) "Class D Preferred Stock" shall mean the Class D
-----------------------
nonvoting preferred stock of the Company, par value $.01
per share, and shall include any capital stock of the
Company into which such Class D convertible preferred
stock is converted, reclassified or exchanged.
(viii) "Preferred Stock" shall mean the Class A Preferred Stock,
---------------
the Class B Preferred Stock, the Class C Preferred Stock
and the Class D Preferred Stock.
6. Further Assurances. Each of the Company, Kelso and CB 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 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.
7. 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.
-Page 4 of 14-
<PAGE>
8. 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.
9. Notices. All notices, requests, demands, waivers and other
-------
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
-
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
- -
sent by next-day or overnight mail or delivery or (d) sent by telecopier as
-
follows:
(a) if to the Company, to it at:
-------
iXL Enterprises, Inc.
1888 Emery Street N.W.
Atlanta, Georgia 30318
Attention: Mr. U. Bertram Ellis, Jr.
Telecopier number: (404) 267-3801
with a copy to:
Minkin & Snyder
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Telecopier number: (404) 233-5824
Attention: James S. Altenbach, Esq.;
(b) If to Kelso, to it at:
-----
Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10022
Telecopier number: (212) 223-2379
Attention: James J. Connors, II, Esq.
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telecopier number: (212) 909-6836
Attention: Margaret A. Davenport, Esq.;
-Page 5 of 14-
<PAGE>
(c) If to CB, to it at:
--
CB Capital Investors, L.P.
380 Madison Avenue
12th Floor
New York, New York 10017-2591
Telecopier number: (212)
Attention: I. Robert Greene
with a copy to:
Harvey M. Eisenberg, Esq.
O'Sullivan Graev & Karbell
30 Rockefeller Plaza
New York, New York 10112
Telecopier number: (212) 408-2420;
or to such other person or address as any party shall specify by notice in
writing to the Company. All such notices, requests, demands, waivers and other
communications shall be deemed to have been received (w) if by personal delivery
-
on the day after such delivery, (x) if by certified or registered mail, on the
-
seventh business day after the mailing thereof, (y) if by next-day or overnight
-
mail or delivery, on the day delivered or (z) if by telecopier on the next day
-
following the day on which such telecopy was sent, provided that a copy is also
sent by certified or registered mail.
10. Headings; Execution in Counterparts. The headings and captions
-----------------------------------
contained herein are for convenience and shall not control or affect the meaning
or 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.
11. Effective Date. This Agreement shall become effective upon the
--------------
closing of the Company's initial public offering of its common stock, par value
$0.01 per share.
[SIGNATURES ON FOLLOWING PAGES]
-Page 6 of 14-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by each of the parties
hereto as of the date first above written.
iXL ENTERPRISES, INC.
By: /s/ U. Bertram Ellis, Jr.
----------------------------
Name: U. Bertram Ellis, Jr.
----------------------------
Title: Chairman & CEO
----------------------------
KELSO INVESTMENT ASSOCIATES V, L.P
By: KELSO PARTNERS V, L.P.
By: /s/ Thomas R. Wall IV
----------------------------
Name: Thomas R. Wall IV
----------------------------
Title: General Partner
----------------------------
KELSO EQUITY PARTNERS V, L. P.
By: /s/ Thomas R. Wall IV
----------------------------
Name: Thomas R. Wall IV
----------------------------
Title: General Partner
----------------------------
STOCKHOLDERS, OTHER THAN KELSO, OWNING AT LEAST
51% OF THE PREFERRED STOCK OF THE COMPANY:
CB CAPITAL INVESTORS, L.P.
By: CHASE CAPITAL PARTNERS,
its General Partner
By: /s/ I.R. Greene
----------------------------
Name: I.R. Greene
----------------------------
Title: General Partner
----------------------------
-Page 7 of 14-
<PAGE>
FLATIRON PARTNERS, LLC
By: /s/ J.D. Colonna
----------------------------
Name: Jerome D. Colonna
----------------------------
Title: Managing Partner
----------------------------
THE FLATIRON FUND 1998/99, LLC
By: /s/ J.D. Colonna
----------------------------
Name: Jerome D. Colonna
----------------------------
Title: Managing Partner
----------------------------
FLATIRON ASSOCIATES, LLC
By: Flatiron Partners, LLC, its Manager
By: /s/ J.D. Colonna
----------------------------
Name: Jerome D. Colonna
----------------------------
Title: Managing Partner
----------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ George Hashbarger, Jr.
----------------------------
Name: George Hashbarger, Jr.
----------------------------
Title: Dept. Operations Manager
----------------------------
-Page 8 of 14-
<PAGE>
GREYLOCK IX LIMITED PARTNERSHIP
By: Greylock IX GP Limited Partnership,
its General Partner
By: /s/ Henry F. McCance
----------------------------
Name: Henry F. McCance
----------------------------
Title: General Partner
----------------------------
MELLON VENTURES II, L.P., a Delaware Limited
Partnership
By: MVMA II, L.P., a Delaware limited
partnership, its General Partner
By: MVMA, Inc., a Delaware corporation, its
General Partner
By: /s/ Jeff Anderson
----------------------------
Name: Jeff Anderson
----------------------------
Title: Principal
----------------------------
THOMSON U.S. INC.
By: /s/ James R. Schurr
----------------------------
Name: James R. Schurr
----------------------------
Title: Vice President
----------------------------
/s/ U. Bertram Ellis, Jr.
-----------------------------------
U. Bertram Ellis, Jr.
-Page 9 of 14-
<PAGE>
SHAREHOLDERS OWNING AT LEAST 51% OF THE CLASS B
COMMON STOCK OF THE COMPANY:
/s/ Karen Booth Adams
-----------------------------------
Karen Booth Adams
/s/ Steven P. Amedio
-----------------------------------
Steven P. Amedio
/s/ Ashish Bahl
-----------------------------------
Ashish Bahl
/s/ Stephan Balzer
-----------------------------------
Stephan Balzer
/s/ Steven C. Baum
-----------------------------------
Steven C. Baum
/s/ Robert Bowman
-----------------------------------
Robert Bowman
/s/ Paul Bryant
-----------------------------------
Paul Bryant
/s/ Eric Butz
-----------------------------------
Eric Butz
/s/ Stefan Chopin
-----------------------------------
Stefan Chopin
/s/ Steven K. Conine
-----------------------------------
Steven K. Conine
-----------------------------------
Barbara B. Cook
/s/ Randall S. Coppersmith
-----------------------------------
Randall S. Coppersmith
-Page 10 of 14-
<PAGE>
/s/ Larry Culbertson
-----------------------------------
Larry Culbertson
/s/ Guy Davidson
-----------------------------------
Guy Davidson
/s/ Edwin J. Davis II
-----------------------------------
Edwin J. Davis II
/s/ Kevin Davis
-----------------------------------
Kevin Davis
/s/ Norwood H. Davis III
-----------------------------------
Norwood H. Davis III
/s/ Michael B. Dowdle
-----------------------------------
Michael B. Dowdle
/s/ U. Bertram Ellis, Jr.
-----------------------------------
U. Bertram Ellis, Jr.
/s/ William Stephen Floyd
-----------------------------------
William Stephen Floyd
/s/ Mary M. Fowlkes
-----------------------------------
Mary M. Fowlkes
/s/ Eric H. Freedman
-----------------------------------
Eric H. Freedman
/s/ James P. Ganley
-----------------------------------
James P. Ganley
/s/ Robert Gear
-----------------------------------
Robert Gear
/s/ Juergen Goersch
-----------------------------------
Juergen Goersch
/s/ Jeffrey R. Gordon
-----------------------------------
Jeffrey R. Gordon
-Page 11 of 14-
<PAGE>
/s/ William A. Grana, Jr.
___________________________________
William A. Grana, Jr.
/s/ David Greeley
___________________________________
David Greeley
/s/ Michael Hettwer
___________________________________
Michael Hettwer
/s/ Stephen P. Jackson
___________________________________
Stephen P. Jackson
/s/ Mark Jacobstein
___________________________________
Mark Jacobstein
/s/ Jeffrey Janer
___________________________________
Jeffrey Janer
/s/ Teresa Joel
___________________________________
Teresa Joel
/s/ William A. Lackey
___________________________________
William A. Lackey
/s/ William M. Lackey
___________________________________
William M. Lackey
/s/ Thomas C. Lakeman
___________________________________
Thomas C. Lakeman
/s/ Jacob McGowan
___________________________________
Jacob McGowan
/s/ Geoff Melick
___________________________________
Geoff Melick
/s/ Colin Morris
___________________________________
Colin Morris
___________________________________
Scott Murphy
-Page 12 of 14-
<PAGE>
/s/ Richard Nailling
___________________________________
Richard Nailling
/s/ Robert Ortiz
___________________________________
Robert Ortiz
/s/ Kyle Parent
___________________________________
Kyle Parent
/s/ N. Blake Patton
___________________________________
N. Blake Patton
/s/ Randall M. Pipp
___________________________________
Randall M. Pipp
/s/ James Rocco
___________________________________
James Rocco
/s/ James V. Sandry
___________________________________
James V. Sandry
/s/ Derek Scanlon
___________________________________
Derek Scanlon
/s/ Niraj S. Shah
___________________________________
Niraj S. Shah
/s/ Barry Sikes
___________________________________
Barry Sikes
/s/ Marc Sirkin
___________________________________
Marc Sirkin
/s/ Richard A. Starbuck
___________________________________
Richard A. Starbuck
/s/ Mark Swanson
___________________________________
Mark Swanson
/s/ John Tierney
___________________________________
John Tierney
-Page 13 of 14-
<PAGE>
/s/ John D. Troxel
___________________________________
John D. Troxel
/s/ Jeffrey Vick
___________________________________
Jeffrey Vick
/s/ Gregory Waldbaum
___________________________________
Gregory Waldbaum
/s/ Kevin Wall
___________________________________
Kevin Wall
/s/ William C. Whitley
___________________________________
William C. Whitley
/s/ Armistead Whitney
___________________________________
Armistead Whitney
/s/ Ronald Wissing
___________________________________
Ronald Wissing
/s/ David Wyler
___________________________________
David Wyler
___________________________________
GE Capital Equity Investments, Inc.
By: /s/ Jonathan K. Sprole
________________________________
Name: Jonathan K. Sprole
Title: Managing Director
/s/ Kevin Wall
___________________________________
Wall 1999 Special Trust
/s/ Kevin Wall
___________________________________
Wall 1999 Family Trust
-Page 14 of 14-
<PAGE>
[LETTERHEAD OF MINKIN & SNYDER APPEARS HERE]
EXHIBIT 5.1
June 28, 1999
iXL Enterprises, Inc.
1888 Emery Street
Atlanta, GA 30318
Re: iXL Enterprises, Inc. Registration Statement on Form S-4
(No. 333-______)
Ladies and Gentlemen:
We have acted as counsel for iXL Enterprises, Inc., a Delaware corporation
(the "Company"), in connection with the offering (the "Offering") by the Company
of 4,000,000 shares (the "Shares") of common stock, par value $.01 per share
(the "Common Stock") of the Company pursuant to the Registration Statement of
the Company on Form S-4 (No. 333-_____) (as further amended and supplemented,
the "Registration Statement").
With your permission, all assumptions and statements of reliance herein
have been made without any independent investigation or verification on our part
except to the extent otherwise expressly stated, and we express no opinion with
respect to the subject matter or accuracy of such assumptions or items relied
upon.
In connection with this opinion, we have (i) investigated such questions of
law, (ii) examined originals or certified, conformed or reproduction copies of
such agreements, instruments, documents and records of the Company, such
certificates of public officials and such other documents, and (iii) received
such information from officers and representatives of the Company as we have
deemed necessary or appropriate for the purposes of this opinion. In all
examinations, we have assumed the legal capacity of all natural persons
executing documents, the genuineness of all signatures, the authenticity of
original and certified documents and the conformity to original or certified
copies of all copies submitted to us as conformed or reproduction copies. As to
various questions of fact relevant to the opinions expressed herein, we have
relied upon, and assume the accuracy of, representations and warranties
contained in the documents and certificates and oral or written statements and
other information of or from representatives of the Company and others and
assume compliance on the part of all parties to the documents with their
covenants and agreements contained therein.
<PAGE>
Law Offices
Minkin & Snyder
Page 2
Based upon the foregoing and subject to the limitations, qualifications and
assumptions set forth herein, we are of the opinion that the Shares registered
pursuant to the Registration Statement (when issued, delivered and paid for in
accordance with the terms of the definitive agreements governing the issuance of
such shares (the "Acquisition Agreements")) will be duly authorized, validly
issued, fully paid and non-assessable, assuming (a) that at least par value will
be paid for the Shares, (b) that the execution and delivery of the Acquisition
Agreements and the issuance of the Shares governed thereby are duly authorized
and approved by the Board of Directors of the Company, and (c) the completion of
all proceedings to be taken in order to permit such issuances to be carried out
in accordance with applicable securities laws.
The opinion expressed herein is limited to the General Corporation Law of
the State of Delaware, as currently in effect.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus forming part of the Registration Statement. In
giving such consent, we do not hereby admit that we are in the category of such
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended.
Yours very truly,
Minkin & Snyder, a professional corporation
By: /s/ James S. Altenbach
---------------------------------------
Vice President
<PAGE>
EXHIBIT 10.54
INDEMNITY AGREEMENT
-------------------
THIS AGREEMENT is made as of June 8, 1999, by and between iXL Enterprises,
Inc., a Delaware corporation ("Company"), and each person described on a
signature page hereto as "Indemnitee".
RECITALS
WHEREAS, highly competent persons have become more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the Company; and
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that, in order to attract and retain qualified individuals, the Company will
attempt to maintain on an ongoing basis, at its sole expense, liability
insurance to protect persons serving the Company and its subsidiaries from
certain liabilities. Although the furnishing of such insurance has been a
customary and widespread practice among United States-based corporations and
other business enterprises, the Company believes that, given current market
conditions and trends, such insurance may be available to it in the future only
at higher premiums and with more exclusions. At the same time, directors,
officers, and other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming litigation
relating to, among other things, matters that traditionally would have been
brought only against the Company or business enterprise itself. The By-laws of
the Company require indemnification of the officers and directors of the
Company. Indemnitee may also be entitled to indemnification pursuant to the
Delaware General Corporation Law ("DGCL"). The By-laws and the DGCL expressly
provide that the indemnification provisions set forth therein are not exclusive,
and thereby contemplate that contracts may be entered into between the Company
and members of the board of directors and officers with respect to
indemnification of directors and officers.
WHEREAS, the uncertainties relating to such insurance and to
indemnification have increased the difficulty of attracting and retaining such
persons; and
WHEREAS, the Board has determined that the increased difficulty in
attracting and retaining such persons is detrimental to the best interests of
the Company's stockholders and that the Company should act to assure such
persons that there will be increased certainty of such protection in the future;
and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify, and to advance expenses on behalf
of, such persons to the fullest extent permitted by applicable law so that they
will serve or continue to serve the Company free from undue concern that they
will not be so indemnified; and
<PAGE>
WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws
of the Company and any resolutions adopted pursuant thereto, and shall not be
deemed a substitute therefor, nor to diminish or abrogate any rights of
Indemnitee thereunder; and
WHEREAS, Indemnitee does not regard the protection available under the
Company's Bylaws and insurance adequate in the present circumstances, and may
not be willing to serve as an officer or director without adequate protection,
and the Company desires Indemnitee to serve in such capacity. Indemnitee is
willing to serve, continue to serve and to take on additional service for or on
behalf of the Company on the condition that he be so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Services to the Company. Indemnitee will serve or continue to serve,
at the will of the Company, as an officer or director of the Company for so long
as Indemnitee is duly elected or appointed or until Indemnitee tenders his or
her resignation in writing.
2. Definitions. As used in this Agreement:
(a) A "Change in Control" shall be deemed to occur upon the earliest
to occur after the date of this Agreement of any of the following events:
(i) Acquisition of Stock by Third Party. Any Person (as defined
below) is or becomes the Beneficial Owner (as defined below), directly or
indirectly, of securities of the Company representing fifteen percent (15%) or
more of the combined voting power of the Company's then outstanding securities;
(ii) Change in Board of Directors. During any period of two (2)
consecutive years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction described
in Sections 2(a)(i), 2(a)(iii) or 2(a)(iv)) whose election by the Board or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at least
a majority of the members of the Board;
(iii) Corporate Transactions. The effective date of a merger or
consolidation of the Company with any other entity, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior to such merger of consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 51% of the combined voting power
of the voting securities of the surviving entity outstanding immediately after
such merger or consolidation and with the power to elect at least a majority of
the board of directors or other governing body of such surviving entity;
<PAGE>
(iv) Liquidation. The approval by the shareholders of the Company
of a complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets;
and
(v) Other Events. There occurs any other event of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A (or a response to any similar item on any similar schedule or
form) promulgated under the Exchange Act (as defined below), whether or not the
Company is then subject to such reporting requirement.
(vi) Certain Definitions. For purposes of this Section 2(a),
the following terms shall have the following meanings:
(A) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(B) "Person" shall have the meaning as set forth in Sections
13(d) and 14(d) of the Exchange Act; provided, however, that
Person shall exclude (i) the Company, (ii) any trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, and (iii) any corporation owned, directly or
indirectly, by the shareholders of the Company in substantially
the same proportions as their ownership of stock of the Company.
(C) "Beneficial Owner" shall have the meaning given to such
term in Rule 13d-3 under the Exchange Act; provided, however,
that Beneficial Owner shall exclude any Person otherwise becoming
a Beneficial Owner by reason of the shareholders of the Company
approving a merger of the Company with another entity.
(b) "Corporate Status" describes the status of a person who is or was
a director, officer, employee or agent of the Company or of any other
corporation, partnership or joint venture, trust, employee benefit plan or other
enterprise which such person is or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(d) "Enterprise" shall mean the Company and any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise of
which Indemnitee is or was serving at the request of the Company as a director,
officer, employee, agent or fiduciary.
<PAGE>
(e) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, being or preparing to be a witness in, or
otherwise participating in, a Proceeding. Expenses, however, shall not include
amounts paid in settlement by Indemnitee or the amount of judgments or fines
against Indemnitee.
(f) As to the Indemnitee, "good faith" shall mean Indemnitee having
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal Proceeding, having had no reasonable cause to believe Indemnitee's
conduct was unlawful.
(g) Reference to "other enterprise" shall include employee benefit
plans; references to "fines" shall include any excise tax assessed with respect
to any employee benefit plan; references to "serving at the request of the
Company" shall include any service as a director, officer, employee or agent of
the Company which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the best interests of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.
(h) The term "Proceeding" shall include any threatened, pending or
completed action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought in the right of the Company or
otherwise and whether of a civil, criminal, administrative or investigative
nature, in which Indemnitee was, is or will be involved as a party or otherwise
by reason of the fact that Indemnitee is or was a director or officer of the
Company, by reason of any action taken by him or of any action on his part while
acting as director or officer of the Company, or by reason of the fact that he
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, in each case whether or not serving in such capacity at the time any
liability or expense is incurred for which indemnification, reimbursement, or
advancement of expenses can be provided under this Agreement.
(i) "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five years has been, retained to represent: (i) the Company
or Indemnitee in any matter material to either such party (other than with
respect to matters concerning the Indemnitee under this Agreement, or of other
indemnitees under similar indemnification agreements), or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement. The Company agrees to pay the reasonable fees and expenses of the
Independent Counsel referred to above and to fully indemnify such counsel
against any and all Expenses, claims,
<PAGE>
liabilities and damages arising out of or relating to this Agreement or its
engagement pursuant hereto.
3. Indemnity in Third-Party Proceedings. The Company shall indemnify
Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is,
or is threatened to be made, a party to or a participant in any Proceeding,
other than a Proceeding by or in the right of the Company to procure a judgment
in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified
against all Expenses, judgments, fines and amounts paid in settlement actually
and reasonably incurred by Indemnitee or on his behalf in connection with such
Proceeding or any claim, issue or matter therein, if Indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and, in the case of a criminal proceeding had no
reasonable cause to believe that his conduct was unlawful.
4. Indemnity in Proceedings by or in the Right of the Company. The
Company shall indemnify Indemnitee in accordance with the provisions of this
Section 4 if Indemnitee is, or is threatened to be made, a party to or a
participant in any Proceeding by or in the right of the Company to procure a
judgment in its favor. Pursuant to this Section 4, Indemnitee shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection with such Proceeding or any claim, issue or matter
therein, if Indemnitee acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company. No
indemnification for Expenses shall be made under this Section 4 in respect of
any claim, issue or matter as to which Indemnitee shall have been finally
adjudged by a court to be liable to the Company, unless and only to the extent
that any court in which the Proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnification.
5. Indemnification for Expenses of a Party Who is Wholly or Partly
Successful. Notwithstanding any other provisions of this Agreement, to the
extent that Indemnitee is a party to (or a participant in) and is successful, on
the merits or otherwise, in any Proceeding or in defense of any claim, issue or
matter therein, in whole or in part, the Company shall indemnify Indemnitee
against all Expenses actually and reasonably incurred by him in connection
therewith. If Indemnitee is not wholly successful in such Proceeding but is
successful, on the merits or otherwise, as to one or more but less than all
claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by him or on
his behalf in connection with each successfully resolved claim, issue or matter.
If the Indemnitee is not wholly successful in such Proceeding, the Company also
shall indemnify Indemnitee against all Expenses reasonably incurred in
connection with a claim, issue or matter related to any claim, issue, or matter
on which the Indemnitee was successful. For purposes of this Section and without
limitation, the termination of any claim, issue or matter in such a Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.
6. Indemnification For Expenses of a Witness. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee is, by reason of his
Corporate Status, a
<PAGE>
witness in any Proceeding to which Indemnitee is not a party, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith.
7. Additional Indemnification.
(a) Notwithstanding any limitation in Sections 3, 4, or 5, the
Company shall indemnify Indemnitee to the fullest extent permitted by law if
Indemnitee is a party to or threatened to be made a party to any Proceeding
(including a Proceeding by or in the right of the Company to procure a judgment
in its favor) against all Expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by Indemnitee in connection with the
Proceeding. No indemnity shall be made under this Section 7(a) on account of
Indemnitee's conduct which constitutes a breach of Indemnitee's duty of loyalty
to the Company or its shareholders or is an act or omission not in good faith or
which involves intentional misconduct or a knowing violation of the law.
(b) Notwithstanding any limitation in Sections 3, 4, 5 or 7(a), the
Company shall indemnify Indemnitee to the fullest extent permitted by law if
Indemnitee is a party to or threatened to be made a party to any Proceeding
(including a Proceeding by or in the right of the Company to procure a judgement
in its favor) against all Expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by Indemnitee in connection with the
Proceeding.
(c) For purposes of Sections 7(a) and 7(b), the meaning of the
phrase "to the fullest extent permitted by law" shall include, but not be
limited to:
i. to the fullest extent permitted by the provision of the Act
that authorizes or contemplates additional indemnification by agreement, or the
corresponding provision of any amendment to or replacement of the Act, and
ii. to the fullest extent authorized or permitted by any
amendments to or replacements of the Act adopted after the date of this
Agreement that increase the extent to which a corporation may indemnify its
officers and directors.
8. Exclusions. Notwithstanding any provision in this Agreement, the
Company shall not be obligated under this Agreement to make any indemnity in
connection with any claim made against Indemnitee:
(a) for which payment has actually been made to or on behalf of
Indemnitee under any insurance policy or other indemnity provision, except with
respect to any excess beyond the amount paid under any insurance policy or other
indemnity provision; or
(b) for an accounting of profits made from the purchase and sale (or
sale and purchase) by Indemnitee of securities of the Company within the meaning
of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar
provisions of state statutory law or common law.
9. Advances of Expenses. Notwithstanding any provision of this Agreement
to the
<PAGE>
contrary, the Company shall advance the expenses incurred by Indemnitee in
connection with any Proceeding within 30 days after the receipt by the Company
of a statement or statements requesting such advances from time to time, whether
prior to or after final disposition of any Proceeding. Advances shall be
unsecured and interest free. Advances shall be made without regard to
Indemnitee's ability to repay the expenses and without regard to Indemnitee's
ultimate entitlement to indemnification under the other provisions of this
Agreement. Advances shall include any and all reasonable Expenses incurred
pursuing an action to enforce this right of advancement, including Expenses
incurred preparing and forwarding statements to the Company to support the
advances claimed. The Indemnitee shall qualify for advances solely upon the
execution and delivery to the Company of an undertaking providing that the
Indemnitee undertakes to repay the advance to the extent that it is ultimately
determined that Indemnitee is not entitled to be indemnified by the Company.
10. Procedure for Notification and Defense of Claim.
(a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification, not later than thirty (30) days after receipt by
Indemnitee of notice of the commencement of any Proceeding. The omission to
notify the Company will not relieve the Company from any liability which it may
have to Indemnitee otherwise than under this Agreement. The Secretary of the
Company shall, promptly upon receipt of such a request for indemnification,
advise the Board in writing that Indemnitee has requested indemnification.
(b) The Company will be entitled to participate in the Proceeding at
its own expense.
11. Procedure Upon Application for Indemnification.
(a) Upon written request by Indemnitee for indemnification pursuant
to the first sentence of Section 10(a), a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control shall have occurred, by
Independent Counsel in a written opinion to the Board of Directors, a copy of
which shall be delivered to Indemnitee; or (ii) if a Change in Control shall not
have occurred, (A) by a majority vote of the Disinterested Directors, even
though less than a quorum of the Board, or (B) if there are no such
Disinterested Directors or, if such Disinterested Directors so direct, by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee or (C) if so directed by the Board, by the stockholders
of the Company; and, if it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within ten (10) days after
such determination. Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person,
<PAGE>
persons or entity making such determination shall be borne by the Company
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(b) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 11(a) hereof, the
Independent Counsel shall be selected as provided in this Section 11(b). If a
Change in Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Company shall give written notice to
Indemnitee advising him of the identity of the Independent Counsel so selected.
If a Change in Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board of Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the Company advising it of
the identity of the Independent Counsel so selected. In either event, Indemnitee
or the Company, as the case may be, may, within 10 days after such written
notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection; provided,
--------
however, that such objection may be asserted only on the ground that the
- -------
Independent Counsel so selected does not meet the requirements of "Independent
Counsel" as defined in Section 2 of this Agreement, and the objection shall set
forth with particularity the factual basis of such assertion. Absent a proper
and timely objection, the person so selected shall act as Independent Counsel.
If such written objection is so made and substantiated, the Independent Counsel
so selected may not serve as Independent Counsel unless and until such objection
is withdrawn or a court has determined that such objection is without merit. If,
within 20 days after submission by Indemnitee of a written request for
indemnification pursuant to Section 10(a) hereof, no Independent Counsel shall
have been selected and not objected to, either the Company or Indemnitee may
petition a court of competent jurisdiction for resolution of any objection which
shall have been made by the Company or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom all objections are so resolved or
the person so appointed shall act as Independent Counsel under Section 11(a)
hereof. Upon the due commencement of any judicial proceeding or arbitration
pursuant to Section 13(a) of this Agreement, Independent Counsel shall be
discharged and relieved of any further responsibility in such capacity (subject
to the applicable standards of professional conduct then prevailing).
12. Presumptions and Effect of Certain Proceedings.
(a) In making a determination with respect to entitlement to indemnification
<PAGE>
hereunder, the person or persons or entity making such determination shall
presume that Indemnitee is entitled to indemnification under this Agreement if
Indemnitee has submitted a request for indemnification in accordance with
Section 10(a) of this Agreement, and the Company shall have the burden of proof
to overcome that presumption in connection with the making by any person,
persons or entity of any determination contrary to that presumption. Neither the
failure of the Company (including by its directors or independent legal counsel)
to have made a determination prior to the commencement of any action pursuant to
this Agreement that indemnification is proper in the circumstances because
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Company (including by its directors or independent legal
counsel) that Indemnitee has not met such applicable standard of conduct, shall
be a defense to the action or create a presumption that Indemnitee has not met
the applicable standard of conduct.
(b) If the person, persons or entity empowered or selected under
Section 11 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days after
receipt by the Company of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such 60-day period may be extended for a
reasonable time, not to exceed an additional thirty (30) days, if the person,
persons or entity making the determination with respect to entitlement to
indemnification in good faith requires such additional time for the obtaining or
evaluating of documentation and/or information relating thereto; and provided,
further, that the foregoing provisions of this Section 12(b) shall not apply (i)
if the determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 11(a) of this Agreement and if (A) within
fifteen (15) days after receipt by the Company of the request for such
determination the Board of Directors has resolved to submit such determination
to the stockholders for their consideration at an annual meeting thereof to be
held within seventy five (75) days after such receipt and such determination is
made thereat, or (B) a special meeting of stockholders is called within fifteen
(15) days after such receipt for the purpose of making such determination, such
meeting is held for such purpose within sixty (60) days after having been so
called and such determination is made thereat, or (ii) if the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 11(a) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not (except as otherwise expressly
- ---- ----------
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
(d) Reliance as Safe Harbor. For purposes of any determination of
-----------------------
good faith, Indemnitee shall be deemed to have acted in good faith if
Indemnitee's action is based on the records or books of account of the
Enterprise, including financial statements, or on information
<PAGE>
supplied to Indemnitee by the officers of the Enterprise in the course of their
duties, or on the advice of legal counsel for the Enterprise or on information
or records given or reports made to the Enterprise by an independent certified
public accountant or by an appraiser or other expert selected with the
reasonable care by the Enterprise. The provisions of this Section 12(d) shall
not be deemed to be exclusive or to limit in any way the other circumstances in
which the Indemnitee may be deemed to have met the applicable standard of
conduct set forth in this Agreement.
(e) Actions of Others. The knowledge and/or actions, or failure to
-----------------
act, of any director, officer, agent or employee of the Enterprise shall not be
imputed to Indemnitee for purposes of determining the right to indemnification
under this Agreement.
13. Remedies of Indemnitee.
(a) In the event that (i) a determination is made pursuant to
Section 11 of this Agreement that Indemnitee is not entitled to
indemnification under this Agreement, (ii) advancement of Expenses is not
timely made pursuant to Section 9 of this Agreement, (iii) no determination
of entitlement to indemnification shall have been made pursuant to Section
11(a) of this Agreement within 90 days after receipt by the Company of the
request for indemnification, (iv) payment of indemnification is not made
pursuant to Section 5, 6, 7 or the last sentence of Section 11(a) of this
Agreement within ten (10) days after receipt by the Company of a written
request therefor, or (v) payment of indemnification pursuant to Section 3
or 4 of this Agreement is not made within ten (10) days after a
determination has been made that Indemnitee is entitled to indemnification,
Indemnitee shall be entitled to an adjudication by a court of his
entitlement to such indemnification or advancement of Expenses.
Alternatively, Indemnitee, at his option, may seek an award in arbitration
to be conducted by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. The Company
shall not oppose Indemnitee's right to seek any such adjudication or award
in arbitration.
(b) In the event that a determination shall have been made pursuant
to Section 11(a) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 13 shall be conducted in all respects as a de novo trial, or
-- ----
arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. In any judicial proceeding or arbitration commenced
pursuant to this Section 13 the Company shall have the burden of proving
Indemnitee is not entitled to indemnification or advancement of Expenses, as the
case may be.
(c) If a determination shall have been made pursuant to Section
11(a) of this Agreement that Indemnitee is entitled to indemnification, the
Company shall be bound by such determination in any judicial proceeding or
arbitration commenced pursuant to this Section 13, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law.
(d) In the event that Indemnitee, pursuant to this Section 13, seeks
a judicial
<PAGE>
adjudication of or an award in arbitration to enforce his rights under, or to
recover damages for breach of, this Agreement, Indemnitee shall be entitled to
recover from the Company, and shall be indemnified by the Company against, any
and all Expenses actually and reasonably incurred by him in such judicial
adjudication or arbitration. If it shall be determined in said judicial
adjudication or arbitration that Indemnitee is entitled to receive part but not
all of the indemnification or advancement of Expenses sought, the Indemnitee
shall be entitled to recover from the Company, and shall be indemnified by the
Company against, any and all Expenses reasonably incurred by Indemnitee in
connection with such judicial adjudication or arbitration.
(e) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 13 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement. The Company
shall indemnify Indemnitee against any and all Expenses and, if requested by
Indemnitee, shall (within ten (10) days after receipt by the Company of a
written request therefore) advance such expenses to Indemnitee, which are
incurred by Indemnitee in connection with any action brought by Indemnitee for
indemnification or advance of Expenses from the Company under this Agreement or
under any directors' and officers' liability insurance policies maintained by
the Company, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, advancement of Expenses or insurance recovery,
as the case may be.
14. Non-exclusivity; Survival of Rights; Insurance; Subrogation.
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Company's Articles of Incorporation, the Company's Bylaws, any
agreement, a vote of stockholders or a resolution of directors, or otherwise. No
amendment, alteration or repeal of this Agreement or of any provision hereof
shall limit or restrict any right of Indemnitee under this Agreement in respect
of any action taken or omitted by such Indemnitee in his Corporate Status prior
to such amendment, alteration or repeal. To the extent that a change in Delaware
law, whether by statute or judicial decision, permits greater indemnification or
advancement of Expenses than would be afforded currently under the Company's
Bylaws and this Agreement, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits so afforded by
such change. No right or remedy herein conferred is intended to be exclusive of
any other right or remedy, and every other right and remedy shall be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other right or remedy.
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees, or
agents of the Company or of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which such person serves at the
request of the Company, Indemnitee shall be covered by such policy or policies
in accordance with its or their terms to the maximum extent of the coverage
available for any such director, officer, employee or agent under such policy or
policies. If, at the
<PAGE>
time of the receipt of a notice of a claim pursuant to Section 2(b) of Section 2
hereof, the Company has director and officer liability insurance in effect, the
Company shall give prompt notice of the commencement of such proceeding to the
insurers in accordance with the procedures set forth in the respective policies.
The Company shall thereafter take all necessary or desirable action to cause
such insurers to pay, on behalf of the Indemnitee, all amounts payable as a
result of such proceeding in accordance with the terms of such policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable (or for which advancement is provided
hereunder) hereunder if and to the extent that Indemnitee has otherwise actually
received such payment under any insurance policy, contract, agreement or
otherwise.
(e) The Company's obligation to indemnify or advance Expenses
hereunder to Indemnitee who is or was serving at the request of the Company as a
director, officer, employee or agent of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise shall be reduced
by any amount Indemnitee has actually received as indemnification or advancement
of expenses from such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise.
15. Duration of Agreement. This Agreement shall continue until and
terminate upon the later of: (a) 10 years after the date that Indemnitee shall
have ceased to serve as a director or officer of the Company or as a director,
officer, employee or agent of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which Indemnitee served at the
request of the Company; or (b) 1 year after the final termination of any
Proceeding then pending in respect of which Indemnitee is granted rights of
indemnification or advancement of Expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 13 of this Agreement relating
thereto. This Agreement shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of Indemnitee and his heirs, executors
and administrators.
16. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby and shall remain enforceable to the
fullest extent permitted by law; (b) such provision or provisions shall be
deemed reformed to the extent necessary to conform to applicable law and to give
the maximum effect to the intent of the parties hereto; and (c) to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, each portion of any Section of this Agreement containing any such
provision held to be invalid, illegal
<PAGE>
or unenforceable, that is not itself invalid, illegal or unenforceable) shall be
construed so as to give effect to the intent manifested thereby.
17. Enforcement.
(a) The Company expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on it hereby in order to
induce Indemnitee to serve as a director or officer of the Company, and the
Company acknowledges that Indemnitee is relying upon this Agreement in serving
as a director or officer of the Company.
(b) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral, written and implied, between the
parties hereto with respect to the subject matter hereof.
18. Modification and Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by the parties
thereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions of this Agreement nor shall
any waiver constitute a continuing waiver.
19. Notice by Indemnitee. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder. The failure of Indemnitee to so notify the Company shall not
relieve the Company of any obligation which it may have to the Indemnitee under
this Agreement or otherwise.
20. Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) if delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or (b) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee, at the address indicated on the signature page
of this Agreement, or such other address as Indemnitee shall provide to the
Company.
(b) If to the Company to:
iXL Enterprises, Inc.
1888 Emery Street, N. W.
Atlanta, Georgia 30318
Attention: Chief Executive Officer
with a required copy to:
Minkin & Snyder, A Professional Corporation
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Attention: James W. Altenbach
<PAGE>
or to any other address as may have been furnished to Indemnitee by the Company.
21. Contribution. To the fullest extent permissible under applicable
law, if the indemnification provided for in this Agreement is unavailable to
Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying
Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for
judgments, fines, penalties, excise taxes, amounts paid or to be paid in
settlement and/or for Expenses, in connection with any claim relating to an
indemnifiable event under this Agreement, in such proportion as is deemed fair
and reasonable in light of all of the circumstances of such Proceeding in order
to reflect (i) the relative benefits received by the Company and Indemnitee as a
result of the event(s) and/or transaction(s) giving cause to such Proceeding;
and/or (ii) the relative fault of the Company (and its directors, officers,
employees and agents) and Indemnitee in connection with such event(s) and/or
transaction(s).
22. Applicable Law. This Agreement and the legal relations among the
parties shall be governed by, and construed and enforced in accordance with, the
laws of the State of Delaware, without regard to its conflict of laws rules.
Except with respect to any arbitration commenced by Indemnitee pursuant to
Section 10(a) of this Agreement, the Company and Indemnitee hereby irrevocably
and unconditionally (i) agree that any action or proceeding arising out of or in
connection with this Agreement shall be brought only in the Chancery Court of
the State of Delaware (the "Delaware Court"), and not in any other state or
federal court in the United States of America or any court in any other country,
(ii) consent to submit to the exclusive jurisdiction of the Delaware Court for
purposes of any action or proceeding arising out of or in connection with this
Agreement, (iii) appoint, to the extent such party is not a resident of the
State of Delaware, irrevocably RL&F Service Corp., One Rodney Square, 10th
Floor, 10th and King Streets, Wilmington, Delaware 19801 as its agent in the
State of Delaware as such party's agent for acceptance of legal process in
connection with any such action or proceeding against such party with the same
legal force and validity as if served upon such party personally within the
State of Delaware, (iv) waive any objection to the laying of venue of any such
action or proceeding in the Delaware Court, and (v) waive, and agree not to
plead or to make, any claim that any such action or proceeding brought in the
Delaware Court has been brought in an improper or inconvenient forum.
23. Identical Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
24. Miscellaneous. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate. The headings of the
paragraphs of this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the construction
thereof.
[Signatures Begin on Following Page]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the day and year first above written.
iXL ENTERPRISES, INC.
By: /s/ U. Bertram Ellis, Jr.
_______________________________
Name: U. Bertram Ellis, Jr.
Title: Chief Executive Officer
INDEMNITEES
/s/ Kevin M. Wall
__________________________________
Name: Kevin M. Wall
Address: 1670 N. Doheny Dr.
__________________________
Los Angeles,
__________________________
CA 90069
__________________________
/s/ William C. Nussey
__________________________________
Name: William C. Nussey
Address: 4177 Gateswalk Dr.
___________________________
Smyrna,
___________________________
GA 30080
___________________________
/s/ C. Cathleen Raffaeli
__________________________________
Name: C. Cathleen Raffaeli
Address: 5 Miller Road
___________________________
Pound Ridge,
___________________________
NY 10576
___________________________
[Signatures Continue on Next Page]
<PAGE>
/s/ Barry T. Sikes
_________________________________
Name: Barry T. Sikes
Address: 1802 Emory Ridge Dr.
___________________________
Atlanta, GA 30329
___________________________
___________________________
/s/ M. Wayne Boylston
__________________________________
Name: M. Wayne Boylston
Address: 244 Units Drive
___________________________
Marrietta, GA 30064
___________________________
___________________________
/s/ David E. Clauson
__________________________________
Name: David E. Clauson
Address: 1444 Fairview Rd.
___________________________
Atlanta, GA 30306
___________________________
___________________________
/s/ Thomas R. Wall, IV
__________________________________
Name: Thomas R. Wall, IV
Address: Kelso & Company
___________________________
320 Park Avenue, 24th Floor
___________________________
New York, NY 10022
___________________________
/s/ Frank K. Bynum, Jr.
__________________________________
Name: Frank K. Bynum, Jr.
Address: Kelso & Company
___________________________
320 Park Avenue, 24th Floor
___________________________
New York, NY 10022
___________________________
/s/ I. Robert Greene
__________________________________
Name: I. Robert Greene
Address: c/o Chase Capital Partners
___________________________
380 Madison Ave., 12th
___________________________
New York, NY 10017
___________________________
[Signatures Continue on Next Page]
<PAGE>
/s/ Jerome D. Colonna
------------------------------------
Name: Jerome D. Colonna
Address: 257 Park Avenue South
---------------------------
New York, NY 10010
---------------------------
---------------------------
/s/ Thomas G. Rosencrants
------------------------------------
Name: Thomas G. Rosencrants
Address: Greystone Capital Partners I, LP
--------------------------------
1200 Ashwood Parkway, Ste. 500
--------------------------------
Atlanta, GA 30338
--------------------------------
/s/ Jeffrey T. Arnold
------------------------------------
Name: Jeffrey T. Arnold
Address: 500 Peachtree Battle Ave.
---------------------------
Atlanta, GA 30305
---------------------------
---------------------------
/s/ Gary C. Wendt
------------------------------------
Name: Gary C. Wendt
Address:
---------------------------
---------------------------
---------------------------
/s/ U. Bertram Ellis, Jr.
------------------------------------
Name: U. Bertram Ellis, Jr.
Address:
---------------------------
---------------------------
---------------------------
<PAGE>
EXHIBIT 10.55
================================================================================
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
among
CONSUMER FINANCIAL NETWORK, INC.,
iXL ENTERPRISES, INC.,
GENERAL ELECTRIC CAPITAL CORPORATION
and
CERTAIN OTHER INVESTORS NAMED HEREIN FROM TIME TO TIME
Dated as of June 8, 1999
================================================================================
<PAGE>
i
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Registrations Upon Request......................................................................... 1
1.1. Requests by the Majority Stockholder....................................................... 1
1.2. Request by the Outside Investors........................................................... 2
1.3. Registration Statement Form................................................................ 3
1.4. Expenses................................................................................... 3
1.5. Priority in Demand Registrations........................................................... 3
1.6. No Company Initiated Registration.......................................................... 4
2. Incidental Registrations........................................................................... 4
3. Registration Procedures............................................................................ 6
4. Underwritten Offerings............................................................................. 10
4.1. Underwriting Agreement..................................................................... 10
4.2. Selection of Underwriters.................................................................. 11
5. Holdback Agreements................................................................................ 11
6. Preparation; Reasonable Investigation.............................................................. 12
7. No Grant of Future Registration Rights............................................................. 12
8. Indemnification.................................................................................... 12
8.1. Indemnification by the Company............................................................. 12
8.2. Indemnification by the Sellers............................................................. 13
8.3. Notices of Claims, etc..................................................................... 14
8.4. Other Indemnification...................................................................... 15
8.5. Indemnification Payments................................................................... 15
8.6. Other Remedies............................................................................. 15
9. Definitions........................................................................................ 15
10. Miscellaneous..................................................................................... 17
10.1. Rule 144 etc.............................................................................. 18
10.2. Successors, Assigns and Transferees....................................................... 18
10.3. Other Stockholders........................................................................ 18
</TABLE>
<PAGE>
ii
<TABLE>
<S> <C>
10.4. Stock Splits, etc......................................................................... 18
10.5. Amendment and Modification................................................................ 19
10.6. Governing Law............................................................................. 19
10.7. Invalidity of Provision................................................................... 19
10.8. Notices................................................................................... 19
10.9. Headings; Execution in Counterparts....................................................... 20
10.10. Injunctive Relief........................................................................ 20
10.11. Entire Agreement......................................................................... 20
10.12. Term..................................................................................... 20
</TABLE>
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
--------------------------------------------------
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, dated as of
June 8, 1999, among Consumer Financial Network, Inc., a Delaware corporation
(the "Company"), iXL Enterprises, Inc., a Delaware corporation ("iXL"), General
Electric Capital Corporation, GE Capital Equity Investments, Inc. and General
Electric Pension Trust (together with any other non-employee Persons who become
stockholders of the Company and party to the Stockholders' Agreement, the
"Outside Investors"), and those individual employees of the Company who have
become stockholders of the Company and whose names are set forth on Exhibit A
hereto (the "Management Stockholders"). Capitalized terms used herein without
definition are defined in Section 9.
1. Registrations Upon Request.
--------------------------
1.1. Requests by the Majority Stockholder. At any time, the Majority
------------------------------------
Stockholder shall have the right to make up to four separate requests that the
Company effect the registration under the Securities Act of all or a portion of
the Registrable Securities owned by the Majority Stockholder, each such request
to specify the intended method or methods of disposition thereof. A request
made by the Majority Stockholder shall not be counted for purposes of the
request limitations set forth above (a) if the Majority Stockholder determines
-
in its good faith judgment to withdraw the proposed registration of any
Registrable Securities requested to be registered pursuant to this Section 1.1
due to marketing or regulatory reasons, (b) the registration statement relating
-
to any such request is not declared effective within 90 days of the date such
registration statement is first filed with the Commission, (c) if, within 180
-
days after the registration relating to any such request has become effective,
such registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court for
any reason and the Company fails to have such stop order, injunction or other
order or requirement removed, withdrawn or resolved to the Majority
Stockholder's reasonable satisfaction within 30 days, (d) if more than 10% of
-
the Registrable Securities requested by the Majority Stockholder to be included
in the registration are not so included pursuant to Section 1.5, or (e) the
-
conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with the registration relating to any such
request are not satisfied (other than as a result of a default or breach
thereunder by the Majority Stockholder). Upon any such request, the Company
will promptly, but in any event within 15 days, give written notice of such
request to all holders of Registrable Securities and thereupon the Company will,
subject to Section 1.5, use its best efforts to effect the prompt registration
under the Securities Act of:
<PAGE>
2
(i) the Registrable Securities which the Company has been so requested to
register by the Majority Stockholder, and
(ii) all other Registrable Securities which the Company has been
requested to register by the holders thereof by written request given to
the Company within 20 days after the giving of such written notice by the
Company
all to the extent required to permit the disposition of the Registrable
Securities so to be registered in accordance with the intended method or methods
of disposition of each seller of such Registrable Securities.
1.2. Request by the Outside Investors. At any time following the
--------------------------------
earlier of (a) the third anniversary of the date hereof and (b) the closing of
- -
any registered underwritten public offering of the Company's Common Stock
(including, without limitation, a Qualified Public Offering), a majority in
interest (based on the number of shares of Series B Preferred Stock and Common
Stock into which any such shares are converted) of the purchasers under the
Stock Purchase Agreement and their transferees who become parties hereto (the
"Requesting Outside Investors") shall have the right in the aggregate to make
four requests that the Company effect the registration under the Securities Act
of any or all of the then outstanding Registrable Securities owned by the
Outside Investors, such request to specify the intended method or methods of
disposition thereof. Upon any such request, the Company will use its best
efforts to effect the prompt registration under the Securities Act of the
Registrable Securities which the Company has been so requested to register by
the Requesting Outside Investors. A request made by the Requesting Outside
Investors shall not be counted for purposes of the request limitation set forth
above (a) if the Requesting Outside Investors determine in their good faith
-
judgment to withdraw the proposed registration of any Registrable Securities
requested to be registered pursuant to this Section 1.2 due to marketing or
regulatory reasons, (b) the registration statement relating to any such request
-
is not declared effective within 90 days of the date such registration statement
is first filed with the Commission, (c) if, within 180 days after the
-
registration relating to any such request has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason and the Company fails to have such stop order, injunction or other order
or requirement removed, withdrawn or resolved to the Requesting Outside
Investors' reasonable satisfaction within 30 days, (d) the conditions to closing
-
specified in the purchase agreement or underwriting
<PAGE>
3
agreement entered into in connection with the registration relating to any such
request are not satisfied (other than as a result of a default or breach
thereunder by any Outside Investor) or (e) if more than 10% of the Registrable
-
Securities requested by the Requesting Outside Investors to be included in the
registration are not so included pursuant to Section 1.5.
Upon any such request, the Company will promptly, but in any event within
15 days, give written notice of such request to all holders of Registrable
Securities and thereupon the Company will, subject to Section 1.5, use its best
efforts to effect the prompt registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so requested to
register by the Requesting Outside Investors, and
(ii) all other Registrable Securities which the Company has been requested
to register by the holders thereof by written request given to the Company
within 20 days after the giving of such written notice by the Company,
all to the extent required to permit the disposition of the Registrable
Securities so to be registered in accordance with the intended method or methods
of disposition of each seller of such Registrable Securities.
Notwithstanding the foregoing, but subject to the rights of
holders of Registrable Securities under Section 2, if the Company shall at any
time furnish to each seller of Registrable Securities a certificate signed by
the President of the Company stating that the Company has pending or in process
a material transaction (including a financing transaction), the disclosure of
which would, in the good faith judgment of the Board, materially and adversely
affect the Company, the Company may defer the filing (but not the preparation)
of a registration statement to be filed pursuant to Sections 1.1 and 1.2 for up
to 60 days (but the Company shall use its best efforts to complete the
transaction and file the registration statement as soon as possible).
1.3. Registration Statement Form. Each registration requested
---------------------------
pursuant to Section 1.1 shall be effected by the filing of a registration
statement on a form agreed to by the Majority Stockholder; each registration
requested pursuant to Section 1.2 shall be effected by the filing of a
registration statement on a form agreed to by the Requesting Outside Investors.
<PAGE>
4
1.4. Expenses. The Company will pay all Registration Expenses in
--------
connection with any registrations requested under Section 1.1 and 1.2 provided
--------
that any seller thereunder shall pay all Registration Expenses to the extent
required to be paid by such seller under applicable law and provided further
-------- -------
that underwriting commissions related to a registration requested under Sections
1.1 and 1.2 shall be paid pro rata by the Persons selling Registrable Securities
--- ----
in such registration, based on the number of shares of Registrable Securities
being sold.
1.5. Priority in Demand Registrations. If a registration pursuant to
--------------------------------
Section 1.1 or Section 1.2 involves an underwritten offering, and the managing
underwriter (or, in the case of an offering which is not underwritten, an
investment banker) shall advise the Company or the initiating stockholder in
writing (with a copy to the Company and each Person requesting registration of
Registrable Securities) that, in its opinion, the number of securities requested
and otherwise proposed to be included in such registration exceeds the number
which can be sold in such offering, the Company will include in such
registration to the extent of the number which the Company is so advised can be
sold in such offering in the case of a registration pursuant to Section 1,
first, the Registrable Securities of the Majority Stockholder and the Outside
- -----
Investors requested to be included in such registration, pro rata, among all
--- ----
such holders, on the basis of the number of Registrable Securities owned by such
holders, second, the Registrable Securities, if any, of the Management
------
Stockholders, pro rata, among such holders, on the basis of the number of
--- ----
Registrable Securities requested to be included in such registration by such
holders and third, the securities, if any, being sold by the Company.
-----
Notwithstanding the foregoing, no employee stockholder will be entitled to
participate in any such registration requested pursuant to Sections 1.1 or 1.2
if the managing underwriter (or, in the case of an offering that is not
underwritten, an investment banker) shall determine in good faith that the
participation of such employee stockholder would adversely affect the
marketability of the securities being sold in such registration.
1.6. No Company Initiated Registration. After receipt of notice of a
---------------------------------
requested registration pursuant to Section 1.1 or 1.2, the Company shall not
initiate, without the consent of the Majority Stockholder, in the case of a
request pursuant to Section 1.1 or the Requesting Outside Investors, in the case
of a request pursuant to Section 1.2, a registration of any of its securities
for its own account until 90 days after such registration has been effected or
such registration has been terminated.
<PAGE>
5
2. Incidental Registrations. If the Company at any time proposes to
------------------------
register any of its equity securities under the Securities Act (other than
pursuant to Section 1 hereof or a registration on Form S-4 or S-8 or any
successor form), and the registration form to be used may be used for the
registration of Registrable Securities, it will give prompt written notice to
all holders of Registrable Securities of its intention to do so. Upon the
written request of any such holder made within 30 days after the receipt of any
such notice (which request shall specify the number of Registrable Securities
intended to be disposed of by such holder and the intended method or methods of
disposition thereof), the Company will use its best efforts to effect the
registration under the Securities Act of all such Registrable Securities in
accordance with such intended method or methods of disposition, provided that:
--------
(a) if such registration shall be in connection with an initial
public offering by the Company, the Company shall not include any
Registrable Securities in such proposed registration if the Board shall
have determined, after consultation with the managing underwriter for such
offering, that it is not in the best interests of the Company to include
any Registrable Securities in such registration;
(b) if, at any time after giving written notice of its intention to
register any equity securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such equity
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon,
shall not be obligated to register any Registrable Securities in connection
with such registration (but shall nevertheless pay the Registration
Expenses in connection therewith), without prejudice, however, to the
rights of the Majority Stockholder and the Requesting Outside Investors to
request that a registration be effected under Section 1.1 or 1.2,
respectively; and
(c) if a registration pursuant to this Section 2 involves an
underwritten offering, and the managing underwriter (or, in the case of an
offering that is not underwritten, an investment banker) shall advise the
Company in writing (with a copy to each holder of Registrable Securities
requesting registration thereof) that, in its opinion, the number of
securities requested and otherwise proposed to be included in such
registration exceeds the number which can be sold in such offering, the
Company will include in such registration to the extent of the num-
<PAGE>
6
ber which the Company is so advised can be sold in such offering, first,
-----
the securities if any, being sold by the Company, and second, the
------
Registrable Securities of the Majority Stockholder requested to be included
in such registration, together with the Registrable Securities of the
Outside Investors requested to be included in such registration, pro rata,
--- ----
among all such holders, on the basis of the number of Registrable
Securities owned by such holders and third, the Registrable Securities, if
-----
any, of the Management Stockholders, pro rata, among such holders, on the
--- ----
basis of the number of such Registrable Securities requested to be included
in such registration by such holders. Notwithstanding the foregoing, no
employee stockholder will be entitled to participate in any such
registration if the managing underwriter (or, in the case of an offering
that is not underwritten, an investment banker) shall determine in good
faith that the participation of such employee stockholder would adversely
affect the marketability of the securities being sold by the Company in
such registration.
The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 2,
provided that any seller thereunder shall pay all Registration Expenses to the
- --------
extent required to be paid by such seller under applicable law and provided
--------
further that underwriting commissions shall be paid pro rata by the sellers in
- ------- --- ----
such registration, based on the number of shares of Registrable Securities being
sold. No registration effected under this Section 2 shall relieve the Company
from its obligation to effect registrations under Section 1.
3. Registration Procedures. If and whenever the Company is required
-----------------------
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 1 and 2, the Company will
promptly:
(a) prepare, and within 60 days thereafter file with the Commission,
a registration statement with respect to such Registrable Securities, make
all required filings with the NASD and use best efforts to cause such
registration statement to become effective as soon as practicable;
(b) prepare and promptly file with the Commission such amendments and
post-effective amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective for so long as is required to comply
with the provisions of the Securities Act and to complete the disposition
of all securities
<PAGE>
7
covered by such registration statement in accordance with the intended
method or methods of disposition thereof, but in no event for a period of
more than six months after such registration statement becomes effective;
(c) furnish copies of all documents proposed to be filed with the
Commission in connection with such registration to (i) in the case of a
-
registration pursuant to Section 1.1 (a "Majority Stockholder
--------------------
Registration"), counsel selected by the Majority Stockholder; (ii) in the
--
case of a registration pursuant to Section 1.2 (an "Outside Investors
-----------------
Registration"), one counsel selected by the Requesting Outside Investors
------------
and approved by the Company (such approval not to be unreasonably withheld,
it being agreed that each of Weil, Gotshal & Manges LLP and Paul, Hastings,
Janofsky & Walker, LLP will be deemed approved by the Company) and (iii) in
---
the case of a registration pursuant to Section 2, one counsel selected by
the holders of at least 51% of the Registrable Securities proposed to be
sold in connection with such registration (such holders, the "Majority
--------
Holders"), which documents will be subject to the review of such counsel
-------
and the Company shall not file any amendment and post-effective amendments
or supplement to such registration statement or the prospectus used in
connection therewith which relevant counsel and the Majority Stockholder,
in the case of a Majority Stockholder Registration, the Requesting Outside
Investors, in the case of an Outside Investors Registration or the Majority
Holders in the case of all other registrations pursuant to this Agreement,
shall have reasonably objected in writing on the grounds that such
amendment or supplement does not comply (explaining why) in all material
respects with the requirements of the Securities Act or of the rules or
regulations thereunder;
(d) furnish to each seller of Registrable Securities, without charge,
such number of conformed copies of such registration statement and of each
such amendment and supplement thereto (in each case including all exhibits
and documents filed therewith) and such number of copies of the prospectus
included in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under
Rule 424 under the Securities Act, in conformity with the requirements of
the Securities Act, and such other documents, as such seller may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such seller in accordance with the intended method or
methods of disposition thereof;
<PAGE>
8
(e) use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under the securities or
blue sky laws of such jurisdictions as each seller shall reasonably
request, and do any and all other acts and things which may be necessary or
advisable to enable such seller to consummate the disposition of such
Registrable Securities in such jurisdictions in accordance with the
intended method or methods of disposition thereof, provided that the
--------
Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it is not
so qualified, subject itself to taxation in any jurisdiction wherein it is
not so subject, or take any action which would subject it to general
service of process in any jurisdiction wherein it is not so subject;
(f) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of
the business and operations of the Company to enable the seller or sellers
thereof to consummate the disposition of such Registrable Securities in
accordance with the intended method or methods of disposition thereof;
(g) furnish to each seller of Registrable Securities a signed
counterpart, addressed to the sellers, of
(i) an opinion of counsel for the Company experienced in
securities law matters, dated the effective date of the registration
statement (and, if such registration includes an underwritten public
offering, the date of the closing under the underwriting agreement),
and
(ii) a "comfort" letter (unless the registration is pursuant to
Section 2 and such a letter is not otherwise being furnished to the
Company), dated the effective date of such registration statement (and
if such registration includes an underwritten public offering, dated
the date of the closing under the underwriting agreement), signed by
the independent public accountants who have issued an audit report on
the Company's financial statements included in the registration
statement,
covering such matters as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities and such other matters as the
Majority Stockholder, in the
<PAGE>
9
case of a Majority Stockholder Registration, the Requesting Outside
Investors, in the case of an Outside Investors Registration and the
Majority Holders, in the case of all other registrations pursuant to this
Agreement, may reasonably request;
(h) notify each seller of any Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event or existence of any fact as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and, as promptly as
is practicable, prepare and furnish to such seller a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing;
(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement of the
Company (in form complying with the provisions of Rule 158 under the
Securities Act) covering the period of at least 12 months, but not more
than 18 months, beginning with the first month after the effective date of
the registration statement;
(j) notify each seller of any Registrable Securities covered by such
registration statement (i) when the prospectus or any prospectus supplement
-
or post-effective amendment has been filed, and, with respect to such
registration statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the Commission for amendments or
--
supplements to such registration statement or to amend or to supplement
such prospectus or for additional information after the effectiveness of
such registration statement, (iii) of the issuance by the Commission of any
---
stop order suspending the effectiveness of such registration statement or
the initiation of any proceedings for that purpose and (iv) of the
--
suspension of the qualification of such securities for offering or sale in
any jurisdiction, or of the institution of any proceedings for any of such
purposes;
<PAGE>
10
(k) use every reasonable effort to obtain the lifting of any stop
order that might be issued suspending the effectiveness of such
registration statement at the earliest possible moment;
(l) use its best efforts (i) (A) to list such Registrable Securities
- -
on any securities exchange on which the equity securities of the Company
are then listed or, if no such equity securities are then listed, on an
exchange selected by the Company, if such listing is then permitted under
the rules of such exchange, or (B) if such listing is not practicable, to
-
secure designation of such securities as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 under the Exchange Act or,
failing that, to secure NASDAQ authorization for such Registrable
Securities, and, without limiting the foregoing, to arrange for at least
two market makers to register as such with respect to such Registrable
Securities with the NASD, and (ii) to provide a transfer agent and
--
registrar for such Registrable Securities not later than the effective date
of such registration statement;
(m) enter into such agreements and take such other actions as the
sellers of Registrable Securities or the underwriters reasonably request in
order to expedite or facilitate the disposition of such Registrable
Securities, including, without limitation, preparing for, and participating
in, such number of "road shows" and all such other customary selling
efforts as the underwriters reasonably request in order to expedite or
facilitate such disposition; and
(n) use its reasonable best efforts to take all other steps necessary
to effect the registration of such Registrable Securities contemplated
hereby.
As a condition to its registration of Registrable Securities of any
prospective seller, the Company may require each seller of any Registrable
Securities as to which any registration is being effected to furnish to the
Company such information regarding such seller, its ownership of Registrable
Securities and the disposition of such Registrable Securities as the Company may
from time to time reasonably request in writing and as shall be required by law
in connection therewith. Each such holder agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such holder not materially
misleading.
<PAGE>
11
The Company agrees not to file or make any amendment to any
registration statement with respect to any Registrable Securities, or any
amendment of or supplement to the prospectus used in connection therewith, which
refers to any seller of any Registrable Securities covered thereby by name, or
otherwise identifies such seller as the holder of any Registrable Securities,
without the consent of such seller, such consent not to be unreasonably
withheld, unless such disclosure is required by law.
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(h), such holder will promptly discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(h). If so directed
by the Company, each holder of Registrable Securities will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
in such holder's possession of the prospectus covering such Registrable
Securities at the time of receipt of such notice. In the event that the Company
shall give any such notice, the period mentioned in Section 3(b) shall be
extended by the number of days during the period from and including the date of
the giving of such notice to and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
Section 3(h).
4. Underwritten Offerings.
----------------------
4.1. Underwriting Agreement. If requested by the underwriters for
----------------------
any underwritten offering by holders of Registrable Securities pursuant to (i) a
Majority Stockholder Registration, (ii) an Outside Investors Registration or
(iii) any other registration pursuant to Section 2, the Company shall enter into
---
an underwriting agreement with the underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to, in the case of
a Majority Stockholder Registration, the Majority Stockholder, in the case of an
Outside Investors Registration, the Requesting Outside Investors, and in the
case of all other registrations, the Majority Holders, and also in each such
case satisfactory to the underwriters, containing such representations and
warranties by the Company and such other terms and provisions as are customarily
contained in agreements of this type, including, without limitation, indemnities
to the effect and to the extent provided in Section 8. The holders of
Registrable Securities to be dis-
<PAGE>
12
tributed by such underwriters shall be parties to such underwriting agreement
and may, at their option, require that any or all of the representations and
warranties by, and the agreements on the part of, the Company to and for the
benefit of such underwriters be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement shall also be
conditions precedent to the obligations of such holders of Registrable
Securities. No underwriting agreement (or other agreement in connection with
such offering) shall require any holder of Registrable Securities to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, the ownership of such holder's Registrable Securities and such holder's
intended method or methods of disposition and any other representation required
by law or to furnish any indemnity to any Person which is broader than the
indemnity furnished by such holder in Section 8.2.
4.2. Selection of Underwriters. If the Company at any time proposes
-------------------------
to register any of its securities under the Securities Act for sale for its own
account pursuant to an underwritten offering, the Company will have the right to
select the managing underwriter (which shall be of nationally recognized
standing) to administer the offering, but only with the approval of the Majority
Stockholder, such approval not to be unreasonably withheld, provided that
--------
whenever a registration requested pursuant to Section 1.1 or 1.2 is for an
underwritten offering, the Majority Stockholder, or the Requesting Outside
Investors, as the case may be, will have the right to select the managing
underwriter (which shall be of nationally recognized standing) to administer the
offering, but only with the approval of the Company, such approval not to be
unreasonably withheld.
5. Holdback Agreements. (a) If and whenever the Company proposes to
-------------------
register any of its equity securities under the Securities Act for its own
account (other than on Form S-4 or S-8 or any successor form) or is required to
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act pursuant to Section 1 or 2, each holder of Registrable
Securities agrees by acquisition of such Registrable Securities not to effect
any public sale or distribution, including any sale pursuant to Rule 144 under
the Securities Act, of any Registrable Securities within seven days prior to and
90 days (unless advised in writing by the managing underwriter that a longer
period, not to exceed 180 days, is required) after the effective date of the
registration statement relating to such registration, except as part of such
registration.
<PAGE>
13
(b) The Company agrees not to effect any public sale or distribution
of its equity securities or securities convertible into or exchangeable or
exercisable for any of such securities within seven days prior to and 90 days
(unless advised in writing by the managing underwriter that a longer period, not
to exceed 180 days, is required) after the effective date of such registration
statement (except as part of such registration or pursuant to a registration on
Form S-4 or S-8 or any successor form). In addition, if requested by the
managing underwriter, the Company shall use its commercially reasonable best
efforts to cause each holder of its equity securities or any securities
convertible into or exchangeable or exercisable for any of such securities,
whether outstanding on the date of this Agreement or issued at any time after
the date of this Agreement (other than any such securities acquired in a public
offering), to agree not to effect any such public sale or distribution of such
securities during such period, except as part of any such registration if
permitted, and to cause each such holder to enter into a similar agreement to
such effect with the Company.
6. Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give the holders of such
Registrable Securities so to be registered and their underwriters, if any, and
their respective counsel and accountants the opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, and
will give each of them such access to the financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have issued audit reports on its financial
statements as shall be reasonably requested by such holders in connection with
such registration statement.
7. No Grant of Future Registration Rights. The Company shall not
--------------------------------------
grant any other demand or incidental registration rights to any other Person
without the prior written consent of the Majority Stockholder; provided, that
--------
the Company shall not grant demand or incidental registration rights which are
inconsistent with the rights granted under this Agreement (it being understood
that the neither the granting of demand registration rights (with respect to
which the holders of Registrable Securities may participate pro rata under the
second paragraph of Section 1.2 hereof) nor pro rata incidental registration
rights, each on terms comparable to the terms hereof is considered inconsistent
with the terms hereof).
<PAGE>
14
8. Indemnification.
---------------
8.1. Indemnification by the Company. In the event of any
------------------------------
registration of any Registrable Securities pursuant to this Agreement, the
Company will indemnify and hold harmless (a) the seller of such Registrable
-
Securities, (b) the directors, officers, partners, employees, agents and
-
Affiliates of such seller, (c) each Person who participates as an underwriter in
-
the offering or sale of such securities and (d) each person, if any, who
-
controls (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) any such seller, partner or underwriter against any and all
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof), joint or several, directly or indirectly based upon or arising out of
(i) any untrue statement or alleged untrue statement of a fact contained in any
-
registration statement under which such Registrable Securities were registered
under the Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein or used in connection with the offering of
securities covered thereby, or any amendment or supplement thereto, or (ii) any
--
omission or alleged omission to state a fact required to be stated therein or
necessary to make the statements therein not misleading; and the Company will
reimburse each such indemnified party for any legal or any other expenses
reasonably incurred by them in connection with investigating, preparing,
pursuing or defending any such loss, claim, damage, liability, action or
proceeding, except insofar as any such loss, claim, damage, liability, action,
proceeding or expense arises out of or is based upon an untrue statement or
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
seller expressly for use in the preparation thereof. Such indemnity shall
remain in full force and effect, regardless of any investigation made by such
indemnified party and shall survive the transfer of such Registrable Securities
by such seller. The indemnity agreement contained in this Section 8.1 shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
action or proceeding if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld).
8.2. Indemnification by the Sellers. The Company may require, as a
------------------------------
condition to including any Registrable Securities of a prospective seller in any
registration statement filed pursuant to Section 1 or 2 that the Company shall
have received an undertaking satisfactory to it from each such prospective
sellers of such Registrable Securities to indemnify and hold harmless,
severally, not jointly, in the same manner and to the same extent as set forth
in Section 8.1, the Company, its directors and
<PAGE>
15
officers and each person, if any, who controls (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) the Company with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such seller expressly for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement. Such indemnity shall remain in full force and effect,
regardless of any investigation made by or on behalf of the Company or any such
director, officer or controlling Person and shall survive the transfer of such
Registrable Securities by such seller. The indemnity agreement contained in this
Section 8.2 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, action or proceeding if such settlement is effected
without the consent of such seller (which consent shall not be unreasonably
withheld). The Company and the holders of Registrable Securities hereby
acknowledge and agree that for all purposes of this Agreement the only
information furnished or to be furnished to the Company for use in any such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement are statements specifically relating to (a)
-
transactions between such holder and its Affiliates, on the one hand, and the
Company, on the other hand, (b) the beneficial ownership of shares of Common
-
Stock by such holder and its Affiliates and (c) the name and address of such
-
holder. The indemnity provided by each seller of Registrable Securities under
this Section 8.2 shall be limited in amount to the net amount of proceeds
actually received by such seller from the sale of Registrable Securities
pursuant to such registration statement.
8.3. Notices of Claims, etc. Promptly after receipt by an
----------------------
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 8,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action or proceeding, provided that the failure of any indemnified party to
--------
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 8, except to the
extent that the indemnifying party is materially prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate therein and to assume the
defense thereof, jointly with any other indemnifying party similarly notified,
to the extent that it may wish, with counsel
<PAGE>
16
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof except for the reasonable fees and expenses
of any counsel retained by such indemnified party to monitor such action or
proceeding. Notwithstanding the foregoing, if such indemnified party and the
indemnifying party reasonably determine, based upon advice of their respective
independent counsel, that a conflict of interest may exist between the
indemnified party and the indemnifying party with respect to such action and
that it is advisable for such indemnified party to be represented by separate
counsel, such indemnified party may retain other counsel, reasonably
satisfactory to the indemnifying party, to represent such indemnified party, and
the indemnifying party shall pay all reasonable fees and expenses of such
counsel. No indemnifying party, in the defense of any such claim or litigation,
shall, except with the consent of such indemnified party, which consent shall
not be unreasonably withheld, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation.
8.4. Other Indemnification. Indemnification similar to that
---------------------
specified in the preceding paragraphs of this Section 8 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration (other than under the
Securities Act) or other qualification of such Registrable Securities under any
federal or state law or regulation of any governmental authority.
8.5. Indemnification Payments. Any indemnification required to be
------------------------
made by an indemnifying party pursuant to this Section 8 shall be made by
periodic payments to the indemnified party during the course of the action or
proceeding, as and when bills are received by such indemnifying party with
respect to an indemnifiable loss, claim, damage, liability or expense incurred
by such indemnified party.
8.6. Other Remedies. If for any reason the foregoing indemnity is
--------------
unavailable, or is insufficient to hold harmless an indemnified party, other
than by reason of the exceptions provided therein, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities, actions, proceedings or
expenses in such proportion as is appropriate to reflect the relative benefits
to and faults of the indemnifying party on the one hand and
<PAGE>
17
the indemnified party on the other in connection with the offering of
Registrable Securities (taking into account the portion of the proceeds of the
offering realized by each such party) and the statements or omissions or alleged
statements or omissions which resulted in such loss, claim, damage, liability,
action, proceeding or expense, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statements or omissions.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. No party shall be
liable for contribution under this Section 8.6 except to the extent and under
such circumstances as such party would have been liable to indemnify under this
Section 8 if such indemnification were enforceable under applicable law.
9. Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following respective meanings:
"Affiliate": A Person that directly, or indirectly through one or
---------
more intermediaries, controls, or is controlled by, or is under common control
with, the Person specified.
"Board": The Board of Directors of the Company.
-----
"Commission": The Securities and Exchange Commission.
----------
"Common Stock": The Common Stock of the Company, par value $.01 per
------------
share.
"Exchange Act": The Securities Exchange Act of 1934, as amended, or
------------
any successor federal statute, and the rules and regulations thereunder which
shall be in effect at the time.
"Majority Stockholder": iXL, regardless of the number or percentage of
--------------------
Registrable Securities held by iXL.
<PAGE>
18
"Management Stockholders": Those individual employees of the Company
-----------------------
who become parties to this Agreement pursuant to Section 10.3.
"NASD": National Association of Securities Dealers, Inc.
----
"NASDAQ": The Nasdaq National Market.
------
"Outside Investors": As defined in the Stockholders' Agreement.
-----------------
"Person": An individual, corporation, partnership, joint venture,
------
association, limited liability company, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Preferred Stock": The Company's Series A Convertible Preferred
---------------
Stock, par value $.01 per share, and the Company's Series B Convertible
Preferred Stock, par value $.01 per share.
"Qualified Public Offering": As defined in the Stockholders'
-------------------------
Agreement.
"Registrable Securities": The shares of Common Stock (or any
----------------------
successor class of common stock) beneficially owned (within the meaning of
Section 13d-3 of the Exchange Act) by the Majority Stockholder, the Outside
Investors and the Management Stockholders or any other Person made a party
hereto pursuant to Section 10.2 or 10.3 (it being agreed that, with respect to
the Outside Investors, the Preferred Stock convertible into Common Stock will be
deemed Registrable Securities for purposes of exercising rights hereunder,
provided that Section 1 hereof shall not require the registration of the offer
or sale of any such Preferred Stock, as distinguished from the Common Stock into
which the Preferred Stock is convertible. With respect to the Management
Stockholders, "Registrable Securities" shall include only those shares of Common
Stock actually held by such Management Stockholders, and shall not include
unexercised options). As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a registration
-
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (ii) they shall have been
--
sold to the public pursuant to Rule 144 under the Securities Act, (iii) they
---
shall have been otherwise transferred and subsequent disposition of them shall
not require registration or qualification of them under the Securities Act of or
any similar state law then in force or (iv) they shall have ceased to be
--
outstanding.
<PAGE>
19
"Registration Expenses": All expenses incident to the Company's
---------------------
performance of or compliance with Section 1 and Section 2, including, without
limitation, (i) registration, filing and NASD fees, (ii) fees and expenses of
- --
complying with securities or blue sky laws, (iii) fees and expenses associated
---
with listing securities on an exchange or NASDAQ, (iv) word processing,
--
duplicating and printing expenses, (v) messenger and delivery expenses, (vi)
- --
fees and disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters, (vii) reasonable fees and disbursements of any one counsel retained by
---
the sellers of Registrable Securities, which counsel shall be selected pursuant
to Section 3(c), and (viii) any fees and disbursements of underwriters
----
customarily paid by issuers or sellers of securities, but excluding underwriting
discounts and commissions and transfer taxes, if any.
"Securities Act": The Securities Act of 1933, as amended, or any
--------------
successor federal statute, and the rules and regulations thereunder which shall
be in effect at the time.
"Stock Purchase Agreement" means the Stock Purchase Agreement, dated
------------------------
as of April 7, 1999, between the Company and GE Capital Equity Investments, Inc.
"Stockholders' Agreement": The Amended and Restated Stockholders'
-----------------------
Agreement, dated as of the date hereof, as the same shall be amended from time
to time, among the Company, iXL, GECC and the other Persons named therein.
10. Miscellaneous.
-------------
10.1. Rule 144 etc. If the Company shall have filed a registration
------------
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act
relating to any class of equity securities, the Company will file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the Commission thereunder, and will take such
further action as any holder of Registrable Securities may reasonably request,
all to the extent required from time to time to enable such holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
-
as such rule may be amended from time to time, or (b) any successor rule or
-
regulation adopted
<PAGE>
20
hereafter by the commission. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
10.2. Successors, Assigns and Transferees. This Agreement shall be
-----------------------------------
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns, subject to the transfer
restrictions set forth in the Stockholders' Agreement. In addition, and
provided that an express assignment shall have been made, and a copy of which
shall have been delivered to the Company, the provisions of this Agreement which
are for the benefit of a holder of Registrable Securities shall be for the
benefit of and enforceable by any subsequent holder of any Registrable
Securities (which subsequent holder shall be deemed to be an Outside Investor
hereunder), provided that each such subsequent holder became a holder of
--------
Registrable Securities in accordance with the Stockholders' Agreement.
Notwithstanding anything herein to the contrary, the assignors of Registrable
Securities shall continue to exercise all rights hereunder on behalf of any such
transferees or assignees and the Company shall be entitled to deal exclusively
with such assignors and rely on the consent, waiver or any other action by the
assignors as the consent, waiver or other action, as the case may be, of any
such transferees or assignees.
10.3. Other Stockholders. In the event that any Person shall become
------------------
a party to the Stockholders' Agreement after the date hereof pursuant to
Sections 13.3 and 13.4 thereof or with respect to any transferee of an Outside
Investor, then the Company (a) shall unilaterally amend this Agreement to
-
include such Person as a party hereto, as an Outside Investor or Management
Stockholder hereunder, as appropriate and (b) in the event such Person is an
-
Outside Investor, the Company may unilaterally amend this Agreement to provide
such Person with additional demand rights under Section 1.2.
10.4. Stock Splits, etc. Each holder of Registrable Securities
-----------------
agrees that it will vote to effect a stock split or combination with respect to
any Registrable Securities in connection with any registration of such
Registrable Securities hereunder, or otherwise, if the managing underwriter
shall advise the Company in writing (or, in connection with an offering that is
not underwritten, if an investment banker shall advise the Company in writing)
that in its opinion such a stock split or combination would facilitate or
increase the likelihood of success of the offering.
<PAGE>
21
10.5. Amendment and Modification. This Agreement may be amended,
--------------------------
modified or supplemented by the Company with the written consent of the Majority
Stockholder and a majority (by number of shares) of any other holder of
Registrable Securities (assuming conversion of Preferred Stock into Registrable
Securities) whose interests would be adversely affected by such amendment.
Notwithstanding the foregoing, this Agreement may be amended unilaterally by the
Company as provided in Section 10.3.
10.6. Governing Law. This Agreement and the rights and obligations
-------------
of the parties hereunder and the Persons subject hereto shall be governed by,
and construed and interpreted in accordance with, the law of the State of
Delaware, without giving effect to the choice of law principles thereof.
10.7. 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.
10.8. Notices. All notices, requests, demands, letters, waivers and
-------
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (a) delivered
-
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
- -
sent by next-day or overnight mail or delivery or (d) sent by fax as follows:
-
(i) If to the Company, to it at:
Consumer Financial Network, Inc.
1465 Northside Drive
Atlanta, Georgia 30318
Attention: Sandra Cuttler, Esq.
(ii) If to any other holder of Registrable Securities, to the address of
such holder as set forth in the books and records of the Company or to such
other person or address as any party shall specify by notice in writing to the
Company. All such notices, requests, demands, letters, waivers and other
communications shall be deemed to have been received (w) if by personal delivery
-
on the day after such delivery, (x) if by certified or registered mail, on the
-
fifth business day after the mailing thereof, (y) if by next-day or
-
<PAGE>
22
overnight mail or delivery, on the day delivered or (z) if by fax, on the next
-
day following the day on which such fax was sent, provided that a copy is also
sent by certified or registered mail.
10.9. Headings; Execution in Counterparts. The headings and captions
-----------------------------------
contained herein are for convenience and shall not control or affect the meaning
or 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.
10.10. Injunctive Relief. Each of the parties recognizes and agrees
-----------------
that money damages may be insufficient and, therefore, in the event of a breach
of any provision of this Agreement the aggrieved party may elect to institute
and prosecute proceedings in any court of competent jurisdiction to enforce
specific performance or to enjoin the continuing breach of this Agreement. Such
remedies shall, however, be cumulative and not exclusive, and shall be in
addition to any other remedy which such party may have.
10.11. Entire Agreement. This Agreement, together with the
----------------
Stockholders Agreement, is intended by the parties hereto as a final expression
of their agreement and intended to be a complete and exclusive statement of
their agreement and understanding in respect of the subject matter contained
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
10.12. Term. This Agreement shall be effective as of the date hereof
----
and shall continue in effect thereafter until the earlier of (a) its termination
-
by the consent of the parties hereto or their respective successors in interest
and (b) the date on which no Registrable Securities (and no securities
-
convertible into or exchangeable for Registrable Securities) remain outstanding.
[The remainder of this page left intentionally blank]
<PAGE>
IN WITNESS WHEREOF, this Registration Rights Agreement has been signed
by each of the parties hereto, effective as of the date first written above.
CONSUMER FINANCIAL NETWORK, INC.
By: /s/ M. Wayne Boylston
--------------------------------
Name: M. Wayne Boylston
Title: Executive Vice President
iXL ENTERPRISES, INC.
By: /s/ M. Wayne Boylston
--------------------------------
Name: M. Wayne Boylston
Title: Executive Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Michael E. Pralle
--------------------------------
Name: Michael E. Pralle
Title: Vice President
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Jeffrey H. Coats
--------------------------------
Name: Jeffrey H. Coats
Title: Managing Director
<PAGE>
EXHIBIT A
Management Stockholders
-----------------------
<PAGE>
Exhibit 10.60
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
among
iXL Enterprises, Inc.
and
GE Capital Equity Investments, Inc.
Dated as of
June 8, 1999
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<PAGE>
WARRANT AGREEMENT
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This WARRANT AGREEMENT is dated as of June 8, 1999 (the "Agreement"),
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and entered into by and among iXL Enterprises, Inc., a Delaware corporation (the
"Company"), and GE Capital Equity Investments, Inc. ("GECC," and together with
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subsequent holders of the Warrants subject hereto, the "Holders").
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WHEREAS, in connection with the Securities Purchase Agreement, dated as of
April 7, 1999, among the Company, GECC and General Electric Pension Trust, and
in consideration of (a) GECC's agreement to help develop and implement a
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mutually satisfactory marketing plan for the Company including a coordinated
promotional campaign extending for one year and emphasizing GECC's continuing
and growing relationship with the Company and Consumer Financial Network, Inc.
("CFN"),and (b) GECC's agreement to use its commercially reasonable efforts to
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implement, within GECC's intranet, the electronic access to CFN's entire
platform and developing a mutually satisfactory plan of implementation and
employee communication with respect thereto, the Company is issuing to GECC
warrants to purchase an aggregate of 1,500,000 shares (subject to adjustment as
provided herein) of the Company's Common Stock, par value $.01 per share (the
"Common Stock"). The warrants referred to in this paragraph are referred to
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herein as the "Warrants" and the shares of Common Stock issuable upon exercise
of the Warrants are referred to herein as the "Warrant Shares";
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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. Simultaneously with the execution
hereof, the Company will issue and deliver to GECC a certificate or certificates
evidencing the Warrants (the "Warrant Certificates"). Such certificate or
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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.
<PAGE>
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"),
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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. No Warrants may be
transferred to any Holder unless the issuance of Warrant Shares to such Holder
upon the exercise of such Warrants would be exempt from registration under the
Securities Act. 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.
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 into 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.
Subject to the foregoing, 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.
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 first anniversary of the date hereof and
ending at 5:00 p.m., New York City time, on the date which is five years after
the date hereof (the "Expiration Date"), to receive from the Company the number
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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 (as defined below) 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
<PAGE>
3
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
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Price") shall be equal to $12.00.
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 by delivering for surrender and
cancellation to the Company Warrants with an aggregate Surrender Value (as
hereinafter defined), as of the date of such exercise, equal to the Exercise
Price for the Warrants being exercised. For the purposes of this paragraph, the
"Surrender Value" of any Warrant is equal to the Fair Market Value, 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. Fair Market Value means with
respect to a Warrant Share at any date: (i) if shares of Common Stock are being
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sold pursuant to a public offering under an effective registration statement
under the Securities Act which has been declared effective and Fair Market Value
is being determined as of the closing of the public offering, the higher of (x)
the "per share price to public" specified for such shares in the final
prospectus for such public offering and (y) the Fair Market Value determined
under clauses (ii), (iii) or (iv), as applicable below; (ii) subject to clause
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(i) above, if shares of Common Stock are then listed or admitted to trading on
any national securities exchange or traded on any national market system, the
average of the daily closing prices for the 20 trading days before such date;
(iii) subject to clause (i) above, if no shares of Common Stock are then listed
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or admitted to trading on any national securities exchange or traded on any
national market system, the average of the reported closing bid and asked prices
thereof on such date in the over-the-counter market as shown by the Nasdaq Stock
Market or, if such shares are not then quoted in such system, as published by
the National Quotation Bureau, Incorporated or any similar successor
organization, and in either case as reported by any member firm of the New York
Stock Exchange selected by the Company; or (iv) subject to clause (i) above, if
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no shares of Common Stock are then listed or admitted to trading on any national
securities exchange or traded on any national market system, if no closing bid
and asked prices thereof are then so quoted or published in the over-the-counter
market, the Fair Market Value of a Warrant Share as determined in good faith by
the Board of Directors of the Company.
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4
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 9. 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.
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.
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5
SECTION 6. 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 GECC 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 7. 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 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 the Common Stock (the
"Transfer Agent") will be irrevocably authorized and directed at all times to
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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 10 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 8 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.
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6
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.
SECTION 8. 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
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from time to time upon the occurrence of the events enumerated in, or as
otherwise provided in, this Section 8.
(a) Adjustment for Change in Capital Stock
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If the Company:
(1) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(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.
<PAGE>
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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 Common Stock unless (i)
the Warrant Holders also receive such dividend or distribution on a ratable
basis or (ii) the appropriate adjustment to the Warrant Number and Exercise
Price is made under this Section 8.
(b) Notice of Adjustment
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Whenever the Warrant Number is adjusted, the Company shall provide the
notices required by Section 10 hereof.
(c) Voluntary Increase
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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 8.
(d) Reorganizations
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In case of any capital reorganization or reclassification, other than in
the cases referred to in Section 8(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
<PAGE>
8
reclassification of any of the outstanding shares of the Company's capital
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
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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 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 acknowledgment 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.
If any event occurs of the type similar to that contemplated by the
provisions of this Section 8 but not expressly provided for by such provisions,
then the Board of Directors of the Company will make an appropriate adjustment
in the Warrant Number so as to protect the Holders, provided, that no such
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adjustment will decrease the applicable Warrant Number as otherwise determined
by this Section 8.
(e) Form of Warrants
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<PAGE>
9
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 9. 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 9,
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 of the
Warrant Share so issuable, multiplied by such fraction.
SECTION 10. Notices to Warrant Holders. Upon any adjustment pursuant to
Section 8 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 10.
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;
(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;
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10
(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 8 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 11 hereof, a written notice stating (i) the date as of
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which the holders of record of shares of the capital 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
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offer or exchange offer for shares of the capital stock of the Company, 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 the capital stock of the Company 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 10 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,
<PAGE>
11
that nothing in the foregoing provision is intended to detract from any
rights explicitly granted to any Holder hereunder.
SECTION 11. 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 GECC, to the address specified on the signature page executed
by GECC; and
(b) if to the Company, iXL Enterprises, Inc., 1888 Emery Street, N.W.,
Atlanta, Georgia, 30318, Telecopy no. (404) 267-3801, Attention: Mr. M. Wayne
Boylston, with a copy to Minkin & Snyder PC, One Buckhead Plaza, 3060
Peachtree Road, N.E., Suite 1100, Atlanta, Georgia 30305, Telecopy No. (404)
261-5064, Attention: James S. Altenbach, Esq., with an additional copy to
Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022, Telecopy
No. (212) 909-6836, Attention: Margaret A. Davenport, 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 12. 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.
<PAGE>
12
SECTION 13. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or GECC shall bind and inure to
the benefit of their respective successors and assigns hereunder, provided that
this Agreement shall not be assignable by any Holder if such Holder has not
complied with the transfer restrictions of Section 3 hereof. Any such
assignment in violation of Section 3 shall be null and void.
SECTION 14. Termination. This Agreement shall terminate if all Warrants
have been exercised or shall have expired or been canceled pursuant to this
Agreement, provided, that any rights of any party accrued with respect hereto
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prior to the termination of this Agreement shall survive such termination.
SECTION 15. 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.
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13
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 GECC'S INVESTMENT IN THE COMPANY CONTEMPLATED HEREBY.
THE SCOPE OF THIS JURY TRIAL WAIVER SHALL BE LIMITED TO DISPUTES BETWEEN THE
COMPANY AND GECC AND SHALL NOT EXTEND TO DISPUTES BETWEEN THE COMPANY AND ANY
OTHER PERSON.
SECTION 16. 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 17. 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 18. 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 18.
[Signature pages follow]
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14
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/ M. Wayne Boylston
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Name: M. Wayne Boylston
Title: Chief Financial Officer
Addresses for Notices:
GE Capital Equity Investments, Inc.
By: /s/ Jeffrey Coats
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Name: Jeffrey Coats
Title: Managing Director
<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
______________, 1999, 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 _____________, 1999,
AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND GE EQUITY CAPITAL
INVESTMENTS, INC. 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 GE Equity Capital Investments,
Inc. or registered assigns, is the registered holder of the number of Warrants
(the "Warrants") set forth above to purchase Common Stock, par value $.01 per
--------
share (the " Common Stock"), of iXL 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 [insert IPO price]
- ----- --------------
payable as provided in the Warrant Agreement, 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
<PAGE>
2
exercise of the Warrants and the Exercise Price are 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 on the first
anniversary of the date hereof and ending at 5:00 p.m., New York City time, on
the date which is five years after the date hereof.
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 _____________, 1999 (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 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. 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.
<PAGE>
3
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.
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 Enterprises, 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: _____________, 1999
iXL Enterprises, Inc.
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
<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
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 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 ________________________________.
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: ____________
<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: ____________
<PAGE>
EXHIBIT 10.61
INVESTORS AGREEMENT, dated as of June 8, 1999, among Consumer Financial
Network, Inc. (the "Company"), iXL Enterprises, Inc. ("iXL") and General
Electric Capital Corporation ("GECC") and GE Capital Equity Investments, Inc.
(the "Investors").
WHEREAS, certain of the Investors have entered into a Stock Purchase
Agreement with the Company pursuant to which they are purchasing on the date
hereof, an aggregate of 16,190,475 shares of Series B Preferred Stock of the
Company;
WHEREAS, GECC holds up to 13,333,334 shares of Series A Preferred Stock of
the Company;
WHEREAS, the parties hereto have entered into an Amended and Restated
Stockholders' Agreement, dated as of the date hereof (the "Stockholders'
Agreement");
WHEREAS, the parties desire to modify and supplement certain provisions of
the Stockholders' Agreement and provide for additional covenants and agreements
relating to the shares of Series A Preferred Stock and Series B Preferred Stock
(collectively the "Preferred Stock") held by the Investors and the shares of
common stock of the Company, par value $.01 per share (the "Common Stock"); into
which the Preferred Stock is convertible;
WHEREAS, any capitalized term used herein without definition shall have
the meaning specified in the Stockholders Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Restrictions on Issuances of Securities. The Company shall not issue
---------------------------------------
or otherwise Transfer any of its equity securities without the prior written
consent of the Investors except as otherwise expressly provided in this Section
1.
(a) The provisions of this Section 1 shall not prohibit the Company
from issuing or otherwise Transferring equity securities in one or more
transactions constituting, in the aggregate for all issuances or Transfers by
the Company after the date hereof, not more than either 20% of the total
outstanding equity interests in the Company or 20% of the outstanding voting
interests in the Company without the consent of the Investors. Notwithstanding
the foregoing, the consent of the Investors shall be required for any issue or
Transfer of equity securities by the Company to any of the entities listed as
"Restricted Entities" on the Schedule of Potential Investors delivered by the
Investors
<PAGE>
2
to the Company and iXL on April 7, 1999 provided that the Company shall provide
--------
each of the Investors with written notice of any proposed issuance or Transfer
to any such person or entity in reasonable detail (which notice shall specify
that failure to object to such issuance or Transfer within 10 business days
after receipt of such notice will be deemed consent thereto under this Section
1) and if no Investor objects to such proposed issuance in writing to the
Company within such 10 business day period, then the Investors shall be deemed
to have granted such consent.
(b) If the Company proposes to issue or Transfer equity securities in
one or more transactions constituting, in the aggregate for all issuances or
Transfers by the Company (including, without limitation, those permitted under
Section 1(a)) after the date hereof, more than either 20% of the total
outstanding equity interests in the Company or 20% of the total outstanding
--
voting interests in the Company, but not more than 80% of the total outstanding
equity interests in the Company or 80% of the total outstanding voting interests
--
in the Company, then the Company must obtain the prior written consent of the
Investors thereto, provided that the Company shall provide each of the Investors
--------
with written notice of any such proposed issuance or Transfer to any such person
or entity in reasonable detail (which notice shall specify that failure to
object to such issuance or Transfer within 10 business days after receipt of
such notice will be deemed consent thereto under this Section 1) and if no
Investor objects to such proposed issuance or Transfer in writing to the Company
within such 10 business day period, then the Investors shall be deemed to have
granted such consent. Notwithstanding the foregoing, the Company shall have the
right to issue or Transfer equity securities in one or more transactions
constituting in the aggregate not more than 20% of the Company's total
outstanding equity or voting securities (which when taken together with any
issuances pursuant to Section 1(a) and this Section 1(b) would constitute, in
the aggregate, not more than 40% of the Company's equity or voting securities)
if such equity securities are issued or Transferred to one of the Pre-Approved
Investors set forth on the Schedule of Potential Investors referred to in
Section 1(a).
(c) The provisions of this Section 1 shall not prohibit the Company
from issuing or otherwise Transferring to one or more Buyers in one or more
Organic Change transactions subject to Section 2.3 of the Stockholders
Agreement, equity securities constituting, in the aggregate, more than 80% of
the Company's total outstanding equity or voting securities (such percentage of
equity securities so Transferred being the "Applicable Percentage") if not later
than the consummation of such issuance or Transfer, (i) the proceeds from such
-
issuances or Transfers are used to redeem equity securities from the Company's
equity holders on a pro rata basis (except as provided below), (ii)
--
<PAGE>
3
not less than the Applicable Percentage of the equity securities of the Company
held by the GE Investors are so redeemed, (iii) the Sales Proceeds (as defined
---
in Section 3(b)) attributable to each redemption, pursuant to clause (ii) above
and clause (vi) below, of Series B Preferred Stock (and with respect to Series B
Preferred Stock that shall have previously been converted, any Common Stock
issued upon such conversion) shall be paid to each Investor at the time of such
redemption(s) and shall represent at least a 35% internal rate of return to such
Investor in respect of the Series B Preferred Stock (and, with respect to Series
B Preferred Stock that shall have been previously converted, the Common Stock
issued upon such conversion) so redeemed, (iv) the aggregate Sales Proceeds
--
received by the Investors pursuant to clause (ii) above represent at least the
aggregate purchase price paid by the Investors for the Series B Preferred Stock
(and the Common Stock issued upon conversion of the Series B Preferred Stock)
being so redeemed, plus $50 million, (v) the Sales Proceeds attributable to each
-
redemption pursuant to clause (ii) above and clause (vi) below, shall be paid to
each Investor in cash or Marketable Securities (as defined in Section 3) to the
extent of the amount of Sales Proceeds ensuring compliance with subsections
(iii) and (iv) above, and (vi) if, in connection with any transaction otherwise
--
satisfying the requirements of this Section 1(c), the redemption pursuant to
clause (i) is for less than 100% of the equity securities of the Company held by
an Investor, then such Investor shall be given the option (which must be
exercised) to either (x) require that all (but not less than all) of such
-
Investor's remaining equity interests in the Company be redeemed by the Company
not later than the consummation of the related Organic Change for the same per
share redemption price, and on the same terms, as is described in clauses (i)
and (iii) above or (y) as to any Preferred Stock that the Investor does not
-
elect to be so redeemed, convert such Preferred Stock into Common Stock upon the
closing of the related Organic Change in accordance with Section 4(a) of the
Series A Certificate of Designation or Series B Certificate of Designation. The
option referred to in clause (vi) above shall be exercised by such Investor
within 15 business days after receipt by such Investor of notice from the
Company describing such option and the circumstances giving rise thereto,
together with all information that the Investor may reasonably request in order
to enable such Investor to make a complete and informed decision with respect
thereto; provided, however, that such option shall not be required to be
-------- -------
exercised earlier than 3 months prior to the Company's entering into a
definitive agreement with respect to such issuance or Transfer.
(d) The provisions of this Section 1 shall not apply to any equity
securities issued by the Company in a Qualified Public Offering or to the
issuance of any Excluded Shares (as defined in Section 9 hereof) except for any
issuance described in paragraph (v) of such definition. All calculations
relating to proposed issuance or Transfer of the
<PAGE>
4
Company's equity securities for purposes of this Section 1 shall be determined
on a pro forma basis, giving effect to the proposed issuance. In determining the
respective percentages of equity or voting securities that are (or will after
such issuance be deemed) outstanding for purposes of this Section 1, securities,
warrants or other rights that are, or in the future may become, exercisable or
convertible into equity securities of the Company will be evaluated under 1(a),
(b) and (c) above on both pre-conversion and post-conversion basis, with the
greater percentage threshold achieved being the one that applies; provided that
--------
any such securities, warrants or other rights that are outstanding and not the
subject of the proposed issuance or Transfer by the Company and that are either
not at the time exercisable or convertible or are not "in the money" will only
be evaluated under 1(a), (b) and (c) on a pre-conversion basis. The percentage
calculations for purposes of this Section 1 shall be made independently of any
of the Company's equity securities purchased by the Investors pursuant to their
preemptive rights set forth in Section 5 hereof. Any "Transfer" by the Company
for purposes of this Section 1 shall not include the registration by the
Company, in its capacity as a transfer agent with respect to equity securities
of the Company, of any Transfers of equity securities by any equity holders of
the Company. For all purposes of this Agreement, "equity securities" shall
include, without limitation, convertible debt.
2. Restrictions on Sales by iXL. iXL (which, for purposes of this
----------------------------
Section 2, shall be deemed to include its affiliates) shall not Transfer any of
its equity securities in the Company without the prior written consent of the
Investors except as provided in this Section 2.
(a) The provisions of this Section 2 shall not prohibit iXL from
Transferring equity securities of the Company in one or more transactions
constituting, in the aggregate for all Transfers by the Company after the date
hereof, not more than either 20% of the total outstanding equity interests in
the Company or 20% of the outstanding voting interests in the Company without
the consent of the Investors. Notwithstanding the foregoing, the consent of the
Investors shall be required for any Transfer of the Company's equity securities
by iXL to any of the entities listed as "Restricted Entities" on the Schedule of
Potential Investors referred to in Section 1(a) hereof; provided that iXL shall
--------
provide each of the Investors with written notice of any proposed Transfer to
any such person or entity in reasonable detail (which notice shall specify that
failure to object to such Transfer within 10 business days after receipt of such
notice will be deemed consent thereto under this Section 2) and if no Investor
objects to such proposed Transfer in writing to the iXL within such 10 business
day period, then the Investors shall be deemed to have granted such consent.
<PAGE>
5
(b) If iXL proposes to Transfer equity securities of the Company in one or
more transactions constituting in the aggregate for all Transfers by iXL
(including, without limitation, those permitted under Section 2(a)) after the
date hereof, more than either 20% of the total outstanding equity interests in
the Company or 20% of the total outstanding voting interests in the Company, but
--
not more than 80% of the total outstanding equity interests in the Company or
--
80% of the total outstanding voting interests in the Company, then iXL must
obtain the prior written consent of the Investors thereto, provided that iXL
--------
shall provide each of the Investors with written notice of any such proposed
Transfer to any such person or entity in reasonable detail (which notice shall
specify that failure to object to such Transfer within 10 business days after
receipt of such notice will be deemed consent thereto under this Section 2) and
if no Investor objects to such proposed Transfer in writing to the Company
within such 10 business day period, then the Investors shall be deemed to have
granted such consent. Notwithstanding the foregoing, iXL shall have the right
to sell equity securities of the Company in one or more transactions
constituting in the aggregate not more than 20% of the Company's equity or
voting securities (which, when taken together with any sales pursuant to Section
2(a) and this Section 2(b) would constitute, in the aggregate, not more than
40% of the Company's equity or voting securities) if such equity securities are
sold to one of the Pre-Approved Investors set forth on the Schedule of Potential
Investors referred to in Section 1(a) hereof.
(c) The provisions of this Section 2 shall not prohibit iXL from
Transferring, pursuant to Section 2.2 or 2.3 of the Stockholders Agreement,
equity securities to one or more Buyers in one or more transactions
constituting, in the aggregate, more than 80% of the Company's total outstanding
equity or voting securities and requiring the Investors to participate in such
sale on a pro rata basis in accordance with Section 2.2 or 2.3 of the
Stockholders Agreement if (i) iXL shall require that the Investors participate
in such sale, pro rata with iXL (except as provided below), to the maximum
extent iXL is entitled to do so under Section 2.2 or 2.3 (as applicable) of the
Stockholders Agreement, (ii) the Sales Proceeds attributable to the sale by each
--
Investor, pursuant to clause (i) above and clause (v) below, of Series B
Preferred Stock (and with respect to Series B Preferred Stock that shall have
previously been converted, any Common Stock issued upon such conversion) shall
be paid to the Investor at the time of the closing of such sale and shall be
equal to the higher of (x) the amount otherwise payable in accordance with
Section 2.2 or 2.3 of the Stockholders Agreement or (y) an amount representing a
35% internal rate of return to such Investor in respect of the Series B
Preferred Stock (and with respect to Series B Preferred Stock that shall have
previously been converted, any Common Stock
<PAGE>
6
issued upon such conversion) so sold, (iii) the aggregate Sales Proceeds
---
received by the Investors pursuant to clause (ii) above represent at least the
aggregate purchase price paid by the Investors for the Series B Preferred Stock
(and Common Stock issued upon conversion of the Series B Preferred Stock) being
so sold, plus $50 million, (iv) the Sales Proceeds received by the Investors
--
pursuant to clause (i) above and clause (v) below shall be paid to each Investor
in cash or Marketable Securities to the extent of the amount of the Sales
Proceeds ensuring compliance with subsections (ii)(y) and (iii) above, and (v)
-
if, in connection with any transaction otherwise satisfying the requirements of
this Section 2(c), the sale pursuant to clause (i) is for less than 100% of the
equity securities of the Company held by an Investor, such Investor shall be
given the option (which must be exercised) to either (x) require that all (but
-
not less than all) of such Investor's remaining equity interests in the Company
be sold in the manner and on the terms described in (ii) above not later than
the date of iXL's Transfer pursuant to this Section 2(c) or (y) as to any
-
Preferred Stock that the Investor does not elect to be sold and that would
otherwise remain outstanding, convert such Preferred Stock into Common Stock in
accordance with Section 4(a) of the Series A Certificate of Designations or
Series B Certificate of Designations upon the closing of the transaction(s)
under Section 2.2 or 2.3 (as applicable) of the Stockholders Agreement. The
option referred to in clause (v) above shall be exercised by such Investor
within 15 business days after receipt by such Investor of notice from describing
such option and the circumstances giving rise thereto, together with all
information that the Investor may reasonably request in order to enable such
Investor to make a complete and informed decision with respect thereto;
provided, however, that such option shall not be required to be exercised
- -------- -------
earlier than 3 months prior to iXL's entering into a definitive agreement with
respect to such sale or Transfer.
(d) The provisions of this Section 2 shall not apply to any equity
securities sold by iXL in an underwritten registered public offering or pursuant
to Rule 144 in a broker's market transaction or to an affiliate of iXL that
agrees to be bound by this Agreement. The percentage calculations for purposes
of Section 2(a) and (b) shall be made independently of any equity securities
held by the Investors which are included in any sale pursuant to Section 2.1 of
the Stockholders Agreement but for purposes of Section 2(c) shall include any
equity securities held by the Investors which are included in any sale pursuant
to Section 2.2 or 2.3 of the Stockholders Agreement.
3. Certain Agreements; Provisions Applicable to Both Section 1 and
---------------------------------------------------------------
Section 2. (a) Any purchasers of the Company's equity securities issued
- ---------
pursuant to Section 1(a) or sold pursuant to Section 2(a) shall not be given,
with respect to any of their equity interests in the Company, any covenants,
agreements or rights that are more favorable or
<PAGE>
7
more comprehensive than those set forth in this Agreement from either the
Company or iXL or either of their Affiliates unless such covenants , agreements
or rights are extended to the Investors with respect to their equity interests
in the Company.
(b) Notwithstanding Sections 1 and 2 above, the number of shares of
equity securities of the Company that shall at any time and from time to time be
issued or Transferred by the Company pursuant to Section 1 shall be aggregated
with the number of shares of equity securities of the Company that shall at any
time and from time to time be Transferred by iXL pursuant to Section 2 and vice
versa, for purposes of calculating each of the applicable percentage thresholds
set forth in Sections 1(a), (b) and (c) and Sections 2(a), (b) and (c) (it being
the intent of the parties that all such percentage thresholds be a measure of
the combined issuances and Transfers of Company equity securities by iXL and its
affiliates and/or the Company). "Internal rate of return" for purposes of
Section 1(c) and 2(c) shall be calculated as follows:
Internal rate of return = [(A divided by B )* (1 divided by C)]-1
Where:
. A = the aggregate cash sales or redemption price (including the fair market
value of any Marketable Securities) received by the applicable Investor in
respect of the sale or redemption of the related Series B Preferred Stock or
Common Stock issued upon conversion of any thereof (the "Sales Proceeds").
. B = the aggregate purchase price paid by such Investor for such Investor's
Series B Preferred Stock (or any Series B Preferred Stock previously
converted into Common Stock) pursuant to the Stock Purchase Agreement
relating to the Series B Preferred Stock, dated as of April 7, 1999.
. * = raised to the power of
. C = Number of years (including fractions thereof) between the date hereof and
the date of receipt by the applicable Investor of the Sales Proceeds.
. "Marketable Securities" means any registered freely transferable (except for
any lock-up period required by law or the purchaser of the Company provided
the
<PAGE>
8
Investors are not treated less favorably than iXL) equity securities that are
listed and actively traded on a national securities exchange or the NASDAQ
system.
4. Termination of the Investors' Rights. (a) Except as provided in
------------------------------------
Section 4(b) below, upon the occurrence of a Qualified Public Offering the
rights of the Investors under Section 2.1 and 9 of the Stockholders' Agreement
and the provisions of Sections 1,2, 3, 5, 6, 7 and 9 of this Agreement shall
terminate (other than any rights thereunder accruing prior to the date of such
termination).
(b) If iXL, together with its Affiliates, continues to hold either more
than 50% of the outstanding equity securities of the Company or more than 50% of
the outstanding voting securities of the Company after a Qualified Public
Offering, then, for so long as iXL and its Affiliates continue to hold more than
any such 50% interest, the Investors shall have the right to designate two
members to the board of directors of the Company pursuant to Section 9 of the
Stockholders' Agreement and the Investors will retain their tag-along rights
pursuant to Section 2.1 of the Stockholders' Agreement.
(c) If at any time prior to a Qualified Public Offering, the Investors
cease to own, in the aggregate, at least 10% of the Company's outstanding equity
securities whether due to sales, transfers, dilution or otherwise (to the extent
effected in compliance with this Agreement and the Stockholders Agreement), then
the Investors' rights hereunder (other than rights relating to obligations which
accrued prior to such cessation) will automatically terminate, other than the
right to designate members to the board of directors of the Company pursuant to
Section 9 of the Stockholders' Agreement and the tag-along rights pursuant to
Section 2.1 of the Stockholders' Agreement. If the Investors cease to own in
the aggregate, at least 5% of the Company's outstanding equity securities
whether due to sales, transfers, dilution or otherwise (to the extent effected
in compliance with this Agreement and the Stockholders Agreement), then, as
provided in Section 9.1 of the Stockholder's Agreement, the Investors will
automatically cease to have any rights to designate directors pursuant to the
Stockholders' Agreement or this Investors Agreement and, if requested by the
Company, the Investors shall request of each designee of the Investors to the
Company's board of directors that such designee shall resign from the Company's
board of directors.
5. Preemptive Rights. (a) Following the date hereof, if the Company
-----------------
proposes to sell, issue or grant any equity securities or other securities or
rights, directly or indirectly convertible into or exercisable or exchangeable
for any capital stock or other equity securities (other than any Excluded Shares
as defined in Section 9 hereof or any
<PAGE>
9
shares issued by the Company in any underwritten public offering) to any person
or entity, then each Investor that owns Preferred Stock shall have the right, on
the same terms and conditions of the proposed sale, issuance or grant and
exercisable within 30 days after the Company has given such Investor notice of
such proposed sale, issuance or grant, to purchase a percentage of the shares or
securities to be sold, issued or granted equal to such Investor's percentage
ownership of Common Stock of the Company, (determined as if all Preferred Stock
were converted to Common Stock), as of the business day immediately prior to the
date of such sale, issuance or grant. If any such Investor exercises any such
preemptive rights, the purchase of shares or securities by such Investor will be
governed by and subject to the terms and conditions applicable to the person or
entity to whom the sale, issuance or grant was initially proposed to be made,
subject to the provisions of Section 5(b).
(b) If the Company issues equity securities (other than Excluded
Shares) for non-cash consideration, the Investors' rights pursuant to Section
5(a) hereof to purchase a percentage of such equity securities will be for a
cash purchase price equal to the fair market value (as determined by the Board
of Directors of the Company in good faith) of such non-cash consideration.
6. Approval Rights. The holders of Series A and Series B Preferred Stock
---------------
will have the approval rights set forth in Section 7 of the Series A and Series
B Certificates of Designation. In addition, the Company agrees that it shall
not issue or Transfer (without the prior written consent of the Investors) any
equity securities of the Company for which, the per security cash consideration
is less than the "Antidilution Price" (as such term is defined in the Series B
Certificate of Designations) in effect at the time. The per security cash
consideration shall be computed on an "as converted" or "as exercised" basis for
convertible securities (including convertible debt) and with respect to non-
convertible voting preferred, shall be computed on the basis of the number of
votes per share. Such approval right will not apply to issuances of equity
securities (a) included in paragraphs (i), (viii) or (ix) of the definition of
-
Excluded Shares; (b) included in paragraphs (ii), (iii) or (iv) of the
-
definition of Excluded Shares which, when taken together and aggregated for all
such issuances does not exceed 10% of the Company's total outstanding equity
securities; and (c) the issuance of any equity securities upon the conversion or
-
exercise of any equity security, the issuance of which has previously been
approved by the Investors.
7. Board Approval. For so long as any of the Investors hold equity
--------------
securities of the Company, the Company will not take the following actions
without the approval
<PAGE>
10
(in accordance with the Company's By-Laws) of the board of directors of the
Company: (i) material transactions with Affiliates other than wholly-owned
-
subsidiaries; (ii) the acquisition of or material investment in any business
--
unit or the sale of equity securities or assets of all or substantially all of
any business unit; (iii) the incurrence of material indebtedness; (iv)
--- --
management compensation (it being understood that so long as the Investors have
a representative on the compensation committee of the Company, approval by the
compensation committee will be sufficient) and (v) capital expenditures
-
materially in excess of amounts provided for in the most recent budget approved
by the board of directors of the Company.
8. Investor Action. Any consent or approval to be provided by the
---------------
Investors hereunder shall be deemed the action of all the Investors if provided
by a majority in interest of the Investors.
9. Definition of Excluded Shares. "Excluded Shares" means (i) any shares
----------------------------- -
of Common Stock issued upon conversion of the Preferred Stock or any shares of
any other series of preferred stock which has been issued in accordance with the
terms of this Agreement, the Stockholders Agreement and the Series A and Series
B Certificate of Designations, (ii) any Common Stock issued upon exercise of any
--
options granted pursuant to the Stock Option Plan or any other options issued to
any employees of the Company pursuant to any option plan approved by the
Compensation Committee of the Board, (iii) any options exercisable into Common
---
Stock issued pursuant to the Stock Option Plan, (iv) employee stock options
--
issued pursuant to any option plans approved by the Compensation Committee of
the Board, (v) any equity securities issued in connection with any business
-
combination, (vi) any securities issued in connection with any stock split,
--
stock dividend or recapitalization of the Company which affects all equity
holders proportionately and does not involve sales or issuance of equity to one
or more third parties, (vii) any securities issued to any entity in connection
---
with a loan or lease by such entity to the Company, if such loan or lease
transaction and such issuance of securities has been approved by the Board and
such securities, when taken together and aggregated with all prior issuances
under this subsection (vii), do not exceed 5% of the Company's total outstanding
equity securities, (viii) any securities issued upon a spin-off of the Company
----
to the stockholders of iXL and (ix) any securities issued in a Qualified Public
--
Offering.
10. Assignment. Neither this Agreement nor any provision hereof may be
----------
assigned or transferred, whether by operation of law or otherwise, by any of the
Investors without the prior consent of the Company and iXL, except to their
respective Affiliates
<PAGE>
11
provided that any such Affiliate transferee agrees in writing to be bound
- --------
hereby. Any Affiliate of an Investor that becomes an assignee of any rights
hereunder shall be deemed to be an Investor hereunder.
11. Termination. Any party to this Agreement who ceases to own any
-----------
shares of Preferred Stock or Common Stock shall cease to be a party to this
Agreement and thereafter shall have no rights or obligations hereunder, provided
--------
that any sale, transfer or other disposition by such party was made in
compliance with the terms hereof and of the Stockholders' Agreement.
12. 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.
13. Notices. All notices, requests, demands, waivers and other
-------
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
-
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
- -
sent by next-day or overnight mail or delivery or (d) sent by as follows:
-
(i) if to the Company or iXL, to it at:
--------------
Consumer Financial Network, Inc. or (as applicable)
iXL Enterprises, Inc.
Two Park Place
1888 Emery Street
2nd Floor
Atlanta, Georgia 30318
Attention: Mr. M. Wayne Boylston
Telecopier number: (404) 267-3801
with a copy (which, in each case, shall not constitute notice)
to:
Minkin & Snyder
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
<PAGE>
12
Telecopier number: (404) 233-5824
Attention: James S. Altenbach, Esq.
and
Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10022
Telecopier number: (212) 223-2379
Attention: James J. Connors, II, Esq.
and
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Telecopier number: (212) 909-6836
Attention: Margaret A. Davenport, Esq.
(ii) If to an Investor, the address or fax number listed on the
signature page hereof.
or to such other person or address as any party shall specify by notice in
writing to the Company. All such notices, requests, demands, waivers and other
communications shall be deemed to have been received (w) if by personal delivery
-
on the day after such delivery, (x) if by certified or registered mail, on the
-
seventh business day after the mailing thereof, (y) if by next-day or overnight
-
mail or delivery, on the day delivered, (z) if by fax on the next day following
-
the day on which such fax was sent, provided that a copy is also sent by
certified or registered mail.
14. Headings; Execution in Counterparts . The headings and captions
-----------------------------------
contained herein are for convenience and shall not control or affect the meaning
or 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.
<PAGE>
13
15. Construction. In the event of any conflict or inconsistency between
------------
any of the terms of this Agreement and any of the terms of the Stockholders
Agreement, the terms of this Agreement shall prevail; provided that no such
resolution shall derogate from the rights of the Investors under the
Stockholders Agreement.
16. Injunctive Relief. The equity securities of the Company can not
------------------
readily be purchased or sold in the open market, and for that reason, among
others, the parties hereto will be irreparably damaged in the event of a breach
of any provision of this Agreement if this Agreement is not specifically
enforced. Each of the parties therefore agrees that in the event of a breach of
any provision of this Agreement the aggrieved party may elect to institute and
prosecute proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of this Agreement. Such remedies
shall, however, be cumulative and not exclusive, and shall be in addition to any
other remedy which any party may have. Each party hereby irrevocably submits to
the non-exclusive jurisdiction of the state and federal courts in New York for
the purposes of any suit, action or other proceeding arising out of or based
upon this Agreement or the subject matter herein. Each party hereby consents to
service of process by mail made in accordance with Section 13.
[Signature Pages Follow]
<PAGE>
14
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first above written.
IXL ENTERPRISES, INC.
By: /s/ M. Wayne Boylston
----------------------------
CONSUMER FINANCIAL NETWORK, INC.
By: /s/ M. Wayne Boylston
----------------------------
Address: GE CAPITAL EQUITY INVESTMENTS, INC
- -------
120 Long Ridge Road
Stanford, CT 06927 By: /s/ Jeffrey H. Coats
Telecopier Number: 203-357-3047 ----------------------------
Attn: General Counsel of GE
Equity
Address: GENERAL ELECTRIC CAPITAL CORPORATION
- -------
120 Long Ridge Road
Stanford, CT 06927 By: /s/ Michael E. Pralle
Telecopier Number: 203-357-3047 ----------------------------
Attn: General Counsel of GE
Equity
<PAGE>
Schedule of Potential Investors
Restricted Entities
- -------------------
CNN/Time Warner
American Broadcasting Company
CBS Corporation
Fox
Bloomberg, Inc.
Citigroup
AIG
Prudential
AXA
Hancock
Pre-Approved Investors
- ----------------------
Microsoft
Amazon.com
America Online
Yahoo
Lycos
Excite
Liberty Media
@Home
USA Network
IBM
First USA
Reader's Digest
Peoplesoft
Oracle
Marsh MacClennan
Hewitt
SAP
Softbank
Dell
<PAGE>
EXHIBIT 10.62
-------------
================================================================================
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
among
CONSUMER FINANCIAL NETWORK, INC.
and
THE INVESTORS NAMED HEREIN
Dated as of June 8, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Restrictions on Transfer of Stock............................................................. 2
1.1. Restrictions on Transfers to Third Parties by iXL........................................ 2
1.2. Restrictions on Transfers to Third Parties by the Outside Investors...................... 2
1.3. Restrictions on Transfers to Third Parties by Management Stockholders.................... 2
1.4. Permitted Transferees.................................................................... 3
1.5. Rights of First Refusal on Sales by
Management Stockholders.................................................................. 4
1.6. Right of First Offer for Sales by Outside Investors...................................... 5
1.7. Involuntary Transfers.................................................................... 7
2. Tag Along and Drag Along Rights............................................................... 8
2.1. Tag Along Rights......................................................................... 8
2.2. Drag Along Rights....................................................................... 9
2.3. Sale of the Company...................................................................... 9
3. Sales to the Company.......................................................................... 11
3.1. Management Stockholders.................................................................. 11
3.2. Notice................................................................................... 11
3.3. Payment.................................................................................. 11
4. Right of the Company to Purchase from
Management Stockholders Shares of Stock....................................................... 11
4.1. Right to Purchase........................................................................ 11
4.2. Notice................................................................................... 12
4.3. Payment.................................................................................. 12
5. Interest...................................................................................... 12
6. Determination of Fair Market Value............................................................ 13
6.1. Appraisals............................................................................... 13
6.2. Calculation.............................................................................. 13
6.3. Notice to Stockholders................................................................... 14
7. Defined Terms................................................................................. 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
8. Prohibited Purchases.............................................. 18
9. Rights of Certain Stockholders.................................... 20
9.1. Board of Directors; Observation Rights....................... 20
9.2. Irrevocable Proxy............................................ 21
9.3. Additional Rights of Outside Investors....................... 21
10. Stock Certificate Legends......................................... 22
11. No Other Arrangements or Agreements............................... 23
12. Amendment and Modification........................................ 23
13. Assignment........................................................ 24
13.1 Assignment Generally....................................... 24
13.2. Agreements to be Bound..................................... 24
13.3. New Management Stockholders................................ 25
13.4. New Outside Investors...................................... 25
14. Termination....................................................... 25
14.1. Termination Generally...................................... 25
14.2. Termination of Rights and Obligations
Under Sections 1, 2, 3, 4 and 5............................ 25
15. Recapitalization, Exchanges, etc. Affecting the Stock............. 26
16. No Third Party Beneficiaries...................................... 26
17. Repurchases of Stock.............................................. 26
18. Further Assurances................................................ 26
19. Governing Law..................................................... 26
20. Invalidity of Provision........................................... 27
21. Notices........................................................... 27
22. Headings; Execution in Counterparts............................... 28
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
23. Entire Agreement............................................. 28
24. Injunctive Relief............................................ 28
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (the "Agreement"), dated as
---------
of June 8, 1999, among Consumer Financial Network, Inc., a Delaware corporation
(the "Company"), iXL Enterprises, Inc., a Delaware corporation ("iXL"), General
---
Electric Capital Corporation, a New York corporation ("GECC").
----
GE Capital Equity Investments, Inc. ("GECEI") and General Electric Pension Trust
("GEPT"), together with any other non-employee Persons who became stockholders
of the Company and whose names are set forth on Schedule 1 hereto (the "Outside
-------
Investors"), those employees of the Company who have become stockholders of the
- ---------
Company and whose names are set forth on Schedule 2 hereto (the "Management
----------
Stockholders"), and the Persons who become parties to this Agreement pursuant to
- ------------
Section 13. Certain capitalized terms used herein are defined in Section 7.
WHEREAS, iXL currently holds all the issued and outstanding Common Stock
of the Company, par value $.01 per share;
WHEREAS, GECC currently owns 13,333,334 shares of the Company's Series A
Convertible Preferred Stock (the "Series A Preferred Stock");
-------------------------
WHEREAS, contemporaneously with the execution and delivery hereof, the
Company will sell to GECEI and GEPT, and GECEI and GEPT will purchase from the
Company pursuant to the Stock Purchase Agreement, an aggregate of 16,190,475
shares of the Company's Series B Convertible Preferred Stock (the "Series B
--------
Preferred Stock"; and, together with the Series A Preferred Stock, the
- ---------------
"Preferred Stock");
- ----------------
WHEREAS, the Company may establish a Stock Option Plan after the date
hereof pursuant to which the Management Stockholders will be issued options,
from time to time, exercisable into Common Stock;
WHEREAS, the parties wish to set forth certain rights and obligations with
respect to their ownership of Common Stock and Preferred Stock;
WHEREAS, certain capitalized terms used herein without definition are
defined in Section 8;
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and obligations set forth in this Agreement, the parties hereto agree
as follows:
1. Restrictions on Transfer of Stock.
---------------------------------
<PAGE>
2
1.1. Restrictions on Transfers to Third Parties by iXL. iXL may,
-------------------------------------------------
directly or indirectly, Transfer all or any portion of its shares of Common
Stock or other equity securities of the Company or any interest therein now or
thereafter owned by it to any third party or any Affiliate, at any time, subject
to (a) the rights of the other Stockholders set forth in Section 2.1; (b) the GE
- -
Investors' rights set forth in the Investors Agreement and (c) Sections 13.1 and
-
13.2.
1.2. Restrictions on Transfers to Third Parties by the Outside
---------------------------------------------------------
Investors. Subject to any applicable securities laws, any Outside Investor may,
- ---------
at any time, directly or indirectly, Transfer all or any portion of its shares
of Stock or any interest therein now or thereafter owned by it (a) to any
-
Affiliate of such Outside Investor other than GEFA, (b) pursuant to Section 2.1
-
(Tag Along Rights), Section 2.2 (Drag Along Rights), Section 2.3 (Sale of the
Company), such Outside Investors' registration rights under the Registration
Agreement, or with respect to any GE Investor, pursuant to Section 1(c) or
Section 2(c) of the Investors Agreement or (c) any third party (other than any
-
online aggregator of financial services or a controlling affiliate of any such
online aggregator for which such online aggregator constitutes 20% or more of
its revenues other than pursuant to a transaction described in clauses (a) or
(b) above), provided that any such sale pursuant to this subsection (c) shall
not be consummated within 180 days of the closing of the initial public offering
for the common stock of iXL and shall be subject to the provisions of Section
1.6 (right of first offer) and Section 2.1 (tag-along rights) hereof.
1.3. Restrictions on Transfers to Third Parties by Management
--------------------------------------------------------
Stockholders.
- ------------
(a) Prior to the earlier of (i) the closing of a Qualified Public Offering
-
and (ii) December 31, 2003 (such period is hereinafter referred to as the
--
"Restricted Period") no Management Stockholder may Transfer Stock or any
-----------------
interest therein now or hereafter owned by any Management Stockholder, except
for any (A) Transfer by such Management Stockholder to a transferee permitted
-
under Section 1.4(a) or a pledge or Transfer of shares of Stock by such
Management Stockholder permitted under Section 1.4(b), (B) involuntary Transfer
-
to a third party permitted under Section 1.7, (C) sale to a third party pursuant
-
to Section 2, (D) sale to the Company pursuant to Section 3 or 4, (E) sale
- -
pursuant to the Registration Rights Agreement or (F) Transfer approved by the
-
Board.
<PAGE>
3
(b) After the Restricted Period, Transfers of Stock or any interest
therein, now or hereafter owned by any Management Stockholder to any third party
will be subject to Section 1.5 and Section 2.
1.4. Permitted Transferees.
---------------------
(a) Affiliates, Trusts, etc. A Management Stockholder may
-----------------------
Transfer any shares of Stock (i) with the prior written consent of the Company's
-
Board of Directors (the "Board"), which consent shall not be unreasonably
-----
withheld, to (w) a trust the beneficiaries of which are such Stockholder, such
-
Stockholder's spouse, parents, lineal descendants, or any other Person approved
by the Board, (x) a corporation the shareholders of which are such Stockholder,
-
such Stockholder's spouse, parents, lineal descendants, or any other Person
approved by the Board, (y) a limited partnership, the general partner of which
-
is (1) such Stockholder, such Stockholder's spouse, parents, lineal descendants,
-
or any other Person approved by the Board or (2) a corporation, limited
-
partnership or limited liability company, the majority of the voting power of
which is owned by such Stockholder, such Stockholder's spouse, parents, lineal
descendants, or any other Person approved by the Board, or (z) a limited
-
liability company, the majority of the voting power of which is owned by such
Stockholder, such Stockholder's spouse, parents, lineal descendants, or any
other Person approved by the Board; or (ii) in case of such Stockholder's death,
--
by will or by the laws of intestate succession to executors, administrators,
testamentary trustees, legatees or beneficiaries. In addition to the foregoing,
any Permitted Transferee of the Management Stockholders may Transfer shares of
Stock back to such transferring Stockholder or to another Permitted Transferee
of such transferring Stockholder, provided, however, that prior to any Permitted
Transferee ceasing to be a Permitted Transferee of the transferring Stockholder,
such Permitted Transferee shall be obligated to transfer such Stock back to such
transferring Stockholder or to a Permitted Transferee of such transferring
Stockholder.
(b) Security Agreements. The Management Stockholders may pledge
-------------------
any or all shares of Stock now or hereafter owned by such Management Stockholder
or grant a security interest therein to secure indebtedness of such Management
Stockholder owing to the Company so long as such indebtedness was incurred for
the sole purpose of paying all or part of the purchase price of such Stock or
for the purpose of refinancing indebtedness incurred for such purpose, provided,
however, that any transferee pursuant to this subsection (b) shall acquire only
a security interest in such Stock entitling such transferee to the proceeds from
any sale of such Stock made in compliance with the terms of this Agreement and
shall not acquire title to such Stock or any other rights incident
<PAGE>
4
thereto. The pledge agreements or other related financing agreements of any
Stockholder shall be subject to and acknowledge the rights of the Company and
the other Stockholders set forth herein.
1.5. Rights of First Refusal on Sales by Management Stockholders.
-----------------------------------------------------------
(a) At any time after the Restricted Period, each of the
Management Stockholders may sell all or any portion of such Management
Stockholder's Stock to any third party, provided that no such Management
Stockholder may so sell any Stock to any third party after the Restricted Period
unless such Stockholder shall first have complied with the provisions of this
Section 1.5.
(b) If any of the Management Stockholders (for purposes of this
Section 1.5, an "Offering Management Stockholder") shall have received a bona
-------------------------------
fide offer or offers from a third party or parties, other than a Permitted
Transferee, to purchase a number of shares of Stock exceeding ten per cent (10%)
of the aggregate number of shares of Stock held by such Offering Management
Stockholder as of the date hereof (other than pursuant to a Qualified Public
Offering), then prior to selling such shares of Stock to such third party or
parties, such Offering Management Stockholder shall deliver to the Company, iXL
and the Outside Investors that own Preferred Stock a letter (the "Offer Letter")
------------
signed by such Offering Management Stockholder setting forth with respect to
such Offering Management Stockholder and such third party or parties the
following information:
(i) the name of such third party or parties;
(ii) the prospective purchase price per share of each class
of Stock;
(iii) all material terms and conditions contained in the
offer of such third party or parties;
(iv) such Offering Management Stockholder's offer
(irrevocable by its terms for 60 days following receipt) to sell first
to the Company and then to iXL and each Outside Investor that owns
Preferred Stock all (but not less than all) of the shares of Stock
covered by the offer of the third party or parties (the "Offered
-------
Stock"), for a purchase price per share of Stock, and on the same
-----
terms and conditions contained in the offer of the third party or
parties (the "Offer"); and
-----
<PAGE>
5
(v) closing arrangements and a closing date (not less than
60 nor more than 90 days following the date of such letter) for any
purchase and sale that may be effected by the Company, iXL or the
Outside Investors.
For 30 days following the receipt of the Offer Letter, the Company shall
have the right to purchase the Offered Stock for the same price per share and on
the same terms and conditions set forth in the Offer. If the Company does not
exercise such right within such 30 day period then iXL and/or the Outside
Investors owning Preferred Stock shall have the right for the next succeeding 30
days to elect to purchase the Offered Stock for the same price per share and on
the same terms and conditions set forth in the Offer. If iXL or any of the
Outside Investors elects to purchase such Offered Stock, each shall have the
right to purchase on a pro rata basis its share of such Offered Stock (based on
the number of shares of Common Stock held by iXL and the number of shares of
Common Stock into which the Preferred Stock held by iXL or the Outside Investor,
as the case may be, would then be convertible). Any amount of such Stock not so
purchased by iXL or an Outside Investor so entitled to purchase may be purchased
by iXL and the other Outside Investors entitled to purchase on a pro rata basis
and so on until all of such Stock has been purchased.
(c) If the Company, iXL or any of the Outside Investors that
owns Preferred Stock accepts the Offer to purchase the Offered Stock, the
closing of the purchase and sale pursuant to such acceptance shall take place at
the offices of the Company on the date set forth in the Offer Letter, or at such
other place or on such other date as the applicable parties may agree or such
later date as may be necessary to obtain any required regulatory approvals. If,
upon the expiration of sixty (60) days following receipt by the Company, iXL and
the Outside Investors that own Preferred Stock of the Offer Letter, the Company,
iXL and such Outside Investors have all elected to not exercise their right of
first refusal pursuant to this Section 1.5, the Offering Management Stockholder
may sell to such third party or parties all, but not less than all, of the
Offered Stock, for the purchase price and on the other terms and conditions
contained in such Offer. Prior to consummating any such sale, the Offering
Management Stockholder shall, upon request from iXL or such Outside Investor,
provide such requesting party with reasonable supporting documentation with
respect to the terms and conditions of any such sale to a third party so as to
demonstrate such Offering Management Stockholder's compliance with the
provisions of the preceding sentence. If such sale has not been completed within
ninety (90) days after the expiration of such sixty (60) day period, the Offered
Stock covered by such Offer may not thereafter be sold by such Offering
<PAGE>
6
Management Stockholder unless the procedures set forth in this Section 1.5 shall
have again been complied with.
1.6. Right of First Offer for Sales by Outside Investors.
---------------------------------------------------
(a) No Outside Investor may sell any Stock to any third party
unless such Outside Investor shall first have complied with the provisions of
this Section 1.6. Notwithstanding anything to the contrary in this Agreement,
the provisions of this Section 1.6 shall not apply to any sale of Stock by an
Outside Investor (i) to any Affiliate thereof or (ii) pursuant to Section 2.1,
2.2 or 2.3 hereof, an underwritten public offering or Section 1(c) or 2 of the
Investors Agreement.
(b) If an Outside Investor (an "Offering Outside Investor")
-------------------------
desires to sell any of its shares of Stock, then prior to selling such shares,
such Offering Outside Investor shall first deliver to the Company, iXL and the
other Outside Investors a letter (the "Offer Letter") signed by such Offering
------------
Outside Investor setting forth:
(i) the prospective purchase price per share of Stock and the
-
number of shares of Stock such Offering Outside Investor desires to
sell;
(ii) any other material terms and conditions of such sale;
--
(iii) such Offering Outside Investor's offer (irrevocable by its
---
terms for 10 Business Days following receipt) to sell to the Company,
iXL and the Outside Investors all of the shares of Stock described in
the Offer Letter (the "Offered Securities"), for a purchase price per
------------------
share of Stock, and on the same terms and conditions contained in the
Offer Letter (the "Offer"); and
-----
(iv) closing arrangements and a closing date (not less than 50
--
nor more than 75 days following the receipt of the Offer Letter) for
any purchase and sale that may be effected by the Company, iXL or any
Outside Investor.
(c) After the receipt of the Offer Letter, the Company shall
have 15 days to elect whether to purchase the shares covered by the Offer
Letter. If the Company does not make such election, iXL and each Outside
Investor shall have the right (exercisable within the 15 day period referred to
in the preceding sentence) in which to notify the Offering Outside Investor
whether it elects to purchase its pro rata portion of the shares covered by the
Offer Letter on the terms set forth in the Offer Letter (which
<PAGE>
7
election shall be irrevocable). iXL's and each Outside Investor's pro rata share
of the Offered Securities shall be based on the number of shares of Common Stock
held by iXL and each Outside Investor, including the number of shares of Common
Stock into which the Preferred Stock held by iXL and each such Outside Investor
would then be convertible. If iXL or any Outside Investor declines the right to
purchase its pro rata share, then such amount shall be offered to iXL and the
Outside Investors on a pro rata basis, and so on (up to the 60 day limit
referred to below) until all the Offered Securities have been either accepted or
declined. All elections by iXL and any Outside Investors to accept or purchase
Offered Securities shall be irrevocable. The purchase of such Offered Securities
by either the Company, iXL or any Outside Investor must be consummated within 60
days of the expiration of the 15 day period referred to in the first sentence of
this Section 1.6(c)and the Offering Outside Investor will extend the proposed
closing date up to such 60 day limit if requested. If all of the Offered
Securities are not accepted, then the Offering Outside Investor may sell all of
the Offered Securities for the purchase price and on substantially the same
other terms and conditions contained in the Offer. Prior to consummating any
such sale, the Offering Outside Stockholder shall, upon the request of the
Company, iXL or any Outside Investor, provide such requesting Person with
reasonable supporting documentation with respect to the terms and conditions of
any such sale to a third party so as to demonstrate such Offering Outside
Investor's compliance with the provisions of the preceding sentence. If such
sale to a third party has not been completed within 90 days from the last day of
the 60-day closing period referred to above, then the Offered Securities covered
by such Offer may not thereafter be sold by such Offering Outside Investor
unless the procedures set forth in this Section 1.6 shall have again been
complied with.
1.7. Involuntary Transfers. Any transfer (an "Involuntary Transfer")
--------------------- --------------------
of title or beneficial ownership of shares of Stock upon default, foreclosure,
forfeit, court order, or otherwise than by a voluntary decision on the part of
any Management Stockholder (a "Transferring Stockholder"), other than any
transfer upon death of a Management Stockholder, shall be void unless such
Stockholder complies with this Section 1.7 and enables the Company, iXL and the
Outside Investors that own Preferred Stock to exercise in full their rights
hereunder. Upon any Involuntary Transfer, the Company, iXL and the Outside
Investors that own Preferred Stock shall have the right to purchase such shares
pursuant to this Section 1.7 and the Person to whom such shares have been
transferred (the "Involuntary Transferee") shall have the obligation to sell
----------------------
such shares in accordance with this Section 1.7. Upon the Involuntary Transfer
of any shares of Stock, such Transferring Stockholder shall promptly (but in no
event later than five days after such Involuntary Transfer) furnish written
notice to the Company, iXL and the Outside
<PAGE>
8
Investors that own Preferred Stock indicating that the Involuntary Transfer has
occurred, specifying the name of the Involuntary Transferee, giving a detailed
description of the circumstances giving rise to, and stating the legal basis
for, the Involuntary Transfer. Subject to the provisions of Section 8, upon the
receipt of such notice, and for 30 days thereafter, the Company shall have the
right to purchase, and the Involuntary Transferee shall have the obligation to
sell, all (but not less than all) Stock acquired by the Involuntary Transferee
for a purchase price equal to the Carrying Value of such Stock. If the Company
fails to exercise within such 30-day period its rights hereunder to purchase
all, but not less than all, of the shares of Stock acquired by the Involuntary
Transferee, for a period of 30 days thereafter, iXL and the Outside Investors
that own Preferred Stock shall have the right to purchase on a pro rata basis,
and the Involuntary Transferee shall have the obligation to sell, all (but not
less than all) of the shares of Stock acquired by the Involuntary Transferee for
a purchase price equal to the Carrying Value of such Stock. iXL and each of the
Outside Investors that owns Preferred Stock may purchase such Stock on a pro
rata basis (based on the number of shares of Common Stock held by iXL and the
number of shares of Common Stock into which the Preferred Stock held by the
Outside Investors would then be convertible). Any amount of such Stock not so
purchased by iXL or an Outside Investor entitled to purchase may be purchased by
the other Outside Investors that own Preferred Stock or iXL proportionally to
their ownership of Common Stock (assuming conversion of Preferred Stock), and so
on until all of such Stock has been purchased.
20 Tag Along and Drag Along Rights.
-------------------------------
2.1. Tag Along Rights. (a) No Stockholder (for purposes of this
----------------
Section 2.1, the "Offering Stockholder") may sell any shares of Stock to any
--------------------
non-Affiliated third party (except through a sale pursuant to a registered
underwritten public offering) if such shares, together with all shares of Stock
previously sold by such Offering Stockholder to third parties (except through a
sale pursuant to an underwritten registered public offering), would represent
more than ten percent (10%) of the sum of (i) the aggregate number of shares of
-
Common Stock held by the Offering Stockholder as of the date hereof plus (ii)
--
the aggregate number of shares of Common Stock into which the shares of
Preferred Stock, if any, held by the Offering Stockholder as of the date thereof
would be ultimately convertible, unless each of the other Stockholders, other
------
than the Management Stockholders, is offered the right, on a pro rata (except as
otherwise provided in Sections 1(c) and 2(c) of the Investors Agreement) basis
(based on the number of shares of Common Stock owned by such Stockholder
including the number of shares of Common Stock into which the Preferred Stock
would then be convertible) to
<PAGE>
9
participate in any such sale by selling to such non-Affiliated third party its
pro rata portion of Common Stock, in the event the Offering Stockholder is
selling Common Stock, and Preferred Stock in the event the Offering Stockholder
is selling Preferred Stock, for a purchase price per share of Common Stock or
Preferred Stock, as the case may be, and on other terms and conditions, not less
favorable to such Stockholder than those applicable to the Offering Stockholder.
(b) This Section 2.1 shall not apply to (i) sales of Common
-
Stock by any Management Stockholder holding less than one per cent (1%) of the
aggregate number of outstanding shares of Common Stock at such time, calculated
on a fully diluted basis, so long as the aggregate purchase price of such Common
Stock is less than $500,000, or (ii) sales of Stock by an Outside Investor
--
pursuant to Section 2.1, 2.2 or 2.3 hereof or Section 1(c) or 2(c) of the
Investors Agreement.
(c) The GE Investors' rights under this Section 2.1 are modified
and supplemented by the Investors Agreement.
2.2. Drag Along Rights. (a) If iXL proposes to sell or otherwise
-----------------
Transfer shares of Common Stock to any third party (except through a sale
pursuant to a Qualified Public Offering, to an Affiliate of iXL or to a Person
that is a stockholder of iXL on the date hereof (or any Affiliate of such
stockholder), which if sold would effect a Change of Control then, if requested
by iXL, each other holder of shares of Stock shall join iXL in any such sale on
a pro rata basis by complying fully with Section 2.2(b). The material terms and
conditions of such sale, including, without limitation, the purchase price per
share of Common Stock, shall be the same for all holders of Common Stock. In
furtherance of the foregoing, each holder of shares of Preferred Stock hereby
agrees that, if requested by iXL, such holder shall convert those shares of
Preferred Stock which will be sold or transferred pursuant to this Section 2.2
into Common Stock pursuant to Section 4(a) of the applicable Certificate of
Designations, and the shares of Common Stock issued upon the conversion of such
Stock shall be subject to the provisions of this Section 2.2.
(b) Each Stockholder who is required to join iXL in a sale
pursuant to Section 2.2(a) shall, at the request of iXL, (i) transfer, upon
-
receipt of the purchase price therefor, such Stockholder's pro rata portion of
the shares of Common Stock to any third party purchaser or purchasers free and
clear of all security interests, liens, claims or encumbrances, (ii) execute and
--
deliver any agreement being executed and delivered by iXL (or no less favorable
agreement than the one being signed by iXL) containing such representations and
warranties (or, at the option of such Stockholder, indemnities in
<PAGE>
10
respect of representations and warranties and representations and warranties
relating exclusively to such Stockholder's ownership and title to its shares of
Common Stock and the ability of such Stockholder to participate in such sale)
and other terms as iXL may deem to be reasonably necessary or desirable to
consummate such transaction, provided, however, that no Stockholder shall be
required to provide indemnification, in the aggregate, in an amount that is in
excess of either its pro rata portion of the related liability or the purchase
price received by such Stockholder in such sale, except in the case of such
Stockholder's fraudulent acts, or to make any representations or warranties
which such Stockholder reasonably believes to be false, (iii) vote in favor of
---
any such transaction of which iXL has voted in favor and (iv) execute and
--
deliver such instruments of conveyance and assignment and take such other
actions as reasonably requested by iXL in order to consummate such transaction.
(c) Notwithstanding the foregoing, iXL's rights under this
Section (2.2) with respect to any shares of Stock held by any of the GE
Investors shall not be applicable except in the circumstances, and subject to
the terms and conditions, set forth in Section 2(c) of the Investors Agreement.
2.3. Sale of the Company. (a) If after receipt by iXL of a bona fide
-------------------
offer (for the purposes of this Section 2.3, the "Offer") from a third party or
-----
parties (other than an Affiliate of iXL, a stockholder of iXL on the date hereof
or any Affiliate thereof) (the "Buyer") to purchase 80% or more of the Company,
-----
either directly or indirectly, in one or a series of related transactions,
including, without limitation, by stock purchase, recapitalization, merger,
combination, consolidation, asset sale or otherwise (each, an "Organic Change"),
--------------
and such Organic Change has been approved by the Board then, if requested by
iXL, each Stockholder shall take all steps as iXL may deem to be reasonably
necessary or desirable to consummate such transaction, including, without
limitation, (i) voting such Stockholder's Stock in favor of such transaction
-
(ii) transferring, upon receipt of the purchase price therefor, all of such
--
Stockholder's Stock to the Buyer, or , in the event iXL is Transferring less
than all, then such Stockholder's pro rata share, free and clear of all security
interests, liens, claims or encumbrances, (iii) execute and deliver any
---
agreement being executed and delivered by iXL (or no less favorable agreement
than the one being signed by iXL) containing such representations and warranties
(or, at the option of such Stockholder, indemnities in respect of
representations and warranties and representations and warranties relating
exclusively to such Stockholder's ownership and title to its shares of Common
Stock and the ability of such Stockholder to participate in such sale) and other
terms as iXL may deem to be reasonably necessary or desirable to consummate such
transaction, provided, however, that no Stockholder shall be required to
<PAGE>
11
provide indemnification, in the aggregate, in an amount that is in excess of
either its pro rata portion of the related liability or the purchase price
received by such Stockholder in such sale, except in the case of such
Stockholder's fraudulent acts or to make any representations or warranties which
such Stockholder reasonably believes to be false, and (iv) executing and
--
delivering such instruments of conveyance and assignment as iXL may deem to be
reasonably necessary or desirable to consummate such transaction. Subject to
Section 2.3(b) below, the terms of such transaction, including, without
limitation, the purchase price per share of Common Stock, shall be the same for
iXL as for each Stockholder, provided that each holder of Preferred Stock,
hereby agrees that, if requested by iXL, such holder shall convert its shares of
Preferred Stock into Common Stock prior to any such Organic Change pursuant to
Section 4(a) of the applicable Certificate of Designations.
(b) Notwithstanding the foregoing, iXL's and the Company's
rights under Section 2.3(a) with respect to any shares of Stock held by any of
the GE Investors shall not be applicable except in the circumstances, and
subject to the terms and conditions, set forth in Section 2(c) of the Investors
Agreement and, in the event the transaction under this Section 2.3 is structured
as a recapitalization to be effected by a redemption of Stock by the Company,
Section 1(c) of the Investors Agreement.
30 Sales to the Company.
--------------------
3.1. Management Stockholders. Subject to all subsections of this
-----------------------
Section 4 and Section 9, each Management Stockholder shall have the right to
sell to the Company, and the Company shall have the obligation to purchase from
such Management Stockholder, all, but not less than all, of such Management
Stockholder's shares of Stock, at a price equal to the Fair Market Value of such
Management Stockholder's Stock (as determined pursuant to Section 7) if the
employment of such Management Stockholder with the Company and all subsidiaries
thereof (a) is terminated by the Company without Cause, (b) terminates as a
- -
result of (i) the death or Disability of such Management Stockholder or (ii) the
- --
retirement of such Management Stockholder, upon or after reaching the age of 65
("Retirement"), or (iii) is terminated by the resignation of such Management
---------- ---
Stockholder for Good Reason.
3.2. Notice. If any Management Stockholder desires to sell shares of
------
Stock pursuant to Section 4.1, such Management Stockholder (or such Management
Stockholder's estate, trust or corporation, as the case may be) shall notify the
Company not more than 30 days after the occurrence of the event giving rise to
such Management
<PAGE>
12
Stockholder's right to sell such Management Stockholder's shares of Stock and
shall specify the number of shares of Stock such Management Stockholder owns.
3.3. Payment. Subject to Section 9, payment for shares of Stock sold
-------
by a Management Stockholder pursuant to Section 4.1 shall be made on the date 30
days (or the first business day thereafter if the 30th day is not a business
day) following the date of the determination of Fair Market Value of such
Management Stockholder's shares of Stock. Such payment will be made by wire
transfer of funds or certified or official bank check against surrender of the
certificates for such shares.
40 Right of the Company to Purchase from Management
------------------------------------------------
Stockholders Shares of Stock.
----------------------------
4.1. Right to Purchase. Subject to all subsections of this Section 5
-----------------
and Section 9, the Company shall have the right to purchase from a Management
Stockholder, and such Management Stockholder shall have the obligation to sell
to the Company, all, but not less than all, of such Management Stockholder's
shares of Stock if such Management Stockholder's employment with the Company and
all subsidiaries thereof is terminated:
(i) at the Fair Market Value of the shares of Stock to be
purchased if such Management Stockholder's employment with the Company
and all subsidiaries thereof is terminated as a result of (1) the
-
termination by the Company of such employment without Cause, (2) the
-
death or Disability of such Management Stockholder, (3) the Retirement
-
of such Management Stockholder or (4) the resignation of such
-
Management Stockholder for Good Reason, or
(ii) at the lesser of the Fair Market Value or the Carrying
Value of the shares of stock to be purchased if such Management
Stockholder's employment with the Company and all subsidiaries thereof
is terminated for any reason other than as a result of an event
described in subparagraph (i) (1), (i) (2), (i) (3) or (i) (4) of this
Section 5.1.
4.2. Notice. If the Company desires to purchase shares of Stock from a
------
Management Stockholder pursuant to Section 5.1, it shall notify such Management
Stockholder (or such Management Stockholder's estate, trust or corporation, as
the case
<PAGE>
13
may be) not more than 30 days after the occurrence of the event giving rise to
the Company's right to acquire such Management Stockholder's shares of Stock.
4.3. Payment. Subject to Section 9, payment for shares of Stock
-------
purchased by the Company pursuant to Section 5.1 based on Fair Market Value
shall be made on the date 30 days (or the first business day thereafter if the
30th day is not a business day) following the date of the determination of Fair
Market Value, and any payment based on Carrying Value shall be made on the date
30 days (or the first business day thereafter if the 30th day is not a business
day) following the date of the notice referred to in Section 5.2. Such payment
will be made by wire transfer of funds or certified or official bank check
against surrender of the certificates for such shares.
50 Interest. Any payments based on Fair Market Value required to be made
--------
by the Company under Section 4 or 5 shall accrue simple interest at 5% per annum
from the date of termination of employment to the date the Company has paid in
full for all of the shares of stock, including, without limitation, during any
period in which the Company's purchase of such shares is prohibited under
Section 9. All payments of interest accrued hereunder shall be paid only at the
date of payment by the Company for the shares of Stock being purchased.
60 Determination of Fair Market Value.
----------------------------------
6.1. Appraisals. The Company shall engage from time to time after
----------
January 1, 2000, but not less often than once every fiscal year, and not later
than 120 days after the end of any such fiscal year, an independent valuation
consultant or appraiser of recognized national standing as agreed to by iXL and
a majority in interest of the holders of the Preferred Stock, to appraise the
Fair Market Value of shares of Stock as of the last day of the fiscal period
then most recently ended or, at the request of the Company (including, without
limitation, for the purpose of satisfying the requirements of paragraph 5(g) of
the Series A Certificate of Designations with respect to the Series A Preferred
Stock and paragraph 5(g) of the Series B Certificate of Designations with
respect to the Series B Preferred Stock), as of any more recent date (the
"Appraisal Date"), and to prepare and deliver a report to the Company describing
--------------
the results of such appraisal (the "Appraisal"). If iXL and the Outside
---------
Investors do not reach agreement on an appraiser within 10 Business Days of the
event giving rise to the Appraisal then iXL and the Outside Investors (acting by
a majority in interest (based on the number of shares of Common Stock held by
such Outside Investors, including all shares into which the
<PAGE>
14
Preferred Stock is convertible)) shall each select an appraiser, and such
appraisers shall select a third appraiser, who shall perform the Appraisal.
6.2. Calculation. (a) "Fair Market Value" of any share of Common Stock
----------- -----------------
shall be the fair market value or the entire Common Stock equity interest of the
Company taken as a whole, after giving effect to any increase in such value
which would result from the Company's receipt of the applicable exercise or
option price in respect of all then outstanding Convertible Securities (as
defined below) (the "Equity Value"), divided by all the issued and outstanding
------------
shares of Common Stock, together with the number of shares of Common Stock into
which any Convertible Securities would be convertible as of the most recent
Appraisal Date, without premiums for control or discounts for minority interests
or restrictions on transfer, and shall be as of the most recent Appraisal Date
and determined with reference to (i) if the Fair Market Value is being
-
determined for the purposes of Sections 4 or 5, the most recent Appraisal prior
to the date of termination of the Management Stockholder's employment, and (ii)
--
if the Fair Market Value is being determined for the purpose of Section 5(g) of
the applicable Certificate of Designations, the most recent Appraisal prior to
the date of the conversion of such Preferred Stock into Common Stock; provided,
however, in the event that the Equity Value (without giving effect to the
conversion of any outstanding shares of Preferred Stock) is less than the
aggregate Liquidation Value of all of the outstanding shares of Preferred Stock,
then the "Fair Market Value" of such share of Common Stock shall be an amount
-----------------
equal to the quotient of (i) the excess, if any, of (A) the Equity Value
- -
(without giving effect to the conversion of any outstanding shares of Preferred
Stock) over (B) the aggregate amount, if any, that the holders of the Preferred
-
Stock would have actually received pursuant to the Certificates of Designations
in respect of their shares of Preferred Stock if the Company had been liquidated
as of the Appraisal Date divided by (ii) the aggregate number of issued and
--
outstanding shares of Common Stock, together with the number of shares of Common
Stock into which any issued and outstanding Convertible Securities (other than
outstanding shares of Preferred Stock) would be convertible as of the most
recent Appraisal Date. "Convertible Securities" shall mean any warrants,
----------------------
options, convertible stock or other rights to purchase Common Stock (including
the Preferred Stock) for which, as the most recent Appraisal Date, the value of
the Common Stock into which such warrants, options, convertible stock or other
rights to purchase Common Stock are exercisable or convertible exceeds the
exercise price or conversion price therefor.
<PAGE>
15
6.3. Notice to Stockholders. After receipt of each Appraisal, the
----------------------
Company shall promptly deliver to each Stockholder a copy of the report as to
value included with such Appraisal.
70 Defined Terms. As used in this Agreement, the following terms shall
-------------
have the meanings ascribed to them below:
(a) Affiliate means, with respect to any Person, any other
---------
Person directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with such Person; provided that for
--------
purposes of this Agreement, GEPT shall be deemed to be an Affiliate of GECC and
each of its Affiliates.
(b) Board means the board of directors of the Company.
-----
(c) Business Day means any day other than a Saturday, Sunday or
------------
other day on which the commercial banks in New York City are authorized or
required by law to close.
(d) Carrying Value means, with respect to any share of Common
--------------
Stock being purchased by the Company: (i) (A) if such shares were acquired in
- -
exchange for cash, the price paid by the selling Stockholder for any such share,
or (B) if such shares were acquired pursuant to any merger or stock exchange
-
agreement, the value assigned to such shares in such merger or stock exchange
agreement, plus (ii) simple interest at a rate per annum equal to 5% which shall
--
be deemed to be the carrying cost, from the date of the purchase of such shares
by such selling Stockholder through the date of the Company's purchase of such
shares, less the amount of dividends paid to such Management Stockholder in
respect of such share (to the extent that the amount of such dividends does not
exceed such simple interest).
(e) Cause means a termination of a Management Stockholder's
-----
employment by the Company or any of its subsidiaries due to (i) the continued
-
failure (other than any such failure resulting from incapacity due to reasonably
documented physical or mental illness) by such Management Stockholder
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 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 such
--
Management Stockholder in serious misconduct which is material to the
performance by
<PAGE>
16
such Management Stockholder of his duties and obligations for the Company or any
of its subsidiaries, including, without limitation, gross negligence,
dishonesty, willful malfeasance, gross insubordination or gross misconduct that
is materially injurious to the Company or any of its subsidiaries or conviction
of a felony or the entering of a plea of nolo contendere to a felony; provided,
however, that with respect to any Management Stockholder who is party to an
employment agreement with the Company or an Affiliate of the Company, the term
"Cause" shall have the meaning assigned to such term in such employment
-----
agreement, if defined therein.
(f) Certificates of Designations means the Series A Certificate
----------------------------
of Designations and the Series B Certificate of Designations.
(g) Certificate of Incorporation means the Amended and Restated
----------------------------
Certificate of Incorporation of the Company, as amended, together with the
Certificates of Designations.
(h) Change of Control means any circumstance in which iXL or its
-----------------
then-existing stockholders cease to be the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 of the Securities Exchange Act of 1934, as amended),
directly or indirectly, of a majority in the aggregate of the total voting power
of the Company.
(i) Code means the Internal Revenue Code of 1986, as amended.
----
(j) Common Stock means the common stock of the Company, par
------------
value $.01 per share.
(k) Disability means the termination of the employment of any
----------
Management Stockholder by the Company or any of its subsidiaries shall be deemed
to be by reason of a "Disability" if such Management Stockholder shall have been
----------
incapable 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 or any of its subsidiaries 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
such Management Stockholder, such Management Stockholder 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; provided, however, that with
respect to any Management Stockholder who is party to an
<PAGE>
17
employment agreement with the Company or an Affiliate of the Company, the term
"Disability" shall have the meaning assigned to such term in such employment
----------
agreement, if defined therein.
(l) GE Investors means the "Investors" as defined in the
------------
Investors Agreement and their Affiliate transferees.
(m) GEFA means General Electric Financial Assurance, Inc., and
----
any other subsidiary or business unit of any Affiliate of GECC a material
portion of whose business is the sale of consumer financial services products
for household, family or personal use.
(n) Investors Agreement means the Investors Agreement, dated as
-------------------
of June 8, 1999, among the Company, iXL and the GE Investors named therein.
(o) Good Reason means a termination of a Management Stockholder
-----------
where such Management Stockholder's employment voluntarily terminates his
employment with the Company as a result of either of the following:
(i) without the Management Stockholder's prior written
consent, a significant reduction by the Company in his current salary,
other than any such reduction which is part of a general salary
reduction or other concessionary arrangement affecting all senior
executive corporate officers; or
(ii) without the Management Stockholder's prior written
consent, the taking of any action by the Company or any of its
subsidiaries that would substantially diminish the aggregate value of
the benefits provided him under the benefit plans of the Company that
may be in effect at such time and in which he was participating, other
than any such reduction which is (A) required by law, (B) implemented
- -
in connection with a general concessionary arrangement affecting all
employees or affecting the group of employees of which the Management
Stockholder is a member or (C) generally applicable to all
-
beneficiaries of such plan.
provided, however, that with respect to any Management Stockholder who is party
to an employment agreement with the Company or an Affiliate of the Company, the
term "Good Reason" shall have the meaning assigned to such term in such
-----------
employment agreement, if defined therein.
<PAGE>
18
(p) Liquidation Value has, with respect to a share of Preferred
-----------------
Stock, the meaning provided therefor in the applicable Certificate of
Designations.
(q) Management Stockholders means those employees of the Company
-----------------------
who become stockholders of the Company, are listed on Schedule 2 hereto and who
become a party to this Agreement pursuant to Sections 13.2 or 13.3
(r) November 1998 Stock Purchase Agreement means the Stock
--------------------------------------
Purchase Agreement, dated as of November 3, 1998, between the Company and GECC.
(s) Outside Investors has the meaning set forth in the first
-----------------
paragraph of this Agreement.
(t) Person means an individual, corporation, partnership,
------
limited liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
(u) Preferred Stock has the meaning set forth in the third
---------------
recital hereto.
(v) Qualified Public Offering means an underwritten public
-------------------------
offering of the Common Stock (i) involving (a) at least 15% of the total
- -
outstanding Common Stock on a fully diluted basis and (b) a minimum offering
-
price of $6.00 per share (adjusted proportionately for any subdivision (by any
stock split, stock dividend, recapitalization or otherwise) or combination (by
reverse stock split or otherwise)) or (ii) which has been approved by GECC.
--
(w) Registration Rights Agreement means the Amended and Restated
-----------------------------
Registration Rights Agreement, dated as of the date hereof, between the Company
and the other parties named therein, as the same may be amended from time to
time.
(x) Series A Certificate of Designations means the Certificate
------------------------------------
of Designations, Powers, Preferences and Relative, Participating, Optional and
Other Special Rights of the Series A Convertible Preferred Stock, filed by the
Company with the Secretary of State of the State of Delaware on or about
November 2, 1998, as amended.
<PAGE>
19
(y) Series B Certificate of Designations means the Certificate
------------------------------------
of Designations, Powers, Preferences and Relative, Participating, Optional and
Other Special Rights of the Series B Convertible Preferred Stock, filed by the
Company with the Secretary of State of the State of Delaware on or about
June 8, 1999.
(z) Stock means all classes of the capital stock of the
-----
Company, including all classes of Common Stock and all classes and series of
preferred stock of the Company, including the Preferred Stock.
(aa) Stockholders means iXL, the Outside Investors and the
------------
Management Stockholders.
(bb) Stock Option Plan means a stock option plan of the Company,
-----------------
as the same may be amended from time to time, adopted by the Board in
conformance with Section 9.3(a) hereof.
(cc) Stock Purchase Agreement means the Stock Purchase Agreement,
------------------------
dated as of April 7, 1999, between the Company, GECEI and GEPT, as the same
shall be amended from time to time.
(dd) Transaction Documents means this Agreement, the Stock
---------------------
Purchase Agreement, the November 1998 Stock Purchase Agreement, the Registration
Rights Agreement, the Certificate of Incorporation and the Stock Option Plan,
and, with respect to iXL, the GE Investors and the Company only, the Investors
Agreement, collectively, or each of such documents singularly, and any documents
or investments contemplated by or executed in connection with any of them or any
of the transactions contemplated hereby or thereby.
(ee) Transfer means any direct or indirect sale, assignment,
--------
mortgage, transfer, pledge, hypothecation or other disposition or transfer.
80 Prohibited Purchases. Notwithstanding anything to the contrary herein,
--------------------
the Company shall not be obligated to purchase any shares of Stock from any
Management Stockholder to the extent (a) the Company is prohibited from
-
purchasing such shares by applicable law or by any debt instrument or agreement,
including any amendment, renewal, extension, substitution, refinancing,
replacement or other modification thereof (collectively, the "Loan Documents"),
--------------
to which the Company or any of its subsidiaries is or becomes a party, (b) a
-
default has occurred under any Loan Document and is con-
<PAGE>
20
tinuing, (c) the purchase of such shares would in the good faith opinion of the
-
Board result in the occurrence of an event of default under any Loan Document or
create a condition which would, with notice or lapse of time or both, result in
such an event of default or (d) the purchase of such shares would, in the good
-
faith opinion of the Board, be imprudent in view of the financial condition
(present or projected) of the Company or the anticipated impact of the purchase
of such shares on the Company's ability to meet its obligations under any Loan
Document or otherwise in connection with its business and operations. If shares
of Stock that the Company has the right or obligation to purchase on any date
exceed the total amount permitted to be purchased on such date pursuant to the
preceding sentence (the "Maximum Amount"), the Company shall purchase on such
--------------
date only that number of shares of Stock equal to the Maximum Amount (and shall
not be required to purchase more than the Maximum Amount) in such amounts as the
Board shall in good faith determine, applying the following order of priority:
(i) First, the shares of Stock of all Management
Stockholders whose shares of Stock are being purchased by the Company
by reason of termination of employment due to death or Disability and,
to the extent that the number of shares of Stock that the Company is
obligated to purchase from such Management Stockholders (but for this
Section 9) exceeds the Maximum Amount, such shares of Stock pro rata
among such Management Stockholders on the basis of the number of
shares of Stock held by each of such Management Stockholders that the
Company is obligated (but for this Section 9) or has the right to
purchase, and
(ii) Second, to the extent that the Maximum Amount is in
excess of the amount the Company purchases pursuant to clause (i)
above, the shares of Stock of all Management Stockholders whose shares
of Stock are being purchased by the Company by reason of termination
of employment without Cause or due to retirement or resignation for
Good Reason, up to the Maximum Amount and, to the extent that the
number of shares of Stock that the Company is obligated to purchase
from such Management Stockholders (but for this Section 9) exceeds the
Maximum Amount, such shares of stock pro rata among such Management
Stockholders on the basis of the number of shares of Stock held by
each of such Management Stockholders that the Company is obligated
(but for this Section 9) or has the right to purchase, and
<PAGE>
21
(iii) Third, to the extent the Maximum Amount is in excess
of the amounts the Company purchases pursuant to clauses (i) and (ii)
above, the shares of all other Management Stockholders whose shares of
Stock are being purchased by the Company up to the Maximum Amount and,
to the extent that the number of shares of Stock that the Company is
obligated to purchase (but for this Section 9) from such Management
Stockholders exceeds the Maximum Amount, the shares of Stock of such
Management Stockholders in such order of priority and in such amounts
as the Board in its sole discretion shall in good faith determine to
be appropriate under the circumstances.
Notwithstanding anything to the contrary contained in this Agreement other than
the provisions of Section 1.7, if the Company is unable by reason of this
Section 9 to make any payment when due to any Management Stockholder, then,
subject to the following paragraphs, the Company shall have the option of either
(x) making such payment at the earliest practicable date permitted under this
-
Section 9 or (y) to the extent permitted under the Loan Documents, proceeding
-
with the purchase of such shares of Stock by paying for them with a promissory
note of the Company with the following terms: (i) a principal amount equal to
-
such purchase price, (ii) an interest rate equal to the greater of 5% per annum
--
and the prime rate as announced by The Chase Manhattan Bank as of the date such
promissory note is issued, (iii) a maturity date of one year and one day after
---
the maturity of the Company's Loan Documents, (iv) subordination provisions as
--
required by the Loan Documents, and (v) such other terms and conditions as the
-
Company may reasonably determine. All payments of interest accrued hereunder
shall be paid only at the date of payment by the Company for the shares of Stock
being purchased.
90 Rights of Certain Stockholders.
------------------------------
9.1. Board of Directors; Observation Rights. (a) Until the closing of
-------------------------------------- -
a Qualified Public Offering, each Stockholder agrees that from and after the
date of this Agreement it will use its best efforts to nominate and elect, and
will vote all of the shares of Stock owned or held of record by such Stockholder
to elect and, thereafter, for such period, to continue in office a Board
consisting of ten members, who will be designated for nomination and election as
follows: (i) so long as GECC and its Affiliates continue to own at least 10% of
-
the Company's Common Stock (assuming conversion of Preferred Stock into
<PAGE>
22
Common Stock), GECC may designate for nomination and election three directors;
so long as GECC and its Affiliates continue to own less than 10% but at least 5%
of the Company's Common Stock (assuming conversion of Preferred Stock into
Common Stock), GECC may designate for nomination and election two directors and
(ii) iXL may designate for nomination and election all the directors not
--
designated for nomination and election by GECC. The rights of GECC set forth in
the previous sentence are personal in nature and unassignable by GECC,
notwithstanding anything to the contrary contained herein, other than to an
Affiliate thereof other than GEFA. The parties agree that the failure by GECC to
so designate for nomination and election will not constitute a waiver by GECC of
such right to do so in the future. The Persons designated pursuant to this
Section 9.1 for nomination and election by iXL and GECC, as the case may be, may
be changed from time to time by the nominating Person, so long as GECC has a
representative on the Board, it shall have representation on each committee
created by the Board proportional to its rights to representation hereunder or
under the Investors Agreement, provided, that with respect to the compensation
--------
committee, GECC will have the right to appoint one of the three members to such
committee and, provided further, that the Company will not create an executive
-------- --------
committee or other committee which is entitled to exercise any power or
authority of the Board without the need for subsequent Board approval with
respect thereto (except for an audit committee and a compensation committee).
GECC's designees on the Board or each committee, as the case may be, may not be
officers of GEFA.
(b) From and after the closing of a QPO, the Company will cause to be
-
nominated and the Stockholders will vote to elect (i) three directors of the
-
Company designated for nomination by iXL and (ii) that number of directors of
--
the Company which the GE Investors shall be entitled to designate for nomination
pursuant to in the Investors Agreement.
(c) In the event that either GECC does not designate for nomination and
-
election members to the Board of Directors in accordance with Section 9.1 hereof
or the GECC designees are not elected to the Board of Directors, then GECC (for
so long as GECC and its Affiliates still own at least 5% of the total
outstanding equity securities of the Company), shall have the right to have a
non-voting representative attend any meetings of the Board (including any
adjournments thereof) either in person or by such other method as shall be
allowed under the bylaws of the Company for directors, and shall further have
the right to receive any notices and materials provided to the entire Board in
their capacity as such. Any such representative shall have the right to speak at
such meetings and to make such suggestions and requests during such meetings as
such representative deems appropriate, and the Board shall consider such
suggestions and requests in good faith.
<PAGE>
23
9.2. Irrevocable Proxy. In order to effectuate Section 9.1 and in
-----------------
addition to and not in lieu of Section 9.1, each Stockholder owning shares of
Stock hereby grants to the Secretary of the Company an irrevocable proxy
pursuant to Section 212(e) of the General Corporation Law of the State of
Delaware, coupled with an interest, solely for the purpose of voting all of the
shares of Stock of the Company owned by the grantor of the proxy for the
election of directors nominated in accordance with Section 9.1. Each Stockholder
agrees to take any further actions necessary to effectuate Section 9.1,
including, without limitation, the calling of a special meeting of the
Stockholders in order to nominate and elect directors as set forth in Section
9.1. The Secretary of the Company will exercise such proxy to give effect to
this Section 9, if necessary.
9.3. Additional Rights of Outside Investors. (a) The Company and the
-------------------------------------- -
Stockholders agree that the Board shall not adopt a stock option plan,
including, without limitation, the Stock Option Plan, or other management or
employee stock bonus, award or incentive without the approval of a majority of
the members of the compensation committee of the Board.
(b) The Outside Investors, to the extent they continue to hold Preferred
-
Stock, shall have such additional rights in respect of the Preferred Stock as
set forth in the applicable Certificate of Designations with respect to the
Preferred Stock held by such Outside Investors.
10. 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 shares of Stock owned by the Stockholders 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
<PAGE>
24
LAWS AND THE AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT OF THE COMPANY,
DATED AS OF JUNE 8, 1999 (THE
"STOCKHOLDERS' AGREEMENT"), AS THE SAME
------------------------
MAY BE AMENDED FROM TIME TO TIME.
(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 of Stock owned by residents of
certain states shall bear any legends required by the laws of such states. All
Stockholders shall be bound by the requirements of such legends to the extent
that such legends are applicable. Upon a registration of any shares of Common
Stock, the certificate representing such shares shall be replaced, at the
expense of the Company, with certificates not bearing the legends required by
this Section 10(i) and (ii). Upon the closing of a Qualified Public Offering,
certificates representing shares of Stock shall be replaced, at the expense of
the Company, with certificates not bearing the legends required by Section
10(ii) or the applicable portions of Section 10(i).
11. No Other Arrangements or Agreements. Each of the Stockholders other
-----------------------------------
than iXL hereby represents and warrants to the Company and iXL that it has not
entered into or agreed to be bound by any other arrangements or agreements of
any kind with any
<PAGE>
25
other Person (other than an Affiliate of such Stockholder or the Company) with
respect to its Stock, or any interest therein, including, but not limited to,
arrangements or agreements with respect to the acquisition, disposition or
voting of shares of Stock (whether or not such agreements and arrangements are
with the Company, other Stockholders or other Persons), except for the
Transaction Documents or any other arrangements or agreements entered into with
the Company or iXL in connection therewith.
12. Amendment and Modification. This Agreement may be amended, modified or
--------------------------
supplemented only by written agreement of iXL and those Stockholders other than
iXL owning at least 51% of all shares of Common Stock (assuming conversion of
Preferred Stock to Common Stock) owned by all such Stockholders other than iXL;
provided, however, that if any such amendment, modification or supplement would
adversely affect (a) the rights of any of the GE Investors hereunder or under
-
the Investors Agreement, then the GE Investors; and (b) any holder of Preferred
-
Stock, the approval of those Stockholders owning at least 51% of all the
outstanding shares of Preferred Stock shall be required. If the requisite number
of Stockholders shall have agreed, the Company shall notify the other
Stockholders promptly after such amendment, modification or supplement shall
take effect. Notwithstanding the foregoing, the Company shall have the
unilateral right to amend Schedules 1 and 2 as provided in Sections 13.3 and
13.4.
13. Assignment.
----------
13.1. Assignment Generally. The provisions of this Agreement shall be
--------------------
binding upon and inure to the benefit of the parties hereto and their respective
heirs, legal representatives, successors and assigns, provided that, except in
connection with Transfers explicitly permitted hereunder, neither the Company
nor any Stockholder other than iXL shall assign any of its rights pursuant to
this Agreement without the prior written agreement of iXL, provided, however,
-------- -------
that the GE Investors and any transferees thereof may assign their rights under
Section 2.1 hereof to any permitted transferee of their shares of Stock. If iXL
Transfers 100% of the shares of Stock owned by it in accordance with and to the
extent permitted by the other provisions of this Agreement and, so long as the
same is in effect, the Investors Agreement, and such transfer is either to an
Affiliate of iXL or is effected in accordance with paragraph 2(c) of the
Investors Agreement, then a single transferee determined by iXL, shall be deemed
to be iXL for purposes of this Agreement and, so long as the Investors Agreement
is in effect, the Investors Agreement and such transferee must sign an
instrument of assumption (delivered to the Stockholders) agreeing to be bound
thereby. If iXL Transfers less than 100% of the Stock owned by it (in accordance
with the other provisions of this
<PAGE>
26
Agreement and, so long as the Investors Agreement is in effect, the Investors
Agreement and such transfer is effected in accordance with paragraph 2(c) of the
---
Investors Agreement or to an Affiliate of iXL, then such transferee shall be
required to agree (in writing delivered to the Stockholders) to be bound by all
of the terms and obligations to which such transferring party is subject under
this Agreement and the Investors Agreement and will have only those rights of
iXL under this Agreement and the Investors Agreement as iXL in its sole
discretion determines.
13.2. Agreements to be Bound. Notwithstanding anything to the
----------------------
contrary contained in this Agreement and in addition to the other restrictions
contained herein, any Transfer by any Management Stockholder or Outside Investor
or iXL to any Permitted Transferee or other third party (whether or not such
third party is affiliated with such transferor), except for Transfers pursuant
to Section 2.3, Rule 144, an underwritten public offering or Sections 1(c) or
2(c) of the Investors Agreement or any Involuntary Transfer to an Involuntary
Transferee shall be permitted under the terms of this Agreement only if such
Permitted Transferee, third party or Involuntary Transferee, as the case may be,
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 the Company and iXL (and in the case of iXL, GECC). Upon the execution
of such instrument by such third party (and compliance with all other relevant
provisions of this Agreement), such third party shall be deemed to be a
Stockholder for all purposes of this Agreement, subject to the same obligations
as the Management Stockholders or the Outside Investors, as the case may be, and
the appropriate schedule hereto will be amended accordingly. Without limiting
the generality of the foregoing, each Management Stockholder agrees that any
such Involuntary Transferee or Permitted Transferee will be bound by such
Management Stockholder's obligations under Section 5 in the event such
Management Stockholder's employment with the Company terminates.
13.3. New Management Stockholders. Each of the Stockholders hereby
---------------------------
agrees that any employee of the Company or any of its subsidiaries who, after
the date of this Agreement, is offered shares of Common Stock or holds stock
options exercisable into shares of Common Stock shall, as a condition precedent
to the acquisition of such shares of Common Stock or the exercise of such stock
options, as the case may be, (i) become a party to this Agreement by executing
-
the same and (ii) if such employee is a resident of a state with a community
--
property system, cause his or her spouse to execute a Spacial Waiver in the form
of Exhibit B hereto and deliver such Agreement and Spacial Waiver, if
applicable, to the Company. Upon such execution and delivery, such employee
shall be deemed to be a Management Stockholder for all purposes of this
<PAGE>
27
Agreement and the Company shall amend Schedule 2 hereto to reflect such
additional Management Stockholder.
13.4. New Outside Investors. Each of the Stockholders hereby
---------------------
acknowledges that on or after the date hereof the Company may, from time to
time, with the approval of the Board, and subject to the Investors Agreement in
the case of the GE Investors, offer and sell shares of Stock to various non-
employee accredited investors who will become "Outside Investors" under this
-----------------
Agreement. Any such investor shall, as a condition precedent to the acquisition
of such shares of Stock (i) become a party to this Agreement by executing the
-
same and (ii) if such investor is an individual who is a resident of a state
--
with a community property system, cause his or her spouse to execute a Spousal
Waiver in the form of Exhibit B hereto and deliver such Agreement and Spousal
Waiver, if applicable, to the Company. Upon such execution and delivery, such
Person shall be deemed to be an Outside Investor for all purposes of this
Agreement and the Company shall amend Schedule 1 hereto to reflect such
additional Outside Investor.
14. Termination.
-----------
14.1. Termination Generally. Any party to, or Person who is
---------------------
subject to, this Agreement who ceases to own any shares of Stock or any interest
therein in accordance with the terms of this Agreement shall cease to be a party
to, or a Person who is subject to, this Agreement and thereafter shall have no
rights or obligations hereunder, provided that any Transfer of shares of Stock
by any Stockholder in breach of this Agreement shall not relieve such
Stockholder of liability for any such breach.
14.2. Termination of Rights and Obligations Under Sections 1,
------------------------------------------------------
2,3, 4 and 5. All rights and obligations pursuant to Sections 1, 2, 3, 4 and 5
- ------------
of this Agreement shall terminate (other than obligations which have arisen and
are outstanding prior to termination) upon the closing of a Qualified Public
Offering, provided that with respect to the GE Investors, Section 2.1 (tag-along
rights) will survive and continue until termination in accordance with the terms
of the Investors Agreement.
15. Recapitalization, Exchanges, etc. Affecting the Stock. The
-----------------------------------------------------
provisions of this Agreement shall apply to any and all shares of capital stock
of the Company or any successor or assignee of the Company (whether by merger,
consolidation, sale of assets or otherwise) which may be issued in respect of,
in exchange for, or in substitution for the shares of Stock, by reason of any
stock dividend, split, reverse split, combination,
<PAGE>
28
recapitalization, reclassification, merger, consolidation, or otherwise in such
a manner as to reflect the intent and meaning of the provisions hereof.
16. No Third Party Beneficiaries. Except as otherwise provided
----------------------------
herein, this Agreement is not intended to confer upon any Person, except for the
parties hereto any rights or remedies hereunder.
17. Repurchases of Stock. If at any time the Company purchases any
--------------------
shares of Stock pursuant to this Agreement, the Company may pay the purchase
price determined under this Agreement for the shares of Stock it purchases by
wire transfer of funds or bank check in the amount of the purchase price, and
upon receipt of payment of such purchase price or, pursuant to Section 8, any
portion thereof, the selling Stockholder shall deliver the certificates
representing the number of shares of Stock being purchased in a form suitable
for transfer, duly endorsed in blank, and free and clear of any lien, claim or
encumbrance. Notwithstanding anything in this Agreement to the contrary, the
Company shall not be required to make any payment for shares of Stock purchased
hereunder until delivery to it of the certificates representing such shares. If
the Company is purchasing less than all the shares of Stock represented by a
single certificate, the Company shall deliver to the selling Stockholder a
certificate for any unpurchased shares of Stock.
18. Further Assurances. Each party 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 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.
19. 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.
20. 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.
21. Notices. All notices, requests, demands, waivers and other
-------
communications required or permitted to be given under this Agreement shall be
in writing and shall be
<PAGE>
29
deemed to have been duly given if (a) delivered personally, (b) mailed,
- -
certified or registered mail with postage prepaid, (c) sent by next-day or
-
overnight mail or delivery or (d) sent by telecopier as follows:
-
(i if to the Company, to it at:
-------
CFN, Inc.
Two Park Place
1888 Emery Street
2nd Floor
Atlanta, Georgia 30318
Attention: Mr. M. Wayne Boylston
Telecopier number: (404) 267-3801
with a copy (which, in each case, shall not
constitute notice) to:
Minkin & Snyder
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
Telecopier number: (404) 233-5824
Attention: James S. Altenbach, Esq.
and
Kelso & Company
320 Park Avenue
24th Floor
New York, New York 10022
Telecopier number: (212) 223-2379
Attention: James J. Connors, II, Esq.
and
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Telecopier number: (212) 909-6836
<PAGE>
30
Attention: Margaret A. Davenport, Esq.
(ii If to an Outside Investor, the address or telecopier
number as listed on Schedule 1.
(iii If to any Management Stockholder, to his or her
address or his telecopier number as listed on the signature page.
(iv If to any other Person who becomes a Stockholder after
the date hereof, to its address or telecopier number set forth in the
counterpart of this Agreement executed and delivered by such
Stockholder pursuant to Sections 13.2, 13.3 or 13.4;
or to such other person or address as any party shall specify by notice in
writing to the Company. All such notices, requests, demands, waivers and other
communications shall be deemed to have been received (w) if by personal delivery
-
on the day after such delivery, (x) if by certified or registered mail, on the
-
seventh business day after the mailing thereof, (y) if by next-day or overnight
-
mail or delivery, on the day delivered, (z) if by fax on the next day following
-
the day on which such fax was sent, provided that a copy is also sent by
certified or registered mail.
22. Headings; Execution in Counterparts. The headings and captions
-----------------------------------
contained herein are for convenience and shall not control or affect the meaning
or 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.
23. Entire Agreement. This Agreement and the Transaction Documents
----------------
embody the entire agreement and understanding of the parties hereto in respect
of the subject matter contained herein and supersede all prior agreements,
understandings, representations and warranties among the parties with respect to
such subject matter.
24. Injunctive Relief. The shares of Stock cannot readily be
-----------------
purchased or sold in the open market, and for that reason, among others, the
Company and Stockholders will be irreparably damaged in the event this Agreement
is not specifically enforced. Each of the parties therefore agrees that in the
event of a breach of any provision of this Agreement the aggrieved party may
elect to institute and prosecute proceedings in any court of competent
jurisdiction to enforce specific performance or to enjoin the
<PAGE>
31
continuing breach of this Agreement. Such remedies shall, however, be cumulative
and not exclusive, and shall be in addition to any other remedy which the
Company or any Stockholder may have. Each Stockholder hereby irrevocably submits
to the non-exclusive jurisdiction of the state and federal courts in New York
for the purposes of any suit, action or other proceeding arising out of or based
upon this Agreement or the subject matter hereof. Each Stockholder hereby
consents to service of process by mail made in accordance with Section 21.
25. Construction. Notwithstanding anything to the contrary set forth
------------
in this Agreement, nothing set forth in this Agreement shall derogate than the
rights of the GE Investors contained in the Investors Agreement. In the event
of any conflict or inconsistency between any terms of this Agreement and the
Investors Agreement, the terms of the Investors Agreement will prevail, provided
that no such resolution shall derogate from any of the rights of the GE
Investors under this Agreement.
[The remainder of this page left intentionally blank.]
<PAGE>
IN WITNESS WHEREOF, this Stockholders' Agreement has been signed by each
of the parties hereto as of the date first above written.
CONSUMER FINANCIAL NETWORK, INC.
By: /s/ M. Wayne Boylston
----------------------------
Title: Executive Vice President
iXL ENTERPRISES, INC.
By: /s/ M. Wayne Boylston
----------------------------
Title: Executive Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Michael E. Pralle
----------------------------
Title: Vice President
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Jeffrey H. Coats
----------------------------
Title: Managing Director
<PAGE>
Schedule 1
----------
OUTSIDE INVESTORS
1. General Electric Capital Corporation
120 Long Ridge Road
Stanford, CT 06927
Telecopier Number: 203-357-3047
Attention: General Counsel of GE Equity
With a copy (which shall not constitute notice) to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telecopier number: (212) 310-8007
Attention: William M. Gutowitz, Esq.
<PAGE>
Schedule 2
----------
2 MANAGEMENT STOCKHOLDERS:
________________________________________
Name:
Address:
________________________________________
________________________________________
Name:
Address:
________________________________________
________________________________________
Name:
Address:
________________________________________
________________________________________
Name:
Address:
<PAGE>
EXHIBIT 10.67
________________________________________________________________________________
IXL ENTERPRISES, INC.
(a Delaware corporation)
4,800,000 Shares of Common Stock
U.S. PURCHASE AGREEMENT
-----------------------
________________________________________________________________________________
Dated: June 2, 1999
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
U.S. PURCHASE AGREEMENT....................................................... 1
SECTION 1. Representations and Warranties............................... 4
------------------------------
(a) Representations and Warranties by the Company.................. 4
(b) Officer's Certificates......................................... 13
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing............. 13
-----------------------------------------------
(a) Initial Securities............................................. 13
(b) Option Securities.............................................. 13
(c) Payment........................................................ 14
(d) Denominations; Registration.................................... 15
SECTION 3. Covenants of the Company..................................... 15
------------------------
(a) Compliance with Securities Regulations and Commission Requests. 15
(b) Filing of Amendments........................................... 15
(c) Delivery of Registration Statements............................ 15
(d) Delivery of Prospectuses....................................... 16
(e) Continued Compliance with Securities Laws...................... 16
(f) Blue Sky Qualifications........................................ 16
(g) Rule 158....................................................... 17
(h) Use of Proceeds................................................ 17
(i) Listing........................................................ 17
(j) Restriction on Sale of Securities.............................. 17
(k) Reporting Requirements......................................... 18
(l) Compliance with NASD Rules..................................... 18
(m) Compliance with Rule 463....................................... 18
SECTION 4. Payment of Expenses.......................................... 18
-------------------
(a) Expenses....................................................... 18
(b) Termination of Agreement....................................... 19
SECTION 5. Conditions of U.S. Underwriters' Obligations................. 19
--------------------------------------------
(a) Effectiveness of Registration Statement........................ 19
(b) Opinions of Counsel for Company................................ 19
(c) Opinion of Counsel for U.S. Underwriters....................... 19
(d) Officers' Certificate.......................................... 20
(e) Accountants' Comfort Letters................................... 20
(f) Bring-down Comfort Letters..................................... 20
(g) Approval of Listing............................................ 20
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
(h) No Objection.......................................................................... 20
(i) Lock-up Agreements.................................................................... 21
(j) Purchase of Initial International Securities.......................................... 21
(k) GE Private Placement.................................................................. 21
(l) Conditions to Purchase of U.S. Option Securities...................................... 21
(m) Additional Documents.................................................................. 22
(n) Termination of Agreement.............................................................. 22
SECTION 6. Indemnification..................................................................... 22
---------------
(a) Indemnification of U.S. Underwriters.................................................. 22
(b) Indemnification of Company, Directors and Officers.................................... 24
(c) Actions against Parties; Notification................................................. 24
(d) Settlement without Consent if Failure to Reimburse.................................... 25
(e) Indemnification for Reserved Securities............................................... 25
SECTION 7. Contribution........................................................................ 25
------------
SECTION 8. Representations, Warranties and Agreements to Survive Delivery...................... 27
--------------------------------------------------------------
SECTION 9. Termination of Agreement............................................................ 27
------------------------
(a) Termination; General.................................................................. 27
(b) Liabilities........................................................................... 27
SECTION 10. Default by One or More of the U.S. Underwriters..................................... 27
-----------------------------------------------
SECTION 11. Notices............................................................................. 28
-------
SECTION 12. Parties............................................................................. 28
-------
SECTION 13. GOVERNING LAW AND TIME............................................................. 29
----------------------
SECTION 14. Effect of Headings................................................................. 29
------------------
SCHEDULE A........................................................................................... Sch A-1
SCHEDULE B........................................................................................... Sch B-1
SCHEDULE C........................................................................................... Sch C-1
Exhibit A-1.......................................................................................... A-1-1
Exhibit A-2.......................................................................................... A-2-1
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Exhibit A-3................................................................... A-3-1
Exhibit A-4................................................................... A-4-1
Exhibit A-5................................................................... A-5-1
Exhibit B..................................................................... B-1
</TABLE>
iii
<PAGE>
IXL ENTERPRISES, INC.
(a Delaware corporation)
4,800,000 Shares of Common Stock
(Par Value $0.01 Per Share)
U.S. PURCHASE AGREEMENT
-----------------------
June 2,1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette Securities Corporation
BancBoston Robertson Stephens Inc.
SG Cowen Securities Corporation
as U.S. Representatives of the several U.S. Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
IXL Enterprises, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other U.S. Underwriters named in
Schedule A hereto (collectively, the "U.S. Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch, Donaldson, Lufkin & Jenrette Securities
Corporation, Banc Boston Robertson Stephens Inc. and SG Cowen Securities
Corporation are acting as representatives (in such capacity, the "U.S.
Representatives"), with respect to the issue and sale by the Company and the
purchase by the U.S. Underwriters, acting severally and not jointly, of the
respective numbers of shares of Common Stock, par value $0.01 per share, of the
Company ("Common Stock") set forth in said Schedule A, and with respect to the
grant by the Company to the U.S. Underwriters, acting severally and not jointly,
of the option described in Section 2(b) hereof to purchase all or any part of
720,000 additional shares of Common Stock to cover over-
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allotments, if any. The aforesaid 4,800,000 shares of Common Stock (the "Initial
U.S. Securities") to be purchased by the U.S. Underwriters and all or any part
of the 720,000 shares of Common Stock subject to the option described in Section
2(b) hereof (the "U.S. Option Securities") are hereinafter called, collectively,
the "U.S. Securities".
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "International Purchase Agreement")
providing for the offering by the Company of an aggregate of 1,200,000 shares of
Common Stock (the "Initial International Securities") through arrangements with
certain underwriters outside the United States and Canada (the "International
Managers") for which Merrill Lynch International, Donaldson, Lufkin & Jenrette
International, BancBoston Robertson Stephens International Limited and SG Cowen
International L.P. are acting as lead managers (the "Lead Managers") and the
grant by the Company to the International Managers, acting severally and not
jointly, of an option to purchase all or any part of the International Managers'
pro rata portion of up to 180,000 additional shares of Common Stock solely to
cover overallotments, if any (the "International Option Securities" and,
together with the U.S. Option Securities, the "Option Securities"). The Initial
International Securities and the International Option Securities are hereinafter
called the "International Securities". It is understood that the Company is not
obligated to sell and the U.S. Underwriters are not obligated to purchase, any
Initial U.S. Securities unless all of the Initial International Securities are
contemporaneously purchased by the International Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters", the Initial U.S. Securities and the
Initial International Securities are hereinafter collectively called the
"Initial Securities", and the U.S. Securities, and the International Securities
are hereinafter collectively called the "Securities".
The Underwriters will concurrently enter into an Intersyndicate Agreement
of even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Underwriters under the direction
of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (in
such capacity, the "Global Coordinator").
The Company understands that the U.S. Underwriters propose to make a public
offering of the U.S. Securities as soon as the U.S. Representatives deem
advisable after this Agreement has been executed and delivered.
The Company and the U.S. Underwriters agree that up to 480,000 shares of
the Initial U.S. Securities to be purchased by the U.S. Underwriters and that up
to 120,000 shares of the Initial International Securities to be purchased by the
International Mangers (collectively, the "Reserved Securities") shall be
reserved for sale by the Underwriters to certain eligible employees and persons
having business relationships with the Company, as part of the distribution of
the Securities by the Underwriters, subject to the terms of this Agreement, the
applicable rules, regulations and interpretations of the National Association of
Securities Dealers, Inc. and all other applicable laws, rules and regulations.
To the extent that such Reserved Securities are not orally confirmed for
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purchase by such eligible employees and persons having business relationships
with the Company by the end of the first business day after the date of this
Agreement, such Reserved Securities may be offered to the public as part of the
public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-71937) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
Two forms of prospectus are to be used in connection with the offering and sale
of the Securities: one relating to the U.S. Securities (the "Form of U.S.
Prospectus") and one relating to the International Securities (the "Form of
International Prospectus"). The Form of International Prospectus is identical
to the Form of U.S. Prospectus, except for the front cover and back cover pages
and the information under the caption "Underwriting" and the inclusion in the
Form of International Prospectus of a section under the caption "Certain United
States Tax Considerations for Non-United States Holders." The information
included in any such prospectus or in any such Term Sheet, as the case may be,
that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each Form of U.S. Prospectus and Form of
International Prospectus used before such registration statement became
effective, and any prospectus that omitted, as applicable, the Rule 430A
Information or the Rule 434 Information, that was used after such effectiveness
and prior to the execution and delivery of this Agreement, is herein called a
"preliminary prospectus." Such registration statement, including the exhibits
thereto and schedules thereto at the time it became effective and including the
Rule 430A Information and the Rule 434 Information, as applicable, is herein
called the "Registration Statement." Any registration statement filed pursuant
to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule
462(b) Registration Statement," and after such filing the term "Registration
Statement" shall include the Rule 462(b) Registration Statement. The final Form
of U.S. Prospectus and the final Form of International Prospectus in the forms
first furnished to the Underwriters for use in connection with the offering of
the Securities are herein called the "U.S. Prospectus" and the "International
Prospectus," respectively, and collectively, the "Prospectuses." If Rule 434 is
relied on, the terms "U.S. Prospectus" and "International Prospectus" shall
refer to the preliminary U.S. Prospectus dated May 13, 1999 and preliminary
International Prospectus dated May 13, 1999, respectively, each together with
the applicable Term Sheet and all references in this Agreement to the date of
such Prospectuses shall mean the date of the applicable Term Sheet. For
purposes of this Agreement, all references to the Registration Statement, any
preliminary prospectus, the U.S. Prospectus, the International Prospectus or any
Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include
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the copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").
SECTION 1. Representations and Warranties.
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(1) Representations and Warranties by the Company. The Company represents
and warrants to each U.S. Underwriter as of the date hereof, as of the Closing
Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if
any) referred to in Section 2(b), hereof and agrees with each U.S. Underwriter,
as follows:
(1) Compliance with Registration Requirements. Each of the
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Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any U.S. Option
Securities are purchased, at the Date of Delivery), the Registration
Statement, the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply as to form in all material
respects with the requirements of the 1933 Act and the 1933 Act Regulations
and did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Prospectuses, any
preliminary prospectuses and any supplement thereto or the prospectus
wrapper relating to sales of Securities in Canada (except as it relates
specifically to matters of Canadian law) prepared in connection therewith,
at their respective times of issuance and at the Closing Time, complied and
will comply in all material respects with any applicable laws or
regulations of foreign jurisdictions in which the Prospectuses and such
preliminary prospectuses, as amended or supplemented, if applicable, are
distributed in connection with the offer and sale of Reserved Securities.
Neither of the Prospectuses nor any amendments or supplements thereto
(including the prospectus wrapper relating to sales of Securities in Canada
(except as it relates specifically to matters of Canadian law)), at the
time the Prospectuses or any amendments or supplements thereto were issued
and at the Closing Time (and, if any U.S. Option Securities are purchased,
at the Date of Delivery), included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. If Rule 434 is used, the
Company will comply with the requirements of Rule 434 and the Prospectuses
shall not be "materially different", as such term is used in Rule 434, from
the prospectuses included in the Registration Statement at
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the time it became effective. The representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or the U.S. Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any U.S.
Underwriter through the U.S. Representatives expressly for use in the
Registration Statement or the U.S. Prospectus.
The Company has filed a registration statement pursuant to
Section 12(b) of the Securities Exchange Act of 1934 (the "1934 Act"), to
register the Common Stock, and such registration statement has been
declared effective.
Each preliminary prospectus and the prospectuses filed as part of
the Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied as to
form when so filed in all material respects with the 1933 Act Regulations
and each preliminary prospectus and the Prospectuses to be delivered to the
Underwriters for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the preliminary prospectus made in reliance
upon and in conformity with information furnished to the Company in writing
by any U.S. Underwriter through the U.S. Representatives expressly for use
in the preliminary prospectus.
(2) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(3) Financial Statements. The financial statements of the Company and
--------------------
its consolidated subsidiaries included in the Registration Statement and
the Prospectuses, together with the related schedules and notes, present
fairly in all material respects the financial position of the Company and
its consolidated Subsidiaries (as defined below) at the dates indicated and
the statement of operations, stockholders' equity and cash flows of the
Company and its consolidated Subsidiaries for the periods specified; said
financial statements have been prepared in conformity with generally
accepted accounting principles (GAAP) applied on a consistent basis
throughout the periods involved. The supporting schedules, if any, included
in the Registration Statement present fairly, in all material respects, in
accordance with GAAP the information required to be stated therein. The
selected consolidated financial data, the summary consolidated financial
information, and the capitalization information included in the
Prospectuses present fairly, in all material respects, the information
shown therein and have been compiled on a basis consistent with that of the
financial statements included in the Registration Statement. The pro forma
financial statements and the related notes thereto included in the
Registration Statement and the Prospectuses, other than the quarterly pro
forma information set forth in the Prospectuses under the caption
"Management's Discussion and
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Analysis of Financial Condition and Results of Operations," present fairly,
in all material respects, the information shown therein, have been prepared
in accordance with the Commission's rules and guidelines with respect to
pro forma financial statements and have been properly compiled on the bases
described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein. No financial
statements are required to be included in the Registration Statement that
have not been so included.
(4) Subsidiary Financial Statements. The financial statements of the
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Company's Subsidiaries included in the Registration Statement and the
Prospectuses, together with the related schedules and notes, present fairly
in all material respects the financial position of such Subsidiaries and
their respective consolidated Subsidiaries at the dates indicated and the
statement of operations, stockholders' equity and cash flows of such
Subsidiaries and their respective consolidated subsidiaries for the periods
specified; said financial statements have been prepared in conformity with
GAAP applied on a consistent basis throughout the periods involved.
(5) No Material Adverse Change in Business. Since the respective
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dates as of which information is given in the Registration Statement and
the Prospectuses, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business (a "Material Adverse Effect"), (B) there have
been no transactions entered into by the Company or any of its
Subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its Subsidiaries considered as
one enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.
(6) Good Standing of the Company. The Company has been duly
----------------------------
incorporated and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and to enter into and perform its
obligations under this Agreement; and the Company is duly qualified as a
foreign corporation to transact business and is in good standing in each
other jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
reasonably be expected to result in a Material Adverse Effect.
(7) Good Standing of Subsidiaries. Each subsidiary of the Company
-----------------------------
(other than subsidiaries in which the Company has only a minority ownership
interest) (each such subsidiary individually a "Subsidiary" and,
collectively, the "Subsidiaries") has been duly incorporated and is validly
existing as a corporation in good standing under the laws
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of the jurisdiction of its incorporation, has corporate power and authority
to own, lease and operate its properties and to conduct its business as
described in the Prospectuses and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not
reasonably be expected to result in a Material Adverse Effect; except for
the pledge of the Subsidiaries' stock pursuant to the Credit Facility (as
such term is defined in the Registration Statement) or as otherwise
disclosed in the Registration Statement, all of the issued and outstanding
capital stock of each such Subsidiary has been duly authorized and validly
issued, is fully paid and non-assessable and is owned by the Company,
directly or through Subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive or similar rights of any security holder of
such Subsidiary or other party. The only Subsidiaries of the Company are
the Subsidiaries listed on Exhibit 21 to the Registration Statement. Except
as described in the Prospectuses, or except as would not be required to be
described the Company has no agreements, commitments, or understandings
with respect to acquiring the business, stock or material assets, except
those assets acquired in the ordinary course of business, of any other
person or entity.
(8) Capitalization. The authorized, issued and outstanding capital
--------------
stock of the Company is as set forth in the Prospectuses under the caption
"Capitalization", and, after giving effect to the offering will be as set
forth as "Pro Forma As Adjusted" under the caption "Capitalization" (except
for subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectuses or pursuant to the exercise of convertible securities or
options referred to in the Prospectuses) and for 4,000,000 shares of Common
Stock registered pursuant to a shelf Registration Statement on Form S-4 for
use in future acquisitions and the number of authorized, issued and
outstanding options and other rights is set forth in the footnotes under
such caption. To the knowledge of the Company, the shares of issued and
outstanding capital stock of the Company and its subsidiary Consumer
Financial Network, Inc. have been duly authorized and validly issued and
are fully paid and non-assessable; none of the outstanding shares of
capital stock of the Company was issued in violation of the preemptive or
other similar rights of any security holder of the Company. The shares of
issued and outstanding capital stock of the Company have been issued in
compliance, in all material respects, with all federal and state securities
laws. Except as disclosed in the Prospectuses, there are no outstanding
options to purchase, or any preemptive rights or other rights to subscribe
for or to purchase, any securities or obligations convertible into, or any
contracts or commitments to issue or sell, shares of the Company's or its
Subsidiaries' capital stock or any such options, rights, convertible
securities or obligations. The description of the Company's stock option
and purchase plans and the options or other rights granted and exercised
thereunder set forth in the Prospectuses
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accurately and fairly describe, in all material respects, the information
required to be shown with respect to such plans, arrangements, options and
rights.
(9) Authorization of Agreement. This Agreement and the International
--------------------------
Purchase Agreement have been duly authorized, executed and delivered by the
Company.
(10) Authorization and Description of Securities. The Securities to be
-------------------------------------------
purchased by the U.S. Underwriters and the International Managers from the
Company have been duly authorized for issuance and sale to the U.S.
Underwriters pursuant to this Agreement and the International Managers
pursuant to the International Purchase Agreement, respectively, and, when
issued and delivered by the Company pursuant to this Agreement and the
International Purchase Agreement, respectively, against payment of the
consideration set forth herein and the International Purchase Agreement,
respectively, will be validly issued, fully paid and non-assessable; the
Common Stock conforms in all material respects to all statements relating
thereto contained in the Prospectuses and such description conforms in all
material respects to the rights set forth in the instruments defining the
same; no holder of the Securities will be subject to personal liability by
reason of being such a holder; and the issuance of the Securities is not
subject to the preemptive rights, co-sale rights, registration rights,
right of first refusal or similar rights of any security holder of the
Company or other party and will be sold free and clear of all liens,
encumbrances, equities or claims.
(11) Absence of Defaults and Conflicts. Neither the Company nor any of
---------------------------------
its Subsidiaries is in violation of its charter or by-laws or in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Company or any Subsidiary is subject (collectively, "Agreements and
Instruments") except for such violations or defaults that would not
reasonably be expected to result in a Material Adverse Effect; and the
execution, delivery and performance of this Agreement and the International
Purchase Agreement and the consummation of the transactions contemplated in
this Agreement, the International Purchase Agreement and in the
Registration Statement (including the issuance and sale of the Securities
and the use of the proceeds from the sale of the Securities as described in
the Prospectuses under the caption "Use of Proceeds") and compliance by the
Company with its obligations under this Agreement and the International
Purchase Agreement have been duly authorized by all necessary corporate
action and do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a breach of,
or default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any Subsidiary pursuant to, the Agreements and
Instruments (except for such violations, conflicts, breaches or defaults or
liens, charges or encumbrances that would not
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reasonably be expected to result in a Material Adverse Effect), nor will
such action result in any violation of the provisions of the charter or by-
laws of the Company or any Subsidiary or any applicable law, statute
binding upon, or, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any Subsidiary or any of their
assets, properties or operations, except for such defaults, which would not
reasonably be expected to result in a Material Adverse Effect. As used
herein, a "Repayment Event" means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any Subsidiary.
(12) Absence of Labor Dispute. No labor dispute with the employees of
------------------------
the Company or any Subsidiary exists or, to the knowledge of the Company,
is imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or any Subsidiary's principal
suppliers, manufacturers, customers or contractors, which, in either case,
would reasonably be expected to result in a Material Adverse Effect.
(13) Absence of Proceedings. There is no action, suit, proceeding,
----------------------
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company or any
Subsidiary, which is required to be disclosed in the Registration Statement
(other than as disclosed therein), or which would reasonably be expected to
result in a Material Adverse Effect, or which would reasonably be expected
to materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in this Agreement and the
International Purchase Agreement or the performance by the Company of its
obligations hereunder or thereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any Subsidiary is a party
or of which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary routine
litigation incidental to the business, would not reasonably be expected to
result in a Material Adverse Effect.
(14) Accuracy of Exhibits. There are no contracts or documents which
--------------------
are required to be described in the Registration Statement or the
Prospectuses or to be filed as exhibits thereto which have not been so
described and filed as required. The contracts so filed as exhibits are
accurate and complete, in all material respects; all such contracts are in
full force and effect on the date hereof, and neither the Company or any of
its Subsidiaries or, to the Company's best knowledge, any other party is in
breach of or default under any material provisions of such contracts the
result of which would reasonably be likely to result in a Material Adverse
Effect.
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(15) Possession of Intellectual Property. The Company and its
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Subsidiaries own or possess or have access to adequate patents, patent
rights, licenses, inventions, copyrights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), United States trademarks, service
marks, trade names or other intellectual property (collectively,
"Intellectual Property") necessary to carry on the business now operated by
them except as would not reasonably be expected to have a Material Adverse
Effect, and neither the Company nor any of its Subsidiaries has received
any notice or is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or of
any facts or circumstances which would render any Intellectual Property
invalid or inadequate to protect the interest of the Company or any of its
Subsidiaries therein, and which infringement or conflict (if the subject of
any unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would reasonably be expected to result in a
Material Adverse Effect.
(16) Absence of Further Requirements. No filing with, or authorization,
-------------------------------
approval, consent, license, order, registration, qualification or decree
of, any court or governmental authority or agency is necessary or required
to be made or obtained by the Company for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities under this Agreement and the International Purchase
Agreement or the consummation of the transactions contemplated by this
Agreement and the International Purchase Agreement, except (i) such as have
been already obtained or as may be required under the 1933 Act or the 1933
Act Regulations and foreign or state securities or blue sky laws, (ii) such
as have been obtained under the laws and regulations of jurisdictions
outside the United States in which the Reserved Securities are offered or
(iii) such as have been described in the Registration Statement.
(17) Possession of Licenses and Permits. The Company and its
----------------------------------
Subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them; the Company and its
Subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental Licenses
or the failure of such Governmental Licenses to be in full force and effect
would not reasonably be expected to have a Material Adverse Effect; and
neither the Company nor any of its Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would reasonably be expected to
result in a Material Adverse Effect.
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(18) Title to Property. The Company and its Subsidiaries have good and
-----------------
marketable title to all real property owned by the Company and its
Subsidiaries and valid title to all other properties and assets owned by
them, in each case, free and clear of all mortgages, pledges, liens,
security interests, claims, restrictions or encumbrances of any kind except
such as (a) are described in the Prospectuses or (b) would not, singly or
in the aggregate reasonably be expected to have a Material Adverse Effect,
the value of such property or assets and would not reasonably be expected
to interfere with the use made and proposed to be made of such property by
the Company or any of its Subsidiaries; and all of the leases and subleases
material to the business of the Company and its Subsidiaries, considered as
one enterprise, and under which the Company or any of its Subsidiaries
holds properties described in the Prospectuses, are in full force and
effect, except for such failure to be in force as would not reasonably be
expected to have a Material Adverse Effect and neither the Company nor any
Subsidiary has any notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or any Subsidiary
under any of the leases or subleases mentioned above, or affecting or
questioning the rights of the Company or such Subsidiary to the continued
possession of the leased or subleased premises under any such lease or
sublease.
(19) Tax Returns and Payment of Taxes. The Company and its Subsidiaries
--------------------------------
have timely filed all Federal, state, local and foreign tax returns that
are required to be filed or have duly requested extensions thereof and all
such tax returns are true, correct and complete, except to the extent that
any failure to file or request an extension, or any incorrectness would not
reasonably be expected to result in a Material Adverse Effect. The Company
and its Subsidiaries have timely paid all taxes shown as due on such filed
tax returns (including any related assessments, fines or penalties), except
to the extent that any such taxes are being contested in good faith and by
appropriate proceedings, or to the extent that any failure to pay would not
reasonably be expected to result in a Material Adverse Effect; and adequate
charges, accruals and reserves have been provided for in the financial
statements referred to in Section 1(a)(iii) above in accordance with GAAP
in respect of all Federal, state, local and foreign taxes for all periods
as to which the tax liability of the Company or any of its Subsidiaries has
not been finally determined or remains open to examination by applicable
taxing authorities. The Company is not a "United States real property
holding corporation" within the meaning of Section 897(c)(3) of the
Internal Revenue Code of 1986, as amended.
(20) Insurance. The Company and each of its Subsidiaries are insured by
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insurers of recognized financial responsibility against such losses and
risks and in such amounts as the Company believes are prudent and customary
in the businesses in which they are engaged; and neither the Company nor
any of its Subsidiaries has any reason to believe that any of them will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business except where the failure to renew or
maintain such coverage would not reasonably be expected to result in a
Material Adverse Effect. The
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officers and directors of the Company are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as are prudent and customary for officers and directors liability insurance
of a public company and as would cover claims which could be made in
connection with the issuance of the Securities; and the Company has no
reason to believe that it will not be able to renew its existing directors
and officers liability insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
cover its officers and directors.
(21) No Stabilization or Manipulation. Neither the Company nor, to the
--------------------------------
knowledge of the Company, any of its directors, officers or affiliates has
taken nor will take, directly or indirectly, any action designed to, or
that might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Securities in violation of Regulation M
under the 1934 Act.
(22) Investment Company Act. The Company is not, and upon the issuance
----------------------
and sale of the Securities as herein contemplated and the application of
the net proceeds therefrom as described in the Prospectuses will not be, an
"investment company" or an entity "controlled" by an "investment company"
as such terms are defined in the Investment Company Act of 1940, as amended
(the "1940 Act").
(23) Environmental Laws. Except as described in the Registration
------------------
Statement and except as would not, singly or in the aggregate, reasonably
be expected to result in a Material Adverse Effect, (A) neither the Company
nor any of its Subsidiaries is in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company
and its Subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in compliance
with their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company or any of its Subsidiaries and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental
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body or agency, against or affecting the Company or any of its Subsidiaries
relating to Hazardous Materials or any Environmental Laws.
(24) Registration Rights. Except as described in the Prospectuses,
-------------------
there are no persons with registration rights or other similar rights to
have any securities registered pursuant to the Registration Statement or
otherwise registered by the Company under the 1933 Act.
(25) Certain Transactions. Except as disclosed in the Prospectuses or
--------------------
except as not reasonably required to be disclosed in the Prospectuses,
there are no outstanding loans, advances, or guarantees of indebtedness by
the Company to or for the benefit of any of the executive officers or
directors of the Company or any of the members of the families of any of
them.
(26) Accounting and other Controls. The Company has established for
-----------------------------
itself and each Subsidiary and, with respect to future acquisitions, will
establish, a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions were, are or, in the case of
such future acquisitions, will be executed in accordance with management's
general or specific authorization; (ii) transactions were, are or, in the
case of such future acquisitions, will be recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii)
access to assets was, is or, in the case of such future acquisitions, will
be permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets was, is or,
in the case of such future acquisitions, will be compared with existing
assets at reasonable intervals and appropriate action was, is or, in the
case of such future acquisitions, will be taken with respect to any
differences.
(27) Regulations. The Company and CFN have not been advised, and have
-----------
no reason to believe, that either they or any of their subsidiaries is not
conducting business in compliance with all applicable laws, rules and
regulations of the jurisdictions in which they are conducting business,
including, without limitation, all applicable local, state and federal laws
and regulations; except where failure to be so in compliance would not
reasonably be expected to result in a Material Adverse Effect.
(2) Officer's Certificates. Any certificate signed by any officer of the
Company or any of its Subsidiaries delivered to the Global Coordinator, the U.S.
Representatives or to counsel for the U.S. Underwriters shall be deemed a
representation and warranty by the Company to each U.S. Underwriter as to the
matters covered thereby.
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.
-----------------------------------------------
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(1) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each U.S. Underwriter, severally and not jointly, and
each U.S. Underwriter, severally and not jointly, agrees to purchase from the
Company, at the price per share set forth in Schedule B, the number of Initial
U.S. Securities set forth in Schedule A opposite the name of such U.S.
Underwriter, plus any additional number of Initial U.S. Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(2) Option Securities. In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby grants an option to each U.S. Underwriter, severally
and not jointly, to purchase up to an additional 720,000 shares of Common Stock
at the price per share set forth in Schedule B, less an amount per share equal
to any dividends or distributions declared by the Company and payable on the
Initial U.S. Securities but not payable on the U.S. Option Securities. The
option hereby granted will expire 30 days after the date hereof and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial U.S. Securities upon notice by the Global
Coordinator to the Company setting forth the number of U.S. Option Securities as
to which the several U.S. Underwriters are then exercising the option and the
time and date of payment and delivery for such U.S. Option Securities. Any such
time and date of delivery for the U.S. Option Securities (a "Date of Delivery")
shall be determined by the Global Coordinator, but shall not be later than seven
full business days after the exercise of said option, nor in any event prior to
the Closing Time, as hereinafter defined. If the option is exercised as to all
or any portion of the U.S. Option Securities, each of the U.S. Underwriters,
acting severally and not jointly, will purchase that proportion of the total
number of U.S. Option Securities then being purchased which the number of
Initial U.S. Securities set forth in Schedule A opposite the name of such U.S.
Underwriter bears to the total number of Initial U.S. Securities, subject in
each case to such adjustments as the Global Coordinator in its discretion shall
make to eliminate any sales or purchases of fractional shares.
(3) Payment. Payment of the purchase price for, and delivery of certificates
for, the Initial Securities shall be made at the offices of Debevoise &
Plimpton, 875 Third Avenue, New York, New York 10022, or at such other place as
shall be agreed upon by the Global Coordinator and the Company, at 9:00 A.M.
(Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M.
(Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by the
Global Coordinator and the Company (such time and date of payment and delivery
being herein called "Closing Time").
In addition, in the event that any or all of the U.S. Option Securities are
purchased by the U.S. Underwriters, payment of the purchase price for, and
delivery of certificates for, such U.S. Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be
14
<PAGE>
agreed upon by the Global Coordinator and the Company, on each Date of Delivery
as specified in the notice from the Global Coordinator to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the U.S. Representatives for the respective accounts of the U.S. Underwriters of
certificates for the U.S. Securities to be purchased by them. It is understood
that each U.S. Underwriter has authorized the U.S. Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial U.S. Securities and the U.S. Option Securities, if any,
which it has agreed to purchase. Merrill Lynch, individually and not as
representative of the U.S. Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial U.S. Securities or the U.S.
Option Securities, if any, to be purchased by any U.S. Underwriter whose funds
have not been received by the Closing Time or the relevant Date of Delivery, as
the case may be, but such payment shall not relieve such U.S. Underwriter from
its obligations hereunder.
(4) Denominations; Registration. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
U.S. Securities and the U.S. Option Securities, if any, will be made available
for examination and packaging by the U.S. Representatives in The City of New
York not later than 10:00 A.M. (Eastern time) on the business day prior to the
Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
------------------------
U.S. Underwriter as follows:
(1) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
or Rule 434, as applicable, and will notify the Global Coordinator immediately,
and confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement shall become effective, or any supplement to the
Prospectuses or any amended Prospectuses shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectuses or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the initiation or
threatening of any proceedings for any of such purposes. The Company, after
consultation with the U.S. Representatives, will promptly effect the filings
necessary pursuant to Rule 424(b) and will take such steps as it deems necessary
to ascertain promptly whether the form of prospectus transmitted for filing
under Rule 424(b) was received for filing by the Commission and, in the event
that it
15
<PAGE>
was not, it will promptly file such prospectus. The Company, after consultation
with the U.S. Representatives, will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(2) Filing of Amendments. The Company will give the Global Coordinator
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectuses,
will furnish the Global Coordinator with copies of any such documents a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file or use any such document to which the Global Coordinator
or counsel for the U.S. Underwriters shall reasonably object.
(3) Delivery of Registration Statements. The Company has furnished or will
deliver to the U.S. Representatives and counsel for the U.S. Underwriters,
without charge, signed copies of the Registration Statement as originally filed
and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the U.S. Representatives,
without charge, a conformed copy of the Registration Statement as originally
filed and of each amendment thereto (without exhibits) for each of the U.S.
Underwriters. The copies of the Registration Statement and each amendment
thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.
(4) Delivery of Prospectuses. The Company has delivered to each U.S.
Underwriter, without charge, as many copies of each preliminary prospectus as
such U.S. Underwriter reasonably requested, and the Company hereby consents to
the use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each U.S. Underwriter, without charge, during the period when the
U.S. Prospectus is required to be delivered under the 1933 Act or the Securities
Exchange Act of 1934 (the "1934 Act"), such number of copies of the U.S.
Prospectus (as amended or supplemented) as such U.S. Underwriter may reasonably
request. The U.S. Prospectus and any amendments or supplements thereto
furnished to the U.S. Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(5) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion of
the distribution of the Securities as contemplated in this Agreement, the
International Purchase Agreement and in the Prospectuses. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection with sales
of the Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the U.S. Underwriters or
for the Company, to amend the Registration Statement or amend or supplement any
Prospectus in order that the Prospectuses will not include any untrue statements
of a material fact or omit to state a material
16
<PAGE>
fact necessary in order to make the statements therein not misleading in the
light of the circumstances existing at the time it is delivered to a purchaser,
or if it shall be necessary, in the opinion of such counsel, at any such time to
amend the Registration Statement or amend or supplement any Prospectus in order
to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Company will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectuses comply
with such requirements, and the Company will furnish to the U.S. Underwriters
such number of copies of such amendment or supplement as the U.S. Underwriters
may reasonably request.
(6) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the U.S. Underwriters, to qualify the Securities for offering
and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Global Coordinator may designate and
to maintain such qualifications in effect for a period of not less than one year
from the later of the effective date of the Registration Statement and any Rule
462(b) Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.
(7) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its security
holders as soon as practicable an earnings statement for the purposes of, and to
provide the benefits contemplated by, the last paragraph of Section 11(a) of the
1933 Act.
(8) Use of Proceeds. The Company will use the net proceeds received by it
from the sale of the Securities in the manner specified in the Prospectuses
under "Use of Proceeds".
(9) Listing. The Company will use its best efforts to effect and maintain
the quotation of the Securities on the Nasdaq National Market or the listing of
the Securities on the New York Stock Exchange and will file with the Nasdaq
National Market or the New York Stock Exchange, as applicable, all documents and
notices required by such exchange of companies that have securities that are
traded in the over-the-counter market and quotations for which are reported by
the Nasdaq National Market or which are listed on the New York Stock Exchange,
as the case may be. The parties understand that this covenant shall terminate
upon a "going private transaction" or the sale or merger of the Company or
similar transaction.
(10) Restriction on Sale of Securities. During a period of 180 days from
the date of the Prospectuses, the Company will not, without the prior written
consent of the Global Coordinator,
17
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(i) directly or indirectly, offer to sell, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or dispose
of any share of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock of itself or any Subsidiary or file any
registration statement under the 1933 Act with respect to any of the foregoing,
except for filing a Registration Statement on Form S-4 to register 4,000,000
shares of Common Stock for future acquisitions, and filing a Registration
Statement on Form S-8 to register shares of Common Stock for issuance under the
Company Stock Option Plans, or (ii) enter into any swap or any other agreement
or any transaction that transfers, in whole or in part, directly or indirectly,
the economic consequence of ownership of the Common Stock, whether any such swap
or transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Securities to be sold hereunder or
under the International Purchase Agreement, (B) any shares of Common Stock
issued by the Company upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof and referred to in the
Prospectuses, (C) any shares of Common Stock issued or options to purchase
Common Stock granted pursuant to existing employee benefit plans or other stock
option plans of the Company referred to in the Prospectuses, or (D) up to
4,000,000 shares of Common Stock issued by the Company pursuant to a
Registration Statement on Form S-4.
(11) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
(12) Compliance with NASD Rules. The Company hereby agrees that it will
ensure that the Reserved Securities will be restricted as required by the
National Association of Securities Dealers, Inc. (the "NASD") or the NASD rules
from sale, transfer, assignment, pledge or hypothecation for a period of three
months following the date of this Agreement. The Underwriters will notify the
Company as to which persons will need to be so restricted. At the request of
the Underwriters, the Company will direct the transfer agent to place a stop
transfer restriction upon such securities for such period of time. Should the
Company release, or seek to release, from such restrictions any of the Reserved
Securities, the Company agrees to reimburse the Underwriters for any reasonable
expenses (including, without limitation, reasonable legal expenses) they incur
in connection with such release.
(13) Compliance with Rule 463. The Company will file with the Commission
such reports and report the use of proceeds of the sale of the Securities as may
be required pursuant to Rule 463 of the 1933 Act Regulations.
SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay all
-------------------
expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as
18
<PAGE>
originally filed and of each amendment thereto, (ii) the printing and delivery
to the Underwriters of this Agreement, any Agreement among Underwriters and such
other documents as may be required in connection with the offering, purchase,
sale, issuance or delivery of the Securities, (iii) the preparation, issuance
and delivery of the certificates for the Securities to the Underwriters,
including any stock or other transfer taxes and any stamp or other duties
payable upon the sale, issuance or delivery of the Securities to the
Underwriters and the transfer of the Securities between the U.S. Underwriters
and the International Managers, (iv) the fees and disbursements of the Company's
counsel, accountants and other advisors, (v) the qualification of the Securities
under securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of the Blue Sky Survey and any supplement thereto, (vi) the printing and
delivery to the Underwriters of copies of each preliminary prospectus, any Term
Sheets and of the Prospectuses and any amendments or supplements thereto, (vii)
the preparation and delivery to the Underwriters of copies of the Blue Sky
Survey and any supplement thereto, (viii) the fees and expenses of any transfer
agent or registrar for the Securities, (ix) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the National Association of Securities Dealers, Inc. (the
"NASD") of the terms of the sale of the Securities, (x) the transportation and
other expenses incurred by the Company in connection with presentations to
prospective purchasers of the Securities, (xi) the fees and expenses incurred in
connection with the inclusion of the Securities in the Nasdaq National Market
and (xii) all costs and expenses of the Underwriters, including the reasonable
fees and disbursements of counsel for the Underwriters, in connection with
matters related to the Reserved Securities which are designated by the Company
for sale to employees and others having a business relationship with the
Company.
(1) Termination of Agreement. If this Agreement is terminated by the U.S.
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the U.S. Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the U.S. Underwriters.
SECTION 5. Conditions of U.S. Underwriters' Obligations. The obligations
--------------------------------------------
of the several U.S. Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any Subsidiary of the Company
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(1) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
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reasonable satisfaction of counsel to the U.S. Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434,
a Term Sheet shall have been filed with the Commission in accordance with Rule
424(b).
(2) Opinions of Counsel for Company. At Closing Time, the U.S.
Representatives shall have received the favorable opinion, dated as of Closing
Time, of (i) Minkin & Snyder, a Professional Corporation, counsel for the
Company, (ii) Debevoise & Plimpton, special counsel for the Company, (iii)
Morris, Manning & Martin, L.L.P., special counsel for the Company, (iv) Hudson
Cook, LLP, special counsel for the Company and (v) Goodwin, Procter & Hoar, LLP,
special counsel for the Company, in each case in form and substance reasonably
satisfactory to counsel for the U.S. Underwriters, together with signed or
reproduced copies of each such letter for each of the other U.S. Underwriters to
the effect set forth in Exhibits A-1 to A-5 hereto and to such further effect as
counsel to the U.S. Underwriters may reasonably request.
(3) Opinion of Counsel for U.S. Underwriters. At Closing Time, the U.S.
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the U.S.
Underwriters, together with signed or reproduced copies of such letter for each
of the other U.S. Underwriters, in customary form and covering such matters as
the U.S. Underwriters may reasonably request. In giving such opinion such
counsel may rely, as to all matters governed by the laws of jurisdictions other
than the law of the State of New York, the federal law of the United States and
the General Corporation Law of the State of Delaware, upon the opinions of
counsel satisfactory to the U.S. Representatives. Such counsel may also state
that, insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Company and its
Subsidiaries and certificates of public officials.
(4) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectuses, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its Subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, and the U.S.
Representatives shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of Closing Time, to the effect that (i) there has been
no such material adverse change, (ii) the representations and warranties in
Section 1(a) hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time, (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or are contemplated by the
Commission.
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(5) Accountants' Comfort Letters. At the time of the execution of this
Agreement, the U.S. Representatives shall have received from
PricewaterhouseCoopers LLP a letter dated such date, in form and substance
reasonably satisfactory to the U.S. Representatives, together with signed or
reproduced copies of such letter for each of the other U.S. Underwriters
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectuses.
(6) Bring-down Comfort Letters. At Closing Time, the Representatives shall
have received from PricewaterhouseCoopers LLP a letter, dated as of Closing
Time, to the effect that it reaffirms the statements made in the letter
furnished pursuant to subsection (e) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to
Closing Time.
(7) Approval of Listing. At Closing Time, the Securities shall have been
approved for inclusion in the Nasdaq National Market, subject only to official
notice of issuance.
(8) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(9) Lock-up Agreements. At the date of this Agreement, the U.S.
Representatives shall have received an agreement substantially in the form of
Exhibit B hereto signed by substantially all of the stockholders and option
holders of any securities of the Company and its Subsidiaries except for those
agreed to in a writing and listed on Schedule C hereto.
(10) Purchase of Initial International Securities. Contemporaneously with
the purchase by the U.S. Underwriters of the Initial U.S. Securities under this
Agreement, the International Managers shall have purchased the Initial
International Securities under the International Purchase Agreement.
(11) GE Private Placement. The sale of 2,000,000 shares of Common Stock to
certain affiliates of General Electric Corporation shall close prior to or
simultaneously with the Closing Time without any material modifications from the
terms of the forms of agreements relating thereto reviewed by the Underwriters
and their counsel and without any modification from the description of such sale
in the Prospectuses.
(12) Conditions to Purchase of U.S. Option Securities. In the event that
the U.S. Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the U.S. Option Securities, the representations
and warranties of the Company contained herein and the statements in any
certificates furnished by the Company or any Subsidiary of the Company hereunder
shall be true and correct as of each Date of Delivery and, at the relevant Date
of Delivery, the U.S. Representatives shall have received:
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(1) Officers' Certificate. A certificate, dated such Date of
---------------------
Delivery, of the President or a Vice President of the Company and of the
chief financial or chief accounting officer of the Company confirming that
the certificate delivered at the Closing Time pursuant to Section 5(d)
hereof remains true and correct as of such Date of Delivery.
(2) Opinions of Counsel for Company. The favorable opinion of each
-------------------------------
of (a) Minkin & Snyder, a Professional Corporation, counsel for the
Company, (b) Debevoise & Plimpton, special counsel for the Company, (c)
Morris, Manning & Martin, L.L.P., special counsel for the Company, (d)
Hudson Cook, LLP, special counsel for the Company and (e) Goodwin, Procter
& Hoar, LLP, special counsel for the Company, in each case in form and
substance reasonably satisfactory to counsel for the U.S. Underwriters,
dated such Date of Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect as the
opinion required by Section 5(b) hereof.
(3) Opinion of Counsel for U.S. Underwriters. The favorable
----------------------------------------
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the U.S.
Underwriters, dated such Date of Delivery, relating to the U.S. Option
Securities to be purchased on such Date of Delivery and otherwise to the
same effect as the opinion required by Section 5(c) hereof.
(4) Bring-down Comfort Letters. A letter from PricewaterhouseCoopers
--------------------------
LLP in form and substance reasonably satisfactory to the U.S.
Representatives and dated such Date of Delivery, substantially in the same
form and substance as the letter furnished to the U.S. Representatives
pursuant to Section 5(f) hereof, except that the "specified date" in the
letter furnished pursuant to this paragraph shall be a date not more than
five days prior to such Date of Delivery.
(13) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the U.S. Underwriters shall have been furnished with such documents
and opinions as they may reasonably require for the purpose of enabling them to
pass upon the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be reasonably satisfactory in form and substance to
the U.S. Representatives and counsel for the U.S. Underwriters.
(14) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of U.S. Option
Securities on a Date of Delivery which is after the Closing Time, the
obligations of the several U.S. Underwriters to purchase the relevant Option
Securities, may be terminated by the U.S. Representatives by notice to the
Company at any time at or prior to Closing Time or such Date of Delivery, as the
case may be, and such termination
22
<PAGE>
shall be without liability of any party to any other party except as provided in
Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such
termination and remain in full force and effect.
SECTION 6. Indemnification.
---------------
(1) Indemnification of U.S. Underwriters. The Company agrees to indemnify
and hold harmless each U.S. Underwriter and each person, if any, who controls
any U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act as follows:
(1) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(2) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of (A) the violation of any applicable
laws or regulations of foreign jurisdictions where Reserved Securities have
been offered and (B) any untrue statement or alleged untrue statement of a
material fact included in the supplement or prospectus wrapper (but only to
the extent the Company has prepared or has had the opportunity to approve
any wrapper) material distributed in Canada in connection with the
reservation and sale of the Reserved Securities to eligible employees and
certain persons having business relationships with the Company or the
omission or alleged omission therefrom of a material fact necessary to make
the statements therein, when considered in conjunction with the
Prospectuses or preliminary prospectuses, not misleading;
(3) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission or in connection with any violation of
the nature referred to in Section 6(a)(ii)(A) hereof; provided that
(subject to Section 6(d) below) any such settlement is effected with the
written consent of the Company; and
(4) against any and all expense whatsoever, as incurred (including
the reasonable fees and disbursements of counsel chosen by Merrill Lynch),
reasonably
23
<PAGE>
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission or
in connection with any violation of the nature referred to in Section
6(a)(ii)(A) hereof, to the extent that any such expense is not paid under
(i), (ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
U.S. Underwriter through the U.S. Representatives expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the U.S. Prospectus (or any amendment or supplement thereto); and
provided further that the Company will not be liable to any U.S. Underwriter
- -------- -------
with respect to any U.S. Prospectus to the extent that the Company shall sustain
the burden of proving that any such loss, liability, claim, damage or expense
resulted from the fact that such U.S. Underwriter, in contravention of a
requirement of this Agreement or applicable law, sold Securities to a person to
whom such U.S. Underwriter failed to send or give, at or prior to the Closing
Date, a copy of the Final Prospectus, as then amended or supplemented if: (i)
the Company has previously furnished copies thereof (sufficiently in advance of
the Closing Date to allow for distribution by the Closing Date) to the U.S.
Underwriter and the loss, liability, claim, damage or expense of such U.S.
Underwriter resulted from an untrue statement or omission of a material fact
contained in or omitted from the Preliminary Prospectus which was corrected in
the Final Prospectus as, if applicable, amended or supplemented prior to the
Closing Date and such Final Prospectus was required by law to be delivered at or
prior to the written confirmation of sale to such person and (ii) such failure
to give or send such Final Prospectus by the Closing Date to the party or
parties asserting such loss, liability, claim, damage or expense would have
constituted a defense to the claim asserted by such person.
Insofar as this indemnity agreement may permit indemnification for
liabilities under the 1933 Act of any person who is a partner of a U.S.
Underwriter or who controls an underwriter within the meaning of Section 15 of
1933 Act or Section 20 of the 1934 Act and who, at the date of this Agreement,
is a director or officer of the Company or controls the Company within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, such
indemnity agreement is subject to the undertaking of the Company in the
Registration Statement under Item 14 thereof.
(2) Indemnification of Company, Directors and Officers. Each U.S.
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto),
24
<PAGE>
including the Rule 430A Information and the Rule 434 Information, if applicable,
or any preliminary U.S. prospectus or the U.S. Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Company by such U.S. Underwriter through the U.S.
Representatives expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the U.S. Prospectus (or any
amendment or supplement thereto).
(3) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(4) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(iii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement; provided that an indemnifying party shall not be liable for any such
settlement effected without its consent if such indemnifying party, prior to the
date of such settlement, (1) reimburses such indemnified party in accordance
with such request for the amount of such fees and expenses of counsel as the
indemnifying party believes in good faith to be
25
<PAGE>
reasonable, and (2) provides written notice to the indemnified party that the
indemnifying party disputes in good faith the reasonableness of the unpaid
balance of such fees and expenses.
(5) Indemnification for Reserved Securities. In connection with the offer
and sale of the Reserved Securities, the Company agrees, promptly upon a
request, in writing to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of eligible employees and friends of the
Company to pay for and accept delivery of Reserved Securities which, by the end
of the first business day following the date of this Agreement, were subject to
a properly confirmed agreement to purchase.
SECTION 7. Contribution. If the indemnification provided for in Section 6
------------
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the U.S. Underwriters on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the U.S.
Underwriters on the other hand in connection with the statements or omissions,
or in connection with any violation of the nature referred to in Section
6(a)(ii)(A) hereof, which resulted in such losses, liabilities, claims, damages
or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the U.S.
Underwriters on the other hand in connection with the offering of the U.S.
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the U.S.
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the U.S.
Underwriters, in each case as set forth on the cover of the U.S. Prospectus, or,
if Rule 434 is used, the corresponding location on the Term Sheet, bear to the
aggregate initial public offering price of the U.S. Securities as set forth on
such cover.
The relative fault of the Company on the one hand and the U.S. Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the U.S. Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission or any violation of the nature referred to in Section
6(a)(ii)(A) hereof.
The Company and the U.S. Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the U.S. Underwriters were treated as one entity for such
purpose) or by any other method of allocation
26
<PAGE>
which does not take account of the equitable considerations referred to above in
this Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any reasonable legal or other expenses incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no U.S. Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the U.S. Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
U.S. Underwriter has otherwise been required to pay by reason of any such untrue
or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a U.S.
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial U.S. Securities set forth
opposite their respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of its Subsidiaries submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any U.S. Underwriter or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities to the U.S. Underwriters.
SECTION 9. Termination of Agreement.
------------------------
(1) Termination; General. The U.S. Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the U.S. Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or
27
<PAGE>
the international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the U.S. Representatives, impracticable to market the Securities or
to enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission or the Nasdaq National Market, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or materially limited, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices have been required, by
any of said exchanges or by such system or by order of the Commission, the
National Association of Securities Dealers, Inc. or any other governmental
authority, or (iv) if a banking moratorium has been declared by either Federal
or New York authorities.
(2) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7 and 8 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the U.S. Underwriters. If one or
-----------------------------------------------
more of the U.S. Underwriters shall fail at Closing Time or a Date of Delivery
to purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the U.S. Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting U.S. Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the U.S.
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(1) if the number of Defaulted Securities does not exceed 10% of the
number of U.S. Securities to be purchased on such date, each of the non-
defaulting U.S. Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of all
non-defaulting U.S. Underwriters, or
(2) if the number of Defaulted Securities exceeds 10% of the number of
U.S. Securities to be purchased on such date, this Agreement or, with respect to
any Date of Delivery which occurs after the Closing Time, the obligation of the
U.S. Underwriters to purchase and of the Company to sell the Option Securities
to be purchased and sold on such Date of Delivery shall terminate without
liability on the part of any non-defaulting U.S. Underwriter.
No action taken pursuant to this Section shall relieve any defaulting U.S.
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a
28
<PAGE>
termination of the obligation of the U.S. Underwriters to purchase and the
Company to sell the relevant U.S. Option Securities, as the case may be, either
the U.S. Representatives or the Company shall have the right to postpone Closing
Time or the relevant Date of Delivery, as the case may be, for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement or Prospectus or in any other documents or arrangements. As used
herein, the term "U.S. Underwriter" includes any person substituted for a U.S.
Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the U.S.
Underwriters shall be directed to the U.S. Representatives at 3300 Hillview
Avenue, Suite 150, Palo Alto, California 94304-1203, attention of Jack Weingart,
with a copy to Gregory C. Smith, Skadden, Arps, Slate, Meagher & Flom LLP, 525
University Avenue, Palo Alto, California, 94301; and notices to the Company
shall be directed to it at 1888 Emery Street, N.W., Atlanta, Georgia 30318,
attention of M. Wayne Boylston with copies to James S. Altenbach, Minkin &
Snyder, One Buckhead Plaza, 3060 Peachtree Road, Suite 1100, Atlanta, Georgia
30305 and Margaret A. Davenport, Debevoise & Plimpton, 875 Third Avenue, New
York, New York 10022.
SECTION 12. Parties. This Agreement shall each inure to the benefit of
-------
and be binding upon the U.S. Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the U.S.
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the U.S. Underwriters and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any U.S.
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
----------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
------------------
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
29
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the U.S. Underwriters and the Company in accordance with its terms.
Very truly yours,
IXL ENTERPRISES, INC.
By /s/ U. Bertram Ellis Jr.
------------------------------
Name: U. Bertram Ellis Jr.
Title: CEO
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
BANCBOSTON ROBERTSON STEPHENS INC.
SG COWEN SECURITIES CORPORATION
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ Palma Mazzola
----------------------
Name: Palma Mazzola
Title: Authorized Signatory
For themselves and as U.S. Representatives of the
other U.S. Underwriters named in Schedule A hereto.
30
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial
Name of Underwriter Securities
------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith 1,138,125
Incorporated
Donaldson, Lufkin & Jenrette Securities 1,138,125
Corporation
BancBoston Robertson Stephens Inc. 455,250
SG Cowen Securities Corporation 303,500
Allen & Company Incorporated 150,000
BT Alex. Brown Incorporated 150,000
Bear, Stearns & Co. Inc. 150,000
Hambrecht & Quist LLC 150,000
Morgan Stanley & Co. Incorporated 150,000
Adams, Harkness & Hill, Inc. 75,000
J.C. Bradford & Co. 75,000
Dain Rauscher Wessels, A division of Dain Rauscher 75,000
Incorporated 75,000
First Albany Corporation 75,000
First Security Van Kasper 75,000
First Union Capital Markets Corp. 75,000
Morgan Keegan & Company, Inc. 75,000
Needham & Company, Inc. 75,000
The Robinson-Humphrey Company, LLC 75,000
Sanders Morris Mundy 75,000
Sandler O'Neill & Partners, L.P. 75,000
Volpe Brown Whelan & Company, LLC 75,000
Wachovia Securities, Inc. 75,000
E* OFFERING Corp. 40,000
---------
TOTAL: 4,800,000
</TABLE>
Sch A-1
<PAGE>
SCHEDULE B
IXL ENTERPRISES, INC.
4,800,000 Share of Common Stock
(Par Value $0.01 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $12.00.
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $11.16, being an amount equal to the initial
public offering price set forth above less $0.84 per share; provided that the
purchase price per share for any Option Securities purchased upon the exercise
of the over-allotment option described in Section 2(b) shall be reduced by an
amount per share equal to any dividends or distributions declared by the Company
and payable on the Initial Securities but not payable on the Option Securities.
Sch B-1
<PAGE>
SCHEDULE C
List of persons and entities
not subject to lock-up
<PAGE>
Exhibit A-1
FORM OF OPINION OF COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(1) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware.
(2) The Company has the corporate power and authority to own, lease
and operate its properties and to conduct its business as presently
conducted and as described in the Prospectuses and to enter into and
perform its obligations under the Purchase Agreement.
(3) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction listed on
Schedule A attached hereto which to our knowledge is each jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not reasonably be expected to
result in a Material Adverse Effect.
(4) On December 31, 1998 and Pro Forma for issuances of capital stock
occurring between January 1, 1999 and the Closing, the authorized, issued
and outstanding capital stock of the Company was and is as described in the
Prospectuses under the caption entitled "Capitalization" and, after giving
effect to the offering will be as described as Pro Forma as Adjusted under
the caption "Capitalization" (except for subsequent issuances, if any,
pursuant to the Purchase Agreements, or pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectuses or
pursuant to the exercise of convertible securities or options referred to
in the Prospectuses and except for 4,000,000 shares of Common Stock
registered pursuant to a shelf Registration Statement on Form S-4 for use
in future acquisitions). The number of authorized, issued and outstanding
options and other rights to acquire capital stock is as described under
such caption. The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable; and to our knowledge none of the outstanding shares of
capital stock of the Company was issued in violation of the preemptive or
other similar rights of any security holder of the Company. Except as
disclosed in the Prospectuses, to our knowledge, there are no outstanding
options to purchase, or any preemptive rights or other rights to subscribe
for or to purchase, any securities or obligations convertible into, or, any
contracts or commitments to issue or sell, shares of the Company's or its
A-1-1
<PAGE>
Subsidiaries' capital stock or any such options, rights, convertible
securities or obligations. The description of the Company's stock option
and purchase plans, and the options or other rights granted and exercised
thereunder, set forth in the Prospectuses accurately and fairly presents in
all material respects the information required to be shown with respect to
such plans, options and rights.
(5) The Securities have been duly authorized for issuance and sale to
the Underwriters pursuant to the Purchase Agreements and, when issued and
delivered by the Company pursuant to the Purchase Agreements against
payment of the consideration set forth in the Purchase Agreements, will be
validly issued and fully paid and non-assessable and no holder of the
Securities is or will be subject to personal liability by reason of being
such a holder. The Common Stock conforms in all material respects as to
legal matters to all statements relating thereto contained in the
Prospectuses and such descriptions conform to the rights set forth in the
instruments defining the same.
(6) To our knowledge, the issuance of the Securities is not subject
to preemptive rights, co-sale rights, registration rights, right of first
refusal or similar rights of any security holder of the Company and the
Securities will be sold free and clear of all liens, encumbrances, equities
or claims.
(7) Each Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectuses and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction listed on Schedule A attached hereto which to our knowledge is
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
reasonably be expected to result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each Subsidiary has been duly authorized and
validly issued, is fully paid and non-assessable and, to our knowledge, is
owned by the Company, directly or through Subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; to our knowledge none of the outstanding shares of capital stock of
any Subsidiary was issued in violation of the preemptive or similar rights
of any security holder of such Subsidiary or other party. To our knowledge,
except as described in the Prospectuses or except as not required to be
disclosed in the Prospectuses, the Company has no written agreement,
commitment or understanding with respect to acquiring the business, stock,
or material assets, except assets acquired in the ordinary course of
business, of any other person or entity.
(8) The Purchase Agreements have been duly authorized, executed and
delivered by the Company.
A-1-2
<PAGE>
(9) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Prospectuses pursuant to Rule 424(b) have been made
in the manner and within the time period required by Rule 424(b); and, to
our knowledge, no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement has been
issued under the 1933 Act and no proceedings for that purpose have been
instituted or are pending or threatened by the Commission.
(10) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434
Information, as applicable, the Prospectuses and each amendment or
supplement to the Registration Statement and Prospectuses as of their
respective effective or issue dates (other than the financial statements
and notes thereto, other financial information and supporting schedules
included therein or omitted therefrom, as to which we need express no
opinion) complied as to form in all material respects with the requirements
of the 1933 Act and the 1933 Act Regulations.
(11) If Rule 434 has been relied upon, the Prospectuses were not
"materially different," as such term is used in Rule 434, from the
prospectuses included in the Registration Statement at the time it became
effective.
(12) The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable requirements of the
General Corporation Law of the State of Delaware, with any applicable
requirements of the charter and by-laws of the Company and the requirements
of the Nasdaq National Market.
(13) To our knowledge, other than as set forth in the Prospectuses,
there is not pending or threatened any action, suit, proceeding, inquiry or
investigation, to which the Company or any Subsidiary is a party, or to
which the property of the Company or any Subsidiary is subject, before or
brought by any court or governmental agency or body (domestic or foreign),
which might reasonably be expected to result in a Material Adverse Effect,
or which might reasonably be expected to materially and adversely affect
the properties or assets thereof or the consummation of the transactions
contemplated in the Purchase Agreements or the performance by the Company
of its obligations thereunder.
(14) The information in the Prospectuses under (A) "Certain
Transactions," and "Management" and (B) in the Registration Statement under
Item 14, to the extent that it constitutes matters of law, summaries of
legal matters, the Company's charter and by-laws or legal proceedings, or
legal conclusions, has been reviewed by us and is correct in all material
respects.
A-1-3
<PAGE>
(15) To our knowledge, there are no statutes or regulations that are
required to be described in the Prospectuses that are not described as
required.
(16) All descriptions in the Registration Statement of contracts and
other documents to which the Company or its Subsidiaries are a party are
accurate in all material respects; to our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes,
leases or other instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein or filed or incorporated by reference as
exhibits thereto, and the descriptions thereof or references thereto are
correct in all material respects.
(17) To our knowledge, neither the Company nor any Subsidiary is in
violation of its charter or by-laws.
(18) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any federal or Georgia
court or governmental authority or agency, (other than under the 1933 Act
and the 1933 Act Regulations, the 1934 Act and the 1934 Act Regulations
which have been obtained, or as may be required under the securities or
blue sky laws of the various states, as to which we need express no
opinion) is necessary or required to be obtained by the Company or any of
its Subsidiaries in connection with the due authorization, execution and
delivery of the Purchase Agreement or for the offering, issuance or sale of
the Securities to the Underwriters.
(19) The execution, delivery and performance of the Purchase
Agreements and the consummation of the transactions contemplated in the
Purchase Agreements and in the Registration Statement (including the
issuance and sale of the Securities and the use of the proceeds from the
sale of the Securities as described in the Prospectuses under the caption
"Use of Proceeds") and compliance by the Company with its obligations under
the Purchase Agreements do not and will not, whether with or without the
giving of notice or lapse of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined in Section 1(a)(x) of
the Purchase Agreements) under or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
or any Subsidiary pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or any other agreement or
instrument listed on the Exhibit Index to the S-1 Registration Statement,
to which the Company or any Subsidiary is a party or by which it or any of
them may be bound, or to which any of the property or assets of the Company
or any Subsidiary is subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not reasonably be
expected to have a Material Adverse Effect), nor will such action result in
any violation of the provisions of the charter or by-laws of the Company or
any Subsidiary, or any applicable law, statute, rule, regulation, judgment,
order, writ or material decree, known
A-1-4
<PAGE>
to us, of the General Corporation Law of the State of Delaware, any Georgia
or United States federal court, government or government instrumentality
having jurisdiction over the Company or any Subsidiary or any of their
respective properties, assets or operations.
(20) To our knowledge, except as described in the Prospectuses, there
are no persons with registration rights or other similar rights to have any
securities registered pursuant to the Registration Statement or otherwise
registered by the Company under the 1933 Act.
(21) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
1940 Act.
We have not ourselves checked the accuracy and completeness of, or
otherwise verified, and are not passing upon and assume no responsibility for
the accuracy or completeness of, the statements contained in the Registration
Statement or the Prospectuses, except to the limited extent stated in paragraph
4, the second sentence of paragraph 5, paragraph 14 and the first clause of
paragraph 16 above. In the course of our review and discussion of the contents
of the Registration Statement and the Prospectuses with certain officers and
employees of the Company and its independent accountants, but without
independent check or verification, no facts have come to our attention which
cause us to believe that the Registration Statement (other than the financial
statements and notes thereto, other financial information and supporting
schedules contained therein or omitted therefrom, as to which we express no
belief), at the time it became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements contained therein not misleading, or that
the Prospectuses (other than the financial statements and notes thereto, other
financial information and supporting schedules contained therein or omitted
therefrom, as to which we express no belief), as of their dates and as of the
date hereof, contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein, in the light
of the circumstances under which they were made, not misleading.
A-1-5
<PAGE>
Exhibit A-2
FORM OF OPINION OF DEBEVOISE & PLIMPTON
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(22) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware.
(23) The Company has the corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under the
Purchase Agreements.
(24) The Securities have been duly authorized for issuance and sale to
the Underwriters pursuant to the Purchase Agreements and, when issued and
delivered by the Company pursuant to the Purchase Agreements against
payment of the consideration set forth in the Purchase Agreements, will be
validly issued and fully paid and non-assessable and no holder of the
Securities is or will be subject to personal liability by reason of being
such a holder. The Common Stock conforms in all material respects as to
legal matters to the statements relating thereto contained under the
caption "Description of Capital Stock" in the Prospectuses.
(25) CFN has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, and
has the corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectuses.
(26) The Purchase Agreements have been duly authorized, executed and
delivered by the Company.
(27) The Registration Statement[, including any Rule 462(b)
Registration Statement,] has been declared effective under the 1933 Act;
the Prospectuses have been filed with the Commission pursuant to Rule
424(b)(_); and, to our knowledge, no stop order suspending the
effectiveness of the Registration Statement [or any Rule 462(b)
Registration Statement] has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or
threatened by the Commission.
(28) The Registration Statement, including [any Rule 462(b)
Registration Statement,] the Rule 430A Information [and the Rule 434
Information, as applicable], the Prospectuses and each amendment or
supplement to the Registration Statement and
A-2-1
<PAGE>
Prospectuses as of their respective effective or issue dates (other than
the financial statements and notes thereto, other financial information and
supporting schedules included therein or omitted therefrom, as to which we
need express no opinion) complied as to form in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations.
(29) The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable requirements of the
General Corporation Law of the State of Delaware, with any applicable
requirements of the charter and by-laws of the Company and the requirements
of the Nasdaq National Market.
(30) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any United States federal
or New York State court or governmental authority or agency, (other than
under the 1933 Act, the 1933 Act Regulations, the 1934 Act and the 1934 Act
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need
express no opinion) is necessary or required to be made or obtained by the
Company or any of its Subsidiaries in connection with the due
authorization, execution and delivery of the Purchase Agreements or for the
offering, issuance or sale of the Securities to the Underwriters.
(31) To our knowledge, the execution, delivery and performance of the
Purchase Agreements and the consummation of the transactions contemplated
in the Purchase Agreements and compliance by the Company with its
obligations under the Purchase Agreements do not and will not, whether with
or without the giving of notice or lapse of time or both, result in any
violation of any applicable law, statute, rule, regulation, judgment,
order, writ or decree, known to us, of any, court, government or government
instrumentality of New York having jurisdiction over the Company or any
Subsidiary or any of their respective properties, assets or operations.
We have not ourselves checked the accuracy and completeness of, or
otherwise verified, and are not passing upon and assume no responsibility for
the accuracy or completeness of, the statements contained in the Registration
Statement or the Prospectuses, except to the limited extent stated in the second
sentence of paragraph 3 above. In the course of our review and discussion of the
contents of the Registration Statement and the Prospectuses with certain
officers and employees of the Company and its independent accountants, but
without independent check or verification, no facts have come to our attention
which cause us to believe that the Registration Statement (other than the
financial statements and notes thereto, other financial information and
supporting schedules contained therein or omitted therefrom, as to which we
express no belief), at the time it became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading, or that the Prospectuses (other than the financial statements and
notes thereto, other financial information and supporting schedules contained
therein or omitted therefrom, as to which
A-2-2
<PAGE>
we express no belief), as of their dates and as of the date hereof, contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements contained therein, in the light of the circumstances
under which they were made, not misleading.
A-2-3
<PAGE>
Exhibit A-3
FORM OF OPINION OF MORRIS,
MANNING & MARTIN, L.L.P.
TO BE DELIVERED PURSUANT
TO SECTION 5(b)
(i) The statements made in the Prospectuses under the captions "Risk
Factors--Government Regulation and Legal Uncertainties Related to CFN
Could Adversely Affect Our Business" and "Business--Government
Regulation," only insofar as those statements constitute a summary of
principles of insurance laws or regulations applicable to the CFN
Agency, Inc. business fairly and accurately represent the material
insurance laws and regulations applicable to the operation of CFN
Agency, Inc. business and, to the best of our actual knowledge, there
are no state insurance statutes or regulations material to the
operation of CFN Agency, Inc. business that are required to be
described in the Prospectuses that are not described as required; and
(ii) Nothing has come to our attention that leads us to believe that
the statements made in the Prospectuses under the captions "Risk
Factors-Government Regulation and Legal Uncertainties Related to CFN
Could Adversely Affect Our Business" and "Business--Government
Regulation" at the time the Registration Statement became effective
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, only insofar as those statements
constitute a summary of principles of state insurance laws or
regulations to the CFN Agency, Inc. business.
A-3-1
<PAGE>
Exhibit A-4
FORM OF OPINION OF
HUDSON COOK, LLP TO BE
DELIVERED PURSUANT
TO SECTION 5(b)
(i) The statements made in the Prospectuses under the captions "Risk
Factors--Government Regulation and Legal Uncertainties Related to CFN
Could Adversely Affect Our Business" and "Business--Government
Regulation," insofar as those statements constitute a summary of
principles of auto loan broker laws or regulations applicable to the
business of CFN, fairly and accurately represent the material auto
loan broker laws and regulations applicable to the operation CFN's
business and to the best of our knowledge, there are no statutes or
regulations material to the operation of CFN's auto loan broker
business that are required to be described in the Prospectuses that
are not described as required; and
(ii) Nothing has come to our attention that leads us to believe that
the statements made in the Prospectuses under the captions "Risk
Factors--Government Regulation and Legal Uncertainties Related to CFN
Could Adversely Affect Our Business" and "Business--Government
Regulation," at the time the Registration Statement became effective
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, insofar as those statements
constitute a summary of principles of auto loan broker laws or
regulations applicable to the business of CFN.
A-4-1
<PAGE>
Exhibit A-5
FORM OF OPINION OF
GOODWIN, PROCTER & HOAR, LLP
DELIVERED PURSUANT TO
SECTION 5(b)
(i) The statements made under "Risk Factors--Risks Relating to Our
CFN Subsidiary--Government regulation and Legal Uncertainties Related
to CFN Could Adversely Affect Our Business." and "Business--Consumer
Financial Network-- Government Regulation of Insurance, Auto Finance
and Mortgages" (the "Risk Factor Information") contained in the
Prospectus regarding residential mortgage issues insofar as those
statements constitute a summary of principles of mortgage loan laws or
regulations applicable to the business of CFN, fairly and accurately
represent the material mortgage loan laws and regulations applicable
to the operation of the CFN home finance program; and
(ii) On the basis of the information that we have gained in the
course of participating in the preparation of the Risk Factor
Information, nothing has come to our attention that would lead us to
believe that the statements made regarding residential mortgage issues
in the Risk Factor Information (i) in the Registration Statement, at
the time it became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, insofar as those statements constitute a summary of the
principles of mortgage loan laws or regulations applicable to the CFN
home finance program, or (ii) in the Prospectus, at the time the
Prospectus was issued or at the initial closing of the Offering,
included or includes an untrue statement of a material fact or omitted
or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading insofar as those statements constitute a
summary of the principles of mortgage loan laws or regulations
applicable to the CFN home finance program. In rendering such opinion,
we have relied as to matters of fact (but not as to legal
conclusions), to the extent we have deemed proper, on certificates or
affidavits of responsible officers of the Company.
A-5-1
<PAGE>
[Form of lock-up from directors, officers or other stockholders pursuant to
Section 5(i)]
Exhibit B
June 8, 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation
NationsBanc Montgomery Securities LLC
BancBoston Robertson Stephens
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering by IXL Enterprises, Inc.
-------------------------------------------------
Dear Sirs:
The undersigned, a security holder of IXL Enterprises, Inc., a Delaware
corporation (the "Company") or none of its Subsidiaries (as such term is defined
in the Purchase Agreement (as defined herein)), understands that Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
Donaldson, Lufkin & Jenrette Securities Corporation, BancBoston Robertson
Stephens Inc. and SG Cowen Securities Corporation propose to enter into a
Purchase Agreement (the "Purchase Agreement") with the Company providing for the
public offering of shares (the "Securities") of the Company's common stock, par
value $0.01 per share (the "Common Stock"). In recognition of the benefit that
such an offering will confer upon the undersigned as a security holder of the
Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
underwriter to be named in the Purchase Agreement that, during a period of 180
days from the date of the Purchase Agreement, the undersigned will not, without
the prior written consent of Merrill Lynch, directly or indirectly, (i) offer to
sell, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any shares of the Company's
Common Stock or any securities convertible into or exchangeable or exercisable
for Common Stock, whether now owned or hereafter acquired by the undersigned or
with respect to which the undersigned has or hereafter acquires the power of
disposition, or file or cause to be filed any registration statement under the
Securities Act of 1933, as amended, with respect to any of the foregoing or (ii)
enter into any swap
B-1
<PAGE>
or any other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the Common
Stock, whether any such swap transaction is to be settled by delivery of Common
Stock or other securities, in cash or otherwise.
The foregoing paragraph shall not apply to (a) transactions by any
person other than the Company relating to shares of Common Stock or other
securities acquired in open market transactions after the completion of the
public offering provided for in the Purchase Agreement or (b) transfers of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock to a member of the undersigned's immediate family or to a trust
of which the undersigned or an immediate family member is the beneficiary
(either one a "Transferee") provided that upon any such transfer, the Transferee
shall sign a letter substantially similar to this letter agreement agreeing not
to sell, grant any option to purchase, or otherwise transfer or dispose of any
such Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock for the remainder of the above-referenced 180-day
period.
The undersigned agrees that the provisions of this Agreement shall be
binding also upon the successors, assigns, heirs and personal representatives of
the undersigned and that any registration rights with respect to the offering of
Securities contemplated by the Purchase Agreement have been hereby waived.
Very truly yours,
Signature:_________________________________
Print Name:________________________________
B-2
<PAGE>
EXHIBIT 10.68
_______________________________________________________________________________
IXL ENTERPRISES, INC.
(a Delaware corporation)
1,200,000 Shares of Common Stock
INTERNATIONAL PURCHASE AGREEMENT
--------------------------------
_______________________________________________________________________________
Dated: June 2, 1999
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTERNATIONAL PURCHASE AGREEMENT......................................................................... 1
SECTION 1. Representations and Warranties.......................................................... 4
------------------------------
(a) Representations and Warranties by the Company......................................... 4
(b) Officer's Certificates................................................................ 13
SECTION 2. Sale and Delivery to International Managers; Closing.................................... 13
----------------------------------------------------
(a) Initial Securities.................................................................... 13
(b) Option Securities..................................................................... 14
(c) Payment............................................................................... 14
(d) Denominations; Registration........................................................... 15
SECTION 3. Covenants of the Company................................................................ 15
------------------------
(a) Compliance with Securities Regulations and Commission Requests........................ 15
(b) Filing of Amendments.................................................................. 15
(c) Delivery of Registration Statements................................................... 16
(d) Delivery of Prospectuses.............................................................. 16
(e) Continued Compliance with Securities Laws............................................. 16
(f) Blue Sky Qualifications............................................................... 17
(g) Rule 158.............................................................................. 17
(h) Use of Proceeds....................................................................... 17
(i) Listing............................................................................... 17
(j) Restriction on Sale of Securities..................................................... 17
(k) Reporting Requirements................................................................ 18
(l) Compliance with NASD Rules............................................................ 18
(m) Compliance with Rule 463.............................................................. 18
SECTION 4. Payment of Expenses..................................................................... 18
-------------------
(a) Expenses.............................................................................. 18
(b) Termination of Agreement.............................................................. 19
SECTION 5. Conditions of International Managers' Obligations....................................... 19
-------------------------------------------------
(a) Effectiveness of Registration Statement............................................... 19
(b) Opinions of Counsel for Company....................................................... 19
(c) Opinion of Counsel for International Managers......................................... 20
(d) Officers' Certificate................................................................. 20
(e) Accountants' Comfort Letters.......................................................... 20
(f) Bring-down Comfort Letters............................................................ 20
(g) Approval of Listing................................................................... 21
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
(h) No Objection..................................................................... 21
(i) Lock-up Agreements............................................................... 21
(j) Purchase of Initial U.S. Securities.............................................. 21
(k) GE Private Placement............................................................. 21
(l) Conditions to Purchase of U.S. Option Securities................................. 21
(m) Additional Documents............................................................. 22
(n) Termination of Agreement......................................................... 22
SECTION 6. Indemnification...................................................................... 22
---------------
(a) Indemnification of International Managers........................................ 22
(b) Indemnification of Company, Directors and Officers............................... 24
(c) Actions against Parties; Notification............................................ 24
(d) Settlement without Consent if Failure to Reimburse............................... 25
(e) Indemnification for Reserved Securities.......................................... 25
SECTION 7. Contribution......................................................................... 25
------------
SECTION 8. Representations, Warranties and Agreements to Survive Delivery....................... 27
--------------------------------------------------------------
SECTION 9. Termination of Agreement............................................................. 27
------------------------
(a) Termination; General............................................................. 27
(b) Liabilities...................................................................... 27
SECTION 10. Default by One or More of the International Managers................................ 28
----------------------------------------------------
SECTION 11. Notices............................................................................. 28
-------
SECTION 12. Parties............................................................................. 29
-------
SECTION 13. GOVERNING LAW AND TIME.............................................................. 29
----------------------
SECTION 14. Effect of Headings.................................................................. 29
------------------
SCHEDULE A.................................................................................................. Sch A-1
SCHEDULE B.................................................................................................. Sch B-1
SCHEDULE C.................................................................................................. Sch C-1
Exhibit A-1................................................................................................. A-1-1
Exhibit A-2................................................................................................. A-2-1
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Exhibit A-3............................................................ A-3-1
Exhibit A-4............................................................ A-4-1
Exhibit A-5............................................................ A-5-1
Exhibit B.............................................................. B-1
</TABLE>
iii
<PAGE>
IXL ENTERPRISES, INC.
(a Delaware corporation)
1,200,000 Shares of Common Stock
(Par Value $0.01 Per Share)
INTERNATIONAL PURCHASE AGREEMENT
--------------------------------
June 2,1999
MERRILL LYNCH INTERNATIONAL
Donaldson, Lufkin & Jenrette International
BancBoston Robertson Stephens International Limited
SG Cowen International L.P.
as Lead Managers of the several International Managers
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Ladies and Gentlemen:
iXL Enterprises, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Merrill Lynch International ("Merrill Lynch") and each of the
other international underwriters named in Schedule A hereto (collectively, the
"International Managers,", which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), for whom Merrill
Lynch, Donaldson, Lufkin & Jenrette International, Banc Boston Robertson
Stephens International Limited and SG Cowen International L.P. are acting as
representatives (in such capacity, the "Lead Managers"), with respect to the
issue and sale by the Company and the purchase by the International Managers,
acting severally and not jointly, of the respective numbers of shares of Common
Stock, par value $.01 per share, of the Company ("Common Stock") set forth in
said Schedule A, and with respect to the grant by the Company to the
International Managers, acting severally and not jointly, of the option
described in Section 2(b) hereof to purchase all or any part of 180,000
additional shares of Common Stock to cover over-allotments, if any. The
aforesaid 1,200,000 shares of Common Stock (the "Initial International
Securities") to be purchased by the International
1
<PAGE>
Managers and all or any part of the 180,000 shares of Common Stock subject to
the option described in Section 2(b) hereof (the "International Option
Securities") are hereinafter called, collectively, the "International
Securities".
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "U.S. Purchase Agreement") providing for
the offering by the Company of an aggregate of 4,800,000 shares of Common Stock
(the "Initial U.S. Securities") through arrangements with certain underwriters
in the United States and Canada (the "U.S. Underwriters") for which Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation, BancBoston Robertson Stephens Inc. and SG Cowen
Securities Corporation are acting as representatives (the "U.S.
Representatives") and the grant by the Company to the U.S. Underwriters, acting
severally and not jointly, of an option to purchase all or any part of the U.S.
Underwriters' pro rata portion of up to 720,000 additional shares of Common
Stock solely to cover overallotments, if any (the "U.S. Option Securities" and,
together with the International Option Securities, the "Option Securities").
The Initial U.S. Securities and the U.S. Option Securities are hereinafter
called the "U.S. Securities". It is understood that the Company is not
obligated to sell and the International Managers are not obligated to purchase,
any Initial International Securities unless all of the Initial U.S. Securities
are contemporaneously purchased by the U.S. Underwriters.
The International Managers and the U.S. Underwriters are hereinafter
collectively called the "Underwriters", the Initial U.S. Securities and the
Initial International Securities are hereinafter collectively called the
"Initial Securities", and the U.S. Securities, and the International Securities
are hereinafter collectively called the "Securities".
The Underwriters will concurrently enter into an Intersyndicate Agreement
of even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Underwriters under the direction
of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (in
such capacity, the "Global Coordinator").
The Company understands that the International Managers propose to make a
public offering of the International Securities as soon as the Lead Managers
deem advisable after this Agreement has been executed and delivered.
The Company and the International Managers agree that up to 120,000 shares
of the Initial International Securities to be purchased by the International
Managers and that up to 480,000 shares of the Initial U.S. Securities to be
purchased by the U.S. Underwriters (collectively, the "Reserved Securities")
shall be reserved for sale by the Underwriters to certain eligible employees and
persons having business relationships with the Company, as part of the
distribution of the Securities by the Underwriters, subject to the terms of this
Agreement, the applicable rules, regulations and interpretations of the National
Association of Securities Dealers, Inc. and all other applicable laws, rules and
regulations. To the extent that such Reserved Securities are not orally
confirmed for purchase by such eligible employees and persons having business
relationships with the Company
2
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by the end of the first business day after the date of this Agreement, such
Reserved Securities may be offered to the public as part of the public offering
contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-71937) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b).
Two forms of prospectus are to be used in connection with the offering and sale
of the Securities: one relating to the U.S. Securities (the "Form of
International Prospectus") and one relating to the U.S. Securities (the "Form of
U.S. Prospectus"). The Form of International Prospectus is identical to the
Form of U.S. Prospectus, except for the front cover and back cover pages and the
information under the caption "Underwriting" and the inclusion in the Form of
International Prospectus of a section under the caption "Certain United States
Tax Considerations for Non-United States Holders." The information included in
any such prospectus or in any such Term Sheet, as the case may be, that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each Form of International Prospectus and Form of U.S.
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto and
schedules thereto at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final Form of
International Prospectus and the final Form of U.S. Prospectus in the forms
first furnished to the Underwriters for use in connection with the offering of
the Securities are herein called the "International Prospectus" and the "U.S.
Prospectus," respectively, and collectively, the "Prospectuses." If Rule 434 is
relied on, the terms "International Prospectus" and "U.S. Prospectus" shall
refer to the preliminary International Prospectus dated May 13, 1999 and
preliminary U.S. Prospectus dated May 13, 1999, respectively, each together
with the applicable Term Sheet and all references in this Agreement to the date
of such Prospectuses shall mean the date of the applicable Term Sheet. For
purposes of this Agreement, all references to the Registration Statement, any
preliminary prospectus, the International Prospectus, the U.S. Prospectus or any
Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include
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the copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").
SECTION 1. Representations and Warranties.
-------------------------------
(1) Representations and Warranties by the Company. The Company represents
and warrants to each International Manager as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b), hereof and agrees with each International
Manager, as follows:
(1) Compliance with Registration Requirements. Each of the
-----------------------------------------
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any International Option
Securities are purchased, at the Date of Delivery), the Registration
Statement, the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply as to form in all material
respects with the requirements of the 1933 Act and the 1933 Act Regulations
and did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Prospectuses, any
preliminary prospectuses and any supplement thereto or the prospectus
wrapper relating to sales of Securities in Canada (except as it relates
specifically to matters of Canadian law) prepared in connection therewith,
at their respective times of issuance and at the Closing Time, complied and
will comply in all material respects with any applicable laws or
regulations of foreign jurisdictions in which the Prospectuses and such
preliminary prospectuses, as amended or supplemented, if applicable, are
distributed in connection with the offer and sale of Reserved Securities.
Neither of the Prospectuses nor any amendments or supplements thereto
(including the prospectus wrapper relating to sales of Securities in Canada
(except as it relates specifically to matters of Canadian law)), at the
time the Prospectuses or any amendments or supplements thereto were issued
and at the Closing Time (and, if any International Option Securities are
purchased, at the Date of Delivery), included or will include an untrue
statement of a material fact or omitted or will omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434 is
used, the Company will comply with the requirements of Rule 434 and the
Prospectuses shall not be "materially different", as such term is used in
Rule 434, from the prospectuses included in the Registration Statement at
the time it became effective. The representations and
4
<PAGE>
warranties in this subsection shall not apply to statements in or omissions
from the Registration Statement or the International Prospectus made in
reliance upon and in conformity with information furnished to the Company
in writing by any International Manager through the Lead Managers expressly
for use in the Registration Statement or the International Prospectus.
The Company has filed a registration statement pursuant to
Section 12(b) of the Securities Exchange Act of 1934 (the "1934 Act"), to
register the Common Stock, and such registration statement has been
declared effective.
Each preliminary prospectus and the prospectuses filed as part of
the Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied as to
form when so filed in all material respects with the 1933 Act Regulations
and each preliminary prospectus and the Prospectuses to be delivered to the
Underwriters for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the preliminary prospectus made in reliance
upon and in conformity with information furnished to the Company in writing
by any International Manager through the Lead Managers expressly for use in
the preliminary prospectus.
(2) Independent Accountants. The accountants who certified the
-----------------------
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(3) Financial Statements. The financial statements of the Company
--------------------
and its consolidated subsidiaries included in the Registration Statement
and the Prospectuses, together with the related schedules and notes,
present fairly in all material respects the financial position of the
Company and its consolidated Subsidiaries (defined below) at the dates
indicated and the statement of operations, stockholders' equity and cash
flows of the Company and its consolidated Subsidiaries for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles (GAAP) applied on a consistent
basis throughout the periods involved. The supporting schedules, if any,
included in the Registration Statement present fairly, in all material
respects, in accordance with GAAP the information required to be stated
therein. The selected consolidated financial data, the summary consolidated
financial information, and the capitalization information included in the
Prospectuses present fairly, in all material respects, the information
shown therein and have been compiled on a basis consistent with that of the
financial statements included in the Registration Statement. The pro forma
financial statements and the related notes thereto included in the
Registration Statement and the Prospectuses, other than the quarterly pro
forma information set forth in the Prospectuses under the caption
"Management's Discussion and Analysis of
5
<PAGE>
Financial Condition and Results of Operations," present fairly, in all
material respects, the information shown therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial statements and have been properly compiled on the bases
described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein. No financial
statements are required to be included in the Registration Statement that
have not been so included.
(4) Subsidiary Financial Statements. The financial statements of the
-------------------------------
Company's Subsidiaries included in the Registration Statement and the
Prospectuses, together with the related schedules and notes, present fairly
in all material respects the financial position of such Subsidiaries and
their respective consolidated subsidiaries at the dates indicated and the
statement of operations, stockholders' equity and cash flows of such
Subsidiaries and their respective consolidated Subsidiaries for the periods
specified; said financial statements have been prepared in conformity with
GAAP applied on a consistent basis throughout the periods involved.
(5) No Material Adverse Change in Business. Since the respective
--------------------------------------
dates as of which information is given in the Registration Statement and
the Prospectuses, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business (a "Material Adverse Effect"), (B) there have
been no transactions entered into by the Company or any of its
Subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its Subsidiaries considered as
one enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.
(6) Good Standing of the Company. The Company has been duly
----------------------------
incorporated and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and to enter into and perform its
obligations under this Agreement; and the Company is duly qualified as a
foreign corporation to transact business and is in good standing in each
other jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
reasonably be expected to result in a Material Adverse Effect.
(7) Good Standing of Subsidiaries. Each subsidiary of the Company
-----------------------------
(other than subsidiaries in which the Company has only a minority ownership
interest) (each such subsidiary, individually a "Subsidiary" and
collectively, the "Subsidiaries") has been duly incorporated and is validly
existing as a corporation in good standing under the laws
6
<PAGE>
of the jurisdiction of its incorporation, has corporate power and authority
to own, lease and operate its properties and to conduct its business as
described in the Prospectuses and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not
reasonably be expected to result in a Material Adverse Effect; except for
the pledge of the Subsidiaries' stock pursuant to the Credit Facility (as
such term is defined in the Registration Statement) as otherwise disclosed
in the Registration Statement, all of the issued and outstanding capital
stock of each such Subsidiary has been duly authorized and validly issued,
is fully paid and non-assessable and is owned by the Company, directly or
through Subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding shares
of capital stock of any Subsidiary was issued in violation of the
preemptive or similar rights of any security holder of such Subsidiary or
other party. The only Subsidiaries of the Company are the Subsidiaries
listed on Exhibit 21 to the Registration Statement. Except as described in
the Prospectuses, or except as would not be required to be described, the
Company has no agreements, commitments, or understandings with respect to
acquiring the business, stock or material assets, except those assets
acquired in the ordinary course of business, of any other person or entity.
(8) Capitalization. The authorized, issued and outstanding capital
--------------
stock of the Company is as set forth in the Prospectuses under the caption
"Capitalization", and, after giving effect to the offering will be as set
forth as "Pro Forma As Adjusted" under the caption "Capitalization" (except
for subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectuses or pursuant to the exercise of convertible securities or
options referred to in the Prospectuses) and for 4,000,000 shares of Common
Stock registered pursuant to a shelf Registration Statement or Form S-4 for
use in future acquisitions and the number of authorized, issued and
outstanding options and other rights is set forth in the footnotes under
such caption. The shares of issued and outstanding capital stock of the
Company and its subsidiary Consumer Financial Network, Inc. have been duly
authorized and validly issued and are fully paid and non-assessable; none
of the outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any security holder
of the Company. To the knowledge of the Company, the shares of issued and
outstanding capital stock of the Company have been issued in compliance, in
all material respects, with all federal and state securities laws. Except
as disclosed in the Prospectuses, there are no outstanding options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts
or commitments to issue or sell, shares of the Company's or its
Subsidiaries' capital stock or any such options, rights, convertible
securities or obligations. The description of the Company's stock option
and purchase plans and the options or other rights granted and exercised
thereunder set forth in the
7
<PAGE>
Prospectuses accurately and fairly describe, in all material respects, the
information required to be shown with respect to such plans, arrangements,
options and rights.
(9) Authorization of Agreement. This Agreement and the International
--------------------------
Purchase Agreement have been duly authorized, executed and delivered by the
Company.
(10) Authorization and Description of Securities. The Securities to
-------------------------------------------
be purchased by the International Managers and the U.S. Underwriters from
the Company have been duly authorized for issuance and sale to the
International Managers pursuant to this Agreement and the U.S. Underwriters
pursuant to the U.S. Purchase Agreement, respectively, and, when issued and
delivered by the Company pursuant to this Agreement and the U.S. Purchase
Agreement, respectively, against payment of the consideration set forth
herein and the U.S. Purchase Agreement, respectively, will be validly
issued, fully paid and non-assessable; the Common Stock conforms in all
material respects to all statements relating thereto contained in the
Prospectuses and such description conforms in all material respects to the
rights set forth in the instruments defining the same; no holder of the
Securities will be subject to personal liability by reason of being such a
holder; and the issuance of the Securities is not subject to the preemptive
rights, co-sale rights, registration rights, right of first refusal or
similar rights of any security holder of the Company or other party and
will be sold free and clear of all liens, encumbrances, equities or claims.
(11) Absence of Defaults and Conflicts. Neither the Company nor any
---------------------------------
of its Subsidiaries is in violation of its charter or by-laws or in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Company or any Subsidiary is subject (collectively, "Agreements and
Instruments") except for such violations or defaults that would not
reasonably be expected to result in a Material Adverse Effect; and the
execution, delivery and performance of this Agreement and the U.S. Purchase
Agreement and the consummation of the transactions contemplated in this
Agreement, the U.S. Purchase Agreement and in the Registration Statement
(including the issuance and sale of the Securities and the use of the
proceeds from the sale of the Securities as described in the Prospectuses
under the caption "Use of Proceeds") and compliance by the Company with its
obligations under this Agreement and the U.S. Purchase Agreement have been
duly authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
Subsidiary pursuant to, the Agreements and Instruments (except for such
violations, conflicts, breaches or defaults or liens, charges or
encumbrances that would not reasonably be expected to result in a Material
Adverse
8
<PAGE>
Effect), nor will such action result in any violation of the provisions of
the charter or by-laws of the Company or any Subsidiary or any applicable
law, statute binding upon, or, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any Subsidiary or any of
their assets, properties or operations, except for such defaults, which
would not reasonably be expected to result in a Material Adverse Effect. As
used herein, a "Repayment Event" means any event or condition which gives
the holder of any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any Subsidiary.
(12) Absence of Labor Dispute. No labor dispute with the employees of
------------------------
the Company or any Subsidiary exists or, to the knowledge of the Company,
is imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or any Subsidiary's principal
suppliers, manufacturers, customers or contractors, which, in either case,
would reasonably be expected to result in a Material Adverse Effect.
(13) Absence of Proceedings. There is no action, suit, proceeding,
----------------------
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company or any
Subsidiary, which is required to be disclosed in the Registration Statement
(other than as disclosed therein), or which would reasonably be expected to
result in a Material Adverse Effect, or which would reasonably be expected
to materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in this Agreement and the
U.S. Purchase Agreement or the performance by the Company of its
obligations hereunder or thereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any Subsidiary is a party
or of which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary routine
litigation incidental to the business, which would not reasonably be
expected to result in a Material Adverse Effect.
(14) Accuracy of Exhibits. There are no contracts or documents which
--------------------
are required to be described in the Registration Statement or the
Prospectuses or to be filed as exhibits thereto which have not been so
described and filed as required. The contracts so filed as exhibits are
accurate and complete, in all material respects; all such contracts are in
full force and effect on the date hereof, and neither the Company or any of
its Subsidiaries or, to the Company's best knowledge, any other party is in
breach of or default under any material provisions of such contracts the
result of which would reasonably be likely to result in a Material Adverse
Effect.
9
<PAGE>
(15) Possession of Intellectual Property. The Company and its
-----------------------------------
Subsidiaries own or possess or have access to adequate patents, patent
rights, licenses, inventions, copyrights, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), United States trademarks, service
marks, trade names or other intellectual property (collectively,
"Intellectual Property") necessary to carry on the business now operated by
them except as would not reasonably be expected to have a Material Adverse
Effect, and neither the Company nor any of its Subsidiaries has received
any notice or is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or of
any facts or circumstances which would render any Intellectual Property
invalid or inadequate to protect the interest of the Company or any of its
Subsidiaries therein, and which infringement or conflict (if the subject of
any unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would reasonably be expected to result in a
Material Adverse Effect.
(16) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required to be made or obtained by the Company for the
performance by the Company of its obligations hereunder, in connection with
the offering, issuance or sale of the Securities under this Agreement and
the U.S. Purchase Agreement or the consummation of the transactions
contemplated by this Agreement and the U.S. Purchase Agreement, except (i)
such as have been already obtained or as may be required under the 1933 Act
or the 1933 Act Regulations and foreign or state securities or blue sky
laws, (ii) such as have been obtained under the laws and regulations of
jurisdictions outside the United States in which the Reserved Securities
are offered or (iii) such as have been described in the Registration
Statement.
(17) Possession of Licenses and Permits. The Company and its
----------------------------------
Subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local or foreign regulatory agencies or bodies
necessary to conduct the business now operated by them; the Company and its
Subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental Licenses
or the failure of such Governmental Licenses to be in full force and effect
would not reasonably be expected to have a Material Adverse Effect; and
neither the Company nor any of its Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would reasonably be expected to
result in a Material Adverse Effect.
10
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(18) Title to Property. The Company and its Subsidiaries have good
-----------------
and marketable title to all real property owned by the Company and its
Subsidiaries and good title to all other properties and assets owned by
them, in each case, free and clear of all mortgages, pledges, liens,
security interests, claims, restrictions or encumbrances of any kind except
such as (a) are described in the Prospectuses or (b) would not, singly or
in the aggregate, reasonably be expected to have a Material Adverse Effect,
the value of such property or assets and would not reasonably be expected
to interfere with the use made and proposed to be made of such property by
the Company or any of its Subsidiaries; and all of the leases and subleases
material to the business of the Company and its Subsidiaries, considered as
one enterprise, and under which the Company or any of its Subsidiaries
holds properties described in the Prospectuses, are in full force and
effect, except for such failure to be in force as would not reasonably be
expected to have a Material Adverse Effect, and neither the Company nor any
Subsidiary has any notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of the Company or any Subsidiary
under any of the leases or subleases mentioned above, or affecting or
questioning the rights of the Company or such Subsidiary to the continued
possession of the leased or subleased premises under any such lease or
sublease.
(19) Tax Returns and Payment of Taxes. The Company and its
--------------------------------
Subsidiaries have timely filed all Federal, state, local and foreign tax
returns that are required to be filed or have duly requested extensions
thereof and all such tax returns are true, correct and complete, except to
the extent that any failure to file or request an extension, or any
incorrectness would not reasonably be expected to result in a Material
Adverse Effect. The Company and its Subsidiaries have timely paid all taxes
shown as due on such filed tax returns (including any related assessments,
fines or penalties), except to the extent that any such taxes are being
contested in good faith and by appropriate proceedings, or to the extent
that any failure to pay would not reasonably be expected to result in a
Material Adverse Effect; and adequate charges, accruals and reserves have
been provided for in the financial statements referred to in Section
1(a)(iii) above in accordance with GAAP in respect of all Federal, state,
local and foreign taxes for all periods as to which the tax liability of
the Company or any of its Subsidiaries has not been finally determined or
remains open to examination by applicable taxing authorities. The Company
is not a "United States real property holding corporation" within the
meaning of Section 897(c)(3) of the Internal Revenue Code of 1986, as
amended.
(20) Insurance. The Company and each of its Subsidiaries are insured
---------
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as the Company believes are prudent and customary
in the businesses in which they are engaged; and neither the Company nor
any of its Subsidiaries has any reason to believe that any of them will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business except where the failure to renew or
maintain such coverage would not reasonably be expected to result in a
Material Adverse Effect. The
11
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officers and directors of the Company are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as are prudent and customary for officers and directors liability insurance
of a public company and as would cover claims which could be made in
connection with the issuance of the Securities; and the Company has no
reason to believe that it will not be able to renew its existing directors
and officers liability insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
cover its officers and directors.
(21) No Stabilization or Manipulation. Neither the Company nor, to
--------------------------------
the knowledge of the Company, any of its directors, officers or affiliates
has taken nor will take, directly or indirectly, any action designed to, or
that might be reasonably expected to, cause or result in stabilization or
manipulation of the price of the Securities in violation of Regulation M
under the 1934 Act.
(22) Investment Company Act. The Company is not, and upon the
----------------------
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectuses
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
(23) Environmental Laws. Except as described in the Registration
------------------
Statement and except as would not, singly or in the aggregate, reasonably
be expected to result in a Material Adverse Effect, (A) neither the Company
nor any of its Subsidiaries is in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials (collectively, "Environmental Laws"), (B) the Company
and its Subsidiaries have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in compliance
with their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against the
Company or any of its Subsidiaries and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental
12
<PAGE>
body or agency, against or affecting the Company or any of its Subsidiaries
relating to Hazardous Materials or any Environmental Laws.
(24) Registration Rights. Except as described in the Prospectuses,
-------------------
there are no persons with registration rights or other similar rights to
have any securities registered pursuant to the Registration Statement or
otherwise registered by the Company under the 1933 Act.
(25) Certain Transactions. Except as disclosed in the Prospectuses
--------------------
or except as not reasonably required to be disclosed in the Prospectus,
there are no outstanding loans, advances, or guarantees of indebtedness by
the Company to or for the benefit of any of the executive officers or
directors of the Company or any of the members of the families of any of
them.
(26) Accounting and other Controls. The Company has established for
-----------------------------
itself and each Subsidiary and, with respect to future acquisitions, will
establish, a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions were, are or, in the case of
such future acquisitions, will be executed in accordance with management's
general or specific authorization; (ii) transactions were, are or, in the
case of such future acquisitions, will be recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii)
access to assets was, is or, in the case of such future acquisitions, will
be permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets was, is or,
in the case of such future acquisitions, will be compared with existing
assets at reasonable intervals and appropriate action was, is or, in the
case of such future acquisitions, will be taken with respect to any
differences.
(27) Regulations. The Company and CFN have not been advised, and
-----------
have no reason to believe, that either they or any of their subsidiaries is
not conducting business in compliance with all applicable laws, rules and
regulations of the jurisdictions in which they are conducting business,
including, without limitation, all applicable local, state and federal laws
and regulations; except where failure to be so in compliance would not
reasonably be expected to result in a Material Adverse Effect.
(2) Officer's Certificates. Any certificate signed by any officer of the
----------------------
Company or any of its Subsidiaries delivered to the Global Coordinator, the
Lead Managers or to counsel for the International Managers shall be deemed a
representation and warranty by the Company to each International Manager as to
the matters covered thereby.
SECTION 2. Sale and Delivery to International Managers; Closing.
----------------------------------------------------
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(1) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each International Manager, severally and
not jointly, and each International Manager, severally and not jointly, agrees
to purchase from the Company, at the price per share set forth in Schedule B,
the number of Initial International Securities set forth in Schedule A opposite
the name of such International Manager, plus any additional number of Initial
International Securities which such International Manager may become obligated
to purchase pursuant to the provisions of Section 10 hereof.
(2) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to each International Manager,
severally and not jointly, to purchase up to an additional 180,000 shares of
Common Stock at the price per share set forth in Schedule B, less an amount per
share equal to any dividends or distributions declared by the Company and
payable on the Initial International Securities but not payable on the
International Option Securities. The option hereby granted will expire 30 days
after the date hereof and may be exercised in whole or in part from time to time
only for the purpose of covering over-allotments which may be made in connection
with the offering and distribution of the Initial International Securities upon
notice by the Global Coordinator to the Company setting forth the number of
International Option Securities as to which the several International Managers
are then exercising the option and the time and date of payment and delivery for
such International Option Securities. Any such time and date of delivery for the
International Option Securities (a "Date of Delivery") shall be determined by
the Global Coordinator, but shall not be later than seven full business days
after the exercise of said option, nor in any event prior to the Closing Time,
as hereinafter defined. If the option is exercised as to all or any portion of
the International Option Securities, each of the International Managers, acting
severally and not jointly, will purchase that proportion of the total number of
International Option Securities then being purchased which the number of Initial
U.S. Securities set forth in Schedule A opposite the name of such International
Manager bears to the total number of Initial International Securities, subject
in each case to such adjustments as the Global Coordinator in its discretion
shall make to eliminate any sales or purchases of fractional shares.
(3) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022, or at such
other place as shall be agreed upon by the Global Coordinator and the Company,
at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after
4:30 P.M. (Eastern time) on any given day) business day after the date hereof
(unless postponed in accordance with the provisions of Section 10), or such
other time not later than ten business days after such date as shall be agreed
upon by the Global Coordinator and the Company (such time and date of payment
and delivery being herein called "Closing Time").
In addition, in the event that any or all of the U.S. Option Securities are
purchased by the International Managers, payment of the purchase price for, and
delivery of certificates for, such International Option Securities shall be made
at the above-mentioned offices, or at such other place
14
<PAGE>
as shall be agreed upon by the Global Coordinator and the Company, on each Date
of Delivery as specified in the notice from the Global Coordinator to the
Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Lead Managers for the respective accounts of the International Managers of
certificates for the International Securities to be purchased by them. It is
understood that each International Manager has authorized the Lead Managers, for
its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Initial International Securities and the International
Option Securities, if any, which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the International Managers, may (but
shall not be obligated to) make payment of the purchase price for the Initial
International Securities or the International Option Securities, if any, to be
purchased by any International Manager whose funds have not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such International Manager from its obligations
hereunder.
(4) Denominations; Registration. Certificates for the Initial
International Securities and the International Option Securities, if any, shall
be in such denominations and registered in such names as the Lead Managers may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
International Securities and the International Option Securities, if any, will
be made available for examination and packaging by the Lead Managers in The City
of New York not later than 10:00 A.M. (Eastern time) on the business day prior
to the Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
------------------------
International Manager as follows:
(1) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
or Rule 434, as applicable, and will notify the Global Coordinator immediately,
and confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement shall become effective, or any supplement to the
Prospectuses or any amended Prospectuses shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectuses or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the initiation or
threatening of any proceedings for any of such purposes. The Company, in
consultation with the Lead Managers, will promptly effect the filings necessary
pursuant to Rule 424(b) and will take such steps as it deems necessary to
ascertain promptly whether the form of prospectus transmitted for filing under
Rule 424(b) was received for filing by the Commission and, in the event that it
was not, it will
15
<PAGE>
promptly file such prospectus. The Company, after consultation with the Lead
Managers, will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible moment.
(2) Filing of Amendments. The Company will give the Global Coordinator
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectuses,
will furnish the Global Coordinator with copies of any such documents a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file or use any such document to which the Global Coordinator
or counsel for the International Managers shall object.
(3) Delivery of Registration Statements. The Company has furnished or
will deliver to the Lead Managers and counsel for the International Managers,
without charge, signed copies of the Registration Statement as originally filed
and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the Lead Managers, without
charge, a conformed copy of the Registration Statement as originally filed and
of each amendment thereto (without exhibits) for each of the International
Managers. The copies of the Registration Statement and each amendment thereto
furnished to the International Managers will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(4) Delivery of Prospectuses. The Company has delivered to each
International Manager, without charge, as many copies of each preliminary
prospectus as such International Manager reasonably requested, and the Company
hereby consents to the use of such copies for purposes permitted by the 1933
Act. The Company will furnish to each International Manager, without charge,
during the period when the International Prospectus is required to be delivered
under the 1933 Act or the Securities Exchange Act of 1934 (the "1934 Act"), such
number of copies of the International Prospectus (as amended or supplemented) as
such International Manager may reasonably request. The International Prospectus
and any amendments or supplements thereto furnished to the International
Managers will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(5) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion of
the distribution of the Securities as contemplated in this Agreement, the U.S.
Purchase Agreement and in the Prospectuses. If at any time when a prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Securities, any event shall occur or condition shall exist as a result of which
it is necessary, in the opinion of counsel for the International Managers or for
the Company, to amend the Registration Statement or amend or supplement any
Prospectus in order
16
<PAGE>
that the Prospectuses will not include any untrue statements of a material fact
or omit to state a material fact necessary in order to make the statements
therein not misleading in the light of the circumstances existing at the time it
is delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement any Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Company will promptly prepare and file with
the Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectuses comply with such requirements, and the Company
will furnish to the International Managers such number of copies of such
amendment or supplement as the International Managers may reasonably request.
(6) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the International Managers, to qualify the Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Global Coordinator may designate and
to maintain such qualifications in effect for a period of not less than one year
from the later of the effective date of the Registration Statement and any Rule
462(b) Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.
(7) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its security
holders as soon as practicable an earnings statement for the purposes of, and to
provide the benefits contemplated by, the last paragraph of Section 11(a) of the
1933 Act.
(8) Use of Proceeds. The Company will use the net proceeds received by it
from the sale of the Securities in the manner specified in the Prospectuses
under "Use of Proceeds".
(9) Listing. The Company will use its best efforts to effect and maintain
the quotation of the Securities on the Nasdaq National Market or the listing of
the Securities on the New York Stock Exchange and will file with the Nasdaq
National Market or the New York Stock Exchange, as applicable, all documents and
notices required by such exchange of companies that have securities that are
traded in the over-the-counter market and quotations for which are reported by
the Nasdaq National Market or which are listed on the New York Stock Exchange,
as the case may be. The parties understand that this covenant shall terminate
upon a "going private transaction" or the sale or merger of the Company or
similar transaction.
17
<PAGE>
(10) Restriction on Sale of Securities. During a period of 180 days from
the date of the Prospectuses, the Company will not, without the prior written
consent of the Global Coordinator, (i) directly or indirectly, offer to sell,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any share of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock of
itself or any Subsidiary or file any registration statement under the 1933 Act
with respect to any of the foregoing, except for filing a Registration Statement
on Form S-4 to register 4,000,000 shares of Common Stock for future
acquisitions, and filing a Registration Statement on Form S-8 to register shares
of Common Stock for issuance under the Company Stock Option Plans, or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Securities to be sold hereunder or under the U.S. Purchase Agreement, (B)
any shares of Common Stock issued by the Company upon the exercise of an option
or warrant or the conversion of a security outstanding on the date hereof and
referred to in the Prospectuses, (C) any shares of Common Stock issued or
options to purchase Common Stock granted pursuant to existing employee benefit
plans or other stock option plans of the Company referred to in the
Prospectuses, or (D) up to 4,000,000 shares of Common Stock issued by the
Company pursuant to a Registration Statement on Form S-4.
(11) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
(a) Compliance with NASD Rules. The Company hereby agrees that it will
ensure that the Reserved Securities will be restricted as required by the
National Association of Securities Dealers, Inc. (the "NASD") or the NASD rules
from sale, transfer, assignment, pledge or hypothecation for a period of three
months following the date of this Agreement. The Underwriters will notify the
Company as to which persons will need to be so restricted. At the request of
the Underwriters, the Company will direct the transfer agent to place a stop
transfer restriction upon such securities for such period of time. Should the
Company release, or seek to release, from such restrictions any of the Reserved
Securities, the Company agrees to reimburse the Underwriters for any reasonable
expenses (including, without limitation, reasonable legal expenses) they incur
in connection with such release.
(12) Compliance with Rule 463. The Company will file with the Commission
such reports and report the use of proceeds of the sale of the Securities as may
be required pursuant to Rule 463 of the 1933 Act Regulations.
18
<PAGE>
SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay
-------------------
all expenses incident to the performance of its obligations under this
Agreement, including (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the printing and delivery
to the Underwriters of this Agreement, any Agreement among Underwriters and such
other documents as may be required in connection with the offering, purchase,
sale, issuance or delivery of the Securities, (iii) the preparation, issuance
and delivery of the certificates for the Securities to the Underwriters,
including any stock or other transfer taxes and any stamp or other duties
payable upon the sale, issuance or delivery of the Securities to the
Underwriters and the transfer of the Securities between the International
Managers and the U.S. Underwriters, (iv) the fees and disbursements of the
Company's counsel, accountants and other advisors, (v) the qualification of the
Securities under securities laws in accordance with the provisions of Section
3(f) hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing
and delivery to the Underwriters of copies of each preliminary prospectus, any
Term Sheets and of the Prospectuses and any amendments or supplements thereto,
(vii) the preparation and delivery to the Underwriters of copies of the Blue Sky
Survey and any supplement thereto, (viii) the fees and expenses of any transfer
agent or registrar for the Securities, (ix) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the National Association of Securities Dealers, Inc. (the
"NASD") of the terms of the sale of the Securities, (x) the transportation and
other expenses incurred by the Company in connection with presentations to
prospective purchasers of the Securities, (xi) the fees and expenses incurred in
connection with the inclusion of the Securities in the Nasdaq National Market
and (xii) all costs and expenses of the Underwriters, including the reasonable
fees and disbursements of counsel for the Underwriters, in connection with
matters related to the Reserved Securities which are designated by the Company
for sale to employees and others having a business relationship with the
Company.
(1) Termination of Agreement. If this Agreement is terminated by the
Lead Managers in accordance with the provisions of Section 5 or Section 9(a)(i)
hereof, the Company shall reimburse the International Managers for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the International Managers.
SECTION 5. Conditions of International Managers' Obligations. The
-------------------------------------------------
obligations of the several International Managers hereunder are subject to the
accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company or any
Subsidiary of the Company delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder, and
to the following further conditions:
(1) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order
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<PAGE>
suspending the effectiveness of the Registration Statement shall have been
issued under the 1933 Act or proceedings therefor initiated or threatened by the
Commission, and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
counsel to the International Managers. A prospectus containing the Rule 430A
Information shall have been filed with the Commission in accordance with Rule
424(b) (or a post-effective amendment providing such information shall have been
filed and declared effective in accordance with the requirements of Rule 430A)
or, if the Company has elected to rely upon Rule 434, a Term Sheet shall have
been filed with the Commission in accordance with Rule 424(b).
(2) Opinions of Counsel for Company. At Closing Time, the Lead Managers
shall have received the favorable opinion, dated as of Closing Time, of (i)
Minkin & Snyder, a Professional Corporation, counsel for the Company, (ii)
Debevoise & Plimpton, special counsel for the Company, (iii) Morris, Manning &
Martin, L.L.P., special counsel for the Company, (iv) Hudson Cook, LLP, special
counsel for the Company and (v) Goodwin, Procter & Hoar, LLP, special counsel
for the Company, in each case in form and substance satisfactory to counsel for
the International Managers, together with signed or reproduced copies of each
such letter for each of the other International Managers to the effect set forth
in Exhibits A-1 to A-5 hereto and to such further effect as counsel to the
International Managers may reasonably request.
(3) Opinion of Counsel for International Managers. At Closing Time, the
Lead Managers shall have received the favorable opinion, dated as of Closing
Time, of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the International
Managers, together with signed or reproduced copies of such letter for each of
the other International Managers, in customary form and covering such matters as
the International Managers may reasonably request. In giving such opinion such
counsel may rely, as to all matters governed by the laws of jurisdictions other
than the law of the State of New York, the federal law of the United States and
the General Corporation Law of the State of Delaware, upon the opinions of
counsel satisfactory to the Lead Managers. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Company and its
Subsidiaries and certificates of public officials.
(4) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectuses, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its Subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, and the Lead Managers
shall have received a certificate of the President or a Vice President of the
Company and of the chief financial or chief accounting officer of the Company,
dated as of Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) the representations and warranties in Section 1(a) hereof
are true and correct with the same force and effect as though expressly made at
and as of Closing Time, (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
Closing Time, and (iv) no stop
20
<PAGE>
order suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or are pending or are
contemplated by the Commission.
(5) Accountants' Comfort Letters. At the time of the execution of this
Agreement, the Lead Managers shall have received from PricewaterhouseCoopers LLP
a letter dated such date, in form and substance satisfactory to the Lead
Managers, together with signed or reproduced copies of such letter for each of
the other International Managers containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectuses.
(6) Bring-down Comfort Letters. At Closing Time, the Lead Managers shall
have received from PricewaterhouseCoopers LLP a letter, dated as of Closing
Time, to the effect that it reaffirms the statements made in the letter
furnished pursuant to subsection (e) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to
Closing Time.
(7) Approval of Listing. At Closing Time, the Securities shall have been
approved for inclusion in the Nasdaq National Market, subject only to official
notice of issuance.
(8) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(9) Lock-up Agreements. At the date of this Agreement, the Lead Managers
shall have received an agreement substantially in the form of Exhibit B hereto
signed by substantially all of the stockholders and option holders of any
securities of the Company and its Subsidiaries except for those agreed to in a
writing and listed on Schedule C hereto.
(10) Purchase of Initial U.S. Securities. Contemporaneously with the
purchase by the International Managers of the Initial International Securities
under this Agreement, the U.S. Underwriters shall have purchased the Initial
U.S. Securities under the U.S. Purchase Agreement.
(11) GE Private Placement. The sale of 2,000,000 shares of Common Stock to
certain affiliates of General Electric Corporation shall close prior to or
simultaneously with the Closing Time without any material modifications from the
terms of the forms of agreements relating thereto reviewed by the Underwriters
and their counsel and without any modification from the description of such sale
in the Prospectuses.
(12) Conditions to Purchase of U.S. Option Securities. In the event that
the International Managers exercise their option provided in Section 2(b) hereof
to purchase all or any portion of the International Option Securities, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company or any
21
<PAGE>
Subsidiary of the Company hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the Lead Managers shall have
received:
(1) Officers' Certificate. A certificate, dated such Date of
---------------------
Delivery, of the President or a Vice President of the Company and of the
chief financial or chief accounting officer of the Company confirming that
the certificate delivered at the Closing Time pursuant to Section 5(d)
hereof remains true and correct as of such Date of Delivery.
(2) Opinions of Counsel for Company. The favorable opinion of each
-------------------------------
of (a) Minkin & Snyder, a Professional Corporation, counsel for the
Company, (b) Debevoise & Plimpton, special counsel for the Company, (c)
Morris, Manning & Martin, L.L.P., special counsel for the Company, (d)
Hudson Cook, LLP, special counsel for the Company and (e) Goodwin, Procter
& Hoar, LLP, special counsel for the Company, in each case in form and
substance reasonably satisfactory to counsel for the International
Managers, dated such Date of Delivery, relating to the International Option
Securities to be purchased on such Date of Delivery and otherwise to the
same effect as the opinion required by Section 5(b) hereof.
(3) Opinion of Counsel for International Managers. The favorable
---------------------------------------------
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
International Managers, dated such Date of Delivery, relating to the
International Option Securities to be purchased on such Date of Delivery
and otherwise to the same effect as the opinion required by Section 5(c)
hereof.
(4) Bring-down Comfort Letters. A letter from PricewaterhouseCoopers
--------------------------
LLP in form and substance satisfactory to the Lead Managers and dated such
Date of Delivery, substantially in the same form and substance as the
letter furnished to the Lead Managers pursuant to Section 5(f) hereof,
except that the "specified date" in the letter furnished pursuant to this
paragraph shall be a date not more than five days prior to such Date of
Delivery.
(13) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the International Managers shall have been furnished with such
documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the representations
or warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Company in connection with the issuance and
sale of the Securities as herein contemplated shall be reasonably satisfactory
in form and substance to the Lead Managers and counsel for the International
Managers.
(14) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of International
Option Securities on a Date of Delivery which is after
22
<PAGE>
the Closing Time, the obligations of the several International Managers to
purchase the relevant Option Securities, may be terminated by the Lead Managers
by notice to the Company at any time at or prior to Closing Time or such Date of
Delivery, as the case may be, and such termination shall be without liability of
any party to any other party except as provided in Section 4 and except that
Sections 1, 6, 7 and 8 shall survive any such termination and remain in full
force and effect.
SECTION 6. Indemnification.
---------------
(1) Indemnification of International Managers. The Company agrees to
indemnify and hold harmless each International Manager and each person, if any,
who controls any International Manager within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act as follows:
(1) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(2) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of (A) the violation of any applicable
laws or regulations of foreign jurisdictions where Reserved Securities have
been offered and (B) any untrue statement or alleged untrue statement of a
material fact included in the supplement or prospectus wrapper (but only to
the extent the Company has prepared or has had the opportunity to approve
any wrapper) material distributed in Canada in connection with the
reservation and sale of the Reserved Securities to eligible employees and
persons having business relationships with the Company or the omission or
alleged omission therefrom of a material fact necessary to make the
statements therein, when considered in conjunction with the Prospectuses or
preliminary prospectuses, not misleading;
(3) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission or in connection with any violation of
the nature referred to in Section 6(a)(ii)(A) hereof; provided that
(subject to Section 6(d) below) any such settlement is effected with the
written consent of the Company; and
23
<PAGE>
(4) against any and all expense whatsoever, as incurred (including
the reasonable fees and disbursements of counsel chosen by Merrill Lynch),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission or in connection with any violation of the nature referred to in
Section 6(a)(ii)(A) hereof, to the extent that any such expense is not paid
under (i), (ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
International Manager through the Lead Managers expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the International Prospectus (or any amendment or supplement
thereto); and provided further that the Company will not be liable to any U.S.
-------- -------
Underwriter with respect to any U.S. Prospectus to the extent that the Company
shall sustain the burden of proving that any such loss, liability, claim, damage
or expense resulted from the fact that such U.S. Underwriter, in contravention
of a requirement of this Agreement or applicable law, sold Securities to a
person to whom such U.S. Underwriter failed to send or give, at or prior to the
Closing Date, a copy of the Final Prospectus, as then amended or supplemented
if: (i) the Company has previously furnished copies thereof (sufficiently in
advance of the Closing Date to allow for distribution by the Closing Date) to
the U.S. Underwriter and the loss, liability, claim, damage or expense of such
U.S. Underwriter resulted from an untrue statement or omission of a material
fact contained in or omitted from the Preliminary Prospectus which was corrected
in the Final Prospectus as, if applicable, amended or supplemented prior to the
Closing Date and such Final Prospectus was required by law to be delivered at or
prior to the written confirmation of sale to such person and (ii) such failure
to give or send such Final Prospectus by the Closing Date to the party or
parties asserting such loss, liability, claim, damage or expense would have
constituted a defense to the claim asserted by such person.
Insofar as this indemnity agreement may permit indemnification for
liabilities under the 1933 Act of any person who is a partner of a International
Manager or who controls an underwriter within the meaning of Section 15 of 1933
Act or Section 20 of the 1934 Act and who, at the date of this Agreement, is a
director or officer of the Company or controls the Company within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, such indemnity
agreement is subject to the undertaking of the Company in the Registration
Statement under Item 14 thereof.
(2) Indemnification of Company, Directors and Officers. Each International
Manager severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this
24
<PAGE>
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary International prospectus or the
International Prospectus (or any amendment or supplement thereto) in reliance
upon and in conformity with written information furnished to the Company by such
International Manager through the Lead Managers expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the International Prospectus (or any amendment or supplement thereto).
(3) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(4) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(iii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement; provided that an indemnifying party shall not be liable for any such
settlement effected without its consent if such indemnifying party, prior to the
date of such
25
<PAGE>
settlement, (1) reimburses such indemnified party in accordance with such
request for the amount of such fees and expenses of counsel as the indemnifying
party believes in good faith to be reasonable, and (2) provides written notice
to the indemnified party that the indemnifying party disputes in good faith the
reasonableness of the unpaid balance of such fees and expenses.
(5) Indemnification for Reserved Securities. In connection with the offer
and sale of the Reserved Securities, the Company agrees, promptly upon a
request, in writing to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of eligible employees and friends of the
Company to pay for and accept delivery of Reserved Securities which, by the end
of the first business day following the date of this Agreement, were subject to
a properly confirmed agreement to purchase.
SECTION 7. Contribution. If the indemnification provided for in Section
------------
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the International Managers on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the
International Managers on the other hand in connection with the statements or
omissions, or in connection with any violation of the nature referred to in
Section 6(a)(ii)(A) hereof, which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
International Managers on the other hand in connection with the offering of the
U.S. Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
International Securities pursuant to this Agreement (before deducting expenses)
received by the Company and the total underwriting discount received by the
International Managers, in each case as set forth on the cover of the
International Prospectus, or, if Rule 434 is used, the corresponding location on
the Term Sheet, bear to the aggregate initial public offering price of the
International Securities as set forth on such cover.
The relative fault of the Company on the one hand and the International
Managers on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the International Managers and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission or any violation of the nature referred to in
Section 6(a)(ii)(A) hereof.
26
<PAGE>
The Company and the International Managers agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the International Managers were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 7.
The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any reasonable legal or other expenses incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no International Manager
shall be required to contribute any amount in excess of the amount by which the
total price at which the International Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such International Manager has otherwise been required to pay by
reason of any such untrue or alleged untrue statement or omission or alleged
omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a
International Manager within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
International Manager, and each director of the Company, each officer of the
Company who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company.
The International Managers' respective obligations to contribute pursuant to
this Section 7 are several in proportion to the number of Initial International
Securities set forth opposite their respective names in Schedule A hereto and
not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of its Subsidiaries submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any International Manager or
controlling person, or by or on behalf of the Company, and shall survive
delivery of the Securities to the International Managers.
SECTION 9. Termination of Agreement.
------------------------
(1) Termination; General. The Lead Managers may terminate this Agreement,
by notice to the Company, at any time at or prior to Closing Time (i) if there
has been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the International Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
Subsidiaries
27
<PAGE>
considered as one enterprise, whether or not arising in the ordinary course of
business, or (ii) if there has occurred any material adverse change in the
financial markets in the United States or the international financial markets,
any outbreak of hostilities or escalation thereof or other calamity or crisis or
any change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Lead Managers,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or materially limited by the Commission or the Nasdaq National Market,
or if trading generally on the American Stock Exchange or the New York Stock
Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any other governmental authority, or (iv) if a banking moratorium has
been declared by either Federal or New York authorities.
(2) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the International Managers. If one
----------------------------------------------------
or more of the International Managers shall fail at Closing Time or a Date of
Delivery to purchase the Securities which it or they are obligated to purchase
under this Agreement (the "Defaulted Securities"), the Lead Managers shall have
the right, within 24 hours thereafter, to make arrangements for one or more of
the non-defaulting International Managers, or any other underwriters, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the Lead
Managers shall not have completed such arrangements within such 24-hour period,
then:
(1) if the number of Defaulted Securities does not exceed 10% of the
number of U.S. Securities to be purchased on such date, each of the non-
defaulting International Managers shall be obligated, severally and not jointly,
to purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of all
non-defaulting International Managers, or
(2) if the number of Defaulted Securities exceeds 10% of the number of
International Securities to be purchased on such date, this Agreement or, with
respect to any Date of Delivery which occurs after the Closing Time, the
obligation of the International Managers to purchase and of the Company to sell
the Option Securities to be purchased and sold on such Date of Delivery shall
terminate without liability on the part of any non-defaulting International
Manager.
No action taken pursuant to this Section shall relieve any defaulting
International Manager from liability in respect of its default.
28
<PAGE>
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
International Managers to purchase and the Company to sell the relevant
International Option Securities, as the case may be, either the Lead Managers or
the Company shall have the right to postpone Closing Time or the relevant Date
of Delivery, as the case may be, for a period not exceeding seven days in order
to effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements. As used herein, the term "International
Manager" includes any person substituted for a International Manager under this
Section 10.
SECTION 11. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
International Managers shall be directed to the Lead Managers at 3300 Hillview
Avenue, Suite 150, Palo Alto, California 94304-1203, attention of Jack Weingart,
with a copy to Gregory C. Smith, Skadden, Arps, Slate, Meagher & Flom LLP, 525
University Avenue, Palo Alto, California, 94301; and notices to the Company
shall be directed to it at 1888 Emery Street, N.W., Atlanta, Georgia 30318,
attention of M. Wayne Boylston with copies to James S. Altenbach, Minkin &
Snyder, One Buckhead Plaza, 3060 Peachtree Road, Suite 1100, Atlanta, Georgia
30305 and Margaret A. Davenport, Debevoise & Plimpton, 875 Third Avenue, New
York, New York 10022.
SECTION 12. Parties. This Agreement shall each inure to the benefit of and
-------
be binding upon the International Managers and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
International Managers and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the International Managers and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any International Manager shall be deemed to be a successor by reason merely of
such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
----------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
------------------
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
29
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the International Managers and the Company in accordance with its terms.
Very truly yours,
IXL ENTERPRISES, INC.
By /s/ U. Bertram Ellis, Jr.
-------------------------
Name: U. Bertram Ellis
Title: CEO
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE INTERNATIONAL
BANCBOSTON ROBERTSON STEPHENS INTERNATIONAL LIMITED
SG COWEN INTERNATIONAL L.P.
By: MERRILL LYNCH INTERNATIONAL
By /s/ Palma Mazzola
--------------------------------
Authorized Signatory
For themselves and as Lead Managers of the
other International Managers named in Schedule A hereto.
30
<PAGE>
SCHEDULE A
Number of
Initial International
Name of International Manager Securities
------------------------------ ----------
Merrill Lynch International.......................... 450,000
Donaldson, Lufkin & Jenrette International 450,000
BancBoston Robertson Stephens International Limited 180,000
SG Cowen International L.P. 120,000
---------
Total............................................................ 1,200,000
=========
Sch A-1
<PAGE>
SCHEDULE B
iXL ENTERPRISES, INC.
1,200,000 Share of Common Stock
(Par Value $0.01 Per Share)
1. The initial public offering price per share for the International
Securities, determined as provided in said Section 2, shall be $12.00.
2. The purchase price per share for the International Securities to
be paid by the several International Managers shall be $11.16, being an amount
equal to the initial public offering price set forth above less $0.84 per share;
provided that the purchase price per share for any International Option
Securities purchased upon the exercise of the over-allotment option described in
Section 2(b) shall be reduced by an amount per share equal to any dividends or
distributions declared by the Company and payable on the Initial International
Securities but not payable on the International Option Securities.
Sch B-1
<PAGE>
SCHEDULE C
List of persons and entities
not subject to lock-up
Sch C-1
<PAGE>
Exhibit A-1
FORM OF OPINION OF COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(1) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware.
(2) The Company has the corporate power and authority to own, lease
and operate its properties and to conduct its business as presently
conducted and as described in the Prospectuses and to enter into and
perform its obligations under the Purchase Agreement.
(3) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction listed on
Schedule A attached hereto which to our knowledge is each jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not reasonably be expected to
result in a Material Adverse Effect.
(4) On December 31, 1998 and Pro Forma for issuances of capital stock
occurring between January 1, 1999 and the Closing, the authorized, issued
and outstanding capital stock of the Company was and is as described in the
Prospectuses under the caption entitled "Capitalization" and, after giving
effect to the offering will be as described as Pro Forma as Adjusted under
the caption "Capitalization" (except for subsequent issuances, if any,
pursuant to the Purchase Agreements, or pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectuses or
pursuant to the exercise of convertible securities or options referred to
in the Prospectuses and except for 4,000,000 shares of Common Stock
registered pursuant to a shelf Registration Statement on Form S-4 for use
in future acquisitions). The number of authorized, issued and outstanding
options and other rights to acquire capital stock is as described under
such caption. The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable; and to our knowledge none of the outstanding shares of
capital stock of the Company was issued in violation of the preemptive or
other similar rights of any security holder of the Company. Except as
disclosed in the Prospectuses, to our knowledge, there are no outstanding
options to purchase, or any preemptive rights or other rights to subscribe
for or to purchase, any securities or obligations convertible into, or, any
contracts or commitments to issue or sell, shares of the Company's or its
Subsidiaries' capital stock or any such options, rights, convertible
securities or
A-1-1
<PAGE>
obligations. The description of the Company's stock option and purchase
plans, and the options or other rights granted and exercised thereunder,
set forth in the Prospectuses accurately and fairly presents in all
material respects the information required to be shown with respect to such
plans, options and rights.
(5) The Securities have been duly authorized for issuance and sale to
the Underwriters pursuant to the Purchase Agreements and, when issued and
delivered by the Company pursuant to the Purchase Agreements against
payment of the consideration set forth in the Purchase Agreements, will be
validly issued and fully paid and non-assessable and no holder of the
Securities is or will be subject to personal liability by reason of being
such a holder. The Common Stock conforms in all material respects as to
legal matters to all statements relating thereto contained in the
Prospectuses and such descriptions conform to the rights set forth in the
instruments defining the same.
(6) To our knowledge, the issuance of the Securities is not subject
to preemptive rights, co-sale rights, registration rights, right of first
refusal or similar rights of any security holder of the Company and the
Securities will be sold free and clear of all liens, encumbrances, equities
or claims.
(7) Each Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectuses and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction listed on Schedule A attached hereto which to our knowledge is
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would not
reasonably be expected to result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued and
outstanding capital stock of each Subsidiary has been duly authorized and
validly issued, is fully paid and non-assessable and, to our knowledge, is
owned by the Company, directly or through Subsidiaries, free and clear of
any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; to our knowledge none of the outstanding shares of capital stock of
any Subsidiary was issued in violation of the preemptive or similar rights
of any security holder of such Subsidiary or other party. To our knowledge,
except as described in the Prospectuses or except as not required to be
disclosed in the Prospectuses, the Company has no written agreement,
commitment or understanding with respect to acquiring the business, stock,
or material assets, except assets acquired in the ordinary course of
business, of any other person or entity.
(8) The Purchase Agreements have been duly authorized, executed and
delivered by the Company.
A-1-2
<PAGE>
(9) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Prospectuses pursuant to Rule 424(b) have been made
in the manner and within the time period required by Rule 424(b); and, to
our knowledge, no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement has been
issued under the 1933 Act and no proceedings for that purpose have been
instituted or are pending or threatened by the Commission.
(10) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434
Information, as applicable, the Prospectuses and each amendment or
supplement to the Registration Statement and Prospectuses as of their
respective effective or issue dates (other than the financial statements
and notes thereto, other financial information and supporting schedules
included therein or omitted therefrom, as to which we need express no
opinion) complied as to form in all material respects with the requirements
of the 1933 Act and the 1933 Act Regulations.
(11) If Rule 434 has been relied upon, the Prospectuses were not
"materially different," as such term is used in Rule 434, from the
prospectuses included in the Registration Statement at the time it became
effective.
(12) The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable requirements of the
General Corporation Law of the State of Delaware, with any applicable
requirements of the charter and by-laws of the Company and the requirements
of the Nasdaq National Market.
(13) To our knowledge, other than as set forth in the Prospectuses,
there is not pending or threatened any action, suit, proceeding, inquiry or
investigation, to which the Company or any Subsidiary is a party, or to
which the property of the Company or any Subsidiary is subject, before or
brought by any court or governmental agency or body (domestic or foreign),
which might reasonably be expected to result in a Material Adverse Effect,
or which might reasonably be expected to materially and adversely affect
the properties or assets thereof or the consummation of the transactions
contemplated in the Purchase Agreements or the performance by the Company
of its obligations thereunder.
(14) The information in the Prospectuses under (A) "Certain
Transactions," and "Management" and (B) in the Registration Statement under
Item 14, to the extent that it constitutes matters of law, summaries of
legal matters, the Company's charter and by-laws or legal proceedings, or
legal conclusions, has been reviewed by us and is correct in all material
respects.
(15) To our knowledge, there are no statutes or regulations that are
required to be described in the Prospectuses that are not described as
required.
A-1-3
<PAGE>
(16) All descriptions in the Registration Statement of contracts and
other documents to which the Company or its Subsidiaries are a party are
accurate in all material respects; to our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes,
leases or other instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein or filed or incorporated by reference as
exhibits thereto, and the descriptions thereof or references thereto are
correct in all material respects.
(17) To our knowledge, neither the Company nor any Subsidiary is in
violation of its charter or by-laws.
(18) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any federal or Georgia
court or governmental authority or agency, (other than under the 1933 Act
and the 1933 Act Regulations, the 1934 Act and the 1934 Act Regulations
which have been obtained, or as may be required under the securities or
blue sky laws of the various states, as to which we need express no
opinion) is necessary or required to be obtained by the Company or any of
its Subsidiaries in connection with the due authorization, execution and
delivery of the Purchase Agreement or for the offering, issuance or sale of
the Securities to the Underwriters.
(19) The execution, delivery and performance of the Purchase
Agreements and the consummation of the transactions contemplated in the
Purchase Agreements and in the Registration Statement (including the
issuance and sale of the Securities and the use of the proceeds from the
sale of the Securities as described in the Prospectuses under the caption
"Use of Proceeds") and compliance by the Company with its obligations under
the Purchase Agreements do not and will not, whether with or without the
giving of notice or lapse of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined in Section 1(a)(x) of
the Purchase Agreements) under or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company
or any Subsidiary pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or any other agreement or
instrument listed on the Exhibit Index to the S-1 Registration Statement,
to which the Company or any Subsidiary is a party or by which it or any of
them may be bound, or to which any of the property or assets of the Company
or any Subsidiary is subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not reasonably be
expected to have a Material Adverse Effect), nor will such action result in
any violation of the provisions of the charter or by-laws of the Company or
any Subsidiary, or any applicable law, statute, rule, regulation, judgment,
order, writ or material decree, known to us, of the General Corporation Law
of the State of Delaware, any Georgia or United
A-1-4
<PAGE>
States federal court, government or government instrumentality having
jurisdiction over the Company or any Subsidiary or any of their respective
properties, assets or operations.
(20) To our knowledge, except as described in the Prospectuses, there
are no persons with registration rights or other similar rights to have any
securities registered pursuant to the Registration Statement or otherwise
registered by the Company under the 1933 Act.
(21) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
1940 Act.
We have not ourselves checked the accuracy and completeness of, or
otherwise verified, and are not passing upon and assume no responsibility for
the accuracy or completeness of, the statements contained in the Registration
Statement or the Prospectuses, except to the limited extent stated in paragraph
4, the second sentence of paragraph 5, paragraph 14 and the first clause of
paragraph 16 above. In the course of our review and discussion of the contents
of the Registration Statement and the Prospectuses with certain officers and
employees of the Company and its independent accountants, but without
independent check or verification, no facts have come to our attention which
cause us to believe that the Registration Statement (other than the financial
statements and notes thereto, other financial information and supporting
schedules contained therein or omitted therefrom, as to which we express no
belief), at the time it became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements contained therein not misleading, or that
the Prospectuses (other than the financial statements and notes thereto, other
financial information and supporting schedules contained therein or omitted
therefrom, as to which we express no belief), as of their dates and as of the
date hereof, contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained therein, in the light
of the circumstances under which they were made, not misleading.
A-1-5
<PAGE>
Exhibit A-2
FORM OF OPINION OF DEBEVOISE & PLIMPTON
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(22) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware.
(23) The Company has the corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under the
Purchase Agreements.
(24) The Securities have been duly authorized for issuance and sale to
the Underwriters pursuant to the Purchase Agreements and, when issued and
delivered by the Company pursuant to the Purchase Agreements against
payment of the consideration set forth in the Purchase Agreements, will be
validly issued and fully paid and non-assessable and no holder of the
Securities is or will be subject to personal liability by reason of being
such a holder. The Common Stock conforms in all material respects as to
legal matters to the statements relating thereto contained under the
caption "Description of Capital Stock" in the Prospectuses.
(25) CFN has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, and
has the corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectuses.
(26) The Purchase Agreements have been duly authorized, executed and
delivered by the Company.
(27) The Registration Statement[, including any Rule 462(b)
Registration Statement,] has been declared effective under the 1933 Act;
the Prospectuses have been filed with the Commission pursuant to Rule
424(b)(_); and, to our knowledge, no stop order suspending the
effectiveness of the Registration Statement [or any Rule 462(b)
Registration Statement] has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or
threatened by the Commission.
(28) The Registration Statement, including [any Rule 462(b)
Registration Statement,] the Rule 430A Information [and the Rule 434
Information, as applicable],
A-2-1
<PAGE>
the Prospectuses and each amendment or supplement to the Registration
Statement and Prospectuses as of their respective effective or issue dates
(other than the financial statements and notes thereto, other financial
information and supporting schedules included therein or omitted therefrom,
as to which we need express no opinion) complied as to form in all material
respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
(29) The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable requirements of the
General Corporation Law of the State of Delaware, with any applicable
requirements of the charter and by-laws of the Company and the requirements
of the Nasdaq National Market.
(30) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any United States federal
or New York State court or governmental authority or agency, (other than
under the 1933 Act, the 1933 Act Regulations, the 1934 Act and the 1934 Act
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need
express no opinion) is necessary or required to be made or obtained by the
Company or any of its Subsidiaries in connection with the due
authorization, execution and delivery of the Purchase Agreements or for the
offering, issuance or sale of the Securities to the Underwriters.
(31) To our knowledge, the execution, delivery and performance of the
Purchase Agreements and the consummation of the transactions contemplated
in the Purchase Agreements and compliance by the Company with its
obligations under the Purchase Agreements do not and will not, whether with
or without the giving of notice or lapse of time or both, result in any
violation of any applicable law, statute, rule, regulation, judgment,
order, writ or decree, known to us, of any, court, government or government
instrumentality of New York having jurisdiction over the Company or any
Subsidiary or any of their respective properties, assets or operations.
We have not ourselves checked the accuracy and completeness of, or
otherwise verified, and are not passing upon and assume no responsibility for
the accuracy or completeness of, the statements contained in the Registration
Statement or the Prospectuses, except to the limited extent stated in the second
sentence of paragraph 3 above. In the course of our review and discussion of the
contents of the Registration Statement and the Prospectuses with certain
officers and employees of the Company and its independent accountants, but
without independent check or verification, no facts have come to our attention
which cause us to believe that the Registration Statement (other than the
financial statements and notes thereto, other financial information and
supporting schedules contained therein or omitted therefrom, as to which we
express no belief), at the time it became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading, or that the Prospectuses (other than the
A-2-2
<PAGE>
financial statements and notes thereto, other financial information and
supporting schedules contained therein or omitted therefrom, as to which we
express no belief), as of their dates and as of the date hereof, contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements contained therein, in the light of the circumstances
under which they were made, not misleading.
A-2-3
<PAGE>
Exhibit A-3
FORM OF OPINION OF MORRIS,
MANNING & MARTIN, L.L.P.
TO BE DELIVERED PURSUANT
TO SECTION 5(b)
(i) The statements made in the Prospectuses under the captions
"Risk Factors-Government Regulation and Legal Uncertainties
Related to CFN Could Adversely Affect Our Business" and
"Business-Government Regulation," only insofar as those
statements constitute a summary of principles of insurance laws
or regulations applicable to the CFN Agency, Inc. business fairly
and accurately represent the material insurance laws and
regulations applicable to the operation of CFN Agency, Inc.
business and, to the best of our actual knowledge, there are no
state insurance statutes or regulations material to the operation
of CFN Agency, Inc. business that are required to be described in
the Prospectuses that are not described as required; and
(ii) Nothing has come to our attention that leads us to believe
that the statements made in the Prospectuses under the captions
"Risk Factors-Government Regulation and Legal Uncertainties
Related to CFN Could Adversely Affect Our Business" and
"Business-Government Regulation" at the time the Registration
Statement became effective contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, only insofar as those statements constitute a summary
of principles of state insurance laws or regulations to the CFN
Agency, Inc. business.
A-3-1
<PAGE>
Exhibit A-4
FORM OF OPINION OF
HUDSON COOK, LLP TO BE
DELIVERED PURSUANT
TO SECTION 5(b)
(i) The statements made in the Prospectuses under the captions
"Risk Factors-Government Regulation and Legal Uncertainties
Related to CFN Could Adversely Affect Our Business" and
"Business-Government Regulation," insofar as those statements
constitute a summary of principles of auto loan broker laws or
regulations applicable to the business of CFN, fairly and
accurately represent the material auto loan broker laws and
regulations applicable to the operation CFN's business and to the
best of our knowledge, there are no statutes or regulations
material to the operation of CFN's auto loan broker business that
are required to be described in the Prospectuses that are not
described as required; and
(ii) Nothing has come to our attention that leads us to believe
that the statements made in the Prospectuses under the captions
"Risk Factors-Government Regulation and Legal Uncertainties
Related to CFN Could Adversely Affect Our Business" and
"Business-Government Regulation," at the time the Registration
Statement became effective contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, insofar as those statements constitute a summary of
principles of auto loan broker laws or regulations applicable to
the business of CFN.
A-4-1
<PAGE>
Exhibit A-5
FORM OF OPINION OF
GOODWIN, PROCTER & HOAR, LLP
DELIVERED PURSUANT TO
SECTION 5(b)
(i) The statements made under "Risk Factors-Risks Relating to
Our CFN Subsidiary-Government regulation and Legal Uncertainties
Related to CFN Could Adversely Affect Our Business." and
"Business-Consumer Financial Network- Government Regulation of
Insurance, Auto Finance and Mortgages" (the "Risk Factor
Information") contained in the Prospectus regarding residential
mortgage issues insofar as those statements constitute a summary
of principles of mortgage loan laws or regulations applicable to
the business of CFN, fairly and accurately represent the material
mortgage loan laws and regulations applicable to the operation of
the CFN home finance program; and
(ii) On the basis of the information that we have gained in the
course of participating in the preparation of the Risk Factor
Information, nothing has come to our attention that would lead us
to believe that the statements made regarding residential
mortgage issues in the Risk Factor Information (i) in the
Registration Statement, at the time it became effective,
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading, insofar as those
statements constitute a summary of the principles of mortgage
loan laws or regulations applicable to the CFN home finance
program, or (ii) in the Prospectus, at the time the Prospectus
was issued or at the initial closing of the Offering, included or
includes an untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading insofar as those statements
constitute a summary of the principles of mortgage loan laws or
regulations applicable to the CFN home finance program. In
rendering such opinion, we have relied as to matters of fact (but
not as to legal conclusions), to the extent we have deemed
proper, on certificates or affidavits of responsible officers of
the Company.
A-5-1
<PAGE>
[Form of lock-up from directors, officers or other stockholders pursuant to
Section 5(i)]
Exhibit B
[ ], 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation
NationsBanc Montgomery Securities LLC
BancBoston Robertson Stephens
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering by iXL Enterprises, Inc.
-------------------------------------------------
Dear Sirs:
The undersigned, a security holder of iXL Enterprises, Inc., a Delaware
corporation (the "Company") or none of its Subsidiaries (as such term is defined
in the Purchase Agreement (as defined herein)), understands that Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
Donaldson, Lufkin & Jenrette Securities Corporation, NationsBanc Montgomery
Securities LLC and BancBoston Robertson Stephens Inc. propose to enter into a
Purchase Agreement (the "Purchase Agreement") with the Company providing for the
public offering of shares (the "Securities") of the Company's common stock, par
value $.01 per share (the "Common Stock"). In recognition of the benefit that
such an offering will confer upon the undersigned as a security holder of the
Company, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned agrees with each
underwriter to be named in the Purchase Agreement that, during a period of 180
days from the date of the Purchase Agreement, the undersigned will not, without
the prior written consent of Merrill Lynch, directly or indirectly, (i) offer to
sell, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any shares of the Company's
Common Stock or any securities convertible into or exchangeable or exercisable
for Common Stock, whether now owned or hereafter acquired by the undersigned or
with respect to which the undersigned has or hereafter acquires the power of
disposition, or file or cause to be filed any registration statement under the
Securities Act of 1933, as amended, with respect to
B-1
<PAGE>
any of the foregoing or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap
transaction is to be settled by delivery of Common Stock or other securities, in
cash or otherwise.
The foregoing paragraph shall not apply to (a) transactions by any
person other than the Company relating to shares of Common Stock or other
securities acquired in open market transactions after the completion of the
public offering provided for in the Purchase Agreement or (b) transfers of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock to a member of the undersigned's immediate family or to a trust
of which the undersigned or an immediate family member is the beneficiary
(either one a "Transferee") provided that upon any such transfer, the Transferee
shall sign a letter substantially similar to this letter agreement agreeing not
to sell, grant any option to purchase, or otherwise transfer or dispose of any
such Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock for the remainder of the above-referenced 180-day
period.
The undersigned agrees that the provisions of this Agreement shall
be binding also upon the successors, assigns, heirs and personal representatives
of the undersigned and that any registration rights with respect to the offering
of Securities contemplated by the Purchase Agreement have been hereby waived.
Very truly yours,
Signature:_____________________
Print Name:____________________
B-2
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in this Registration Statement on Form S-4 of iXL
Enterprises, Inc. 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 Registration
Statement.
PricewaterhouseCoopers LLP
Atlanta, Georgia
June 28, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001018705
<NAME> IXL ENTERPRISES INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 13,880 0
<SECURITIES> 0 0
<RECEIVABLES> 12,734 0
<ALLOWANCES> 998 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 50,330 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 143,698 0
<CURRENT-LIABILITIES> 25,615 0
<BONDS> 11,185 0
80,253 0
2 0
<COMMON> 163 0
<OTHER-SE> 26,480 0
<TOTAL-LIABILITY-AND-EQUITY> 143,698 0
<SALES> 33,012 6,864
<TOTAL-REVENUES> 33,012 6,864
<CGS> 19,583 4,899
<TOTAL-COSTS> 19,583 4,899
<OTHER-EXPENSES> 1,058 907
<LOSS-PROVISION> 202 93
<INTEREST-EXPENSE> 336 28
<INCOME-PRETAX> (18,255) (5,938)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (18,255) (5,938)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (23,548) (6,663)
<EPS-BASIC> (1.46) (0.78)
<EPS-DILUTED> (1.46) (0.78)
</TABLE>
<PAGE>
June 28, 1999
iXL Enterprises, Inc.
1888 Emery Street, N.W.
Atlanta, Georgia 30318
Re: Consent to be Named in Registration Statement
In connection with my agreement to become a director of iXL Enterprises,
Inc., a Delaware corporation ("iXL"), I hereby consent to being named in any
registration statement for the registration of the securities of iXL filed with
the Securities and Exchange Commission, including any amendment or amendments
thereto (each a "Registration Statement"). This consent is being given to comply
with the applicable requirements of the Securities Act of 1933, as amended, and
the rules and regulations thereunder, including without limitation Rule 438 of
Regulation C thereof.
I also grant my permission to include a copy of this consent as a part of
any Registration Statement.
Sincerely yours,
/s/ Jeffrey Walker
------------------
Jeffrey Walker
