<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
<TABLE>
<C> <S>
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM --------------- TO
---------------
</TABLE>
COMMISSION FILE NUMBER 000-26167
IXL ENTERPRISES, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 58-2234342
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1900 EMERY STREET, N.W., ATLANTA, GEORGIA 30318
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(800) 673-5544
Registrant's Telephone Number, Including Area Code
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE PER SHARE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]
The aggregate market value of the common stock held by non-affiliates of
the Company was approximately $1,873,381,018 on December 31, 1999 based on the
last reported sale price of the Company's Common Stock on the Nasdaq National
Market System on January 31, 2000. There were 71,874,234 shares of Common Stock
outstanding as of January 31, 2000.
---------------------
DOCUMENTS INCORPORATED BY REFERENCE
The information required to be provided in Part III (Items 10, 11, 12, and
13) of this Annual Report on Form 10-K is hereby incorporated by reference from
the Company's Definitive 2000 Proxy Statement which will be filed with the
Securities and Exchange Commission within 120 days of the end of the Company's
fiscal year.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
IXL ENTERPRISES, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 18
Item 3. Legal Proceedings........................................... 18
Item 4. Submission of Matters to a Vote of Security Holders......... 18
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 19
Item 6. Selected Financial Data..................................... 21
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 37
Item 8. Financial Statements and Supplementary Data................. 38
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 70
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 70
Item 11. Executive Compensation...................................... 70
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 70
Item 13. Certain Relationships and Related Transactions.............. 70
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 70
Signatures.................................................. 77
</TABLE>
---------------------
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in this Annual Report on Form 10-K, including
information with respect to the Company's future business plans, constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. For this purpose, any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"believes," "plans," "expects" and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause the results of the Company to differ materially from those indicated by
such forward-looking statements. These factors include those set forth in Part
II, Item 7 "Management's Discussion and Analysis of Financial Conditions and
Results of Operations -- Risk Factors."
i
<PAGE> 3
PART I
ITEM 1. BUSINESS
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. 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 strategy and applications;
- enterprise relationship management;
- online learning and performance;
- digital media solutions;
- web site development;
- customized hosting;
- proprietary sales presentation systems; and
- Web publishing technology.
We use our extensive engineering capabilities to deliver complex
Internet-based business solutions by employing proven technologies such as Java,
XML, Perl, CGI, C and C++. To foster the best possible solutions and service, we
have assembled industry practice groups including professionals with expertise
in the business practices and processes of specific industries. In addition, we
utilize an engagement methodology called iD5, which defines and delineates
business procedures and processes to take full advantage of best practices
developed throughout iXL. We offer our services on both a time-and-materials and
fixed price basis. Our clients include BellSouth, Budget Rent a Car, Chase
Manhattan Bank, Delta Air Lines, General Electric, Merrill Lynch, Virgin and
Healtheon/WebMD.
We have expanded rapidly since our founding in March 1996 through a
combination of acquisitions and internal growth. We have completed 36
acquisitions (34 from inception through 1998, one by CFN in 1999 and one in
January 2000) 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 December 31, 1999, we had approximately 2,100 employees. Our headquarters
is located in Atlanta, Georgia, and we also have 18 regional offices located
throughout the United States and in England, Germany, and Spain. In January
2000, additional offices were added in Wakefield, Massachusetts and Tokyo,
Japan.
In addition to our strategic Internet services offerings, we have developed
Consumer Financial Network, Inc., which operates YouDecide.com. YouDecide.com is
a sophisticated e-commerce web site for marketing financial services and
benefits over corporate intranets and the Internet. CFN also provides these
services through a call center. CFN's equity is owned approximately 76% by iXL,
23% by General Electric, and 1% by other stockholders. CFN has contracted with
competing providers of various financial and other services to create a web site
for comparison shopping and purchase of these services. The YouDecide.com web
site currently offers the following services:
- automobile, homeowners and other lines of personal insurance;
- home mortgages;
- home equity loans;
- auto finance;
1
<PAGE> 4
- long-term care insurance;
- term life insurance;
- prepaid legal services;
- financial planning;
- credit cards;
- online banking; and
- pet insurance.
CFN's services are currently provided to the general public via CFN's
YouDecide.com web site and to large companies and associations for distribution
as a human resources benefit to their employees or members. CFN service
providers include Nationwide Mutual Insurance Co., American Express Property and
Casualty, and BankOne. Member companies include Nextel, Ericsson, General
Electric Capital Corporation, and BellSouth. CFN receives a fee from the service
providers for each sale of their services through CFN.
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:
- attract, train and retain experienced professionals;
- 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;
- leverage our strategic alliances with key technology companies such as
Sun Microsystems, Intel, Oracle, Broadvision and others; and
- enhance and extend the CFN program.
iXL is a Delaware corporation. Our principal executive offices are located
at 1900 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 Annual Report of Form 10-K, "the
Company," "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.
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 web sites accessible only within a given company, and
extranets are intranets also available to select outsiders.
2
<PAGE> 5
Growth of E-Business
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 business models
for the sale and delivery of goods and services by operating an Internet-only
business and maintaining a limited physical presence. Forrester Research expects
dramatic growth in total e-commerce transaction volume, projecting an increase
from $51 billion in 1998 to $1.4 trillion in 2003.
Market for Strategic Internet Services
The Internet represents a revolutionary and powerful new opportunity for
business. Many companies that do not currently utilize the Internet are being
forced to reevaluate their business models and to adopt or supplement existing
Internet-based business solutions. The development and implementation of
Internet-based solutions require the successful integration of strategy
consulting, creative design and systems engineering skills. Historically,
expertise in these areas either has not existed within an organization or has
been located in disparate functional areas. Accordingly, many businesses have
chosen to outsource a significant portion of the development, design and
maintenance of their intranets, extranets, web sites and e-business 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 $8 billion in 1998 to
$79 billion in 2003. 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.
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
3
<PAGE> 6
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 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. 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 Microsystems, Oracle and Broadvision. 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 our clients and their customers and vendors. As of
December 31, 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 and Raleigh, North Carolina; Richmond, Virginia;
Memphis, Tennessee; Norwalk, Connecticut; London, England; Berlin and
Hamburg, Germany; and Madrid, Spain. In addition, the January 11, 2000
acquisition of Tessera Enterprise Systems, Inc. added an office in
Wakefield, Massachusetts and an office was also opened in Tokyo, Japan in
January 2000. 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.
4
<PAGE> 7
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 & Technology, Healthcare and Retail industries. We
believe that these industries have been leaders in the utilization of
Internet-enabled technologies.
- 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.
- Expand Geographic Coverage. Since our inception, we have expanded our
geographic presence aggressively through a combination of acquisitions
and internal growth. As of December 31, 1999, iXL had 19 offices located
throughout the United States and in England, Germany and Spain. An
additional domestic office was added January 11, 2000 with the completion
of the acquisition of Tessera Enterprise Systems, Inc. and an office was
also opened in Japan in January 2000. 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 our 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
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
5
<PAGE> 8
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.
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 industry practice groups, which are in varying stages
of development and staffing, in the Banking & Financial Services, Media &
Entertainment, Travel, Telecommunications & Technology, Healthcare and Retail
industries. We also employ strategy consultants with general business and
Internet expertise. As of December 31, 1999, we employed approximately 190
professionals who provide strategy consulting services.
6
<PAGE> 9
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 management services, and web site development and
hosting services.
- E-Commerce Strategy and Applications. We design, develop and deploy
sophisticated e-commerce applications for bringing buyers and sellers
together via the Internet. We have created a broad range of 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 Broadvision, for e-commerce server applications;
- Oracle for database platform development; and
- Sun Microsystems and Compaq 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 which have
developed more general applications for conducting different aspects of
e-commerce ranging from security to online transaction payments
processing.
- Enterprise Relationship Management. 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 web sites also have the capacity to
recognize and profile the types of information a user is typically
interested in, and to provide that information automatically to the user
during future visits to the site. As part of our Enterprise Relationship
Management capability, we develop intranets and extranets which enable
our clients to communicate with employees, customers, suppliers and
vendors, as well as track and store critical business data and other
information.
- Online Learning and Performance. 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.
- Digital Media Solutions. We have developed solutions that combine video,
audio, animation, graphics and content into digital media presentations.
These media are also frequently utilized to create
7
<PAGE> 10
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.
iXL has transferred the video library and the other assets related
thereto to FootageNow, Inc. in exchange for equity in FootageNow. iXL
will retain a perpetual worldwide, royalty-free license to use these
transferred assets. Our Chairman of the Board and Chief Executive
Officer, U. Bertram Ellis, Jr., is a director of FootageNow and holds a
less than 1% equity interest therein.
- Web Sites and Hosting. To provide complete Internet solutions, we offer
development of traditional web sites and state-of-the-art web site
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 Solution Sets are custom applications based on a common, reusable
framework and component library which can be customized and implemented quickly
and cost-effectively. Historically, a significant portion of iXL's revenues was
generated by iXL Solution Sets. The amount of revenue generated by Solution Sets
was nominal in 1999 and iXL does not expect any significant revenues from iXL
Solution Sets in the future.
IXL INDUSTRY PRACTICE GROUPS
iXL has established practice groups in the Banking & Financial Services,
Media & Entertainment, Travel, Telecommunications & Technology, Healthcare and
Retail industries. These practice groups are in varying stages of development,
staffing and activity. 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 our
industry expertise in serving the clients listed below. These clients, included
for illustrative purposes, are not intended to be representative of our clients
generally.
8
<PAGE> 11
<TABLE>
<CAPTION>
INDUSTRY CLIENTS
-------- -------
<S> <C>
Banking & Financial Services................................ Chase Manhattan Bank
General Electric
Merrill Lynch
Media & Entertainment....................................... Warner Brothers
21e Web Network
Travel...................................................... Budget Rent a Car
Delta Air Lines
Virgin Atlantic Airways
Telecommunications & Technology............................. BellSouth
Diamond Multimedia RioPort
Healthcare.................................................. DuPont
McKessonHBOC
Healtheon/WebMD
Retail...................................................... Shop At Home
Wherehouse.com
</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 web site, and also engineers and oversees central marketing
and communications programs for use by each of our local offices. Regional
marketing representatives are responsible for building brand awareness within
each geographic region. These representatives report to the Executive Vice
President for Worldwide Marketing of iXL, Inc.
As part of its continuing relationship with iXL and CFN, General Electric
as agreed to use its reasonable efforts to provide access to CFN's platform to
its employees and to employees of its affiliates.
iXL's sales force is split into two units, one which deals with generation
of new clients, and the other which focuses on sales to existing clients.
Existing clients are managed by local project managers who report to the general
managers of the local offices, which then report to the Regional Vice Presidents
for Operations on sales- and client development-related issues. The Regional
Vice Presidents then report to the Executive Vice President for Worldwide Client
Development of iXL, Inc. New clients are targeted by iXL's business development
staff which operates regionally, reporting to the Regional Vice Presidents for
Operations, which in turn report to the Executive Vice President for Worldwide
Client Development of iXL, Inc.
ACQUISITION STRATEGY
iXL's current acquisition strategy is to pursue selective strategic
acquisitions to enhance its service capabilities and to permit iXL to scale
rapidly in a targeted skill set or industry. Our post-acquisition strategy is to
integrate the acquired component to enhance the competitiveness and
profitability of iXL as a whole.
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.
9
<PAGE> 12
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' systems to our central systems. In an effort
to promote integration with the entire company, we rarely base the purchase
price for a company we acquire on the post-acquisition performance of that
company.
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 and have registered 411,345 shares of common stock pursuant to a "shelf"
Registration Statement on Form S-4 for this purpose, and expect to register
6,000,000 shares of common stock pursuant to one or more additional Registration
Statements on Form S-4. By maximizing the use of stock as acquisition
consideration, we believe that each acquired company's 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.
Recent Acquisition
On October 4, 1999, we entered into an Agreement and Plan of Merger with
Tessera Enterprise Systems, Inc., a Wakefield, Massachusetts enterprise
relationship management solutions firm, for a purchase price of approximately
$120 million (based on the exchange ratio and stock valuation dictated by the
merger agreement as of October 4, 1999), consisting primarily of iXL common
stock. This acquisition was consummated on January 11, 2000. This acquisition
provides iXL with enterprise relationship management expertise. These new
capabilities will enable iXL to design, build, integrate, deploy and maintain
advanced enterprise relationship management, or ERM, solutions that allow
clients to:
- integrate customer interactions across all points of contact;
- provide information infrastructure and data management capabilities
necessary to fully understand customer behaviors across all channels;
- prioritize new business opportunities based on business objectives and
impact; and
- use customer information more effectively to generate revenue.
Since its founding in 1995, Tessera Enterprise Systems focused exclusively
on the ERM marketplace. Prior to its acquisition by iXL, Tessera Enterprise
Systems delivered over 100 ERM engagements and over 30 large scale technical
implementations primarily to Fortune 1000 clients. The acquisition of Tessera
Enterprise Systems adds approximately 130 employees in offices in Wakefield,
Massachusetts, and San Francisco, California.
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 Microsystems, Cisco, EMC and Oracle. These strategic affiliations
provide us early access to training, product support and technology.
10
<PAGE> 13
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,
Sun Microsystems and Broadvision. 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. Sun recently named iXL as the first founding member
of their new, highly strategic e-channel partner program. This allows iXL early
access to the latest Sun technology and software as well as commitment to
training iXL engineers on the Sun platform. Through our strategic alliance with
Broadvision, which specializes in personalized electronic commerce software
applications for businesses and consumers, we have gained access to Broadvision
software, maintenance, support, and training on a preferred basis. We are also
engaging in joint marketing, sales, and development efforts with Broadvision.
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 facilitates the integration of 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.
While readily available third-party technologies are used to develop nearly
all iXL solutions, iXL does not believe it is 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.
TRADEMARKS
iXL(TM), the iXL logo, Interactive Excellence(TM), Internet Excellence(TM),
the CFN logo, CFN(TM), Consumer Financial Network(TM), CFN.com(TM),
YouDecide.com(TM), the YouDecide.com logo, Surf Less. Net More.(TM), Ultimate
Solution(TM), iD5(TM) 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 Annual Report on Form 10-K also includes product
names, trade names and trademarks of other companies.
11
<PAGE> 14
CONSUMER FINANCIAL NETWORK
Consumer Financial Network, Inc., or CFN operates YouDecide.com, which is a
sophisticated e-commerce web site for marketing financial services and benefits
over corporate intranets and the Internet. CFN also offers its services through
a call center. CFN's equity is owned 76% by iXL, 23% by General Electric, and 1%
by other stockholders. 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. The CFN Program is provided to the general
public via its YouDecide.com web site and to large companies and associations,
many with 5,000 or more employees, for distribution as a voluntary human
resources benefit to their employees or members.
Currently, CFN provides access to 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;
- prepaid legal services;
- financial planning;
- credit cards;
- online banking; and
- pet insurance.
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 YouDecide.com is an attractive offering for consumers because it
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 the general public and 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 certain products for its customers.
Consumers can access CFN online or by telephone.
We believe YouDecide.com is attractive to services providers, because it is
designed to:
- provide directed access through corporate intranets to employed
consumers, a highly desirable customer market segment, as well as to the
general public;
- 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 access to the general public and the
participation of large employers and associations;
12
<PAGE> 15
- allow providers to expand geographically; and
- allow providers to utilize Internet-enabled payments and 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 online or through its call
center. Currently, a significant portion of consumer inquiries to CFN for
services offered by CFN's providers are made through CFN's call center. Our goal
is for the relative volume of online inquiries as well as the automation of the
entire process from inquiry to completed transaction to increase significantly
in the future as intranets become more widespread and as customers become more
familiar with the Internet. We believe that such an increase in online inquiries
in proportion to call 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 web sites. Expenses and
investments must be incurred well in advance of the potential transactions
intended to generate revenue to justify this cost structure.
Member Companies
We believe CFN is attractive to employers because CFN enables employers to
offer to their employees, at no cost to the employer, access to a wide range of
financial services and employee benefits at generally discounted rates.
Initially, CFN has chosen to provide its program to large companies and
associations as a no cost human resources benefit for their employees or
members. Current CFN member companies include:
<TABLE>
<S> <C>
Advantica Ryder Corporation
Amerigas Society for Human Resource Management
BellSouth Texas A&M University
Ericsson Thomson Corporation
Nextel General Electric Capital Corporation
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 offerings includes property and casualty insurance, home finance,
automobile finance, legal services, long-term care, term life insurance and
vision plans. Providers available through CFN include:
- Allied Insurance Company, American Express Property Casualty companies,
Amica Mutual Insurance Company, Chubb Group of Insurance Cos., Electric
Insurance Company, and Nationwide Mutual Insurance Co. in property and
casualty insurance;
- BankOne, CharterBank, Chase and GMAC Mortgage Corporation in home
finance;
- debis Financial Services, First Union National Bank and MSDW Credit Corp
in automobile finance;
- Law Phone in legal services;
- Transamerica, Alliance, CNA, CSO and Portis in long-term care;
13
<PAGE> 16
- Empire General Life, CAN/Life, First Penn Pacific, North American and
Ameritas in life insurance;
- Vision Care Advantage and the Signature Group in vision services;
- Ernst & Young, DirectAdvice.com and Money Minds in Financial Planning;
- First USA and Security First Network Bank in credit card services; and
- Premier Pet Insurance in pet insurance.
The terms of these contracts range from one to three years. Most contracts
terminate either on or before December 31, 2000 with automatic renewals for
additional one year terms, and some contracts are on a trial basis only. The
contracts specify the terms of the agreement with CFN, generally including
information on terms of pricing to be provided, the fulfillment process,
compensation to CFN, necessary regulatory requirements, restrictions on use of
consumer information provided by CFN, indemnification, and intellectual property
protection for CFN. There are no minimum volume requirements required from CFN
to providers. CFN is currently working to obtain non-residential mortgage
brokerage licenses where necessary. In jurisdictions where CFN is currently not
so licensed, CFN provides access to mortgages through one of its appropriately
licensed providers.
Market Expansion
CFN has expanded its business to make its program available to the general
public over the Internet via its YouDecide.com web site and through its call
center. This expansion has been effected to date primarily by entering into
agreements with selected Internet retail and informational sites to expand
awareness of the YouDecide.com web site, including agreements with Hoover's
Online, Women.com, Forbes.com, and SmartMoney.com. This expansion into the
general public arena is intended to broaden the prospective customer base for
both CFN and its services providers. The service offerings and the corresponding
prices offered to the general public are sometimes different from those offered
to CFN's corporate participants.
Technology
CFN's e-commerce program consists of three component layers. The first, or
top, layer is the YouDecide.com Internet web site accessed by the consumer which
gathers and displays information. The second component layer is decision
software which takes the consumer information and chooses applicable services
from the provider information maintained in this second layer. The third
component layer stores consumer information and integrates with CFN providers'
systems. CFN expanded its technology resources by its acquisition of iExpert,
Inc. in October 1999. iExpert is a providers of knowledge-based human resource
software solutions for large corporations. CFN's acquisition of iExpert enhances
CFN's product offering to corporate human resources departments and CFN's
ability to gain access to large corporate employee populations.
The e-commerce technology developed by CFN, for which CFN has multiple
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.
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.
14
<PAGE> 17
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 49 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 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 engaging in its insurance agency 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 in a given
state cannot be paid to, or received by, a person or entity that is not licensed
as an insurance agent or agency in such state, 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 and the general public
regarding the insurance products described on YouDecide.com. 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 resident in such state about insurance products on YouDecide.com,
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
15
<PAGE> 18
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 and auto finance program in those states which require licenses.
CFN Finance's residential mortgage and auto finance programs are being offered
in states where no licenses are required. 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 and auto finance program
licensing agreements will be renewed upon its expiration date of March 31, 2000,
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.
IXL VENTURES
As a complement to iXL's core business, iXL assists in the development of
other Internet-related businesses. Through its subsidiary iXL Ventures, Inc.,
iXL lends its management experience to early stage and developing
Internet-related businesses. iXL Ventures relationships frequently include many
of the following facets:
- executive-level introductions of the developing business to other
businesses in the same market;
- advising the developing business with respect to the development of its
business plan;
- inclusion of the developing business in preferred provider programs for
executive search services; and
- designation by iXL of one member of the developing business' board of
directors.
In return for its assistance, iXL receives a minority equity interest in
the developing business. iXL generally does not recognize any revenue related to
these activities because of the difficulty in valuing such services. In
addition, because of the high degree of uncertainty surrounding these
businesses, most equity interests acquired by iXL in connection with this
program to date are recorded at no value in the Financial Statements.
In some circumstances, these developing businesses are created from
existing non-core iXL business units that are beyond the scope of iXL's
principal business. In such circumstances, iXL seeks strategic investors to
assist in the full development of these projects into viable stand-alone
businesses, while retaining an equity interest in the project. Additionally, any
such transaction must be approved by a committee of independent directors before
any non-core assets are transferred by iXL. CFN was the first major stand-alone
business to emerge from this process. iXL also expects to move its equity
interest in FootageNow, Inc. to iXL Ventures for continued development under iXL
Ventures. iXL has transferred its stock video library to FootageNow, Inc. in
exchange for its equity interest. Our Chairman of the Board and Chief Executive
Officer, U. Bertram Ellis, Jr., is a less than 1% equity holder of FootageNow,
Inc. and is expected to serve as a director (possibly as Chairman of the Board).
Current iXL Ventures companies include:
- Student Advantage, Inc., which maintains a series of commercial Internet
sites for leading colleges and universities;
- Kinzan, Inc., a software and services company that develops, distributes
and hosts Siteman; and
- eCandy.com, an online retailer of confections.
16
<PAGE> 19
iXL's policy is to not make cash investments in third party companies or to
guarantee any obligations of third party companies. However, participants in the
iXL Ventures program are often referred to Mercury Investors, LLC or NeoCarta
Ventures, L.P. as a potential source for cash investments. Our Chief Executive
Officer and certain directors of iXL are investors in Mercury, which has
invested in NeoCarta.
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.
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 iXL target market or prevent iXL's penetration
into their client accounts. Additionally, because competition for Fortune 500
client accounts is significant, some clients are demanding discounts and/or
other preferred terms in their contracts. iXL's unwillingness to grant discounts
in an effort to protect its profit margins may impact iXL's ability to attract
and maintain these clients. We believe that our primary competitors currently
are International Business Machines Corporation, Proxicom, Inc., Sapient
Corporation, Scient Corp., USWeb Corporation, Viant Corp., and smaller
professional Internet services firms.
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. Because of the multitude of diverse technologies available to
implement client solutions, there is no single 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. Accordingly, 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.
17
<PAGE> 20
The success of CFN will be highly dependent upon CFN's services becoming
available to a large number of consumers. 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 Answer
Financial, Rewards Plus, Quicken.com, Quiken Insurance, Quicken Mortgage,
InsWeb, E-Loan, iOwn, People First, and Giggo.com. CE-Loan and iOwn are also
providers on the YouDecide.com web site. 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.
EMPLOYEES
As of December 31, 1999, iXL had approximately 2,100 employees, including
approximately 190 strategy consultants, 440 engineers and 280 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 web site. 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.
ITEM 2. PROPERTIES
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. iXL
has executed a lease for its new headquarters in Atlanta, which will contain
approximately 300,000 square feet. iXL will not occupy this space until after
April 2000. 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 and
Raleigh, NC; Richmond, VA; Denver, CO; Norwalk, CT; Hamburg and Berlin, Germany;
London, England; Madrid, Spain; and Tokyo, Japan. CFN leases space for its
executive offices in Atlanta, Georgia and New York, New York and its operations
offices in Duluth, Georgia.
ITEM 3. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended December 31, 1999, there were no matters submitted
to a vote of security holders.
18
<PAGE> 21
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
iXL's common stock commenced trading publicly on the Nasdaq National Market
on June 3, 1999 and is traded under the symbol IIXL. Prior to that date, there
was no public market for the common stock. The following table sets forth for
the periods indicated the high and low sales prices of the common stock.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Year Ended December 31, 1999
Second Quarter (from June 3, 1999 through June 30,
1999).................................................. $27.00 $13.75
Third Quarter............................................. $38.38 $20.00
Fourth Quarter............................................ $58.00 $31.63
</TABLE>
As of January 31, 2000, there were approximately 506 holders of record of the
common stock.
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 cash dividends to
its stockholders.
RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of the transactions by the Company during 1999
involving sales of iXL's securities that were not registered under the
Securities Act of 1933.
1. During the period from January 1, 1999 through December 31, 1999, iXL
granted employee stock options to purchase an aggregate 7,649,713 shares of its
common stock pursuant to the iXL Enterprises, Inc. 1996 Stock Option Plan in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act. These shares were registered on a Form S-8 Registration
Statement, filed December 10, 1999.
2. During the period from January 1, 1999 through December 31, 1999, iXL
granted for employee stock options to purchase an aggregate 5,408,717 shares of
its common stock pursuant to the iXL Enterprises, Inc. 1999 Stock Option Plan in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act. These shares were registered on Form S-8 Registration Statement,
filed December 10, 1999.
3. During the period from January 1, 1999 through December 31, 1999, iXL
granted employee stock options to purchase an aggregate 1,712,093 shares of its
common stock pursuant to the iXL Enterprises, Inc. 1999B Stock Option Plan in
reliance on the exemption from registration provided by Section 4(2) of the
Securities Act. These shares were registered on Form S-8 Registration Statement,
filed December 10, 1999.
4. During the period from January 1, 1999 through December 31, 1999, iXL
granted for no cash consideration options to purchase an aggregate 385,000
shares of its common stock pursuant to the iXL Enterprises, Inc. 1998
Non-Employee Stock Option Plan in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act. 290,000 of these shares were
registered on a Form S-8 Registration Statement, filed December 10, 1999.
5. During the period from January 1, 1999 through December 31, 1999, iXL
issued and sold 45,150 shares of common stock upon exercise of options granted
under the 1998 Non-Employee Stock Option Plan for an aggregate consideration of
$108,745 in cash. These issuances of stock were made in reliance on Section 4(2)
of the Securities Act and Rule 701 promulgated under the Securities Act.
6. During the period from January 1, 1999 through December 31, 1999, iXL
issued and sold 884,930 shares of common stock upon exercise of employee stock
options under the 1996 Stock Option Plan for an aggregate consideration of
$2,700,278 in cash. These issuances of stock were made in reliance on Section
4(2) of the Securities Act and Rule 701 promulgated under the Securities Act.
19
<PAGE> 22
USE OF PROCEEDS
On June 2, 1999, the Securities and Exchange Commission declared iXL's
Registration Statement on Form S-1 (File No. 333-71937) effective. On June 8,
1999, iXL closed its initial public offering of an aggregate of 6,000,000 shares
of iXL's Common Stock at an aggregate offering price of $72,000,000. The
managing underwriters for the offering were Merrill Lynch, Pierce Fenner & Smith
Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and BancBoston
Robertson Stephens Inc. and SG Cowen Securities Corporation. Net cash proceeds
to iXL, after deducting underwriting discounts and commissions of $5,040,000 and
offering expenses of $5,293,000 were $61,667,000.
In connection with the initial public offering, iXL registered and offered
the underwriters of the offering an option to purchase an additional 900,000
shares of Common for an aggregate offering price of $10,800,000. The
underwriters exercised this option on June 14, 1999. Net proceeds to iXL, after
deducting underwriting discounts and commissions of $756,000 were $10,044,000.
iXL has used approximately $59,011,000 of the net proceeds from its initial
public offering for working capital purposes and $12,700,000 for purchases of
fixed assets related to certain office expansions and purchases of computer
hardware and software.
20
<PAGE> 23
ITEM 6. SELECTED FINANCIAL DATA
You should read the following selected Consolidated Financial Data with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations for iXL" and iXL's audited Consolidated Financial Statements and the
Notes thereto included elsewhere in this Annual Report on Form 10-K. 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 years ended
December 31, 1997, 1998 and 1999, and the consolidated balance sheet data at
December 31, 1998 and 1999 are derived from and qualified by reference to iXL's
audited Consolidated Financial Statements, which appear elsewhere in this Annual
Report on Form 10-K.
<TABLE>
<CAPTION>
EIGHT
MONTHS
ENDED YEARS ENDED DECEMBER 31,
DECEMBER 31, ------------------------------
1996 1997 1998 1999
------------ -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues............................................ $ 5,379 $ 18,986 $ 64,767 $218,343
Cost of revenues.................................... 3,577 11,343 44,242 125,725
------- -------- -------- --------
Gross profit.............................. 1,802 7,643 20,525 92,618
Sales and marketing expenses........................ 812 3,903 17,325 55,670
General and administrative expenses................. 1,247 9,114 30,163 73,839
Research and development expenses................... -- 4,820 4,408 4,655
Depreciation........................................ 372 1,408 5,217 12,857
Amortization........................................ 928 5,191 10,590 18,174
------- -------- -------- --------
Loss from operations...................... (1,557) (16,793) (47,178) (72,577)
Other income (expense), net......................... 48 116 (28) (161)
Loss on equity investment........................... (249) (1,443) (1,640) (65)
Interest income..................................... 32 136 750 3,577
Interest expense.................................... (30) (238) (770) (987)
------- -------- -------- --------
Loss before income taxes.................. (1,756) (18,222) (48,866) (70,213)
Income tax benefit.................................. 302 2,782 -- --
------- -------- -------- --------
Net loss.................................. (1,454) (15,440) (48,866) (70,213)
Dividends and accretion on mandatorily redeemable
preferred stock................................... -- -- (9,099) (20,966)
------- -------- -------- --------
Net loss available to common
stockholders............................ $(1,454) $(15,440) $(57,965) $(91,179)
======= ======== ======== ========
Basic and diluted net loss per common share......... $ (0.37) $ (2.36) $ (4.92) $ (2.08)
======= ======== ======== ========
Weighted average common shares outstanding.......... 3,972 6,540 11,777 43,747
======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1996 1997 1998 1999
------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................ $ 409 $23,038 $19,259 $120,812
Working capital.......................................... 217 23,879 27,119 199,450
Total assets............................................. 16,472 57,612 142,951 357,855
Debt, including current portion.......................... 691 1,273 21,420 1,838
Mandatorily redeemable preferred stock................... -- 29,930 65,679 --
Mandatorily redeemable preferred stock of subsidiary..... -- -- 9,839 48,955
Stockholders' equity..................................... 12,989 21,950 25,560 260,095
</TABLE>
21
<PAGE> 24
ITEM 7. 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 in conjunction with the Consolidated Financial
Statements and the Notes thereto included elsewhere in this Annual Report on
Form 10-K.
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 commenced operations effective May 1,
1996, and since that time has acquired a total of 36 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 December 31, 1999, iXL had an
accumulated deficit of approximately $136 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 has historically been 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. Historically, iXL has
primarily priced 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. In order to mitigate risks associated with fixed-price
contracts, where possible iXL is negotiating new contracts on a
time-and-materials basis. iXL has implemented 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. Currently, less than a third of iXL's revenues are derived from
contracts priced on a three-phase basis.
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. However, we derive
a significant portion of our revenue from a small number of clients, including
General Electric which represented approximately 8% of our revenue for the
twelve months ended December 31, 1999, and may continue to account for a large
portion of our revenue in the future. Additionally, iXL recently entered into a
services agreement with Virgin Group which is expected to generate significant
revenue in the future. Competition for Fortune 500 clients has become
significant, causing some clients to demand discounts and/or other preferred
terms in their services agreements. iXL's unwillingness to grant these discounts
in an effort to protect its profit margins, may impact iXL's ability to obtain
or maintain these clients.
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 web site 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. We have entered into multi-year
22
<PAGE> 25
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 resulted in non-cash charges that reduced our reported revenue. For Delta
Air Lines, this charge approximated $1.2 million, reducing the $10 million of
guaranteed revenue from Delta Air Lines in 1999 and early 2000 to $8.8 million,
and for General Electric this charge approximated $4.8 million, reducing the $20
million of guaranteed revenue from General Electric earned during 1999 to
approximately $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 which have been charged to the appropriate
expense classification based on the terms of each option or warrant.
In connection with (1) the reasonable efforts of GE Capital Equity
Investments, Inc. to provide the CFN program to its employees and (2) the
marketing agreement among iXL and General Electric, iXL has issued warrants to
purchase 1,500,000 shares of common stock to General Electric. iXL believes the
value of these agreements to be $1.4 million and accordingly this is expected to
result in $1.4 million of marketing expenses to be recorded in the 12 month
period from April 1999 through March 2000. Net loss available to common
stockholders and stockholders' equity will also be impacted by non-cash charges
related to this warrant issuance. Through December 31, 1999, $1.0 million was
charged to expense related to this warrant issuance.
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 program and to establish access to the YouDecide.com web site.
None of these expenses is incurred under long-term vendor contracts. In
addition, CFN has expended and will continue to expend significant resources to
promote its YouDecide.com brand and web site. Each of these expenditures must be
incurred in advance of the recognition of revenue. 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 $38 million for the twelve
months ended December 31, 1999. 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 twelve months ended December 31, 1999, totaling $4.9
million. iXL expects to recognize approximately $3.7 million in 1999, $2.4
million in 2000, $2.2 million in 2001, $1.8 million in 2002 and $0.9 million in
2003 in stock compensation expense relating to the grant of options from
inception through December 31, 1999.
ACQUISITION PROGRAM
iXL has acquired a total of 36 businesses since its inception and intends
to continue acquiring similar businesses. iXL evaluates acquisitions based on
numerous quantitative and qualitative factors. Quantitative
23
<PAGE> 26
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.
On October 4, 1999, we entered into an Agreement and Plan of Merger with
Tessera Enterprise Systems, Inc., a Wakefield, Massachusetts enterprise
relationship management solutions firm, for a purchase price of approximately
$120 million (based on the exchange ratio and stock valuation as dictated by the
merger agreement as of October 4, 1999). The acquisition was completed on
January 11, 2000. The acquisition is expected to provide enterprise relationship
management expertise and has expanded our workforce by approximately 130
employees.
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. iXL expects additional acquisition-related amortization expense as a
result of its acquisition program.
We believe our historical acquisitions have contributed to our growth by
rapidly expanding our employee base, geographic coverage, client base, industry
expertise and technical skills.
iXL anticipates that a portion of its future growth will be accomplished by
acquiring existing businesses. 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."
ANNUAL RESULTS OF OPERATIONS
Years Ended December 31, 1999 and December 31, 1998
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.
iXL completed 24 acquisitions during 1998 and one during 1999. As a result, we
believe the operating results for the year ended December 31, 1999 are not
comparable to the operating results for the year ended December 31, 1998.
Revenues. Revenues increased $153.6 million, or 237%, to $218.3 million
for the twelve months ended December 31, 1999 from $64.8 million for the twelve
months ended December 31, 1998. The increase was primarily attributable to a
series of acquisitions throughout 1998 and to an aggressive hiring initiative
throughout 1999 and 1998 which expanded our client base and headcount. The
growth was also due to an increase in the number and size of client engagements
and the development and growth of industry practice groups and other internet
based business solutions.
Cost of revenues. Cost of revenues increased $81.5 million, or 184%, to
$125.7 million for the twelve months ended December 31, 1999 from $44.2 million
for the twelve months ended December 31, 1998. As a
24
<PAGE> 27
percentage of revenues, cost of revenues decreased to 58% for the twelve months
ended December 31, 1999, down from 68% for the twelve months ended December 31,
1998. The dollar increase was primarily attributable to an increase in headcount
due to the integration of the companies acquired by iXL, organic growth in
billable headcount, as well as to the development of CFN. Also included in this
increase was $0.9 million of non-cash expense related to stock compensation
charges. The decrease as a percentage of revenues was primarily attributable to
increases in billing rates and improvements in revenue per billable employee.
Sales and marketing expenses. Sales and marketing expenses increased $
38.3 million, or 221%, to $55.7 million for the twelve months ended December 31,
1999 from $17.3 million for the twelve months ended December 31, 1998. As a
percentage of revenues, sales and marketing expenses decreased to 26% for the
twelve months ended December 31, 1999, down from 27% for the twelve months ended
December 31, 1998. The dollar increase was primarily attributable to the
increase in headcount due to the development of iXL's sales and marketing
infrastructure and staff. Also included in this increase was $1.4 million of
non-cash expense related to stock compensation charges.
General and administrative expenses. General and administrative expenses
increased $43.7 million, or 145%, to $73.8 million for the twelve months ended
December 31, 1999 from $30.2 million for the twelve months ended December 31,
1998. As a percentage of revenues, general and administrative expenses decreased
to 34% for the twelve months ended December 31, 1999, from 47% for the twelve
months ended December 31, 1998. 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 expansion of management and physical
infrastructure to support the growth in iXL's operations. Also included in this
increase was $1.0 million of non-cash expense related to stock compensation
charges.
Research and development expenses. Research and development expenses
remained relatively constant at $4.7 million for the twelve months ended
December 31, 1999 as compared to $4.4 million for the twelve months ended
December 31, 1998. As a percentage of revenues, research and development
expenses decreased to 2% for the twelve months ended December 31, 1999, from 7%
for the twelve months ended December 31, 1998.
Depreciation. Depreciation expenses increased $7.7 million, or 146%, to
$12.9 million for the twelve months ended December 31, 1999 from $5.2 million
for the twelve months ended December 31, 1998. The increase primarily 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 expenses increased $7.6 million, or 72%, to
$18.2 million for the twelve months ended December 31, 1999 from $10.6 million
for the twelve months ended December 31, 1998. The increase was a result of the
amortization of goodwill and assembled workforce recorded in connection with the
acquisitions which took place during 1998.
Interest expense. Interest expense increased $0.2 million to approximately
$1 million in 1999 primarily due to borrowings under the iXL's credit agreement.
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.
iXL completed four acquisitions during 1997 and 24 during 1998. 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.
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
25
<PAGE> 28
development and growth of industry practice groups. CFN had no revenue in 1997
and accounted for $251,000 of iXL's 1998 revenues.
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, 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 $0.8 million 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 $0.4 million, 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 1999 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.
26
<PAGE> 29
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 $0.5 million to approximately
$0.8 million in 1998 primarily due to borrowings under the iXL's credit
facility.
The following tables present certain unaudited quarterly results of
operations of iXL for 1999 and 1998. We believe that our historical financial
statements are not necessarily indicative of future results of operations. You
should read these quarterly results of operations in conjunction with the
audited Consolidated Financial Statements and Notes thereto included elsewhere
in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED FOR THE QUARTER ENDED
---------------------------------------------- ----------------------------------------------
3/31/1998 6/30/1998 9/30/1998 12/31/1998 3/31/1999 6/30/1999 9/30/1999 12/31/1999
--------- --------- --------- ---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue......................... $ 6,864 $ 10,520 $ 18,123 $ 29,260 $ 33,012 $ 45,896 $ 63,731 $ 75,704
Cost of revenue................. 4,899 8,086 12,628 18,629 19,583 27,044 36,664 42,434
------- -------- -------- -------- -------- -------- -------- --------
Gross profit.................. 1,965 2,434 5,495 10,631 13,429 18,852 27,067 33,270
Selling expenses................ 2,036 2,887 4,573 7,829 8,150 11,308 12,960 23,252
General and administrative
expenses...................... 2,956 5,862 7,021 14,324 15,725 15,320 19,080 23,714
Research and development
expenses...................... 907 1,322 1,244 935 1,058 1,337 1,094 1,166
Depreciation expense............ 699 955 1,261 2,302 2,284 2,931 3,284 4,358
Amortization expense............ 1,182 1,709 3,101 4,598 4,351 4,333 4,329 5,161
------- -------- -------- -------- -------- -------- -------- --------
Loss from operations............ (5,815) (10,301) (11,705) (19,357) (18,139) (16,377) (13,680) (24,381)
Other income (expense), net..... 36 17 (13) (68) 69 (183) (69) 22
Loss on equity investment....... (395) (508) (384) (353) (65) -- -- --
Interest income................. 264 106 181 199 216 517 1,447 1,397
Interest expense................ (28) (19) (275) (448) (336) (357) (136) (158)
------- -------- -------- -------- -------- -------- -------- --------
Loss before taxes............... (5,938) (10,705) (12,196) (20,027) (18,255) (16,400) (12,438) (23,120)
Income tax expense (benefit).... -- -- -- -- -- -- -- --
------- -------- -------- -------- -------- -------- -------- --------
Net loss................ $(5,938) $(10,705) $(12,196) $(20,027) $(18,255) $(16,400) $(12,438) $(23,120)
======= ======== ======== ======== ======== ======== ======== ========
Dividends and accretion on
MRPS.......................... (725) (1,753) (2,618) (4,003) (5,293) (14,769) (452) (452)
------- -------- -------- -------- -------- -------- -------- --------
Net loss available to
common stockholders... $(6,663) $(12,458) $(14,814) $(24,030) $(23,548) $(31,169) $(12,890) $(23,572)
======= ======== ======== ======== ======== ======== ======== ========
Weighted average shares
outstanding................... 8,592 9,657 12,796 16,063 16,082 28,719 64,539 65,648
Basic and diluted net loss per
share......................... $ (0.78) $ (1.29) $ (1.16) $ (1.50) $ (1.46) $ (1.09) $ (0.20) $ (0.36)
======= ======== ======== ======== ======== ======== ======== ========
</TABLE>
27
<PAGE> 30
LIQUIDITY AND CAPITAL RESOURCES
On June 8, 1999, iXL completed its initial public offering and received net
proceeds of approximately $61.7 million from the sale of 6,000,000 shares of
common stock. On June 14, 1999, the underwriters exercised their over-allotment
option resulting in the sale of 900,000 additional shares of common stock for
net proceeds of approximately $10.0 million. On June 8, 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. Also on June 8, 1999, iXL received
net proceeds of approximately $23.3 million from the sale of 2,000,000 shares of
common stock in a private placement. On November 24, 1999, iXL completed the
public offering of 2,000,000 shares of common stock, and received net proceeds
of approximately $68.6 million. On December 14, 1999, the underwriters exercised
a portion of their over-allotment option resulting in the sale of 50,000
additional shares of common stock for net proceeds of approximately $1.8
million. 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, and borrowings under its credit
facility and other loans.
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 $20.0 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 with a portion
of the proceeds of a private placement of iXL's Series A Preferred Stock.
Additionally, in June 1999 iXL repaid all remaining amounts outstanding under
the credit facility (approximately $13.1 million) 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 remained available under the credit facility. iXL's obligations
under the credit facility were secured by substantially all of the assets of iXL
and its domestic subsidiaries other than CFN and CFN's subsidiaries. These
obligations were 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 accrued 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
December 31, 1999, there were no amounts outstanding under the credit facility
although letters of credit totalling approximately $3 million had been issued
under this facility, reducing the revolver availability by such amount.
On January 7, 2000, iXL terminated its existing July 29, 1998 credit
facility and entered into a senior secured revolving syndicated credit facility
with several banks providing for borrowings of up to $50 million. As of January
31, 2000, no borrowings were outstanding under this credit facility. iXL's
obligations under the credit facility are secured by substantially all of the
assets of iXL and its domestic operating subsidiaries other than iXL Ventures,
Inc., CFN and CFN's subsidiaries. These obligations are also secured by all of
the stock of iXL's domestic operating subsidiaries, other than CFN's
subsidiaries, and 65% of the stock of iXL's foreign subsidiaries. Borrowings
under this credit facility mature December 31, 2002 and accrue interest either
(a) at a rate of 1.75% plus the greater of Chase Manhattan Bank's prime rate or
0.5% plus the weighted average of the rates on overnight Federal funds
transactions, or (b) at a rate of 2.75% plus an adjusted LIBOR rate. This credit
agreement provides for borrowings based upon a borrowing base formula. A
commitment fee is charged on the unused portion of the credit agreement.
At December 31, 1999, iXL had approximately $121 million in cash and cash
equivalents. For the three year period ended December 31, 1999, iXL used
approximately $113.9 million, $23.8 million and $63.8 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 December 31, 1999, iXL had outstanding commitments for
capital expenditures of approximately $24.8 million, primarily related to the
expansion and improvement of its Atlanta, Richmond and Chicago offices. The
remainder of iXL's significant commitments consist of obligations outstanding
under operating leases.
28
<PAGE> 31
iXL has executed a lease of its new headquarters in Atlanta which would
contain approximately 300,000 square feet. iXL anticipates capital expenditures
of up to approximately $14 million related to the improvement of this new
headquarters.
iXL believes its available cash resources and credit facilities, combined
with the net proceeds of its recent secondary offering, 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. iXL believes
that the available cash resources for CFN will be sufficient to meet its
anticipated working capital expenditures for at least the next six months. CFN
is currently in discussions with several potential investors to secure
additional capital. iXL believes that CFN will be successful securing such
capital. If however, CFN is unable to raise additional capital funds, CFN may
require additional funding from iXL, although iXL is under no obligation to
provide any such funding.
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, 2001. iXL does not
expect the adoption to have a material impact on its financial statements.
YEAR 2000 RISK
Prior to December 31, 1999, many installed computer systems and software
products were coded to accept only two-digit entries to identify a year in the
date code field. Consequently, as of 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, have upgraded 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,
definition, design, development and deployment. Each of these phases have been
completed. iXL believes it has identified its mission critical systems. iXL has
obtained confirmations from the providers of these systems that they are Year
2000 complaint. iXL has conducted internal tests of such systems as part of its
Year 2000 efforts.
iXL has confirmed Year 2000 compliance of all material existing iXL systems
supplied by third party providers and continues to test new products. iXL has
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 also obtained written certification regarding
facilities items such as elevators and other non-standard applications and
systems that are not prevalent throughout all iXL offices.
29
<PAGE> 32
iXL has not examined third party readiness, although CFN has examined the
readiness of third parties that provide date sensitive information critical to
CFN's business. iXL has not researched and is not researching its clients'
readiness, except to the extent clients request iXL to examine solutions
delivered by iXL.
Prior to December 31, 1999, iXL completed contingency plans for critical
individual information technology systems and non-information technology systems
for implementation. iXL has not to date experienced any material adverse effects
of its systems. Furthermore, Management believes that the Year 2000 risk will
not pose significant future 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 future material adverse effects on
iXL's operations, customer relations or financial condition. iXL's total cost of
its Year 2000 program was approximately $165,000, as of December 31, 1999.
However, there is no guarantee that additional costs will not be incurred.
30
<PAGE> 33
RISK FACTORS
iXL stockholders may be exposed to risks inherent in our business. The
value of such an investment may increase or decline and could result in a loss.
Prospective investors should carefully consider the following factors as well as
other information contained in this Annual Report on Form 10-K before deciding
to invest in iXL 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. 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.
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
December 31, 1999, we had an accumulated deficit of approximately $136 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 web site
development and implementation of our Solution Sets(TM). 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, 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 trading price of our common stock would likely decline.
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 December 31, 1999, our staff increased from approximately 90 to
approximately 2,100 employees. This rapid growth places a significant demand on
management and
31
<PAGE> 34
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 completed 36 acquisitions. We anticipate that
a 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. Further,
we may not be able to successfully integrate the recent acquisition of Tessera
Enterprise Systems on a timely basis, or at all, and our inability to do so
could harm our operating results.
We may not be able to keep up with the demand for services under our
guaranteed payment services agreements.
We have entered into multi-year services agreements with General Electric
and Delta Air Lines for the delivery of strategic Internet services and may
enter into comparable agreements in the future. 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 service those clients. These impacts could
harm our financial condition. We may execute additional agreements of this type
in the future.
Our fixed-price contracts involve financial risk.
Most of our existing contracts are 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. If we fail to estimate
costs on fixed-price contracts accurately or encounter unexpected problems, our
financial performance will be adversely effected. To reduce this financial risk,
we are attempting to price most new contracts on a time-and-materials basis. We
try to price any 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
fixed-price contracts 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.
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
32
<PAGE> 35
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 or technical
personnel may materially and adversely affect our business and results of
operations. Currently, our key management and technical personnel are U. Bertram
Ellis, Jr., our Chief Executive Officer, William C. Nussey, our subsidiary iXL,
Inc.'s Chief Executive Officer and President, C. Cathleen Raffaeli, our
subsidiary 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, iXL,
Inc.'s Chief Operating Officer, David Clauson, iXL, Inc.'s Executive Vice
President for Worldwide Marketing, and Benjamin Chen, iXL, Inc.'s Chief
Technology Officer. 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.
Vincent M. Copeland, iXL, Inc.'s Executive Vice President for Worldwide Client
Development, died January 26, 2000 from injuries sustained in an automobile
accident. Mr. Copeland was one of iXL's key employees prior to his death.
Additionally, Mr. Chen has terminated his employment with iXL. The failure to
hire capable replacements for Mr. Copeland and Mr. Chen could adversely affect
the operations and financial condition of iXL.
The loss of one or more of our major customers could harm our business.
The loss of one or more of our major customers, the failure to attract new
customers on a timely basis, or a reduction in revenue associated with existing
or proposed customers would harm our business and prospects. General Electric
comprised approximately 8% of our revenue for the twelve months ended December
31, 1999, and may continue to account for a large portion of our revenue in the
future. Additionally, iXL recently entered into a services agreement with Virgin
Group which is expected to generate significant revenue in the future.
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.
33
<PAGE> 36
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.
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. iXL believes that the available cash
resources for CFN will be sufficient to meet its anticipated working capital
expenditures for at least the next six months. CFN is currently in discussions
with several potential investors to secure additional capital. iXL believes that
CFN will be successful securing such capital. If, however, CFN is unable to
raise additional capital funds, CFN may require additional funding from iXL,
although iXL is under no obligation to provide any such funding.
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.
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 by iXL as well as 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. Further, because patent applications are not matters of public record
until approved and issued, we may be using technologies subject to patent
applications by other parties, and we cannot be sure that we will be entitled to
continued use of such technologies if any such third party patent were approved
and issued.
34
<PAGE> 37
Our investments in iXL Ventures involve risk.
Through iXL Ventures, we have occasionally assisted in the development of
businesses engaged in the "new media and e-commerce" segment of the technology
industry. iXL's relationship with these businesses is typically publicized by
press releases. Accordingly, the failure of these businesses may directly or
indirectly harm our reputation. The businesses are generally unproven, involve
substantial risk and may never be profitable.
Our international operations and expansion involve financial and operational
risk.
Revenue from our foreign offices has been limited to date. 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.
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.
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
35
<PAGE> 38
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.
Additionally, because competition for Fortune 500 client accounts is
significant, some clients are demanding discounts and/or other preferred terms
in their contracts. iXL's unwillingness to grant discounts in an effort to
protect its profit margins may impact iXL's ability to attract and maintain
these clients.
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.
RISKS RELATED TO OUR CFN SUBSIDIARY
CFN's business model is new and unproven.
CFN, our 76%-owned subsidiary, has incurred significant losses since
inception and is expected to generate significant losses for the foreseeable
future. As of December 31, 1999, CFN had an accumulated deficit of approximately
$55 million. 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 YouDecide.com web site 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 CFN has been limited and,
accordingly, the revenue recognized by CFN has been minimal. CFN has recently
made its services available to the general public through the YouDecide.com web
site and through its call center. This expansion is in its early stages and
accordingly CFN has little experience marketing to the general public. Also,
none of the CFN services providers has a long-term contract with CFN. The
failure of CFN to successfully implement its business plan could adversely
affect our business results and financial condition. Further, CFN must expend
significant resources to grow its infrastructure, and the growth of CFN is
heavily dependent on its relationships with online services such as Internet
portals, financial institutions, and other online companies.
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, legal and
administrative enforcement actions and private litigation. 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.
36
<PAGE> 39
RISKS RELATED TO OUR COMMON STOCK
You may encounter volatility in the market price for our common stock.
The trading price of our common stock has been and is likely to continue to
be highly volatile. Our stock price could be subject to wide fluctuations in
response to factors such as the following:
- actual or anticipated variations in quarterly results of operations;
- the addition or loss of affiliates or providers;
- our ability to hire and retain employees;
- additions or departures of key personnel;
- announcements of technological innovations, new products or services by
us or our competitors;
- changes in financial estimates or recommendations by securities analysts;
- conditions or trends in the Internet and online commerce industries;
- changes in the market valuations of other Internet or online service
companies;
- our announcements of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
- sales of our common stock;
- general market conditions; and
- other events or factors, many of which are beyond our control.
In addition, the stock market in general, and the Nasdaq National Market
and the market for Internet and technology companies in particular, have
experienced extreme price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of these companies. These broad
market and industry factors may materially and adversely affect our stock price,
regardless of our operating performance. The trading prices of the stocks of
many technology companies are at or near historical highs and reflect
price-earnings ratios substantially above historical levels. These trading
prices and price-earnings ratios may not be sustained.
Further, the existing market for our common stock may not be sustained. In
such circumstances, it may be difficult for shareholders to sell shares of our
common stock at a price that is attractive. 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company does not believe that there is any material market risk
exposure with respect to derivative or other financial instruments which would
require disclosure under this item.
37
<PAGE> 40
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Financial Statements
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Accountants........................... 39
Consolidated Balance Sheets at December 31, 1998 and 1999... 40
Consolidated Statements of Operations for each of the three
years in the period ended December 31, 1999............... 41
Consolidated Statements of Changes in Stockholders' Equity
for each of the three years in the period ended December
31, 1999.................................................. 42
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1999............... 43
Notes to Consolidated Financial Statements.................. 44
FINANCIAL STATEMENT SCHEDULE:
For each of the three years in the period ended December 31,
1999
II -- Valuation and Qualifying Accounts................ 68
Summary of Quarterly Results of Operations -- Unaudited..... 69
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
38
<PAGE> 41
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
iXL Enterprises, Inc.:
In our opinion, the accompanying consolidated financial statements listed
in the accompanying index present fairly, in all material respects, the
financial position of iXL Enterprises, Inc. and its subsidiaries at December 31,
1998 and 1999, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. In addition, in
our opinion, the financial statement schedules listed in the accompanying index
present fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements. These
financial statements and financial statement schedules are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, 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 14, 2000
39
<PAGE> 42
IXL ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 19,259 $120,812
Marketable securities..................................... -- 34,895
Accounts receivables less allowance for doubtful accounts
of $796 and $4,021...................................... 17,737 62,836
Unbilled revenues......................................... 8,089 21,794
Prepaid expenses and other assets......................... 3,355 6,610
-------- --------
Total current assets............................... 48,440 246,947
Property and equipment, net............................... 27,975 52,273
Intangible assets, net.................................... 64,217 55,851
Other non-current assets.................................. 2,319 2,784
-------- --------
Total assets....................................... $142,951 $357,855
======== ========
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 6,438 $ 13,988
Deferred revenues......................................... 6,072 10,750
Accrued liabilities....................................... 7,943 22,229
Current portion of long-term debt......................... 868 530
-------- --------
Total current liabilities.......................... 21,321 47,497
Long-term debt.............................................. 20,552 1,308
-------- --------
Total liabilities.................................. 41,873 48,805
-------- --------
Mandatorily redeemable preferred stock...................... 65,679 --
Mandatorily redeemable preferred stock of subsidiary........ 9,839 48,955
-------- --------
75,518 48,955
-------- --------
Commitments and contingencies (Note 14)
Stockholders' equity
Class A Convertible Preferred Stock, par value $.01,
250,000 and 0 shares authorized; issued and outstanding
177,291 and 0; aggregate liquidation preference of
$31,103 and $0.......................................... 2 --
Class B Common Stock, par value of $.01, 200,000,000 and 0
shares authorized; issued and outstanding 16,334,905 and
0 (including 252,416 and 0 shares held in treasury)..... 163
Common Stock, par value of $.01, 0 and 200,000,000
authorized; issued and outstanding 0 and 67,558,858
(including 0 and 352,416 shares held in treasury)....... -- 676
Additional paid-in capital................................ 94,820 392,432
Note receivable from stockholder.......................... (900) (900)
Unearned compensation..................................... (1,867) (7,272)
Accumulated deficit....................................... (65,760) (135,973)
Accumulated other comprehensive income.................... (10) 12,020
Treasury stock at cost; 252,416 and 352,416 shares........ (888) (888)
-------- --------
Total stockholders' equity................................ 25,560 260,095
-------- --------
Total liabilities, mandatorily redeemable preferred stock
and stockholders' equity................................ $142,951 $357,855
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
40
<PAGE> 43
IXL ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenues.................................................... $ 18,986 $ 64,767 $218,343
Cost of revenues............................................ 11,343 44,242 125,725
-------- -------- --------
Gross profit...................................... 7,643 20,525 92,618
Sales and marketing expenses................................ 3,903 17,325 55,670
General and administrative expenses......................... 9,114 30,163 73,839
Research and development expenses........................... 4,820 4,408 4,655
Depreciation................................................ 1,408 5,217 12,857
Amortization................................................ 5,191 10,590 18,174
-------- -------- --------
Loss from operations.............................. (16,793) (47,178) (72,577)
Other income (expense), net................................. 116 (28) (161)
Loss on equity investment................................... (1,443) (1,640) (65)
Interest income............................................. 136 750 3,577
Interest expense............................................ (238) (770) (987)
-------- -------- --------
Loss before income taxes.......................... (18,222) (48,866) (70,213)
Income tax benefit.......................................... 2,782 -- --
-------- -------- --------
Net loss.......................................... (15,440) (48,866) (70,213)
Dividends and accretion on mandatorily redeemable preferred
stock..................................................... -- (9,099) (20,966)
-------- -------- --------
Net loss available to common stockholders................. $(15,440) $(57,965) $(91,179)
======== ======== ========
Basic and diluted net loss per common share............... $ (2.36) $ (4.92) $ (2.08)
======== ======== ========
Weighted average common shares outstanding................ 6,540 11,777 43,747
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
41
<PAGE> 44
IXL ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CLASS A
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------- -------------------- PAID-IN ACCUMULATED COMPREHENSIVE
SHARES VALUE SHARES VALUE CAPITAL DEFICIT INCOME
-------- ----- ----------- ----- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
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 -- --
Stock issuance in connection with
acquisitions......................... -- -- 8,047,305 81 41,663 -- --
Treasury stock acquired................ -- -- (252,416) -- -- -- --
Stock options exercised................ -- -- 57,800 -- -- -- --
Dividends and accretion on mandatorily
redeemable preferred stock........... -- -- -- -- (8,671) -- --
Common Stock to be issued in connection
with Class D Preferred............... -- -- -- -- 13,235 -- --
Issuance of stock options and
warrants............................. -- -- -- -- 3,508 -- --
Stock compensation and warrant
expense.............................. -- -- -- -- 813 -- --
Comprehensive income:
Net loss............................. -- -- -- -- -- (48,866) (48,866)
Foreign currency translation
adjustment......................... -- -- -- -- -- -- (10)
--------
Other comprehensive income........... -- -- -- -- -- -- (10)
--------
Comprehensive income................... (48,876)
-------- ---- ----------- ----- --------- --------- --------
Balance, December 31, 1998............. 177,291 2 16,082,489 163 94,820 (65,760)
-------- ---- ----------- ----- --------- ---------
Stock issuance......................... (177,291) (2) 33,437,434 335 183,969 -- --
Conversion of escrow shares to treasury
stock................................ -- -- (100,000) -- -- -- --
Conversion, dividends and accretion of
mandatorily redeemable preferred
stock................................ -- -- 17,786,519 178 85,870 -- --
Issuance of stock options.............. -- -- -- -- 10,325 -- --
Accretion of mandatorily redeemable
preferred stock of subsidiary........ -- -- -- -- (1,054) -- --
Stock compensation and warrant
expenses............................. -- -- -- -- 18,502 -- --
Comprehensive income:
Net loss............................. -- -- -- -- -- (70,213) (70,213)
Foreign currency translation
adjustment......................... -- -- -- -- -- -- (197)
Unrealized gain on marketable
securities......................... -- -- -- -- -- -- 12,227
--------
Other comprehensive income........... -- -- -- -- -- -- 12,030
--------
Comprehensive income................... -- -- -- -- -- -- $(58,183)
-------- ---- ----------- ----- --------- --------- ========
Balance, December 31, 1999............. -- $ -- 67,206,442 $ 676 $ 392,432 $(135,973)
======== ==== =========== ===== ========= =========
<CAPTION>
NOTE
OTHER RECEIVABLE TOTAL
COMPREHENSIVE FROM UNEARNED TREASURY STOCKHOLDERS'
INCOME STOCKHOLDER COMPENSATION STOCK EQUITY
------------- ----------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C>
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......................... -- (900) -- -- 4,612
Stock issuance in connection with
acquisitions......................... -- -- -- -- 41,744
Treasury stock acquired................ -- -- -- (888) (888)
Stock options exercised................ -- -- --
Dividends and accretion on mandatorily
redeemable preferred stock........... -- -- -- -- (8,671)
Common Stock to be issued in connection
with Class D Preferred............... -- -- -- -- 13,235
Issuance of stock options and
warrants............................. -- -- (3,508) -- --
Stock compensation and warrant
expense.............................. -- -- 1,641 -- 2,454
Comprehensive income:
Net loss............................. -- -- -- -- (48,866)
Foreign currency translation
adjustment......................... (10) -- -- -- (10)
Other comprehensive income........... -- -- -- -- --
Comprehensive income...................
------- ----- -------- ----- ---------
Balance, December 31, 1998............. (10) (900) (1,867) (888) 25,560
------- ----- -------- ----- ---------
Stock issuance......................... -- -- -- -- 184,302
Conversion of escrow shares to treasury
stock................................ -- -- -- -- --
Conversion, dividends and accretion of
mandatorily redeemable preferred
stock................................ -- -- -- -- 86,048
Issuance of stock options.............. -- -- (10,325) -- --
Accretion of mandatorily redeemable
preferred stock of subsidiary........ -- -- -- -- (1,054)
Stock compensation and warrant
expenses............................. -- -- 4,920 -- 23,422
Comprehensive income:
Net loss............................. -- -- -- -- (70,213)
Foreign currency translation
adjustment......................... (197) -- -- --
Unrealized gain on marketable
securities......................... 12,227 -- -- --
-----
Other comprehensive income........... -- -- -- -- 12,030
-----
Comprehensive income................... -- -- -- -- --
------- ----- -------- ----- ---------
Balance, December 31, 1999............. $12,020 $(900) $ (7,272) $(888) $ 260,095
======= ===== ======== ===== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
42
<PAGE> 45
IXL ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss................................................... $(15,440) $(48,866) $(70,213)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation............................................. 1,408 5,217 12,857
Amortization............................................. 5,191 10,590 18,174
Provision for bad debts.................................. 118 1,227 5,111
Acquired in-process technology........................... 2,400 -- --
Deferred income taxes.................................... (2,782) -- --
Non-cash investment and losses in equity affiliate and
amortization.......................................... 807 1,365 65
Stock options and warrant charges........................ -- 2,454 11,923
Changes in assets and liabilities, net of effects from
purchase of subsidiaries
Accounts receivable................................... (1,538) (9,840) (49,893)
Unbilled revenues..................................... (1,597) (5,328) (13,705)
Prepaid expenses and other assets..................... (684) (4,669) (5,223)
Accounts payable and accrued liabilities.............. 1,534 5,523 20,597
Deferred revenues..................................... (156) 4,888 4,587
-------- -------- --------
Net cash used in operating activities............ (10,739) (37,439) (65,720)
-------- -------- --------
Cash flows from investing activities
Purchases of property and equipment...................... (6,704) (20,304) (36,797)
Purchases of subsidiaries, net of cash acquired.......... (3,433) (16,602) (3,717)
Purchases of marketable securities....................... -- -- (28,504)
Proceeds from marketable securities...................... -- -- 5,998
Investment in equity affiliate........................... (625) -- --
Loan to equity affiliate................................. (250) -- --
Proceeds from sale of fixed and intangible assets........ -- -- 1,892
-------- -------- --------
Net cash used in investing activities............ (11,012) (36,906) (61,128)
-------- -------- --------
Cash flows from financing activities
Proceeds from borrowings................................. 6,849 23,428 --
Repayment of borrowings.................................. (6,259) (6,729) (20,130)
Proceeds from issuance of mandatorily redeemable
preferred stock....................................... 29,930 40,314 --
Proceeds from issuance of stock.......................... 13,860 4,612 199,466
Proceeds from issuance of mandatorily redeemable
preferred stock of subsidiary......................... -- 9,839 49,262
Acquisition of treasury stock............................ -- (888) --
-------- -------- --------
Net cash provided by financing activities........ 44,380 70,576 228,598
-------- -------- --------
Effect of exchange rate changes on cash and cash
equivalents.............................................. -- (10) (197)
Net increase (decrease) in cash and cash
equivalents.................................... 22,629 (3,779) 101,553
Cash and cash equivalents at beginning of period........... 409 23,038 19,259
-------- -------- --------
Cash and cash equivalents at end of period................. $ 23,038 $ 19,259 $120,812
======== ======== ========
Supplemental disclosure of cash flow information
Cash paid for interest................................... $ 168 $ 797 $ 819
======== ======== ========
Non-cash investing and financing activities
Acquisition of equipment through capital leases.......... $ 289 $ 569 $ 440
Unrealized gain on marketable securities................. $ -- $ -- $ 12,227
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
43
<PAGE> 46
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 35 companies (see Note 3).
In June 1999 the Company completed its initial public offering (IPO) and
sold 6,900,000 shares of Common Stock. Also in June 1999, the Company completed
a private placement of 2,000,000 shares of Common Stock. In November 1999 the
Company completed a follow-on public offering which resulted in the sale of an
additional 2,050,000 shares of Common Stock.
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 accounted for its investment
in University Netcasting, Inc. ("UNI") under the equity method until June 1999,
at which time UNI merged with Student Advantage, Inc. ("STAD"). As the Company
holds less than a 5% interest in STAD, its investment is recorded as a
marketable security.
At December 31, 1998 and 1999 the Company owned 100% and 98%, respectively,
of the common stock of CFN. CFN has also issued mandatorily redeemable
convertible preferred stock, of which 29,523,809 shares are issued and
outstanding as of December 31, 1999 and are owned by a third party. At December
31, 1998 and 1999 the Company owned 88% and 76%, respectively, of CFN, on an
as-converted basis. As the Company owns the majority of the common stock of CFN,
it has continued to reflect in its consolidated financial statements all of the
operating results of CFN.
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 material 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 revenue represents 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.
44
<PAGE> 47
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
MARKETABLE SECURITIES
Marketable securities include the Company's investment in STAD. Such
investment is classified as an available-for-sale security and reported at fair
value with unrealized gains and losses reported as a component stockholders'
equity. Marketable securities also includes short-term investments with original
maturities in excess of three months.
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 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.
45
<PAGE> 48
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ADVERTISING COSTS
The Company expenses production costs of advertising the first time the
advertising takes place. Advertising expenses were $596, $1,584 and $9,927 for
the years ended December 31, 1997, 1998 and 1999, respectively.
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,
"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 calculated 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 1997 1998 1999
-------- ----------- ----------- -----------
<S> <C> <C> <C>
Stock Options................................... 5,549,200 18,226,112 28,862,536
Warrants........................................ 1,295,900 2,486,006 3,500,000
Class A Convertible Preferred Stock............. 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 outstanding at
December 31, 1998 was not a convertible security, but provided for certain
amounts of Common Stock to be issued upon redemption. The minimum aggregate
number of shares to be issued upon redemption was 3,722,502.
CFN has outstanding mandatorily redeemable preferred stock.
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 and mandatorily redeemable preferred
stock of subsidiary.
46
<PAGE> 49
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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 as of January 1, 1997.
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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments including cash, cash
equivalents, marketable securities, 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, comprised of foreign currency
translation adjustments and unrealized gains or losses on marketable securities,
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.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard 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, 2001. The
Company does not expect the adoption to have a material impact on its financial
statements.
47
<PAGE> 50
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 DECEMBER 31,
USEFUL LIVES ------------------
IN YEARS 1998 1999
------------ ------- --------
<S> <C> <C> <C>
Land................................................... N/A $ 100 $ 100
Building............................................... 40 550 550
Improvements........................................... 5-10 4,852 13,074
Furniture and fixtures................................. 5-7 5,472 11,539
Computer equipment and software........................ 3-5 19,883 41,429
Equipment.............................................. 5-10 6,068 6,706
------- --------
36,925 73,398
Less: Accumulated depreciation and amortization........ (8,950) (21,125)
------- --------
$27,975 $ 52,273
======= ========
</TABLE>
At December 31, 1998 and 1999 the Company had approximately $2,570 and
$2,735, respectively, of vehicles and equipment under capital leases included in
property and equipment and related accumulated amortization of approximately
$889 and $1,257, respectively. Amortization of these assets recorded under
capital leases is included in depreciation expense.
48
<PAGE> 51
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, 1999, the Company and its
subsidiaries acquired 25 companies. The companies acquired and purchase price,
including the shares of Common Stock and related warrants and options issued are
as follows:
<TABLE>
<CAPTION>
FAIR VALUE
PER SHARE CASH USED OF NET
FAIR VALUE SHARES OF FOR TANGIBLE
OF IXL COMMON WARRANTS/ ACQUISITIONS, TOTAL ASSETS
DATE COMMON STOCK OPTIONS NET OF CASH PURCHASE (LIABILITIES)
BUSINESS ACQUIRED ACQUIRED STOCK ISSUED ISSUED(1) ACQUIRED PRICE ACQUIRED
----------------- -------------- ------------ ---------- ---------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Digital Planet
Los Angeles, CA (5)......... May 1998 $ 5.50 259,584 -- $ 1,962 $ 3,550 $ (39)
Micro Interactive, Inc.
New York, NY (3)............ May 1998 5.50 740,000 19,500 1,718 5,809 281
CommerceWave, Inc.
San Diego, CA (7)........... July 1998 5.82 877,898 64,434 117 5,459 (1,037)
Image Communications, Inc.
Vienna, VA (4).............. July 1998 5.82 378,999 125,054 753 3,324 381
Spinners Incorporated
Boston, MA (4).............. July 1998 5.82 674,132 66,495 1,383 5,543 499
Tekna, Inc.
Richmond, VA (4)(5)......... September 1998 4.50 762,622 125,757 611 4,758 527
Larry Miller Productions, Inc.
Boston, MA (4).............. September 1998 4.50 113,823 248,135 1,812 3,490 (143)
NetResponse, L.L.C.
Arlington, VA (4)(5)(11).... September 1998 4.50 701,375 73,625 1,719 5,307 1,312
Ionix Development Corp.
Chicago, IL (5)............. September 1998 4.50 358,551 -- 1,059 3,013 231
Pequot Systems, Inc.
Norwalk, CA (5)(9).......... September 1998 4.50 378,066 -- 792 2,501 154
TwoWay Communications LLC
Chicago, IL (4)(10)......... September 1998 4.50 269,421 -- 1,246 2,469 335
Lava Gesellschaft fur Digitale
Medien GmbH (4) Hamburg,
Germany..................... September 1998 4.50 184,124 -- 691 1,519 (274)
Other Acquisitions
(aggregated 1998)........... Various 2,111,406 57,215 2,739 12,669 1,069
--------- ------- ------- ------- -------
Total of 1998
acquisitions........ 7,810,001 780,215 $16,602 $59,411 $ 3,296
========= ======= ======= ======= =======
LAVA (additional
consideration).............. August-1999 24.63 137,304 3,381
iExpert, Inc.(12)............. October-1999 (a) (a) 3,717 8,359 142
--------- ------- ------- ------- -------
Total of 1999
acquisitions........ 137,304 $ 3,717 $11,740 $ 142
========= ======= ======= ======= =======
<CAPTION>
EXCESS OF
COST OVER
FAIR VALUE OF
ASSEMBLED OTHER NET ASSETS
BUSINESS ACQUIRED WORKFORCE INTANGIBLES(2) ACQUIRED
----------------- ---------- -------------- --------------
<S> <C> <C> <C>
Digital Planet
Los Angeles, CA (5)......... $ 1,012 $ -- $ 2,577
Micro Interactive, Inc.
New York, NY (3)............ 999 -- 4,529
CommerceWave, Inc.
San Diego, CA (7)........... 662 700 5,134
Image Communications, Inc.
Vienna, VA (4).............. 1,213 -- 1,730
Spinners Incorporated
Boston, MA (4).............. 1,129 -- 3,915
Tekna, Inc.
Richmond, VA (4)(5)......... 820 -- 3,411
Larry Miller Productions, Inc.
Boston, MA (4).............. 963 -- 2,670
NetResponse, L.L.C.
Arlington, VA (4)(5)(11).... 1,168 -- 2,827
Ionix Development Corp.
Chicago, IL (5)............. 778 -- 2,004
Pequot Systems, Inc.
Norwalk, CA (5)(9).......... 357 -- 1,990
TwoWay Communications LLC
Chicago, IL (4)(10)......... 713 -- 1,421
Lava Gesellschaft fur Digitale
Medien GmbH (4) Hamburg,
Germany..................... 892 -- 901
Other Acquisitions
(aggregated 1998)........... 5,183 -- 6,417
------- ------ -------
Total of 1998
acquisitions........ $15,889 $ 700 $39,526
======= ====== =======
LAVA (additional
consideration).............. 3,381
iExpert, Inc.(12)............. 369 3,900 3,948
------- ------ -------
Total of 1999
acquisitions........ $ 369 $3,900 $ 7,329
======= ====== =======
</TABLE>
- ---------------
(1) Amounts equal the number of Common Stock shares to be issued upon exercise
of the warrants and options.
(2) Other intangibles include non-compete agreements and acquired technology.
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; (12) Human resources consulting.
(a) iExpert was purchased by CFN with cash and CFN common stock. A total of
$3,717 cash was used for this acquisition and a total of 1,625,000 shares
of CFN common stock was issued to the stockholders of iExpert. The per
share value of the CFN common stock of $2.60 used for purchase accounting
was determined by the Company based upon the terms of preferred equity
financing that CFN has consummated in 1999.
49
<PAGE> 52
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>
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, Inc. -- 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 and Lawrence, New York, NY(7) -- New York......... July 1998 5.82
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 when 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.
For acquisitions made in 1998 and 1999, the purchase price in excess of
identifiable tangible and intangible assets acquired and liabilities assumed of
$39,526 and $7,329, respectively, was allocated to
50
<PAGE> 53
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
goodwill and is being amortized over estimated useful lives of primarily five
years. Approximately $15,889 and $369 of the aggregate purchase price was
allocated to assembled workforce in place for acquisitions made in 1998 and
1999, 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 1998 acquisitions was determined based primarily upon
independent appraisals. The fair value of options and warrants issued in
connection with the 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. There were
no options or warrants issued in conjunction with the 1999 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. For two of the acquired companies, the contingency period ended
December 31, 1998; for the other entity, the contingency period ended August 31,
1999.
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 have been accounted for as additional purchase price as
of December 31, 1998 and were released from escrow in March 1999.
The targeted revenues were achieved at the acquired entity whose
contingency period ended August 31, 1999. As such, 137,304 shares of the
Company's Common Stock have been accounted for as additional purchase price as
of December 31, 1999 and will be released from escrow in March 2000.
The additional consideration requirements of the third 1998 acquisition
were not met.
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, 1998 and 1999, as if the
acquisitions had occurred on January 1, 1998. 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, 1998 and may not be indicative of future
operating results. The unaudited pro forma results are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
Revenues.................................................... $ 88,468 $220,152
======== ========
Net loss.................................................... $(63,306) $(73,111)
======== ========
Net loss available to common stockholders................... $(72,405) $(94,077)
======== ========
Basic and diluted net loss per common share................. $ (4.46) $ (2.14)
======== ========
</TABLE>
51
<PAGE> 54
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,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Excess of cost over fair value of net assets acquired....... $ 55,066 $ 60,447
Assembled work force........................................ 19,916 20,285
Other....................................................... 3,816 7,665
-------- --------
78,798 88,397
Less -- accumulated amortization............................ (14,581) (32,546)
-------- --------
$ 64,217 $ 55,851
======== ========
</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.
At December 31, 1998, the Company accounted for its investment in UNI under
the equity method. The Company's investments in UNI had 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.
During June 1999, UNI merged with STAD and the Company's interest in UNI
was converted into common stock of STAD. The Company holds less than a 5%
ownership interest in STAD and classifies this investment as an
available-for-sale marketable security. At December 31, 1999 the market value of
STAD common stock was $12,388 based on its quoted market price per share.
The following is a summary of the activity in the investment in UNI:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------
1997 1998
------- -------
<S> <C> <C>
Net investment in UNI balance, beginning of period.......... $ 1,298 $ 1,115
Additional investment in UNI................................ 1,260 525
Equity in UNI net loss...................................... (1,001) (1,010)
Amortization of goodwill.................................... (442) (630)
------- -------
Net investment in UNI balance, end of period................ $ 1,115 $ --
======= =======
</TABLE>
52
<PAGE> 55
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 year ended December 31, 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>
6. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1999
------ -------
<S> <C> <C>
Accrued compensation and related costs...................... $3,244 $11,203
Other accrued liabilities................................... 4,699 11,026
------ -------
$7,943 $22,229
====== =======
</TABLE>
7. LONG-TERM DEBT
The Company's long-term debt is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1999
------- ------
<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......... 465 444
Notes payable to a former shareholder at interest rates from
4.75 to 8.0% expiring from 2000 to 2001................... -- 137
Capital lease obligations, at interest rates from 4% to 24%
expiring from 1999 to 2004................................ 1,627 1,257
------- ------
Total debt........................................ 21,420 1,838
Less current portion of long-term debt...................... (868) (530)
------- ------
Long-term debt.............................................. $20,552 $1,308
======= ======
</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 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
53
<PAGE> 56
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
credit. The Company's borrowing rate under the Credit Agreement was 9.75% and
10.5% at December 31, 1998 and 1999, respectively.
In June 1999, the Company repaid all outstanding borrowings under its
Credit Agreement with a portion of the proceeds from its initial public
offering.
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, 1999, the Company had no amounts outstanding under the
Credit Agreement and was in compliance with, or has received a waiver of all
covenants. In January 2000, the Company entered into a new credit facility that
replaced this Credit Agreement (see Note 17).
As of December 31, 1998 and 1999, the Company had letters of credit
outstanding, totaling $1,740 and $2,923, respectively. The Company had
certificates of deposits in the amount of the outstanding letters of credit as
of December 31, 1998. The certificates of deposits which are included in prepaid
expenses and other assets are pledged as collateral for these letters of credit.
As of December 31, 1999, aggregate principal maturities of notes payable
and capital lease obligations are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
YEAR 1999
---- ------------
<S> <C>
2000........................................................ $ 530
2001........................................................ 485
2002........................................................ 731
2003........................................................ 84
2004........................................................ 8
------
$1,838
======
</TABLE>
8. MANDATORILY REDEEMABLE PREFERRED STOCK
Prior to the Company's initial public offering, a total of 265,000 shares
of mandatorily redeemable convertible preferred stock had been designated for
issuance; 200,000, 15,000 and 50,000 of such shares had been designated as Class
B, Class C and Class D, respectively.
Prior to the closing of the Company's initial public offering, the
Company's shareholders approved an amendment to the Company's Certificate of
Incorporation which took 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 were reclassified as common stock.
This reclassification precluded the automatic conversion feature of the Class A,
Class B and Class C Convertible Preferred Stock.
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.
54
<PAGE> 57
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The Company accounted for the Class B, Class C and Class D Preferred as
mandatorily redeemable preferred stock. Accordingly, the Company accrued
dividends and amortized any difference between the carrying value and the
redemption value over the projected redemption period with a charge to
additional paid-in capital ("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 amount
charged to APIC related to the Class B and Class C Preferred was $5,160 and
$482, respectively, for the year ended December 31, 1999.
The Class D Preferred provided that, upon redemption the holders would
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 varied based on the timing 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"). At a minimum, the number of Class B
Common Stock shares to be issued would equal 3,722,502 shares. The proceeds from
the issuance of the Class D Preferred were 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 could potentially increase up to a maximum of 5,279,293 shares,
depending on the timing of a Qualified Public Offering. The fair value of the
additional 1,556,791 potentially issuable shares of Class B Common Stock was
determined at the end of each reporting period was ratably charged to net loss
available to common stockholders, over the projected 7-year redemption period.
Through the date of the closing of the initial public offering, the Company
accrued the 12% dividend on the Class D Preferred and accreted any difference
between the carrying value and the redemption value over the projected 7-year
redemption period with a charge to APIC.
Upon the closing of the Company's initial public offering in June 1999, the
Class D Preferred stockholders received 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 or 3,264,115 shares. This transaction resulted 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.
The amount of this charge was $12,341.
The rights, preferences and privileges of the Class B, Class C and Class D
Preferred were as follows:
VOTING
Class B Preferred had the same number of votes as each share of Class A
Common Stock into which such preferred stock could have been converted. Class C
and Class D Preferred had no voting rights.
DIVIDENDS
The Company could have made distributions to the holders of Class B and
Class C Preferred; however, there was no requirement for dividends and none were
approved. The Class D Preferred accrued dividends at the rate of 12% per annum.
55
<PAGE> 58
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
CONVERSION
Each share of Class B and Class C Preferred was convertible at the option
of the holder into 100 shares of Class A Common Stock. Such conversion was
automatic upon the effective date of a Qualified Public Offering. The Class D
Preferred was not convertible.
REDEMPTION
The Class B and Class C Preferred stockholders had 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 would have been calculated as 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 was 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 Class D Preferred stockholders had the right to require the Company to
redeem the shares only upon the occurrence of certain events. Holders of Class D
Preferred had 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 would have been equal
to the liquidation preference amount plus all accrued and unpaid dividends plus
a certain number of shares of Class B Common Stock, which varied depending on
the timing of a Qualified Public Offering, as follows:
<TABLE>
<CAPTION>
NUMBER OF CLASS B
COMMON STOCK
DATE OF QUALIFIED PUBLIC OFFERING SHARES 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 had a 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 equaled $325 per share for the Class B and Class C Preferred
and $1,000 per share for the Class D Preferred plus any declared and unpaid
dividends, subject to adjustment.
The following is a summary of the carrying value of the mandatorily
redeemable preferred stock at December 31, 1998. There was no mandatorily
redeemable preferred stock outstanding at December 31, 1999.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------
REDEMPTION CARRYING
VALUE VALUE
---------- --------
<S> <C> <C>
Class B Preferred........................................... $93,829 37,683
Class C Preferred........................................... 8,770 3,523
Class D Preferred........................................... 50,552 24,473
-------
$65,679
=======
</TABLE>
56
<PAGE> 59
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
9. MANDATORILY REDEEMABLE PREFERRED STOCK OF SUBSIDIARY
In November 1998, CFN sold 13,333,334 shares of CFN Series A Mandatorily
Redeemable Preferred Stock to General Electric for net proceeds of $9,839.
As more fully described in the Related Party Transactions note (See Note
16), in April 1999, the Company and CFN entered into several agreements with
affiliates of the General Electrical Company ("GE"). In one of the agreements,
GE committed to purchase 16,190,475 shares of CFN Series B Mandatorily
Redeemable Preferred Stock with a face value of $50,000. Warrants to purchase
iXL Enterprises, Inc. Common Stock were issued in conjunction with these
agreements with GE. The warrants granted to GE were valued using the Black
Scholes option pricing model and $11,200 of the value of these warrants was
allocated to the purchase of the CFN Series B Mandatorily Redeemable Preferred
Stock. As such, this $11,200 has been recorded as a reduction of Mandatorily
Redeemed Preferred Stock of subsidiary and an increase in APIC. This amount is
being accreted ratably over the redemption period to increase the carrying value
of the CFN Series B Mandatorily Redeemable Preferred Stock to its redemption
value of $50,000. CFN received net proceeds of approximately $49,300 from the
sale of the CFN Series B Mandatorily Redeemable Preferred. The amount charged to
APIC related to the accretion of the CFN Series B Mandatorily Redeemable
Preferred was $1,054 for the year ended December 31, 1999.
The rights, preferences and privileges of the 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 Mandatory Redeemable Preferred shares authorized, issued and
outstanding, respectively. As of December 31, 1999, there were 30,000,000,
29,523,809, and 29,523,809 shares of CFN Mandatorily Redeemable Preferred shares
authorized, issued and outstanding, respectively.
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 for the
CFN Series A Mandatorily Redeemable Preferred
57
<PAGE> 60
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
and approximately $3.09 per share for the CFN Series B Mandatorily Redeemable
Preferred which are subject to adjustment if certain events occur that would
otherwise dilute the liquidation rights of the CFN Mandatorily Redeemable
Preferred. The amount to be paid to the CFN Mandatorily Redeemable Preferred
stockholders equals the liquidation value plus any declared and unpaid dividends
as of the liquidation date. CFN Mandatorily Redeemable Preferred stockholders
will not participate in any balance remaining after such amounts have been paid.
REDEMPTION
CFN Mandatorily Redeemable Preferred stockholders have the right at their
option, to require CFN to redeem any or all of the CFN Mandatorily Redeemable
Preferred on or after December 31, 2005. Such redemption will be a redemption
price per share equal to the Liquidation Value plus all declared and unpaid
dividends. As of December 31, 1998, the carrying value of the CFN Mandatorily
Redeemable Preferred equaled its redemption value. The following is a summary of
the carrying value of the CFN Mandatorily Redeemable Preferred as of December
31, 1999:
<TABLE>
<CAPTION>
REDEMPTION CARRYING
VALUE VALUE
---------- --------
<S> <C> <C>
CFN Series A Mandatorily Redeemable Preferred............... $10,000 $ 9,839
CFN Series B Mandatorily Redeemable Preferred............... 50,000 39,116
-------
$48,955
=======
</TABLE>
10. STOCKHOLDERS' EQUITY
As of December 31, 1998, the Company's capital stock consisted 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, 1998, there were 75,000,000 shares of
Class A Common Stock authorized and no shares issued or outstanding.
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.
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.
On June 8, 1999, the Company completed its initial public offering and
received net proceeds of approximately $61,700 from the sale of 6,000,000 shares
of common stock. Also, on June 8, 1999, the Company received net proceeds of
approximately $23,500 from the sale of 2,000,000 shares of common stock in the
private placement with GE. On June 14, 1999, the underwriters exercised their
overallotment option resulting in the sale of 900,000 additional shares of
common stock for net proceeds of approximately $10,000.
On November 24, 1999, the Company completed a secondary public offering and
received net proceeds of approximately $68,600 from the sale of 2,000,000 shares
of common stock. On December 14, 1999, the underwriters exercised their
overallotment option resulting in the sale of 50,000 additional shares of common
stock for net proceeds of approximately $1,800.
Upon the closing of the Company's initial public offering, all outstanding
shares of Class A, Class B and Class C Convertible Preferred Stock, Class D
non-voting Preferred Stock, and Class A and Class B Common Stock were
reclassified as Common Stock. This reclassification precluded the automatic
conversion feature of the Class A, Class B and Class C Convertible Preferred
Stock.
58
<PAGE> 61
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The Class D Preferred Stockholders, as a result of the reclassification,
received 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 accounts or 3,264,115
shares.
The rights, preferences and privileges with respect to the Class A and
Class B Common Stock and Class A Preferred were as follows:
Voting. Holders of shares of Class A Common Stock were entitled to ten
votes per share, holders of Class B Common Stock were entitled to one vote per
share and holders of Class A Preferred were entitled to voting rights as if the
stock had been converted into Class A Common Stock.
Dividends. Holders of shares of Class A and Class B Common Stock were
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 were 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 was convertible into 100 shares of Class
A Common Stock. This conversion rate was subject to change if certain events
occurred that would otherwise dilute the conversion rights of the Class A
Preferred.
Liquidation. The Class A Preferred had liquidation preference over the
Class A and Class B Common Stock. The liquidation value for the Class A
Preferred was equal the amount invested, which ranged from $100 to $1,000 per
share, plus any declared and unpaid dividends.
WARRANTS
In November 1998, the Company issued warrants to purchase 500,000 shares of
Class A Common Stock at $10 per share to affiliates of the General Electric
Company (GE). 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 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. A total of $1,050 was recorded as contra-revenue relating to this
agreement in the year ended December 31, 1999. 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.
As more fully described in the Related Party Transactions note, in 1999 the
Company granted to GE warrants to purchase 2,500,000 shares of common stock.
59
<PAGE> 62
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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.
During November 1999, the Company converted 100,000 shares of common stock
held in escrow into treasury stock.
11. INCOME TAXES
The components of the benefit (provision) for income taxes consist of the
following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Current
State..................................................... $ -- $ -- $ --
------ ------ ------
Deferred
State..................................................... -- -- --
Federal................................................... 2,782 -- --
------ ------ ------
2,782 -- --
------ ------ ------
$2,782 $ -- $ --
====== ====== ======
</TABLE>
A reconciliation of the federal statutory rate and the effective income tax
rate follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Statutory federal tax rate (34%)........................ $ 6,195 $ 16,614 $ 23,872
Nondeductible amortization.............................. (1,684) (2,667) (3,666)
State income tax........................................ 252 743 2,780
Earnings (losses) of foreign subsidiaries............... -- (860) 152
Change in valuation allowance, including effect of
acquisition........................................... (2,159) (13,427) (22,892)
Other................................................... 178 (403) (246)
------- -------- --------
$ 2,782 $ -- $ --
======= ======== ========
</TABLE>
60
<PAGE> 63
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,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Gross deferred tax assets
Allowance for doubtful accounts........................... $ (349) $ (1,526)
Loss in equity investment................................. (750) (1,290)
Net operating loss carryforward........................... (16,923) (45,819)
Valuation allowance....................................... 11,400 42,121
-------- --------
(6,622) (6,514)
-------- --------
Gross deferred tax liabilities
Property and equipment.................................... 842 373
Intangible assets......................................... 5,603 1,439
Unrealized gain on marketable securities.................. -- 4,646
Other..................................................... 177 56
-------- --------
6,622 6,514
-------- --------
Net deferred tax asset...................................... $ -- $ --
======== ========
</TABLE>
In June 1999, the Company's ownership in CFN decreased to less than 80%. As
a result, CFN is no longer included in the Company's consolidated group for tax
purposes and the net operating loss carryforwards applicable to CFN may only be
utilized by it. As of December 31, 1999, CFN had net operating loss
carryforwards for federal income tax purposes of approximately $53,000.
As of December 31, 1999, the Company had net operating loss carryforwards
for federal income tax purposes (exclusive of CFN) of approximately $67,000
which includes net operating loss carryforwards from acquisitions of
approximately $9,000. Of the Company's net operating net operating loss
carryforwards, $22,000 related to tax deductions from exercised stock options
which will be tax-effected and reflected as additional paid-in-capital when
realized.
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 and CFN experienced ownership changes as
defined under Section 382 of the Internal Revenue Code in June 1999. As a result
of the ownership changes, net operating loss carryforwards for the Company and
CFN of approximately $36,000 and $23,000, respectively, which were incurred
prior to the date of change, are subject to annual limitations on their future
use. As of December 31, 1999, a valuation allowance has been established against
the deferred tax assets which the Company and CFN do not believe are more likely
than not to be realized.
12. 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 Common Stock not to exceed an aggregate maximum of
25,000,000 shares to officers and employees, of which 21,850,895 were
outstanding as of December 31, 1999. 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
61
<PAGE> 64
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
employees of the Company. The 1998 Stock Option Plan authorizes the granting of
up to an aggregate maximum of 1,000,000 options, of which 599,064 were
outstanding as of December 31, 1999.
In February 1999, the Board of Directors of the Company adopted the 1999
Employee Stock Option Plan (the "1999 Stock Option Plan"), which contains
essentially the same terms as the 1996 Stock Option Plan with additional change
in control provisions. Such provisions provide that all options that are not
vested will become vested upon a change in control, unless the options are
either assumed or substituted for equivalent options. The 1999 Stock Option Plan
authorizes the granting of up to an aggregate maximum of 5,000,000 options, of
which 4,716,767 were outstanding as of December 31, 1999.
In November 1999, the Board of Directors of the Company adopted the 1999B
Employee Stock Option Plan (the "1999B Stock Option Plan"), which contains
essentially the same terms as the 1999 Stock Option Plan. The 1999B Stock Option
Plan authorizes the granting of up to an aggregate maximum of 10,000,000
options, of which 1,695,810 were outstanding as of December 31, 1999.
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 APB25 and related interpretations in accounting for the
stock option plans. During 1997, 1998 and 1999, $0, $1,641, and $4,920,
respectively, of compensation expense was recognized. Stock options issued in
connection with acquisitions were accounted for as purchase price.
Had compensation expense for the Company's Plan been determined under the
provisions of FAS 123 based on the fair value at the grant date, the Company's
net loss and loss per share would have been increased to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net loss
As reported.......................................... $(15,440) $(48,866) $(70,213)
Pro forma............................................ (15,501) (50,388) (86,323)
Basis and diluted net loss per common share
As reported.......................................... $ (2.36) $ (4.92) $ (2.08)
Pro forma............................................ (2.37) (5.05) (2.45)
</TABLE>
The minimum value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants during the 1997, 1998 and 1999 periods,
respectively; dividend yield of 0% for all periods; expected volatility of 0%,
0% and 85%, risk free interest rate of 5.7%, 5.0% and 5.75%, expected life of 4
years, 4 years and 4 years.
62
<PAGE> 65
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
A summary of stock options as of December 31, 1997, 1998 and 1999 and
activity during the period ending on those dates is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period.......................... 1,915,500 $1.77 5,549,200 $2.35 18,226,112 $ 5.89
Granted........................... 3,847,200 $2.59 13,310,331 $7.31 15,155,523 $17.78
Exercised......................... -- $ -- (57,800) $ .01 (930,080) $ 3.02
Forfeited......................... (213,500) $1.03 (575,619) $5.39 (3,589,019) $11.17
--------- ----- ---------- ----- ---------- ------
Outstanding at the end of
period.......................... 5,549,200 $2.35 18,226,112 $5.89 28,862,536 $11.50
Options exercisable at end of
period.......................... 3,045,300 $2.03 7,833,247 $3.88 11,223,327
--------- ----- ---------- ----- ---------- ------
Weighted average fair value of
options granted during the
period
</TABLE>
<TABLE>
<CAPTION>
1997 1998 1999
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE FAIR AVERAGE FAIR AVERAGE FAIR
EXERCISE MARKET EXERCISE MARKET EXERCISE MARKET
OPTION GRANTED DURING THE YEAR PRICE VALUE PRICE VALUE PRICE VALUE
- ------------------------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Option price > fair market value......... $3.45 $ -- $9.87 $.02 $14.33 $ 5.76
Option price = fair market value......... $ -- $ -- $5.00 $.94 $25.72 $16.69
Option price < fair market value......... $ .89 $1.38 $3.42 $.78 $10.85 $ 5.86
</TABLE>
The following table summarizes information about stock options outstanding
at December 31,1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- -----------------------
NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
OUTSTANDING AVERAGE AVERAGE EXERCISABLE AVERAGE
AT REMAINING EXERCISE AT EXERCISE
DECEMBER 31, CONTRACTUAL PRICE DECEMBER 31, PRICE
RANGE OF EXERCISE PRICES 1999 LIFE $ 1999 $
- ------------------------ ------------ ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$ 0.010 -- $ 2.500 3,782,548 6.54 $ 1.6303 3,432,038 $ 1.5932
$ 2.600 -- $ 4.500 4,356,032 8.06 $ 3.9457 2,881,012 $ 3.8891
$ 5.000 -- $ 6.000 1,684,180 8.29 $ 5.0648 1,038,663 $ 5.0512
$10.000 -- $10.000 9,204,494 8.89 $10.0000 3,694,807 $10.0000
$15.000 -- $15.000 4,910,537 9.16 $15.0000 151,711 $15.0000
$17.125 -- $31.625 3,156,246 9.41 $23.0413 25,096 $27.0800
$32.750 -- $54.500 1,768,499 9.89 $35.8717 0 $ 0.0000
---------- ----------
28,862,536 11,223,327
========== ==========
</TABLE>
13. 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. The
compensation committee of the Board of Directors has approved a $1,800
discretionary contribution to the Plan. Such contribution has been accrued as of
December 31, 1999.
63
<PAGE> 66
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
14. COMMITMENTS AND CONTINGENCIES
Certain operating facilities and equipment are leased under non-cancelable
agreements. Operating lease expense charged to operations was approximately $956
in 1997, $3,844 in 1998 and $8,125 in 1999. As of December 31, 1999, the
approximate future minimum lease payments for noncancelable operating leases are
as follows:
<TABLE>
<S> <C>
2000........................................................ $ 13,999
2001........................................................ 15,889
2002........................................................ 14,635
2003........................................................ 13,638
2004........................................................ 12,827
Thereafter.................................................. 53,485
--------
$124,473
========
</TABLE>
As of December 31, 1999, the Company has commitments for capital
expenditures of approximately $24,794, primarily in connection with expansion
and improvement of its Atlanta, Richmond and Chicago 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.
15. 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, 1999 is set forth below. For the year ended December 31, 1998,
CFN's information includes the period from December 20, 1996 (date of
acquisition) through December 31, 1997:
<TABLE>
<CAPTION>
STRATEGIC
INTERNET
1999 SERVICES CFN ELIMINATIONS TOTAL
---- --------- -------- ------------ --------
<S> <C> <C> <C> <C>
Revenues.................................... $216,870 $ 1,850 $(377) $218,343
Loss from operations........................ (34,444) (38,133) -- (72,577)
Loss of equity investment................... (65) -- -- (65)
Interest income............................. 2,440 1,137 -- 3,577
Interest expense............................ (973) (14) -- (987)
Amortization................................ 17,644 530 -- 18,174
Depreciation................................ 10,975 1,882 -- 12,857
Identifiable assets......................... 281,211 34,368 -- 315,579
Capital expenditures........................ 30,290 6,947 -- 37,237
</TABLE>
64
<PAGE> 67
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
STRATEGIC EXERCISE
INTERNET PRICE
1998 SERVICES CFN ELIMINATIONS TOTAL
---- --------- -------- ------------ --------
<S> <C> <C> <C> <C>
Revenues.................................... $ 64,658 $ 251 $(142) $ 64,767
Loss from operations........................ (33,619) (13,559) -- (47,178)
Loss of 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
</TABLE>
16. 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 in 1997, $628 in 1998, and $1,602 in 1999 under this
lease.
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.
The Company has 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. During
1999, the Company paid Kelso 62,500 shares of Common Stock valued at $750 in
connection with services provided to the Company during its initial public
offering.
The Company recognized revenues in 1997, 1998 and 1999 from providing
services to certain of its investors, and entities related to its investors, of
$100, $2,177, and $30,005, respectively.
A member of the Company's Board of Directors is also the CEO of
Healtheon/WebMD. In 1997, 1998 and 1999 the Company recognized revenue of
approximately $53, $5,540 and $3,311, respectively, from Healtheon/WebMD, or its
predecessor companies.
As of December 31, 1999 amounts due from GE comprised approximately $11,300
or 18% of the accounts receivable. Amounts relating to GE contracts comprised
approximately $3,400 or 16% of the unbilled revenues as of December 31, 1999.
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 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 proposed 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
65
<PAGE> 68
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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
$20,000 service agreement is $4,800. During 1999 the related charges were
recorded as contra-revenue as the services were 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 $12,600 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 to purchase 1.5 million shares of the
Company's Common stock has been allocated as follows:
- $200 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 expensed in 1999.
- $1,200 of the value of the warrants have been allocated to the agreement
by General Electric to provide marketing services to iXL and CFN. Such
amount has been reflected in the consolidated financial statements in
prepaid expenses and other assets and is being expensed when General
Electric performs the marketing services under the agreement. The amount
charged to expense during 1999 under this agreement was $820.
- The remaining $11,200 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 is
being accreted ratably over the redemption period to increase the
carrying value of the CFN Series B Convertible Preferred Stock to its
redemption value of $50,000. This accretion impacts 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.
17. SUBSEQUENT EVENTS
On January 7, 2000, the Company entered into a senior secured revolving
syndicated credit facility (the "Credit Facility") with several banks providing
for borrowings of up to $50,000. The Credit Facility expires December 31, 2002.
The Credit Agreement bears interest payable at least quarterly at a rate of
either 2.75% plus an adjusted LIBOR rate of 2% plus the greater of Chase
Manhattan Bank's prime rate or .5% plus the federal funds rate. Credit Facility
is secured by liens on substantially all of the assets of the Company's domestic
subsidiaries except CFN and CFN subsidiaries and 65% of the stock of iXL's
foreign subsidiaries, including the pledge of the capital stock of the same
subsidiary companies. The Credit Facility provides for borrowings based upon a
borrowing base formula. A commitment fee is charged on the unused portion of the
Credit Facility.
66
<PAGE> 69
IXL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
In February 2000, the Company contributed its existing film footage library
with a book value of less than $500 to a separate company known as FootageNow,
Inc. in exchange for equity in FootageNow, Inc. In addition, Second Line Search,
Inc. and other affiliated companies will be merged into FootageNow, Inc. in a
series of transactions that are expected to close in February 2000. Prior to the
closing, FootageNow, Inc. is raising additional capital in the form of cash. The
Chairman and CEO of the Company will make an investment of $250 and will own
less than 1% of FootageNow, Inc. subsequent to all the planned transactions.
After giving effect to the contemplated transactions, the Company will own
approximately 15%-19% of FootageNow, Inc.
In January 2000, the Company acquired Tessera Enterprise Systems, Inc. in
exchange for $3,700 and 3,588,655 shares of the Company's common stock.
67
<PAGE> 70
SCHEDULE II
IXL ENTERPRISES, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
<CAPTION>
BALANCE AT CHARGES TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND AND END
DESCRIPTION OF PERIOD EXPENSES RECLASSIFICATIONS(1) OTHER(2) OF PERIOD
- ----------- ---------- ---------- -------------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts for the
year ended December 31,
1999.................................. $796 5,111 (1,886) -- 4,021
1998.................................. 138 1,227 (765) 196 796
1997.................................. 150 118 (130) -- 138
</TABLE>
- ---------------
(1) Amounts represent write-offs.
(2) Amounts represent the beginning balances of the allowance for doubtful
accounts for the companies acquired during the respective periods.
68
<PAGE> 71
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS -- UNAUDITED.
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED FOR THE QUARTER ENDED
---------------------------------------------- ----------------------------------------------
3/31/1998 6/30/1998 9/30/1998 12/31/1998 3/31/1999 6/30/1999 9/30/1999 12/31/1999
--------- --------- --------- ---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................... $ 6,864 $ 10,520 $ 18,123 $ 29,260 $ 33,012 $ 45,896 $ 63,731 $ 75,704
Cost of revenue........... 4,899 8,086 12,628 18,629 19,583 27,044 36,664 42,434
------- -------- -------- -------- -------- -------- -------- --------
Gross profit............ 1,965 2,434 5,495 10,631 13,429 18,852 27,067 33,270
Selling expenses.......... 2,036 2,887 4,573 7,829 8,150 11,308 12,960 23,252
General and administrative
expenses................ 2,956 5,862 7,021 14,324 15,725 15,320 19,080 23,714
Research and development
expenses................ 907 1,322 1,244 935 1,058 1,337 1,094 1,166
Depreciation expense...... 699 955 1,261 2,302 2,284 2,931 3,284 4,358
Amortization expense...... 1,182 1,709 3,101 4,598 4,351 4,333 4,329 5,161
------- -------- -------- -------- -------- -------- -------- --------
Loss from operations...... (5,815) (10,301) (11,705) (19,357) (18,139) (16,377) (13,680) (24,381)
Other income (expense),
net..................... 36 17 (13) (68) 69 (183) (69) 22
Loss on equity
investment.............. (395) (508) (384) (353) (65) -- -- --
Interest income........... 264 106 181 199 216 517 1,447 1,397
Interest expense.......... (28) (19) (275) (448) (336) (357) (136) (158)
------- -------- -------- -------- -------- -------- -------- --------
Loss before taxes......... (5,938) (10,705) (12,196) (20,027) (18,255) (16,400) (12,438) (23,120)
Income tax expense
(benefit)............... -- -- -- -- -- -- -- --
------- -------- -------- -------- -------- -------- -------- --------
Net loss......... $(5,938) $(10,705) $(12,196) $(20,027) $(18,255) $(16,400) $(12,438) $(23,120)
======= ======== ======== ======== ======== ======== ======== ========
Dividends and accretion on
MRPS.................... (725) (1,753) (2,618) (4,003) (5,293) (14,769) (452) (452)
------- -------- -------- -------- -------- -------- -------- --------
Net loss
available to
common
stockholders... $(6,663) $(12,458) $(14,814) $(24,030) $(23,548) $(31,169) $(12,890) $(23,572)
======= ======== ======== ======== ======== ======== ======== ========
Weighted average shares
outstanding............. 8,592 9,657 12,796 16,063 16,082 28,719 64,539 65,648
Basic and diluted net loss
per share............... $ (0.78) $ (1.29) $ (1.16) $ (1.50) $ (1.46) $ (1.09) $ (0.20) $ (0.36)
======= ======== ======== ======== ======== ======== ======== ========
</TABLE>
69
<PAGE> 72
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to this item is incorporated by reference from the
Company's Definitive 2000 Proxy Statement which shall be filed with the
Securities and Exchange Commission within 120 days of the end of its fiscal
year.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is incorporated by reference from the
Company's Definitive 2000 Proxy Statement which shall be filed with the
Securities and Exchange Commission within 120 days of the end of its fiscal
year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item is incorporated by reference from the
Company's Definitive 2000 Proxy Statement which shall be filed with the
Securities and Exchange Commission within 120 days of the end of its fiscal
year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item is incorporated by reference from the
Company's Definitive 2000 Proxy Statement which shall be filed with the
Securities and Exchange Commission within 120 days of the end of its fiscal
year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K.
1. Financial Statements
The Consolidated Financial Statements filed as part of this report are
listed and indexed under Item 8 Financial Statements and Supplementary
Data.
2. Financial Statement Schedules
The Financial Statement Schedules filed as part of this report are
listed and indexed under Item 8 Financial Statements and Supplementary
Data.
3. Exhibits
Items marked with an asterisk, "*," relate to management contracts or
compensatory plans or arrangements.
<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.+
</TABLE>
70
<PAGE> 73
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
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.+
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.+
</TABLE>
71
<PAGE> 74
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
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.+
2.34 Agreement and Plan of Merger, dated as of October 4, 1999,
by and between iXL Enterprises, Inc., iXL-Massachusetts,
Inc., and Tessera Enterprise Systems, Inc.++
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.+
4.7 Third Amended and Restated Stockholders' Agreement.++++
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.+
</TABLE>
72
<PAGE> 75
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
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.+
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.+
</TABLE>
73
<PAGE> 76
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
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.+
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.+
</TABLE>
74
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
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 Amended and Restated Registration Rights Agreement dated as
of October 28, 1999 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., together with the First Amendment to such agreement,
dated November 2, 1999.+++
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.++++
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.+
</TABLE>
75
<PAGE> 78
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
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.++++
10.69* iXL Enterprises, Inc. 1999B Employee Stock Option Plan.+++
10.70 U.S. Purchase Agreement dated as of November 18, 1999 by and
among iXL Enterprises, Inc. and the underwriters listed
therein.++++
10.71 International Purchase Agreement dated as of November 18,
1999 by and among iXL Enterprises, Inc. and the underwriters
listed therein.++++
10.72 Credit Agreement dated as of January 7, 2000 among iXL
Enterprises, Inc., the lenders party hereto and The Chase
Manhattan Bank, as Administrative Agent and First Union
National Bank as Syndication Agent.
10.73* iXL Enterprises, Inc. Tessera 1995 Stock Option Plan.
11.1 Statement re Computation of Net Loss Per Share of Common
Stock.
21.1 Subsidiaries of the Company.
23.1 Consent of PricewaterhouseCoopers LLP.
27.1 Financial Data Schedule (for SEC use only).
</TABLE>
- ---------------
+ Incorporated by reference to iXL's Registration Statement on Form S-1
(No. 333-71937).
++ Incorporated by reference to iXL's Form 8-K, dated October 12, 1999.
+++ Incorporated by reference to iXL's Registration Statement on Form S-1
(No. 333-88847).
++++ Incorporated by reference to iXL's Registration Statement on Form S-4
(No. 333-81731).
(b). The following Reports on Form 8-K were filed during the three months
ended December 31, 1999:
<TABLE>
<CAPTION>
DATE OF REPORT DATE FILED ITEMS INCLUDED
- -------------- ---------- --------------
<S> <C> <C>
10/04/99... 10/12/99 5, 7
</TABLE>
76
<PAGE> 79
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Atlanta, State of Georgia, on February 15, 2000.
iXL Enterprises, Inc.,
a Delaware corporation
By: /s/ M. WAYNE BOYLSTON
------------------------------------
Name: M. Wayne Boylston
Title: Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ U. BERTRAM ELLIS, JR. Chief Executive Officer February 15, 2000
- ----------------------------------------------------- (Principal Executive
U. Bertram Ellis, Jr. Officer)
/s/ M. WAYNE BOYLSTON Chief Financial Officer February 15, 2000
- ----------------------------------------------------- (Principal Financial
M. Wayne Boylston Officer)
/s/ JEFFREY T. ARNOLD Director February 15, 2000
- -----------------------------------------------------
Jeffrey T. Arnold
/s/ FRANK K. BYNUM, JR. Director February 15, 2000
- -----------------------------------------------------
Frank K. Bynum, Jr.
/s/ JEROME D. COLONNA Director February 15, 2000
- -----------------------------------------------------
Jerome D. Colonna
/s/ WILLIAM C. NUSSEY Director February 15, 2000
- -----------------------------------------------------
William C. Nussey
/s/ THOMAS G. ROSENCRANTS Director February 15, 2000
- -----------------------------------------------------
Thomas G. Rosencrants
/s/ THOMAS R. WALL, IV Director February 15, 2000
- -----------------------------------------------------
Thomas R. Wall, IV
/s/ JEFFREY C. WALKER Director February 15, 2000
- -----------------------------------------------------
Jeffrey C. Walker
/s/ GARY C. WENDT Director February 15, 2000
- -----------------------------------------------------
Gary C. Wendt
</TABLE>
77
<PAGE> 1
EXHIBIT 10.72
==============================================================================
CREDIT AGREEMENT
dated as of
January 7, 2000
among
iXL ENTERPRISES, INC.,
The Lenders Party Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
---------------------------
CHASE SECURITIES INC.,
as Lead Arranger and Book Manager
---------------------------
First Union National Bank
as Syndication Agent
==============================================================================
<PAGE> 2
2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms.............................................................................1
SECTION 1.02. Classification of Loans and Borrowings...................................................25
SECTION 1.03. Terms Generally..........................................................................25
SECTION 1.04. Accounting Terms; GAAP...................................................................25
ARTICLE II
The Credits
-----------
SECTION 2.01. Commitments..............................................................................26
SECTION 2.02. Loans and Borrowings.....................................................................26
SECTION 2.03. Requests for Borrowings..................................................................26
SECTION 2.04. Letters of Credit........................................................................27
SECTION 2.05. Funding of Borrowings....................................................................32
SECTION 2.06. Interest Elections.......................................................................33
SECTION 2.07. Termination and Reduction of Commitments.................................................34
SECTION 2.08. Repayment of Loans; Evidence of Debt.....................................................35
SECTION 2.09. Prepayment of Loans......................................................................36
SECTION 2.10. Fees.....................................................................................37
SECTION 2.11. Interest.................................................................................38
SECTION 2.12. Alternate Rate of Interest...............................................................39
SECTION 2.13. Increased Costs..........................................................................39
SECTION 2.14. Break Funding Payments...................................................................40
SECTION 2.15. Taxes....................................................................................41
SECTION 2.16. Payments Generally; Pro Rata Treatment;
Sharing of Set-offs.........................................................42
SECTION 2.17. Mitigation Obligations; Replacement of Lenders...........................................44
ARTICLE III
Representations and Warranties
------------------------------
SECTION 3.01. Organization; Powers.....................................................................45
SECTION 3.02. Authorization; Enforceability............................................................45
</TABLE>
<PAGE> 3
3
<TABLE>
<S> <C>
SECTION 3.03. Governmental Approvals; No Conflicts.....................................................46
SECTION 3.04. Financial Condition; No Material Adverse Change..........................................46
SECTION 3.05. Properties...............................................................................47
SECTION 3.06. Litigation and Environmental Matters.....................................................47
SECTION 3.07. Compliance with Laws and Agreements......................................................48
SECTION 3.08. Investment and Holding Company Status....................................................48
SECTION 3.09. Taxes....................................................................................48
SECTION 3.10. ERISA....................................................................................48
SECTION 3.11. Disclosure...............................................................................49
SECTION 3.12. Subsidiaries.............................................................................49
SECTION 3.13. Insurance................................................................................49
SECTION 3.14. Labor Matters............................................................................49
SECTION 3.15. Solvency.................................................................................49
SECTION 3.16. Security Documents.......................................................................50
SECTION 3.17. Year 2000................................................................................51
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date...........................................................................51
SECTION 4.02. Each Credit Event........................................................................54
ARTICLE V
Affirmative Covenants
---------------------
SECTION 5.01. Financial Statements and Other Information...............................................55
SECTION 5.02. Notices of Material Events...............................................................57
SECTION 5.03. Information Regarding Collateral.........................................................58
SECTION 5.04. Existence; Conduct of Business...........................................................59
SECTION 5.05. Payment of Obligations...................................................................59
SECTION 5.06. Maintenance of Properties................................................................59
SECTION 5.07. Insurance................................................................................59
SECTION 5.08. Books and Records; Inspection and Collateral
Review Rights...............................................................59
SECTION 5.09. Compliance with Laws.....................................................................60
SECTION 5.10. Use of Proceeds and Letters of Credit....................................................60
SECTION 5.11. Additional Subsidiaries..................................................................61
SECTION 5.12. Further Assurances.......................................................................61
SECTION 5.13. Federal Reserve Regulations..............................................................62
SECTION 5.14. Bank Account.............................................................................62
ARTICLE VI
Negative Covenants
------------------
</TABLE>
<PAGE> 4
4
<TABLE>
<S> <C>
SECTION 6.01. Indebtedness and Preferred Stock.........................................................63
SECTION 6.02. Liens....................................................................................64
SECTION 6.03. Fundamental Changes......................................................................65
SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions................................................................66
SECTION 6.05. Asset Sales..............................................................................68
SECTION 6.06. Sale and Lease-Back Transactions.........................................................68
SECTION 6.07. Hedging Agreements.......................................................................69
SECTION 6.08. Restricted Payments; Certain Payments of
Indebtedness................................................................69
SECTION 6.09. Transactions with Affiliates.............................................................70
SECTION 6.10. Restrictive Agreements...................................................................70
SECTION 6.11. Amendment of Material Documents..........................................................71
SECTION 6.12. Subsidiaries.............................................................................71
SECTION 6.13. Capital Expenditures.....................................................................71
SECTION 6.14. Minimum Consolidated EBITDA..............................................................71
SECTION 6.15. Total Debt to Consolidated Net Worth.....................................................72
SECTION 6.16. Fiscal Year..............................................................................72
ARTICLE VII
Events of Default.......................................................................................71
- -----------------
ARTICLE VIII
The Administrative Agent................................................................................74
- ------------------------
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Notices..................................................................................78
SECTION 9.02. Waivers; Amendments......................................................................78
SECTION 9.03. Expenses; Indemnity; Damage Waiver.......................................................79
SECTION 9.04. Successors and Assigns...................................................................81
SECTION 9.05. Survival.................................................................................84
SECTION 9.06. Counterparts; Integration; Effectiveness.................................................84
SECTION 9.07. Severability.............................................................................84
SECTION 9.08. Right of Set-off.........................................................................84
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service
of Process..................................................................85
SECTION 9.10. WAIVER OF JURY TRIAL.....................................................................86
SECTION 9.11. Headings.................................................................................86
SECTION 9.12. Confidentiality..........................................................................86
</TABLE>
<PAGE> 5
5
<TABLE>
<S> <C>
SECTION 9.13. Interest Rate Limitation.................................................................87
SCHEDULES:
- ----------
Schedule 2.01 -- Commitments
Schedule 3.04 -- Contingent Liabilities
Schedule 3.05 -- Real Property
Schedule 3.06 -- Disclosed Matters
Schedule 3.12 -- Subsidiaries
Schedule 3.13 -- Insurance
Schedule 4.01 -- Non-Pledgor Subsidiary Loan Parties
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
Schedule 6.04 -- Existing Investments
Schedule 6.05 -- Asset Sales
Schedule 6.10 -- Existing Restrictions
EXHIBITS:
- ---------
Exhibit A -- Form of Assignment and Acceptance
Exhibit B-1 -- Form of Opinion of Borrower's Counsel
Exhibit B-2 -- Form of Opinion of Greenberg & Traurig, Counsel to the Loan Parties
Exhibit C -- Form of Guarantee Agreement
Exhibit D -- Form of Indemnity, Subrogation and Contribution Agreement
Exhibit E -- Form of Pledge Agreement
Exhibit F -- Form of Security Agreement
Exhibit G -- Form of Borrowing Base Certificate
</TABLE>
<PAGE> 6
CREDIT AGREEMENT dated as of January 7,
2000, among iXL ENTERPRISES, INC., the LENDERS party
hereto, THE CHASE MANHATTAN BANK, as Administrative
Agent and Collateral Agent and FIRST UNION NATIONAL
BANK as Syndication Agent.
The Borrower (such term and each other capitalized term used
herein having the meaning given in Article I) has requested that the Lenders
extend credit to the Borrower in the form of Revolving Loans at any time, and
from time to time prior to the Revolving Maturity Date, in an aggregate
principal amount not in excess of $50,000,000. The proceeds of the Revolving
Loans will be used to refinance outstanding indebtedness of the Borrower and
for other general purposes of the Borrower including Permitted Acquisitions and
capital expenditures permitted hereunder.
The Lenders are willing to extend such credit to the Borrower
on the terms and subject to the conditions set forth herein. Accordingly, the
parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are
bearing interest at a rate determined by reference to the Alternate Base Rate.
"Account" means any right to payment for goods sold or leased
or for services rendered, whether or not earned by performance.
"Account Debtor" means, with respect to any Account, the
obligor with respect to such Account.
"Accounts Receivable Subsidiary" means any active, wholly
owned operating Subsidiary of the Borrower that is also a Subsidiary Loan Party
and is organized under the laws of any state of the United States or any
territory thereof or the District of Columbia.
"Adjusted LIBO Rate" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%)
<PAGE> 7
2
equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the
Statutory Reserve Rate.
"Administrative Agent" means The Chase Manhattan Bank, in its
capacity as administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative
Questionnaire in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified.
"Alternate Base Rate" means, for any day, a rate per annum
equal to the greater of (a) the Prime Rate in effect on such day, and (b) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change
in the Alternate Base Rate due to a change in the Prime Rate or the Federal
Funds Effective Rate shall be effective from and including the effective date
of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively.
"AppGeneSys" means AppGeneSys, Inc., a wholly owned
subsidiary of iXL Memphis, Inc.
"Applicable Percentage" means, with respect to any Revolving
Lender, the percentage of the total Revolving Commitments represented by such
Lender's Revolving Commitment. If the Revolving Commitments have terminated or
expired, the Applicable Percentages shall be determined based upon the
Revolving Commitments most recently in effect, giving effect to any
assignments.
"Applicable Rate" means, for any day a rate of (a) 1.75% per
annum, in the case of an ABR Loan, or (b) 2.75% per annum, in the case of a
Eurodollar Loan; provided that if, on the most recent determination date (as
set forth below)(i) Consolidated EBITDA for the period of four consecutive
fiscal quarters ending on the last day of the fiscal quarter most recently
ended is equal to or greater than $75,000,000 and (ii) the ratio of Total Debt
to Consolidated Net Worth on the last day of such fiscal quarter is equal to or
less than .05 to 1.00, the "Applicable Rate" shall be a rate of (A) 1.50% per
annum, in the case of an ABR Loan, or (B) 2.50% per annum, in the case of a
Eurodollar Loan, as set forth below.
<PAGE> 8
3
For purposes of the foregoing, (i) the ratio of Total Debt to
Consolidated Net Worth and the amount of Consolidated EBITDA for a period of
four consecutive fiscal quarters shall be determined as of the end of each
fiscal quarter of the Borrower's fiscal year based upon the Borrower's
consolidated financial statements delivered pursuant to Section 5.01(a) or (b)
and (ii) any change in the Applicable Rate resulting from a change in
Consolidated EBITDA and the ratio of Total Debt to Consolidated Net Worth shall
be effective during the period commencing on and including the date of delivery
to the Administrative Agent of such consolidated financial statements
indicating such change and ending on the date immediately preceding the
effective date of the next such change; provided that the Applicable Rate shall
be deemed to be the rate set forth in clause(a) or (b) above, as the case may
be, (A) at any time that an Event of Default has occurred and is continuing or
(B) at the option of the Administrative Agent or at the request of the Required
Lenders if the Borrower fails to deliver the consolidated financial statements
required to be delivered by it pursuant to Section 5.01(a) or (b), during the
period from the expiration of the time for delivery thereof until such
consolidated financial statements are delivered.
"Assignment and Acceptance" means an assignment and
acceptance entered into by a Lender and an assignee (with the consent of any
party whose consent is required by Section 9.04), and accepted by the
Administrative Agent, in the form of Exhibit A or any other form approved by
the Administrative Agent.
"Attributable Debt" means, on any date, in respect of any
lease of the Borrower or any Subsidiary entered into as part of a sale and
leaseback transaction subject to Section 6.06, (i) if such lease is a Capital
Lease Obligation, the capitalized amount thereof that would appear on a balance
sheet of such Person prepared as of such date in accordance with GAAP, and (ii)
if such lease is not a Capital Lease Obligation, the capitalized amount of the
remaining lease payments under such lease that would appear on a balance sheet
of such Person prepared as of such dated in accordance with GAAP if such lease
were accounted for as a Capital Lease Obligation.
"Billed Receivable Availability" means 75% of Eligible Billed
Accounts Receivable.
"Board" means the Board of Governors of the Federal Reserve
System of the United States of America.
"Borrower" means iXL Enterprises, Inc., a Delaware
corporation.
<PAGE> 9
4
"Borrowing" means Loans of the same Type, made, converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect.
"Borrowing Base" means, an amount equal to the sum, without
duplication of (i) the Billed Receivable Availability, (ii) the Unbilled
Receivable Availability, and (iii) 25% of the Video Equipment Valuation. The
Borrowing Base shall be computed as of the end of each fiscal month and at such
other times as may be reasonably requested by the Collateral Agent; provided
that the Borrowing Base in effect at any time shall be determined by reference
to the most recent Borrowing Base Certificate delivered to the Administrative
Agent, absent any error in such Borrowing Base Certificate. Standards for
calculation of the Borrowing Base may be fixed from time to time solely by the
Administrative Agent in the exercise of its reasonable judgment, with any
changes in such standards to be effective 30 days after delivery of notice
thereof to the Borrower; provided, however that the Administrative Agent shall
obtain the prior written consent of the Required Lenders to any such change
with has the effect of increasing the amount of the Borrowing Base.
"Borrowing Base Certificate" means a certificate in the form
of Exhibit G or any other form approved by the Administrative Agent, together
with all attachments contemplated thereby.
"Borrowing Request" means a request by the Borrower for a
Borrowing in accordance with Section 2.03.
"Budgeted Amount" means $75,000,000.
"Business Day" means any day that is not a Saturday, Sunday
or other day on which commercial banks in New York City are authorized or
required by law to remain closed; provided that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.
"Capital Expenditures" means, for any period, (a) the
additions to property, plant and equipment and other capital expenditures of
the Borrower and its consolidated Subsidiaries (other than the CFN
Subsidiaries, the iXL Ventures Subsidiaries and the Joint Venture Subsidiaries)
that are (or would be) set forth in a consolidated statement of cash flows of
the Borrower for such period prepared in accordance with GAAP and (b) Capital
<PAGE> 10
5
Lease Obligations incurred by the Borrower and its consolidated Subsidiaries
(other than the CFN Subsidiaries, the iXL Ventures Subsidiaries and the Joint
Venture Subsidiaries) during such period.
"Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"CB Capital" means CB Capital Investors, L.P.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ' 9601 et seq.
"Change in Control" means, (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof)
other than the Equity Interest Holders of Equity Interests representing more
than 25% of the aggregate ordinary voting power represented by the issued and
outstanding Equity Interests of the Borrower or (b) occupation of a majority of
the seats (other than vacant seats) on the board of directors of the Borrower
by Persons who were neither (i) nominated by the board of directors of the
Borrower nor (ii) appointed by directors so nominated.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the Effective Date, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the Effective Date or (c) compliance by any Lender or the
Issuing Bank (or, for purposes of Section 2.13(b), by any lending office of
such Lender or by such Lender's or the Issuing Bank's holding company, if any)
with any request, guideline or directive (whether or not having the force of
law) of any Governmental Authority made or issued after the Effective Date.
"Chase Account" means the Collateral Proceeds Account,
account number 323142168, held at The Chase Manhattan Bank.
<PAGE> 11
6
"CFN" means Consumer Financial Network, Inc., a Delaware
corporation, 77% of the outstanding Equity Interests of which are, on the date
hereof, owned by the Borrower.
"CFN Subsidiaries" means CFN and its subsidiaries.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral" means any and all "Collateral", as defined in
any applicable Security Document.
"Collateral Agent" means The Chase Manhattan Bank, in its
capacity as collateral agent for the Secured Parties.
"Collateral Proceeds Account" means the account held at The
Chase Manhattan Bank, as defined in the Security Agreement.
"Commitment" means a Revolving Commitment.
"Consolidated EBITDA" means, for any period, Consolidated Net
Income for such period, plus, without duplication and to the extent deducted
from revenues in determining Consolidated Net Income, the sum of (a) the
aggregate amount of Consolidated Interest Expense for such period, (b) the
aggregate amount of letter of credit fees paid during such period, (c) the
aggregate amount of income tax expense for such period, (d) all amounts
attributable to depreciation and amortization for such period, (e) all
extraordinary charges during such period, (f) all non-cash expenses resulting
from the grant of stock options to management personnel of the Borrower
pursuant to a written plan or agreement and (g) all non-cash expenses resulting
from the write-off of in-process research and development incurred as a result
of the consummation of a Permitted Acquisition, and minus, without duplication
and to the extent added to revenues in determining Consolidated Net Income for
such period, all extraordinary gains during such period, all as determined on a
consolidated basis with respect to the Borrower and its Subsidiaries in
accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the
interest expense, both expensed and capitalized (including the interest
component in respect of Capital Lease Obligations), accrued or paid by the
Borrower and its Subsidiaries (other than the CFN Subsidiaries, the iXL
Ventures Subsidiaries and the Joint Venture Subsidiaries) during such period,
determined on a consolidated basis in accordance with GAAP.
<PAGE> 12
7
"Consolidated Net Worth" means, at any date, on a
consolidated basis for the Borrower and its Subsidiaries, (a) the sum of (i)
common stock taken at par or stated value, (ii) preferred stock taken at its
liquidation value, (iii) capital surplus relating to common stock, (iv)
retained earnings (or deficit) minus (b) the sum of (i) treasury stock and (ii)
any write-up in the book value of any asset resulting from a revaluation
thereof, all determined in accordance with GAAP and after giving effect to all
adjustments required thereby.
"Consolidated Net Income" means, for any period, net income
or loss of the Borrower and its Subsidiaries (other than the CFN Subsidiaries,
the iXL Ventures Subsidiaries and the Joint Venture Subsidiaries) for such
period determined on a consolidated basis in accordance with GAAP; provided
that there shall be excluded (a) the income (or non-cash loss to the extent
recorded as a loss on the books of the Borrower) of any Person in which any
other Person (other than the Borrower or any Subsidiary or any director holding
qualifying shares in compliance with applicable law) has a joint interest,
except to the extent of the amount of dividends or other distributions actually
paid in cash to the Borrower or any Subsidiary (other than the CFN
Subsidiaries, the iXL Ventures Subsidiaries and the Joint Venture Subsidiaries)
by such Person (or any cash losses incurred by such Person) during such period
and (b) the income (or loss) of any Person accrued prior to the date it becomes
a Subsidiary (other than the CFN Subsidiaries, the iXL Ventures Subsidiaries
and the Joint Venture Subsidiaries) or is merged into or consolidated with the
Borrower or any Subsidiary (other than the CFN Subsidiaries, the iXL Ventures
Subsidiaries and the Joint Venture Subsidiaries) or the date that Person's
assets are acquired by the Borrower or any Subsidiary (other than the CFN
Subsidiaries, the iXL Ventures Subsidiaries and the Joint Venture
Subsidiaries).
"Control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.
"Creative Video Library" means Creative Video Library, Inc.,
a wholly owned subsidiary of the Borrower.
"Cyberstarts" means Cyberstarts, Inc., a wholly owned
subsidiary of iXL Ventures.
"Default" means any event or condition that constitutes an
Event of Default or that upon notice, lapse of
<PAGE> 13
8
time or both would, unless cured or waived, become an Event of Default.
"Designated Affiliates" means Kelso Investment Associates
V, L.P., Kelso Equity Partners V, L.P., 1996 Connors Family Trust, Richard M.
Cyert, Louis and Patricia Kelso Trust, Marquard Family Partnership, LTD, John
F. McGillicuddy, Frank T. Nickell Retained Annuity Trust 1296-C-IXL, Michel
Rapoport, David M. Roderick, Peter F. Schweinfurth Family Trust and 1996
Wahrhaftig Family Trust.
"Disclosed Matters" means the actions, suits and proceedings
and the environmental matters disclosed in Schedule 3.06.
"dollars" or "$" refers to lawful money of the United States
of America.
"Effective Date" means the date on which the conditions
specified in Section 4.01 are satisfied (or waived in accordance with Section
9.02).
"Eligible Billed Accounts Receivable" means, at the time of
any determination thereof, each Account that satisfies the following criteria
at the time of creation and continues to meet the same at the time of such
determination: such Account (i) has been invoiced to, and represents the bona
fide amounts due to the Borrower or an Accounts Receivable Subsidiary from, the
purchaser of merchandise or services, in each case originated in the ordinary
course of business of the Borrower or an Accounts Receivable Subsidiary in
connection with its trade operations and (ii) is not ineligible for inclusion
in the calculation of the Borrowing Base pursuant to any of clauses (a) through
(l) below or otherwise deemed by the Collateral Agent in good faith to be
ineligible for inclusion in the calculation of the Borrowing Base as described
below. Without limiting the foregoing, to qualify as an Eligible Billed Account
Receivable, an Account shall indicate as sole payee and as sole remittance
party the Borrower or any of the Accounts Receivable Subsidiaries. In
determining the amount to be so included, the face amount of an Account shall
be reduced by, without duplication, to the extent not reflected in such face
amount, (i) the amount of all accrued and actual returns, discounts, claims,
credits or credits pending, charges, price adjustments, freight or finance
charges or other allowances (including any amount that the Borrower or an
Accounts Receivable Subsidiary, as applicable, may be obligated to rebate to a
customer pursuant to the terms of any agreement or understanding (written or
oral)), (ii) the aggregate amount of all limits and deductions provided for in
this definition and elsewhere in this
<PAGE> 14
9
Agreement and (iii) the aggregate amount of all cash received in respect of
such Account and, without duplication, all other Accounts of the Account Debtor
on such Account but not yet applied by the Borrower or the applicable
Subsidiary to reduce the amount of such Account or other Accounts of the
Account Debtor on such Account. Unless otherwise approved from time to time in
writing by the Administrative Agent, no Account shall be an Eligible Billed
Account Receivable if, without duplication:
(a) the Borrower or an Accounts Receivable Subsidiary
does not have sole lawful and absolute title to such Account; or
(b) it arises out of a billing made by the Borrower or
an Accounts Receivable Subsidiary to (i) any Affiliate of the Borrower
or any Accounts Receivable Subsidiary, (ii) any Person in which the
Borrower or any Accounts Receivable Subsidiary owns an Equity Interest
of 30% or greater or (iii) any Person that owns an Equity Interest in
the Borrower or any Accounts Receivable Subsidiary of 5% or greater,
except for General Electric and CB Capital; or
(c) (i) it is unpaid more than 90 days from the original
date of invoice or 60 days from the original due date or (ii) it has
been written off the books of the Borrower or an Accounts Receivable
Subsidiary or has been otherwise designated on such books as
uncollectible; or
(d) more than 50% in face amount of all Accounts of the
same Account Debtor are ineligible pursuant to clause (c) above; or
(e) the Account Debtor (i) has a potential offset in the
form of deferred revenue, with the ineligible portion being equal to
the lesser of the Account Debtor's (x) deferred revenue balance
(calculated in the aggregate and in accordance with GAAP on a basis
consistent with the Borrower's historical and current accounting
practices) and (y) accounts receivable balance (calculated in the
aggregate), (ii) is a creditor of any Loan Party, (iii) has or has
asserted a right of set-off against any Loan Party (unless such
Account Debtor has entered into a written agreement reasonably
acceptable to the Administrative Agent to waive such set-off rights)
or (iv) has disputed its liability (whether by chargeback or
otherwise) or made any claim with respect to the Account or any other
Account of any Loan Party which has not been resolved, in each case,
without duplication, to the extent of the amount owed by such Loan
Party to the Account
<PAGE> 15
10
Debtor, the amount of such actual or asserted right of set-off, or the
amount of such dispute or claim, as the case may be; or
(f) the Account Debtor is insolvent or the subject of
any bankruptcy case or insolvency proceeding of any kind; or
(g) the Account is not payable in Dollars or the Account
Debtor is either not incorporated under the laws of the United States
of America, any state thereof or the District of Columbia or is
located outside or has its principal place of business or
substantially all of its assets outside the United States, except to
the extent the Account is supported by an irrevocable letter of credit
reasonably satisfactory to the Administrative Agent (as to form,
substance and issuer) and assigned to and directly drawable by the
Collateral Agent; or
(h) the sale to the Account Debtor is on a bill-and-
hold, guaranteed sale, sale-and-return, ship-and-return, extended
terms or consignment or other similar basis or made pursuant to any
other agreement providing for repurchase or return of any merchandise
which has been claimed to be defective or otherwise unsatisfactory; or
(i) the Account Debtor is the United States of America
or any department, agency or instrumentality thereof, unless the
Borrower or the relevant Accounts Receivable Subsidiary duly assigns
its rights to payment of such Account to the Collateral Agent pursuant
to the Assignment of Claims Act of 1940, as amended, which assignment
and related documents and filings shall be in form and substance
reasonably satisfactory to the Collateral Agent; or
(j) the Account does not comply in all material respects
with the requirements of all applicable laws and regulations, whether
Federal, state or local, including the Federal Consumer Credit
Protection Act, the Federal Truth in Lending Act and Regulation Z of
the Board; or
(k) the aggregate Accounts of the Account Debtor are
subject to any adverse security deposit, retainage or other similar
advance made by or for the benefit of the Account Debtor, in each case
to the extent thereof; or
<PAGE> 16
11
(l) (i) it is not subject to a valid and perfected first
priority Lien in favor of the Collateral Agent for the benefit of the
Secured Parties, subject to no other Liens other than the Liens (if
any) permitted by the Loan Documents or (ii) it does not otherwise
conform in all material respects to the representations and warranties
contained in the Loan Documents relating to Accounts; or
(m) such account is evidenced by a judgment, an
instrument or an item of chattel paper.
Notwithstanding the foregoing, all Accounts of any single
Account Debtor and its Affiliates which, in the aggregate (after
subtracting the relevant Account Debtor's deferred revenue balance),
exceed 25% of the total amount of all Eligible Billed Accounts
Receivable at the time of any determination shall be deemed not to be
Eligible Billed Accounts Receivable to the extent of such excess. In
determining the aggregate amount of Accounts from the same Account
Debtor that are unpaid more than 90 days from the date of invoice or
more than 60 days from the due date pursuant to clause (c) above,
there shall be excluded the amount of any net credit balances relating
to Accounts with invoice dates more than 90 days prior to the date of
determination or more than 60 days from the due date.
"Eligible Unbilled Accounts" means, at the time of any
determination thereof, all unbilled Accounts that meet the criteria for
Eligible Billed Accounts Receivable (other than that an invoice therefor has
not been sent to the applicable Account Debtors), with the exception that (x)
unbilled Accounts will not be considered Eligible Unbilled Accounts if aged
over 90 days from the date of creation and (y) the "extended terms" provision
in clause (h) of the definition of Eligible Billed Accounts Receivable shall
not apply.
"Environmental Laws" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the environment, preservation or reclamation
of natural resources, the handling, treatment, storage, disposal Release or
threatened Release of any Hazardous Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including, but not limited to, any liability for damages, natural
resource damage, costs of environmental remediation, administrative oversight
costs fines,
<PAGE> 17
12
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"Equity Interests" means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person.
"Equity Interest Holders" means the Designated Affiliates,
CB Capital, U. Bertram Ellis, Jr. and William C. Nussey.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b)
the existence with respect to any Plan of an "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by the Borrower or any of its ERISA Affiliates of any liability
with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate
of any notice, or the receipt by any Multiemployer Plan from the Borrower or
any ERISA Affiliate of
<PAGE> 18
13
any notice, concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or
Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing,
are bearing interest at a rate determined by reference to the Adjusted LIBO
Rate.
"Event of Default" has the meaning assigned to such term in
Article VII.
"Excluded Taxes" means, with respect to the Administrative
Agent, any Lender, the Issuing Bank or any other recipient of any payment to be
made by or on account of any obligation of the Borrower hereunder, (a) income
or franchise taxes imposed on (or measured by) its net income by the United
States of America, or by the jurisdiction under the laws of which such
recipient is organized or in which its principal office is located or, in the
case of any Lender, in which its applicable lending office is located, (b) any
branch profits taxes imposed by the United States of America or any similar tax
imposed by any other jurisdiction described in clause (a) above and (c) in the
case of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.17(b)), any withholding tax that (i) is in effect and
would apply to amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party to this Agreement (or designates a new lending office),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new lending office (or assignment),
to receive additional amounts from the Borrower with respect to any withholding
tax pursuant to Section 2.15(a), or (ii) is attributable to such Foreign
Lender's failure to comply with Section 2.15(e).
"Federal Funds Effective Rate" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
<PAGE> 19
14
"Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or controller of the Borrower.
"FootageNow" means FootageNow, Inc., a wholly owned
subsidiary of Creative Video Library, Inc.
"Foreign Lender" means any Lender that is organized under the
laws of a jurisdiction other than that in which the Borrower is located. For
purposes of this definition, the United States of America, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.
"Foreign Subsidiary" means any Subsidiary that is organized
under the laws of a jurisdiction other than the United States of America or any
State thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the
United States of America.
"General Electric" means General Electric Company and its
Affiliates.
"Governmental Authority" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having
the economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued
<PAGE> 20
15
to support such Indebtedness or obligation; provided, that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary course
of business.
"Guarantee Agreement" means the Guarantee Agreement,
substantially in the form of Exhibit C, made by the Subsidiary Loan Parties in
favor of the Administrative Agent for the benefit of the Secured Parties.
"Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law, including any material listed as a hazardous
substance under Section 101(14) of CERCLA.
"Hedging Agreement" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price
hedging arrangement.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person under conditional sale or other title retention
agreements relating to property acquired by such Person, (d) all obligations of
such Person in respect of the deferred purchase price of property or services
(excluding current accounts payable incurred in the ordinary course of
business), (e) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or
not the Indebtedness secured thereby has been assumed, (f) all Guarantees by
such Person of Indebtedness of others, (g) all Capital Lease Obligations of
such Person, (h) all obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit and letters of guaranty and (i)
all obligations, contingent or otherwise, of such Person in respect of bankers'
acceptances. The Indebtedness of any Person shall include the Indebtedness of
any other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person's ownership interest in or other relationship with such entity, except
to the extent the terms of such Indebtedness provide that such Person is not
liable therefor.
<PAGE> 21
16
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnity, Subrogation and Contribution Agreement" means the
Indemnity, Subrogation and Contribution Agreement substantially in the form of
Exhibit D.
"Information Memorandum" means the Confidential Information
Memorandum dated November, 1999 relating to the Borrower and the Transactions.
"Interest Election Request" means a request by the Borrower
to convert or continue a Borrowing in accordance with Section 2.06.
"Interest Payment Date" means (a) with respect to any ABR
Loan, the last day of each March, June, September and December, and (b) with
respect to any Eurodollar Loan, the last day of the Interest Period applicable
to the Borrowing of which such Loan is a part and, in the case of a Eurodollar
Borrowing with an Interest Period of more than three months' duration, each day
prior to the last day of such Interest Period that occurs at intervals of three
months' duration after the first day of such Interest Period.
"Interest Period" means, with respect to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on
the numerically corresponding day in the calendar month that is one, two, three
or six months thereafter, as the Borrower may elect; provided, that (a) if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day and (b) any
Interest Period that commences on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period. For purposes hereof, the date
of a Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
"Issuing Bank" means The Chase Manhattan Bank, in its
capacity as the issuer of Letters of Credit hereunder, and its successors in
such capacity as provided in Section 2.04(i). The Issuing Bank may, in its
discretion, arrange for one or more Letters of Credit to be issued by
Affiliates of the Issuing Bank,
<PAGE> 22
17
in which case the term "Issuing Bank" shall include any such Affiliate with
respect to Letters of Credit issued by such Affiliate.
"iXL Live" means iXL Live, Inc. a Delaware corporation, a
wholly owned subsidiary of iXL, Inc.
"iXL Ventures" means iXL Ventures, Inc. a Delaware
corporation, a wholly owned subsidiary of the Borrower.
"iXL Ventures Subsidiaries" means iXL Ventures and its
subsidiaries.
"iVisit" means iVisit, Inc., a wholly owned subsidiary of
iXL, Inc.
"Joint Venture" means, as to a Person, any corporation,
partnership or other legal entity or arrangement in which such Person has any
direct or indirect equity interest (or owns securities convertible into such an
equity interest) and that is not a subsidiary of such Person.
"Joint Venture Subsidiaries" means (a) each of (i)
Cyberstarts, (ii) FootageNow, (iii) iXL Live, (iv) AppGeneSys, (v) Creative
Video Library and (vi) iVisit and (b) any Subsidiary of the Borrower (i) that
is newly organized to act as a vehicle for the conduct of a joint venture
between the Borrower and one or more entities that are not Affiliates of the
Borrower, (ii) that engages only in internet or media related businesses and
(iii) not more than 80% of the outstanding Equity Interests and not more than
80% of the voting securities of which are owned, directly or indirectly, by the
Borrower and its Subsidiaries. No Subsidiary of the Borrower (other than those
referred to in clause (a) above) existing on the date of this Agreement shall
be a Joint Venture Subsidiary.
"Kelso" means Kelso & Company, L.P., a Delaware limited
partnership.
"LC Disbursement" means a payment made by the Issuing Bank
pursuant to a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the
aggregate undrawn amount of all outstanding Letters of Credit at such time plus
(b) the aggregate amount of all LC Disbursements that have not yet been
reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any
Revolving Lender at any time shall be its Applicable Percentage of the total LC
Exposure at such time.
<PAGE> 23
18
"Lenders" means the Persons listed on Schedule 2.01 and any
other Person that shall have become a party hereto pursuant to an Assignment
and Acceptance, other than any such Person that ceases to be a party hereto
pursuant to an Assignment and Acceptance.
"Letter of Credit" means any letter of credit issued pursuant
to this Agreement.
"LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, the rate appearing on Page 3750 of the Dow Jones
Market Service (or on any successor or substitute page of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the "LIBO Rate"
with respect to such Eurodollar Borrowing for such Interest Period shall be the
rate at which dollar deposits of $5,000,000 and for a maturity comparable to
such Interest Period are offered by the principal London office of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention
agreement (or any financing lease having substantially the same economic effect
as any of the foregoing) relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities.
"Loan Documents" means this Agreement, the Guarantee
Agreement, the Indemnity, Subrogation and Contribution Agreement and the
Security Documents.
"Loan Parties" means the Borrower and the Subsidiary Loan
Parties.
<PAGE> 24
19
"Loans" means the loans made by the Lenders to the Borrower
pursuant to this Agreement.
"Margin Stock" has the meaning assigned to such term in
Regulation U.
"Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and its Subsidiaries taken as a whole, (b) the
ability of any Loan Party to perform any of its obligations under any Loan
Document or (c) the rights of or benefits available to the Lenders under any
Loan Document.
"Material Indebtedness" means Indebtedness (other than the
Loans and Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any one or more of the Borrower and its Subsidiaries in an
aggregate principal amount exceeding $2,500,000. For purposes of determining
Material Indebtedness, the "principal amount" of the obligations of the
Borrower or of its Subsidiary in respect of any Hedging Agreement at any time
shall be the maximum aggregate amount (giving effect to any netting agreements)
that the Borrower or such Subsidiary would be required to pay if such Hedging
Agreement were terminated at such time.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Proceeds" means, with respect to any event (a) the cash
proceeds received by the Borrower and the Subsidiary Loan Parties in respect of
such event, including any cash received in respect of any non-cash proceeds,
but only as and when received, net of (b) the sum of (i) all reasonable fees
and out-of-pocket expenses paid by the Borrower and the Subsidiary Loan Parties
to third parties (other than to the Borrower or a Subsidiary) in connection
with such event, (ii) the amount of all payments required to be made by the
Borrower and the Subsidiary Loan Parties as a result of such event to repay
Indebtedness (other than Loans) secured by such asset or otherwise subject to
mandatory prepayment as a result of such event and (iii) the amount of all
taxes paid (or reasonably estimated to be payable) by the Borrower and the
Subsidiary Loan Parties, and the amount of any reserves established by the
Borrower and its Subsidiaries to fund contingent liabilities reasonably
estimated to be payable, in each case during the year that such event occurred
or the next succeeding year and that are directly attributable to
<PAGE> 25
20
such event (as determined reasonably and in good faith by the chief financial
officer of the Borrower). In the case of Net Proceeds denominated in a currency
other than dollars, the amount of such Net Proceeds shall be the dollar
equivalent thereof based upon the exchange rates prevailing at the time.
"Obligations" has the meaning assigned to such term in the
Security Agreement.
"Other Taxes" means any and all current or future recording,
stamp, documentary, excise, transfer, sales, property or similar taxes, charges
or levies arising from any payment made under any Loan Document or from the
execution, delivery or enforcement of, or otherwise with respect to, any Loan
Document.
"PBGC" means the Pension Benefit Guaranty Corporation
referred to and defined in ERISA and any successor entity performing similar
functions.
"Perfection Certificate" means a certificate in the form of
Annex 1 to the Security Agreement or any other form approved by the Collateral
Agent.
"Permitted Acquisition" means any acquisition of all or
substantially all the assets of, or all the shares or other Equity Interests
in, a Person or division or line of business of a Person if, immediately after
giving effect thereto, (a) no Default has occurred and is continuing or would
result therefrom, (b) all transactions related thereto are consummated in
accordance with applicable laws, (c) in the case of an acquisition of shares or
other Equity Interests in a Person, 100% of the Equity Interests in such
Person, and of any other Subsidiary resulting from such acquisition, shall be
owned directly by the Borrower or a Subsidiary Loan Party and all actions
required to be taken, if any, with respect to each Subsidiary resulting from
such acquisition under Sections 5.11 and 5.12 have been taken, (d) the Borrower
and its consolidated Subsidiaries are in compliance, on a pro forma basis after
giving effect to such acquisition, with the covenants contained in Sections
6.13, 6.14 and 6.15 recomputed as at the last day of the most recently ended
fiscal quarter of the Borrower for which financial statements are available as
if such acquisition had occurred on the first day of each relevant period for
testing such compliance and (e) the Borrower has delivered to the
Administrative Agent an officer's certificate to the effect set forth in
clauses (a), (b), (c) and (d) above, together with all relevant financial
information for the business or entity being acquired.
<PAGE> 26
21
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or
are being contested in compliance with Section 5.05;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not
overdue by more than 30 days or are being contested in compliance with
Section 5.05;
(c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations and deposits
made in the ordinary course of business and securing liability to
insurance providers;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case
in the ordinary course of business;
(e) judgment liens in respect of judgments that do not
constitute an Event of Default under clause (k) of Article VII;
(f) easements, zoning restrictions, rights-of-way and
similar encumbrances on real property imposed by law or arising in the
ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business
of the Borrower or any Subsidiary;
(g) any interest of a landlord in or to property of the
tenant imposed by law, arising in the ordinary course of business and
securing lease obligations that are not overdue by more than 60 days
or are being contested in compliance with Section 5.05, or any
possessory rights of a lessee to the leased property under the
provisions of any lease permitted by the terms of this Agreement; and
(h) Liens of a collection bank arising in the ordinary
course of business under ' 4-208 of the Uniform Commercial Code in
effect in the relevant jurisdiction;
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
<PAGE> 27
22
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of
and interest on which are unconditionally guaranteed by, the United
States of America (or by any agency thereof to the extent such
obligations are backed by the full faith and credit of the United
States of America), in each case maturing within one year from the
date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from S&P or from
Moody's;
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within 365 days from the date
of acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by, any domestic
office of any commercial bank organized under the laws of the United
States of America or any State thereof which has a combined capital
and surplus and undivided profits of not less than $500,000,000;
(d) fully collateralized repurchase agreements with a term
of not more than 30 days for securities described in clause (a) above
and entered into with a financial institution satisfying the criteria
described in clause (c) above; and
(e) shares of funds registered under the Investment Company
Act of 1940, as amended, that have assets of at least $500,000,000 and
invest only in obligations described in clauses (a) through (c) above
to the extent that such shares are rated by Moody's or S&P in one of
the two highest rating categories assigned by such agency for shares
of such nature.
"Permitted Preferred Stock" means any class of preferred
stock of the Borrower (a) the amounts, terms and conditions of which are
reasonably satisfactory in all material respects to the Required Lenders or (b)
that does not materially conflict with and is not more restrictive than the
terms under the Loan Documents and does not include any of the following terms:
(i) current pay dividend requirements prior to the date six months following
the Revolving Maturity Date, (ii) repayment or redemption requirements (other
than at the sole option of the Borrower) prior to the date six months following
the Revolving
<PAGE> 28
23
Maturity Date, (iii) provisions that provide for the exchange or conversion of
such preferred stock with or into Indebtedness prior to the date six months
following the Revolving Maturity Date or (iv) other terms similar to or
consistent with terms included in documents, instruments or agreements in
respect of Indebtedness.
"Permitted Subordinated Indebtedness" means unsecured
Indebtedness of the Borrower in respect of debt securities that (a) mature at
least one year after, and do not require any scheduled payment of principal or
any mandatory redemption or prepayment (or any right on the part of the holder
thereof to require any payment) of principal, in each case prior to the date
one year after the Revolving Maturity Date, (b) are not Guaranteed by any
Subsidiary Loan Party or any Foreign Subsidiary, (c) are subordinated to the
Borrower's Obligations on terms and conditions reasonably satisfactory to the
Required Lenders, (d) are issued for cash consideration, the net proceeds of
which are invested in the Borrower and (e) are in amounts and have terms and
conditions that are reasonably satisfactory in all material respects to the
Required Lenders.
"Person" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower
or any of its ERISA Affiliates is (or, if such plan were terminated, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Pledge Agreement" means the Pledge Agreement substantially
in the form of Exhibit E among the Loan Parties and the Collateral Agent for
the benefit of the Secured Parties.
"Prepayment Event" means (a) any sale, transfer or other
disposition (including pursuant to a sale and lease-back transaction) of any
property or asset of the Borrower or any of the Subsidiary Loan Parties, other
than (i) dispositions described in clauses (a), (b) and (c) of Section 6.05 and
(ii) any sale, transfer or other dispositions of property or assets by the
Borrower or any of the Subsidiary Loan Parties resulting in aggregate Net
Proceeds not exceeding $2,500,000 during any fiscal year of the Borrower, (b)
any dividend, distribution, liquidation or dissolution of any CFN Subsidiary,
iXL Ventures Subsidiary or any Joint Venture Subsidiary; provided
<PAGE> 29
24
that, if the Borrower shall deliver a certificate of a Financial Officer to the
Administrative Agent at the time of any such event described in clause (a) or
(b) above (x) setting forth the intent of the Borrower or one of the Subsidiary
Loan Parties to use the Net Proceeds of such event to acquire other assets to
be used in a line of business of the type conducted by the Borrower and the
Subsidiary Loan Parties as of the Effective Date within 365 days of receipt of
such Net Proceeds and (y) certifying that no Default has occurred and is
continuing, then such event shall not constitute a Prepayment Event except to
the extent the Net Proceeds therefrom are not so used at the end of such
365-day period, at which time such event shall be deemed a Prepayment Event
with Net Proceeds equal to the Net Proceeds so remaining unused, (c) the
incurrence by the Borrower or any of the Subsidiary Loan Parties of (i)
Permitted Subordinated Indebtedness or (ii) any other Indebtedness not
permitted under Section 6.01 and (d) any casualty or other insured damage to,
or any taking under power of eminent domain or by condemnation or similar
proceeding of, any property or asset of the Borrower or Subsidiary Loan Party,
but only to the extent that the Net Proceeds therefrom have not been applied to
repair, restore or replace such property or asset within 270 days of the
receipt thereof (or within 6 months of a binding commitment entered into during
such 270 day period).
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by The Chase Manhattan Bank as its prime rate in
effect at its principal office in New York City; each change in the Prime Rate
shall be effective from and including the date such change is publicly
announced as being effective.
"Register" has the meaning set forth in Section 9.04.
"Regulation U" means Regulation U of the Board as in effect
from time to time and all official rulings and interpretations thereunder or
thereof.
"Related Parties" means, with respect to any specified
Person, such Person's Affiliates and the respective directors, officers,
employees, agents and advisors of such Person and such Person's Affiliates.
"Release" has the meaning set forth in Section 101(22) of
CERCLA.
"Required Lenders" means, at any time, Lenders having
Revolving Exposures and unused Commitments representing more than
<PAGE> 30
25
50% of the sum of the total Revolving Exposures and unused Commitments at such
time.
"Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any Equity
Interests of the Borrower or any Subsidiary, or any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit,
on account of the purchase, redemption, retirement, acquisition, cancelation or
termination of any Equity Interests of the Borrower or any Subsidiary or of any
option, warrant or other right to acquire any such Equity Interests of the
Borrower or any Subsidiary.
"Revolving Availability Period" means the period from and
including the Effective Date to but excluding the earlier of the Revolving
Maturity Date and the date of termination of the Revolving Commitments.
"Revolving Commitment" means, with respect to each Lender,
the commitment, if any, of such Lender to make Revolving Loans and to acquire
participations in Letters of Credit hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender's Revolving Exposure
hereunder, as such commitment may be (a) reduced from time to time pursuant to
Section 2.07 and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 9.04. The initial amount
of each Lender's Revolving Commitment is set forth on Schedule 2.01, or in the
Assignment and Acceptance pursuant to which such Lender shall have assumed its
Revolving Commitment, as applicable. The initial aggregate amount of the
Lenders' Revolving Commitments is $50,000,000.
"Revolving Exposure" means, with respect to any Lender at any
time, the sum of the outstanding principal amount of such Lender's Revolving
Loans and its LC Exposure at such time.
"Revolving Lender" means a Lender with a Revolving Commitment
or, if the Revolving Commitments have terminated or expired, a Lender with
Revolving Exposure.
"Revolving Loan" means a Loan made pursuant to Section 2.01.
"Revolving Maturity Date" means December 31, 2002.
"S&P" means Standard & Poor's Ratings Group, a division of
The McGraw-Hill Companies, Inc.
<PAGE> 31
26
"Secured Parties" has the meaning assigned to such term in
the Security Agreement.
"Security Agreement" means the Security Agreement,
substantially in the form of Exhibit F, among the Loan Parties and the
Collateral Agent for the benefit of the Secured Parties.
"Security Documents" means the Security Agreement, the Pledge
Agreement and each other security agreement or other instrument or document
executed and delivered pursuant to Section 4.01 or to secure any of the
Obligations.
"Statutory Reserve Rate" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which the Administrative Agent is
subject with respect to the Adjusted LIBO Rate, for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of the
Board). Such reserve percentages shall include those imposed pursuant to such
Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency
funding and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to any Lender under such Regulation D or any comparable regulation. The
Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
"subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held,
or (b) that is, as of such date, otherwise Controlled, by the parent or one or
more subsidiaries of the parent or by the parent and one or more subsidiaries
of the parent.
"Subsidiary" means any subsidiary of the Borrower.
<PAGE> 32
27
"Subsidiary Loan Party" means any Subsidiary other than (a)
the CFN Subsidiaries, (b) the iXL Ventures Subsidiaries, (c) any Foreign
Subsidiary and (d) any Joint Venture Subsidiary.
"Syndication Agent" means First Union National Bank in its
capacity as syndication agent for the Lenders.
"Taxes" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any
Governmental Authority.
"Tax Allocation Agreement" means, the Tax Allocation
Agreement dated the date hereof between the Borrower and its direct or indirect
Subsidiaries to the effect that such parties will make payments between
themselves such that, with respect to any period, the amount of taxes to be
paid by such Person generally will be determined as though such Person were to
file separate federal, state and local income tax returns.
"Total Debt" means, as of any date of determination, without
duplication, the aggregate principal amount of Indebtedness of the Borrower and
its Subsidiaries (other than the CFN Subsidiaries, the iXL Ventures
Subsidiaries and the Joint Venture Subsidiaries) outstanding as of such date
and net of any cash or cash equivalents held by the Borrower and such
Subsidiaries (other than the CFN Subsidiaries, the iXL Ventures Subsidiaries
and the Joint Venture Subsidiaries), determined on a consolidated basis in
accordance with GAAP (other than Indebtedness of the type referred to in clause
(h) of the definition of the term "Indebtedness", except to the extent of any
unreimbursed drawings thereunder).
"Transactions" means the execution, delivery and performance
by each Loan Party of the Loan Documents to which it is to be a party, the
borrowing of Loans, the use of the proceeds thereof and the issuance of Letters
of Credit hereunder.
"Type", when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on the Loans comprising
such Borrowing, is determined by reference to the Adjusted LIBO Rate or the
Alternate Base Rate.
"Unbilled Receivable Availability" means the lesser of (a)
60% of Eligible Unbilled Accounts and (b) 75% of the Billed Receivable
Availability.
"Video Equipment Valuation" means, at the time of any
determination thereof, the net book value of the Borrower's and its Accounts
Receivable Subsidiaries' video equipment
<PAGE> 33
28
(depreciated on a straight-line basis), determined in accordance with GAAP on a
basis consistent with the Borrower's historical and current accounting
practices. Upon the Borrower's prior consent, which consent shall not be
unreasonably withheld, professionals retained by the Collateral Agent may
conduct annual appraisals of such video equipment, provided each such annual
appraisal shall utilize appraisal techniques consistent with the appraisal of
such video equipment conducted on behalf of the Collateral Agent prior to the
Effective Date. The Borrower shall pay the fees and expenses of such
professionals. For purposes of calculating the Borrowing Base, no video
equipment may be included in the Video Equipment Valuation unless (i) the
Borrower or an Accounts Receivable Subsidiary has good and unencumbered title
thereto (subject to Permitted Encumbrances), (ii) the Collateral Agent on
behalf of the Secured Parties possesses a valid first priority perfected
security interest therein pursuant to the Security Documents, (iii) such
equipment is in service at the end of the month for which the Borrowing Base is
being determined and is not construction-in-progress and (iv) such equipment is
located in the United States of America and is owned by an Accounts Receivable
Subsidiary that is incorporated under the laws of the United States of America,
any state thereof or the District of Columbia or has its principal place of
business or substantially all of its assets located in the United States of
America.
"Withdrawal Liability" means liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from such Multiemployer
Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For
purposes of this Agreement, Loans may be classified and referred to by Type
(e.g., a "Eurodollar Loan"). Borrowings also may be classified and referred to
by Type (e.g., a "Eurodollar Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase
"without limitation". The word "will" shall be construed to have the same
meaning and effect as the word "shall". Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, supplemented or otherwise
modified
<PAGE> 34
29
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be construed to
include such Person's successors and assigns, (c) the words "herein", "hereof"
and "hereunder", and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision hereof, (d)
all references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have
been withdrawn or such provision amended in accordance herewith.
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and
conditions set forth herein, each Lender agrees to make Revolving Loans to the
Borrower from time to time during the Revolving Availability Period in an
aggregate principal amount that will not result in (i) such Lender's Revolving
Exposure exceeding such Lender's Revolving Commitment or (ii) the sum of the
Revolving Exposures exceeding the Borrowing Base then in effect. Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, prepay and reborrow Revolving Loans.
SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be
made as part of a Borrowing consisting of Loans of the
<PAGE> 35
30
same Type made by the Lenders ratably in accordance with their respective
Commitments. The failure of any Lender to make any Loan required to be made by
it shall not relieve any other Lender of its obligations hereunder; provided
that the Commitments of the Lenders are several and no Lender shall be
responsible for any other Lender's failure to make Loans as required.
(b) Subject to Section 2.14, each Revolving Borrowing shall
be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may
request in accordance herewith. Each Lender at its option may make any
Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan; provided that any exercise of such option shall not
affect the obligation of the Borrower to repay such Loan in accordance with the
terms of this Agreement.
(c) At the commencement of each Interest Period for any
Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $1,000,000. At the time that
each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that
is an integral multiple of $100,000 and not less than $100,000; provided that
an ABR Revolving Borrowing may be in an aggregate amount that is equal to the
entire unused balance of the total Revolving Commitments or that is required to
finance the reimbursement of an LC Disbursement as contemplated by Section
2.04(e). Borrowings of more than one Type may be outstanding at the same time;
provided that there shall not at any time be more than a total of 5 Eurodollar
Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement,
the Borrower shall not be entitled to request, or to elect to convert or
continue, any Borrowing if the Interest Period requested with respect thereto
would end after the Revolving Maturity Date.
SECTION 2.03. Requests for Borrowings. To request a
Borrowing the Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m.,
New York City time, three Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m.,
New York City time, one Business Day before the date of the proposed Borrowing;
provided that any such notice of an ABR Borrowing to finance the reimbursement
of an LC Disbursement as contemplated by Section 2.04(e) may be given not later
than 10:00 a.m., New York City time, on the date of the proposed Borrowing.
Each such telephonic Borrowing Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the
<PAGE> 36
31
Administrative Agent of a written Borrowing Request in a form approved by the
Administrative Agent and signed by the Borrower. Each such telephonic and
written Borrowing Request shall specify the following information in compliance
with Section 2.02:
(i) the aggregate amount of such Borrowing;
(ii) the date of such Borrowing, which shall be a Business
Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial
Interest Period to be applicable thereto, which shall be a period
contemplated by the definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to
which funds are to be disbursed, which shall comply with the
requirements of Section 2.05.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be
deemed to have selected an Interest Period of one month's duration. Promptly
following receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.04. Letters of Credit. (a) General. Subject to the
terms and conditions set forth herein, the Borrower may request the issuance of
Letters of Credit for its own account, in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the Revolving Availability Period. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and conditions
of any form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the Issuing Bank relating to
any Letter of Credit, the terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension;
Certain Conditions. To request the issuance of a Letter of Credit (or the
amendment, renewal or extension of an outstanding Letter of Credit), the
Borrower shall hand deliver or
<PAGE> 37
32
telecopy (or transmit by electronic communication, if arrangements for doing so
have been approved by the Issuing Bank) to the Issuing Bank and the
Administrative Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter
of Credit, or identifying the Letter of Credit to be amended, renewed or
extended, and specifying the date of issuance, amendment, renewal or extension
(which shall be a Business Day), the date on which such Letter of Credit is to
expire (which shall comply with paragraph (c) of this Section), the amount of
such Letter of Credit, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend, renew or extend such
Letter of Credit. If requested by the Issuing Bank, the Borrower also shall
submit a letter of credit application on the Issuing Bank's standard form in
connection with any request for a Letter of Credit. A Letter of Credit shall be
issued, amended, renewed or extended only if (and upon issuance, amendment,
renewal or extension of each Letter of Credit the Borrower shall be deemed to
represent and warrant that), after giving effect to such issuance, amendment,
renewal or extension (i) the LC Exposure shall not exceed $10,000,000 and (ii)
the total Revolving Exposures shall not exceed the lesser of the total
Revolving Commitments and the Borrowing Base then in effect.
(c) Expiration Date. Each Letter of Credit shall expire at
or prior to the close of business on the earlier of (i) the date one year after
the date of the issuance of such Letter of Credit (or, in the case of any
renewal or extension thereof, one year after such renewal or extension) and
(ii) the date that is five Business Days prior to the Revolving Maturity Date.
(d) Participations. By the issuance of a Letter of Credit
(or an amendment to a Letter of Credit increasing the amount thereof) and
without any further action on the part of the Issuing Bank or the Lenders, the
Issuing Bank hereby grants to each Revolving Lender, and each Revolving Lender
hereby acquires from the Issuing Bank, a participation in such Letter of Credit
equal to such Lender's Applicable Percentage of the aggregate amount available
to be drawn under such Letter of Credit. In consideration and in furtherance of
the foregoing, each Revolving Lender hereby absolutely and unconditionally
agrees to pay to the Administrative Agent, for the account of the Issuing Bank,
such Lender's Applicable Percentage of each LC Disbursement made by the Issuing
Bank and not reimbursed by the Borrower on the date due as provided in
paragraph (e) of this Section, or of any reimbursement payment required to be
refunded to the Borrower for any reason. Each Lender acknowledges and agrees
that its
<PAGE> 38
33
obligation to acquire participations pursuant to this paragraph in respect of
Letters of Credit is absolute and unconditional and shall not be affected by
any circumstance whatsoever, including any amendment, renewal or extension of
any Letter of Credit or the occurrence and continuance of a Default or
reduction or termination of the Commitments, and that each such payment shall
be made without any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse
such LC Disbursement by paying to the Administrative Agent an amount equal to
such LC Disbursement not later than 12:00 noon, New York City time, on the date
that such LC Disbursement is made, if the Borrower shall have received notice
of such LC Disbursement prior to 10:00 a.m., New York City time, on such date,
or, if such notice has not been received by the Borrower prior to such time on
such date, then not later than 12:00 noon, New York City time, on (i) the
Business Day that the Borrower receives such notice, if such notice is received
prior to 10:00 a.m., New York City time, on the day of receipt, or (ii) the
Business Day immediately following the day that the Borrower receives such
notice, if such notice is not received prior to such time on the day of
receipt; provided that, if such LC Disbursement is not less than $1,000,000,
the Borrower may, subject to the conditions to borrowing set forth herein,
request in accordance with Section 2.03 that such payment be financed with an
ABR Borrowing in an equivalent amount and, to the extent so financed, the
Borrower's obligation to make such payment shall be discharged and replaced by
the resulting ABR Revolving Borrowing. If the Borrower fails to make such
payment when due, the Administrative Agent shall notify each Revolving Lender
of the applicable LC Disbursement, the payment then due from the Borrower in
respect thereof and such Lender's Applicable Percentage thereof. Promptly
following receipt of such notice, each Revolving Lender shall pay to the
Administrative Agent its Applicable Percentage of the payment then due from the
Borrower, in the same manner as provided in Section 2.05 with respect to Loans
made by such Lender (and Section 2.05 shall apply, mutatis mutandis, to the
payment obligations of the Revolving Lenders), and the Administrative Agent
shall promptly pay to the Issuing Bank the amounts so received by it from the
Revolving Lenders. Promptly following receipt by the Administrative Agent of
any payment from the Borrower pursuant to this paragraph, the Administrative
Agent shall distribute such payment to the Issuing Bank or, to the extent that
Revolving Lenders have made payments pursuant to this paragraph to reimburse
the Issuing Bank, then to such Lenders and the Issuing Bank as their interests
may appear. Any payment made by a Revolving Lender pursuant to this paragraph
<PAGE> 39
34
to reimburse the Issuing Bank for any LC Disbursement (other than the funding
of ABR Loans as contemplated above) shall not constitute a Loan and shall not
relieve the Borrower of its obligation to reimburse such LC Disbursement.
(f) Obligations Absolute. The Borrower's obligation to
reimburse LC Disbursements as provided in paragraph (e) of this Section shall
be absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of
any Letter of Credit or this Agreement, or any term or provision therein, (ii)
any draft or other document presented under a Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a
Letter of Credit against presentation of a draft or other document that does
not comply with the terms of such Letter of Credit, or (iv) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that
might, but for the provisions of this Section, constitute a legal or equitable
discharge of, or provide a right of set-off against, the Borrower's obligations
hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank,
nor any of their Related Parties, shall have any liability or responsibility by
reason of or in connection with the issuance or transfer of any Letter of
Credit or any payment or failure to make any payment thereunder (irrespective
of any of the circumstances referred to in the preceding sentence), or any
error, omission, interruption, loss or delay in transmission or delivery of any
draft, notice or other communication under or relating to any Letter of Credit
(including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond
the control of the Issuing Bank; provided that the foregoing shall not be
construed to excuse the Issuing Bank from liability to the Borrower to the
extent of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the Borrower to the extent permitted by
applicable law) suffered by the Borrower that are caused by the Issuing Bank's
failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof. The parties
hereto expressly agree that, in the absence of gross negligence or wilful
misconduct on the part of the Issuing Bank (as finally determined by a court of
competent jurisdiction), the Issuing Bank shall be deemed to have exercised
care in each such determination. In furtherance of the foregoing and without
limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be
<PAGE> 40
35
in substantial compliance with the terms of a Letter of Credit, the Issuing
Bank may, in its sole discretion, either accept and make payment upon such
documents without responsibility for further investigation, regardless of any
notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank shall,
promptly following its receipt thereof, examine all documents purporting to
represent a demand for payment under a Letter of Credit. The Issuing Bank shall
promptly notify the Administrative Agent and the Borrower by telephone
(confirmed by telecopy) of such demand for payment and whether the Issuing Bank
has made or will make an LC Disbursement thereunder; provided that any failure
to give or delay in giving such notice shall not relieve the Borrower of its
obligation to reimburse the Issuing Bank and the Revolving Lenders with respect
to any such LC Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Loans; provided
that, if the Borrower fails to reimburse such LC Disbursement when due pursuant
to paragraph (e) of this Section, then Section 2.11(c) shall apply. Interest
accrued pursuant to this paragraph shall be for the account of the Issuing
Bank, except that interest accrued on and after the date of payment by any
Revolving Lender pursuant to paragraph (e) of this Section to reimburse the
Issuing Bank shall be for the account of such Lender to the extent of such
payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may be
replaced at any time by written agreement among the Borrower, the
Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank.
The Administrative Agent shall notify the Lenders of any such replacement of
the Issuing Bank. At the time any such replacement shall become effective, the
Borrower shall pay all unpaid fees accrued for the account of the replaced
Issuing Bank pursuant to Section 2.10(b). From and after the effective date of
any such replacement, (i) the successor Issuing Bank shall have all the rights
and obligations of the Issuing Bank under this Agreement with respect to
Letters of Credit to be issued thereafter and (ii) references herein to the
term "Issuing Bank" shall be deemed to refer to such
<PAGE> 41
36
successor or to any previous Issuing Bank, or to such successor and all
previous Issuing Banks, as the context shall require. After the replacement of
an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party
hereto and shall continue to have all the rights and obligations of an Issuing
Bank under this Agreement with respect to Letters of Credit issued by it prior
to such replacement, but shall not be required to issue additional Letters of
Credit.
(j) Cash Collateralization. If any Event of Default shall
occur and be continuing, on the Business Day that the Borrower receives notice
from the Administrative Agent or the Required Lenders (or, if the maturity of
the Loans has been accelerated, Revolving Lenders with LC Exposure representing
greater than 50% of the total LC Exposure) demanding the deposit of cash
collateral pursuant to this paragraph, the Borrower shall deposit in an account
with the Administrative Agent, in the name of the Administrative Agent and for
the benefit of the Lenders, an amount in cash equal to the LC Exposure as of
such date attributable to all Letters of Credit issued for the account of the
Borrower plus any accrued and unpaid interest thereon; provided that the
obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with
respect to the Borrower described in clause (h) or (i) of Article VII. The
Borrower also shall deposit cash collateral pursuant to this paragraph as and
to the extent required by Section 2.09(b), and any such cash collateral so
deposited and held by the Administrative Agent hereunder shall constitute part
of the Borrowing Base for purposes of determining compliance with Section
2.09(b). Each such deposit shall be held by the Administrative Agent as
collateral for the payment and performance of the obligations of the Borrower
under this Agreement. The Administrative Agent shall have exclusive dominion
and control, including the exclusive right of withdrawal, over such account.
Other than any interest earned on the investment of such deposits, which
investments shall be made at the option and sole discretion of the
Administrative Agent and at the Borrower's risk and expense, such deposits
shall not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall be applied by the
Administrative Agent to reimburse the Issuing Bank for LC Disbursements for
which it has not been reimbursed and, to the extent not so applied, shall be
held for the satisfaction of the reimbursement obligations of the Borrower for
the LC Exposure at such time or, if the maturity of the Loans has been
accelerated (but subject to the consent of Revolving Lenders with LC Exposure
representing greater than 50% of the total LC
<PAGE> 42
37
Exposure), be applied to satisfy other obligations of the Borrower under this
Agreement. If the Borrower is required to provide an amount of cash collateral
hereunder as a result of the occurrence of an Event of Default, such amount (to
the extent not applied as aforesaid) shall be returned to the Borrower within
three Business Days after all Events of Default have been cured or waived. If
the Borrower is required to provide an amount of cash collateral hereunder
pursuant to Section 2.09(b), such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower as and to the extent that, after
giving effect to such return, the Borrower would remain in compliance with
Section 2.09(b) and no Default shall have occurred and be continuing.
SECTION 2.05. Funding of Borrowings. (a) Each Lender shall
make each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 12:00 noon, New York City time, to
the account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders. The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in
like funds, to an account of the Borrower maintained with the Administrative
Agent in New York City and designated by the Borrower in the applicable
Borrowing Request; provided that ABR Loans made to finance the reimbursement of
an LC Disbursement as provided in Section 2.04(e) shall be remitted by the
Administrative Agent to the Issuing Bank.
(b) Unless the Administrative Agent shall have received
notice from a Lender prior to the proposed date of any Borrowing that such
Lender will not make available to the Administrative Agent such Lender's share
of such Borrowing, the Administrative Agent may assume that such Lender has
made such share available on such date in accordance with paragraph (a) of this
Section and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount. In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and the Borrower severally agree to pay to
the Administrative Agent forthwith on demand such corresponding amount with
interest thereon, for each day from and including the date such amount is made
available to the Borrower to but excluding the date of payment to the
Administrative Agent, at (i) in the case of such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation or (ii) in
the case of the Borrower, the interest rate applicable to ABR Loans. If such
Lender pays such amount to
<PAGE> 43
38
the Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.
SECTION 2.06. Interest Elections. (a) Each Borrowing
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurodollar Borrowing, shall have an initial Interest
Period as specified in such Borrowing Request. Thereafter, the Borrower may
elect to convert such Borrowing to a different Type or to continue such
Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest
Periods therefor, all as provided in this Section. The Borrower may elect
different options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Borrowing.
(b) To make an election pursuant to this Section, the
Borrower shall notify the Administrative Agent of such election by telephone by
the time that a Borrowing Request would be required under Section 2.03 if the
Borrower were requesting a Borrowing of the Type resulting from such election
to be made on the effective date of such election. Each such telephonic
Interest Election Request shall be irrevocable and shall be confirmed promptly
by hand delivery or telecopy to the Administrative Agent of a written Interest
Election Request in a form approved by the Administrative Agent and signed by
the Borrower.
(c) Each telephonic and written Interest Election Request
shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to
each resulting Borrowing (in which case the information to be
specified pursuant to clauses (iii) and (iv) below shall be specified
for each resulting Borrowing);
(ii) the effective date of the election made pursuant to
such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing; and
<PAGE> 44
39
(iv) if the resulting Borrowing is a Eurodollar Borrowing,
the Interest Period to be applicable thereto after giving effect to
such election, which shall be a period contemplated by the definition
of the term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election
Request, the Administrative Agent shall advise each Lender of the details
thereof and of such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest
Election Request with respect to a Eurodollar Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof,
if an Event of Default has occurred and is continuing and the Administrative
Agent, at the request of the Required Lenders, so notifies the Borrower, then,
so long as an Event of Default is continuing (i) no outstanding Borrowing may
be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid,
each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of
the Interest Period applicable thereto.
SECTION 2.07. Termination and Reduction of Commitments. (a)
Unless previously terminated, the Revolving Commitments shall terminate on the
Revolving Maturity Date.
(b) The Borrower may at any time terminate, or from time to
time reduce, the Commitments; provided that (i) each reduction of the
Commitments shall be in an amount that is an integral multiple of $1,000,000
and not less than $1,000,000 and (ii) the Borrower shall not terminate or
reduce the Commitments if, after giving effect to any concurrent prepayment of
the Revolving Loans in accordance with Section 2.09, the sum of the Revolving
Exposures would exceed the total Commitments.
(c) In the event and on each occasion that any Net Proceeds
are received by or on behalf of the Borrower or any Subsidiary Loan Party in
respect of any Prepayment Event, the Revolving Commitments shall automatically
be reduced by an aggregate amount equal to the amount of such Net Proceeds and
the
<PAGE> 45
40
Borrower shall make any related prepayment of Loans required by Section
2.09(b).
(d) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b) of this
Section and of any mandatory reduction of Commitments under paragraph (c) of
this Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election or event giving rise to a
mandatory reduction and the effective date thereof, and providing a reasonably
detailed calculation of the amount of any such mandatory reduction of
Commitments. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable; provided that a notice
of termination of the Revolving Commitments delivered by the Borrower may state
that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Borrower (by notice
to the Administrative Agent on or prior to the specified effective date) if
such condition is not satisfied. Any termination or reduction of the
Commitments shall be permanent. Each reduction of the Commitments shall be made
ratably among the Lenders in accordance with their respective Commitments.
SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay to the Administrative Agent for
the account of each Lender the then unpaid principal amount of each Loan of
such Lender on the Revolving Maturity Date.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in
which it shall record (i) the amount of each Loan made hereunder, the Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be prima
<PAGE> 46
41
facie evidence of the existence and amounts of the obligations recorded
therein; provided that the failure of any Lender or the Administrative Agent to
maintain such accounts or any error therein shall not in any manner affect the
obligation of the Borrower to repay the Loans in accordance with the terms of
this Agreement.
(e) Any Lender may request that Loans made by it be
evidenced by a promissory note. In such event, the Borrower shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent. Thereafter, the
Loans evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 9.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and
its registered assigns).
SECTION 2.09. Prepayment of Loans. (a) The Borrower shall
have the right at any time and from time to time to prepay any Borrowing in
whole or in part, subject to the requirements of this Section.
(b) In the event and on such occasion that the sum of the
Revolving Exposures exceeds the lesser of the Borrowing Base and the total
Revolving Commitments, the Borrower shall prepay Borrowings (or, if no such
Borrowings are outstanding, deposit cash collateral in an account with the
Administrative Agent pursuant to Section 2.04(j)) in an aggregate amount equal
to such excess.
(c) Prior to any optional or mandatory prepayment of
Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to
be prepaid and shall specify such selection in the notice of such prepayment
pursuant to paragraph (d) of this Section.
(d) The Borrower shall notify the Administrative Agent by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case
of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York
City time, three Business Days before the date of prepayment, or (ii) in the
case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York
City time, one Business Day before the date of prepayment. Each such notice
shall be irrevocable and shall specify the prepayment date, the principal
amount of each Borrowing or portion thereof to be prepaid and, in the case of a
<PAGE> 47
42
mandatory prepayment, a reasonably detailed calculation of the amount of such
prepayment; provided that, if a notice of optional prepayment is given in
connection with a conditional notice of termination of the Revolving
Commitments as contemplated by Section 2.07, then such notice of prepayment may
be revoked if such notice of termination is revoked in accordance with Section
2.07. Promptly following receipt of any such notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each partial prepayment of
any Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.02, except as
necessary to apply fully the required amount of a mandatory prepayment. Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the
extent required by Section 2.11.
SECTION 2.10. Fees. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee, which
shall accrue on the daily unused amount of the Revolving Commitment of such
Lender during the period from and including the Effective Date to but excluding
the date on which such Commitment terminates at a rate of (a) .75% per annum in
respect of any day when the outstanding principal amount of the Loans is less
than 50% of the Commitments and (b) .50% per annum in respect of any day when
the outstanding principal amount of the Loans is equal to or greater than 50%
of the Commitments. Accrued commitment fees shall be payable in arrears on the
last day of March, June, September and December of each year and on the date on
which the Revolving Commitments terminate, commencing on the first such date to
occur after the Effective Date. All commitment fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day). For purposes of
computing commitment fees with respect to Revolving Commitments, a Revolving
Commitment of a Lender shall be deemed to be used to the extent of the
outstanding Revolving Loans and LC Exposure of such Lender.
(b) The Borrower agrees to pay (i) to the Administrative
Agent for the account of each Revolving Lender a participation fee with respect
to its participations in Letters of Credit, which shall accrue at the same
Applicable Rate as would apply to interest on Eurodollar Loans on the daily
amount of such Lender's LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender's
Revolving Commitment terminates and the date on which such Lender ceases to
have any
<PAGE> 48
43
LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at
the rate of 0.25% per annum on the average daily amount of the LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the Effective Date to but excluding the
later of the date of termination of the Revolving Commitments and the date on
which there ceases to be any LC Exposure, as well as the Issuing Bank's
standard fees with respect to the issuance, amendment, renewal or extension of
any Letter of Credit or processing of drawings thereunder. Participation fees
and fronting fees accrued through and including the last day of March, June,
September and December of each year shall be payable on the third Business Day
following such last day, commencing on the first such date to occur after the
Effective Date; provided that all such fees shall be payable on the date on
which the Revolving Commitments terminate and any such fees accruing after the
date on which the Revolving Commitments terminate shall be payable on demand.
Any other fees payable to the Issuing Bank pursuant to this paragraph shall be
payable within 10 days after demand. All participation fees and fronting fees
shall be computed on the basis of a year of 360 days and shall be payable for
the actual number of days elapsed (including the first day but excluding the
last day).
(c) The Borrower agrees to pay to the Administrative Agent,
for its own account, fees payable in the amounts and at the times separately
agreed upon between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates
due, in immediately available funds, to the Administrative Agent (or to the
Issuing Bank, in the case of fees payable to it) for distribution, in the case
of commitment fees and participation fees, to the Lenders entitled thereto.
Fees paid shall not be refundable under any circumstances.
SECTION 2.11. Interest. (a) The Loans comprising each ABR
Borrowing shall bear interest at the Alternate Base Rate plus the Applicable
Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by the Borrower
hereunder is not paid when due, whether at stated maturity, upon acceleration
or otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate
<PAGE> 49
44
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus
the rate otherwise applicable to such Loan as provided in the preceding
paragraphs of this Section or (ii) in the case of any other amount, 2% plus the
rate applicable to ABR Revolving Loans as provided in paragraph (a) of this
Section.
(d) Accrued interest on each Loan shall be payable in
arrears on each Interest Payment Date for such Loan and upon termination of the
Revolving Commitments; provided that (i) interest accrued pursuant to paragraph
(c) of this Section shall be payable on demand, (ii) in the event of any
repayment or prepayment of any Loan (other than a prepayment of an ABR Loan
prior to the end of the Revolving Availability Period), accrued interest on the
principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment and (iii) in the event of any conversion of any
Eurodollar Loan prior to the end of the current Interest Period therefor,
accrued interest on such Loan shall be payable on the effective date of such
conversion.
(e) All interest hereunder shall be computed on the basis of
a year of 360 days, except that interest computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate
shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and in each case shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). The applicable Alternate
Base Rate or Adjusted LIBO Rate shall be determined by the Administrative
Agent, and such determination shall be conclusive absent manifest error.
SECTION 2.12. Alternate Rate of Interest. If prior to the
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and
reasonable means do not exist for ascertaining the Adjusted LIBO Rate
for such Interest Period; or
(b) the Administrative Agent is advised by the Required
Lenders that the Adjusted LIBO Rate for such Interest Period will not
adequately and fairly reflect the cost to such Lenders of making or
maintaining their Loans included in such Borrowing for such Interest
Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as
<PAGE> 50
45
practicable thereafter and, until the Administrative Agent notifies the
Borrower and the Lenders that the circumstances giving rise to such notice no
longer exist, (i) any Interest Election Request that requests the conversion of
any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing
shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar
Borrowing, such Borrowing shall be made as an ABR Borrowing.
SECTION 2.13. Increased Costs. (a) If any Change in Law
shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBO Rate) or the
Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or
participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit
or to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower agrees to pay to such Lender or the Issuing Bank, as the case may be,
such additional amount or amounts as will compensate such Lender or the Issuing
Bank, as the case may be, for such additional costs incurred or reduction
suffered.
(b) If any Lender or the Issuing Bank determines that any
Change in Law regarding capital requirements has or would have the effect of
reducing the rate of return on such Lender's or the Issuing Bank's capital or
on the capital of such Lender's or the Issuing Bank's holding company, if any,
as a consequence of this Agreement or the Loans made by, or participations in
Letters of Credit held by, such Lender, or the Letters of Credit issued by the
Issuing Bank, to a level below that which such Lender or the Issuing Bank or
such Lender's or the Issuing Bank's holding company could have achieved but for
such Change in Law (taking into consideration such Lender's or the Issuing
Bank's policies and the policies of such Lender's or the Issuing Bank's holding
company with respect to capital adequacy), then from time
<PAGE> 51
46
to time the Borrower agrees to pay to such Lender or the Issuing Bank, as the
case may be, such additional amount or amounts as will compensate such Lender
or the Issuing Bank or such Lender's or the Issuing Bank's holding company for
any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting
forth the amount or amounts necessary to compensate such Lender or the Issuing
Bank or its holding company, as the case may be, as specified in paragraph (a)
or (b) of this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof by the Borrower.
(d) Failure or delay on the part of any Lender or the
Issuing Bank to demand compensation pursuant to this Section shall not
constitute a waiver of such Lender's or the Issuing Bank's right to demand such
compensation; provided that the Borrower shall not be required to compensate a
Lender or the Issuing Bank pursuant to this Section for any increased costs or
reductions incurred more than 180 days prior to the date that such Lender or
the Issuing Bank, as the case may be, notifies the Borrower of the Change in
Law giving rise to such increased costs or reductions and of such Lender's or
the Issuing Bank's intention to claim compensation therefor; provided further
that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 180-day period referred to above shall be extended to
include the period of retroactive effect thereof.
SECTION 2.14. Break Funding Payments. In the event of (a)
the payment of any principal of any Eurodollar Loan other than on the last day
of an Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under Section
2.09(e) and is revoked in accordance therewith), or (d) the assignment of any
Eurodollar Loan other than on the last day of the Interest Period applicable
thereto as a result of a request by the Borrower pursuant to Section 2.17,
then, in any such event, the Borrower shall compensate each Lender for the
loss, cost and expense attributable to such event. In the case of a Eurodollar
Loan, such loss, cost or expense to any Lender shall be deemed to include an
amount determined by such Lender to be the excess, if
<PAGE> 52
47
any, of (i) the amount of interest which would have accrued on the principal
amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that
would have been applicable to such Loan, for the period from the date of such
event to the last day of the then current Interest Period therefor (or, in the
case of a failure to borrow, convert or continue, for the period that would
have been the Interest Period for such Loan), over (ii) the amount of interest
which would accrue on such principal amount for such period at the interest
rate which such Lender would bid were it to bid, at the commencement of such
period, for dollar deposits of a comparable amount and period from other banks
in the eurodollar market. A certificate of any Lender setting forth any amount
or amounts that such Lender is entitled to receive pursuant to this Section
shall be delivered to the Borrower and shall be conclusive absent manifest
error. The Borrower shall pay such Lender the amount shown as due on any such
certificate within 10 days after receipt thereof by the Borrower.
SECTION 2.15. Taxes. (a) Any and all payments by or on
account of any obligation of the Borrower hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if the Borrower shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments,
then (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section) the Administrative Agent, Lender or Issuing Bank
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to
the relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent,
each Lender and the Issuing Bank, within 10 days after written demand therefor,
for the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on
or with respect to any payment by or on account of any obligation of the
Borrower hereunder or under any other Loan Document (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
<PAGE> 53
48
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender or the Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing
Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy
of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(e) Each Foreign Lender, and any Issuing Bank that is not a
"United States person" within the meaning of Section 7701(a)(30) of the Code
(together with the Foreign Lenders, the "Non-U.S. Lenders"), shall deliver to
the Borrower (with a copy to the Administrative Agent) two copies of either
United States Internal Revenue Service Form 1001 or Form 4224, or, in the case
of a Non-U.S. Lender claiming exemption from U.S. Federal withholding tax under
Section 871(h) or 881(c) of the Code with respect to payments of "portfolio
interest", a Form W-8, or any subsequent versions thereof or successors thereto
(and, if such Non-U.S. Lender delivers a Form W-8, a certificate representing
that such Non-U.S. Lender is not a bank for purposes of Section 881(c) of the
Code, is not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Borrower and is not a controlled foreign
corporation related to the Borrower (within the meaning of Section 864(d)(4) of
the Code)), properly completed and duly executed by such Non-U.S. Lender
claiming complete exemption from, or reduced rate of, U.S. Federal withholding
tax on payments by the Borrower under this Agreement or any other Loan
Document. Such forms shall be delivered by each Non-U.S. Lender on or before
the date it becomes a party to this Agreement or designates a new lending
office. In addition, each Non-U.S. Lender shall deliver such forms promptly
upon the obsolescence, expiration or invalidity of any form previously
delivered by such Non-U.S. Lender. Notwithstanding any other provision of this
Section 2.14, a Non-U.S. Lender shall not be required to deliver any form
pursuant to this Section 2.14(e) that such Non-U.S. Lender is not legally able
to deliver.
SECTION 2.16. Payments Generally; Pro Rata Treatment;
Sharing of Set-offs. (a) The Borrower shall make each payment required to be
made by it hereunder or under any other Loan Document (whether of principal,
interest, fees or reimbursement
<PAGE> 54
49
of LC Disbursements, or of amounts payable under Section 2.13, 2.14 or 2.15, or
otherwise) prior to the time expressly required hereunder or under such other
Loan Document for such payment (or, if no such time is expressly required,
prior to 12:00 noon, New York City time), on the date when due, in immediately
available funds, without set-off or counterclaim. Any amounts received after
such time on any date may, in the discretion of the Administrative Agent, be
deemed to have been received on the next succeeding Business Day for purposes
of calculating interest thereon. All such payments shall be made to the
Administrative Agent at its offices at 270 Park Avenue, New York, New York,
except payments to be made directly to the Issuing Bank as expressly provided
herein and except that payments pursuant to Sections 2.13, 2.14, 2.15 and 9.03
shall be made directly to the Persons entitled thereto and payments pursuant to
other Loan Documents shall be made to the Persons specified therein. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof. If any payment under any Loan Document shall be due on a day
that is not a Business Day, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All
payments under each Loan Document shall be made in dollars.
(b) If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
unreimbursed LC Disbursements, interest and fees then due hereunder, such funds
shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal and unreimbursed LC Disbursements then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal and unreimbursed LC Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of set-off
or counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans or participations in LC Disbursements resulting in
such Lender receiving payment of a greater proportion of the aggregate amount
of its Loans and participations in LC Disbursements and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Loans and participations in LC Disbursements of other
Lenders to the extent necessary so that the benefit of all such payments shall
be
<PAGE> 55
50
shared by the Lenders ratably in accordance with the aggregate amount of
principal of and accrued interest on their respective Loans and participations
in LC Disbursements; provided that (i) if any such participations are purchased
and all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this paragraph
shall not be construed to apply to any payment made by the Borrower pursuant to
and in accordance with the express terms of this Agreement or any payment
obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans or participations in LC Disbursements to any
assignee or participant, other than to the Borrower or any Subsidiary or
Affiliate thereof (as to which the provisions of this paragraph shall apply).
The Borrower consents to the foregoing and agrees, to the extent it may
effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the
Borrower rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrower in the amount
of such participation.
(d) Unless the Administrative Agent shall have received
notice from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the Issuing Bank
hereunder that the Borrower will not make such payment, the Administrative
Agent may assume that the Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to
the Lenders or the Issuing Bank, as the case may be, the amount due. In such
event, if the Borrower has not in fact made such payment, then each of the
Lenders or the Issuing Bank, as the case may be, severally agrees to repay to
the Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including
the date such amount is distributed to it to but excluding the date of payment
to the Administrative Agent, at the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to
be made by it pursuant to Section 2.04(d) or (e), 2.05(b), 2.16(d) or 9.03(c),
then the Administrative Agent may, in its discretion (notwithstanding any
contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy
<PAGE> 56
51
such Lender's obligations under such Sections until all such unsatisfied
obligations are fully paid.
SECTION 2.17. Mitigation Obligations; Replacement of
Lenders. (a) If any Lender requests compensation under Section 2.13, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.15,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be,
in the future and (ii) would not subject such Lender to any unreimbursed cost
or expense and would not otherwise be disadvantageous to such Lender. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any
Lender in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.13,
or if the Borrower is required to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section
2.15, or if any Lender defaults in its obligation to fund Loans hereunder, then
the Borrower may, at its sole expense and effort, upon notice to such Lender
and the Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the restrictions contained
in Section 9.04), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that (i) the
Borrower shall have received the prior written consent of the Administrative
Agent and the Issuing Bank, which consent shall not unreasonably be withheld,
(ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in LC Disbursements,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.13 or payments required to be made pursuant to
Section 2.15, such assignment will result in a material reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.
<PAGE> 57
52
ARTICLE III
Representations and Warranties
The Borrower represents and warrants to the Lenders that:
SECTION 3.01. Organization; Powers. Each of the Borrower and
its Subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business
in, and is in good standing in, every jurisdiction where such qualification is
required.
SECTION 3.02. Authorization; Enforceability. The Transactions
to be entered into by each Loan Party are within such Loan Party's corporate
powers and have been duly authorized by all necessary corporate and, if
required, stockholder action. This Agreement has been duly executed and
delivered by the Borrower and constitutes, and each other Loan Document to
which any Loan Party is to be a party, when executed and delivered by such Loan
Party, will constitute, a legal, valid and binding obligation of the Borrower
or such Loan Party (as the case may be), enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in
equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect and except filings
necessary to perfect Liens created under the Loan Documents, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of the Borrower or any of its Subsidiaries or any
order of any Governmental Authority, (c) will not violate or result in a
default under any indenture, agreement or other instrument binding upon the
Borrower or any of its Subsidiaries or its assets, except such violations or
defaults which individually and in the aggregate, would not be reasonably
likely to result in a Material Adverse Effect or give rise to a right
thereunder to require any payment to be made by the
<PAGE> 58
53
Borrower or any of its Subsidiaries, and (d) will not result in the creation or
imposition of any Lien on any asset of the Borrower or any of its Subsidiaries,
except Liens created under the Loan Documents.
SECTION 3.04. Financial Condition; No Material Adverse
Change. (a) The Borrower has heretofore furnished to the Lenders its (i)
audited consolidated balance sheet and statements of income, stockholders
equity and cash flows (A) as of and for the fiscal year ended December 31,
1998, reported on by PricewaterhouseCoopers LLP, independent public
accountants, (B) as of and for the fiscal quarter and the portion of the fiscal
year ended September 30, 1999, certified by its chief financial officer and
(ii) consolidated balance sheet and statements of income and stockholders
equity as of and for any month and the portion of the fiscal year ended on the
last day of such month that has been completed during the fiscal quarter ended
December 31, 1999, certified by its chief financial officer. Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Borrower and its consolidated
Subsidiaries as of such dates and for such periods in accordance with GAAP,
subject to year-end audit adjustments and the absence of footnotes in the case
of the statements referred to in clauses (ii) and (iii) above.
(b) The Borrower has heretofore furnished to the Lenders its
pro forma consolidated balance sheet as of September 30, 1999, prepared giving
effect to the Transactions as if the Transactions had occurred on such date.
Such pro forma consolidated balance sheet (i) has been prepared in good faith
based on the same assumptions used to prepare the pro forma financial
statements included in the Information Memorandum (which assumptions are
believed by the Borrower to be reasonable), (ii) is based on the best
information available to the Borrower after due inquiry, (iii) accurately
reflects all material adjustments necessary to give effect to the Transactions
and (iv) presents fairly, in all material respects, the pro forma financial
position of the Borrower and its consolidated Subsidiaries as of September 30,
1999 as if the Transactions had occurred on such date.
(c) Except as disclosed on Schedule 3.04, in the financial
statements referred to above or the notes thereto or in the Information
Memorandum and except for the Disclosed Matters, after giving effect to the
Transactions, none of the Borrower or its Subsidiaries has, as of the Effective
Date, any material contingent liabilities, unusual long-term commitments or
unrealized losses.
<PAGE> 59
54
(d) Since December 31, 1998, there has been no material
adverse change in the business, assets, operations, prospects or condition,
financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole.
SECTION 3.05. Properties. (a) Each of the Borrower and its
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business, except for minor defects in
title that do not interfere with its ability to conduct its business as
currently conducted or to utilize such properties for their intended purposes.
(b) Each of the Borrower and its Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by the
Borrower and its Subsidiaries does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(c) Schedule 3.05 sets forth the address of each real
property that is owned or leased by the Borrower or any of its Subsidiaries as
of the Effective Date after giving effect to the Transactions.
SECTION 3.06. Litigation and Environmental Matters. (a) There
are no actions, suits or proceedings by or before any arbitrator or
Governmental Authority pending against or, to the knowledge of the Borrower,
threatened against or affecting the Borrower or any of its Subsidiaries (i) as
to which there is a reasonable possibility of an adverse determination and
that, if adversely determined, could reasonably be expected, individually or in
the aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve any of the Loan Documents or the Transactions.
(b) Except for the Disclosed Matters and except with respect
to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, none of the
Borrower or its Subsidiaries (i) has failed to comply with any Environmental
Law or to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) has become subject to any
Environmental Liability, (iii) has received notice of any claim with respect to
any Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
<PAGE> 60
55
(c) Since the Effective Date of this Agreement, there has
been no change in the status of the Disclosed Matters that, individually or in
the aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect.
SECTION 3.07. Compliance with Laws and Agreements. Each of
the Borrower and its Subsidiaries is in compliance with all laws, regulations
and orders of any Governmental Authority applicable to it or its property and
all indentures, agreements and other instruments binding upon it or its
property, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect. No
Default has occurred and is continuing.
SECTION 3.08. Investment and Holding Company Status. None of
the Borrower or any of its Subsidiaries is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
SECTION 3.09. Taxes. Each of the Borrower and its
Subsidiaries has timely filed or caused to be filed all Tax returns or
extensions and reports required to have been filed and has paid or caused to be
paid all Taxes required to have been paid by it, except (a) any Taxes that are
being contested in good faith by appropriate proceedings and for which the
Borrower or such Subsidiary, as applicable, has set aside on its books adequate
reserves or (b) to the extent that the failure to do so could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all other such
ERISA Events for which liability is reasonably expected to occur, could
reasonably be expected to result in a Material Adverse Effect. The present
value of all accumulated benefit obligations under each Plan (based on the
assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $500,000 the fair market value of
the assets of such Plan, and the present value of all accumulated benefit
obligations of all underfunded Plans (based on the assumptions used for
purposes of Statement of Financial Accounting Standards No. 87) did not, as of
the date of the most recent financial statements reflecting such amounts,
exceed by more than $500,000 the fair market value of the assets of all such
underfunded Plans.
<PAGE> 61
56
SECTION 3.11. Disclosure. The Borrower has disclosed to the
Lenders all agreements, instruments and corporate or other restrictions to
which the Borrower or any of its Subsidiaries is subject, and all other matters
known to any of them, that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect. None of the Information
Memorandum or any of the other reports, financial statements, certificates or
other information furnished by or on behalf of any Loan Party to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or any other Loan Document or delivered hereunder or thereunder (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.
SECTION 3.12. Subsidiaries. Schedule 3.12 sets forth the name
of, and the ownership interest of the Borrower in, each direct and indirect
Subsidiary of the Borrower and identifies each such Subsidiary that is a
Subsidiary Loan Party, in each case as of the Effective Date.
SECTION 3.13. Insurance. Schedule 3.13 sets forth a
description of all insurance maintained by or on behalf of the Borrower and its
Subsidiaries as of the Effective Date. As of the Effective Date, all premiums
in respect of such insurance have been paid in accordance with their terms. The
Borrower believes that the insurance maintained by or on behalf of the Borrower
and its Subsidiaries is adequate.
SECTION 3.14. Labor Matters. As of the Effective Date, there
are no strikes, lockouts or slowdowns against the Borrower or any of its
Subsidiaries pending or, to the knowledge of the Borrower, threatened. The
hours worked by and payments made to employees of the Borrower and its
Subsidiaries have not been in violation of the Fair Labor Standards Act or any
other applicable Federal, state, local or foreign law dealing with such
matters, except where any such violations, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect. All
payments due from the Borrower or any Subsidiary, or for which any claim may be
made against the Borrower or any Subsidiary, on account of wages and employee
health and welfare insurance and other benefits, have been paid or accrued as a
liability on the books of the Borrower or such Subsidiary. The consummation of
the Transactions will not give
<PAGE> 62
57
rise to any right of termination or right of renegotiation on the part of any
union under any collective bargaining agreement to which the Borrower or any
Subsidiary is bound.
SECTION 3.15. Solvency. Immediately after the consummation of
the Transactions to occur on the Effective Date and immediately following the
making of each Loan made on the Effective Date and after giving effect to the
application of the proceeds of such Loans, (a) the fair value of the assets of
each Loan Party, at a fair valuation, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of each Loan Party will be greater than the amount that will be
required to pay the probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured; (c) each Loan Party will be able to pay its debts
and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) each Loan Party will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted
following the Effective Date.
SECTION 3.16. Security Documents. (a) The Pledge Agreement is
effective to create in favor of the Collateral Agent, for the ratable benefit
of the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Pledge Agreement) and, when the Collateral is
delivered to the Collateral Agent, the Pledge Agreement shall constitute a
fully perfected first priority Lien on, and security interest in, all right,
title and interest of the pledgor thereunder in such Collateral, in each case
prior and superior in right to any other person.
(b) The Security Agreement is effective to create in favor of
the Collateral Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral (as defined in the
Security Agreement) and, when financing statements in appropriate form are
filed in the offices specified pursuant to the Perfection Certificate, the
Security Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the grantors thereunder in such
Collateral (other than the Intellectual Property (as defined in the Security
Agreement), in each case prior and superior in right to any other person, other
than with respect to Liens expressly permitted by Section 6.02.
(c) When the Security Agreement is filed in the United States
Patent and Trademark Office and the United States
<PAGE> 63
58
Copyright Office, the Security Agreement shall constitute a fully perfected
Lien on, and security interest in, all right, title and interest of the Loan
Parties in the Intellectual Property (as defined in the Security Agreement) in
which a security interest may be perfected by filing, recording or registering
a security agreement, financing statement or analogous document in the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, in each case prior and superior in right to any other person (it
being understood that subsequent recordings in the United States Patent and
Trademark Office and the United States Copyright Office may be necessary to
perfect a lien on registered trademarks, trademark applications and copyrights
acquired by the Loan Parties after the Effective Date).
SECTION 3.17. Year 2000. Any reprogramming required to permit
the proper functioning, in and following the year 2000, of (i) the computer
systems of the Borrower and its Subsidiaries and (ii) equipment containing
embedded microchips (including, to the Borrower's knowledge, systems and
equipment supplied by others or, such material systems or equipment with which
the systems of the Borrower and its Subsidiaries interface) and the testing of
all such systems and equipment, as so reprogrammed, was completed in all
material respects by November 30, 1999. The cost to the Borrower and its
Subsidiaries of such reprogramming and testing and of the reasonably
foreseeable consequences of year 2000 to the Borrower and its Subsidiaries
(including reprogramming errors and, to the Borrower's knowledge, the failure
of the systems or equipment of others material to the Borrower or its
Subsidiaries) will not result in a Default or a Material Adverse Effect. Except
for such of the reprogramming referred to in the preceding sentence as may be
necessary, the computer and management information systems of the Borrower and
its Subsidiaries are and, with ordinary course upgrading and maintenance, will
continue for the term of this Agreement to be sufficient to permit the Borrower
to conduct its business without a Material Adverse Effect.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. The obligations of the Lenders
to make Loans and of the Issuing Bank to issue Letters of Credit hereunder
shall not become effective until the date on which each of the following
conditions is satisfied (or waived in accordance with Section 9.02):
<PAGE> 64
59
(a) The Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this
Agreement signed on behalf of such party or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page of this Agreement) that such
party has signed a counterpart of this Agreement.
(b) The Administrative Agent shall have received a favorable
written opinion (addressed to the Administrative Agent and the Lenders
and dated the Effective Date) of Greenberg & Traurig, counsel for the
Borrower and the Loan Parties, substantially in the form of Exhibit
B-1, and covering such other matters relating to the Loan Parties, the
Loan Documents or the Transactions as the Required Lenders shall
reasonably request. The Borrower hereby requests such counsel to
deliver such opinions.
(c) The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or its counsel
may reasonably request relating to the organization, existence and
good standing of each Loan Party, the authorization of the
Transactions and any other legal matters relating to the Loan Parties,
the Loan Documents or the Transactions, all in form and substance
satisfactory to the Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a
certificate, dated the Effective Date and signed by the President, a
Vice President or a Financial Officer of the Borrower, confirming
compliance with the conditions set forth in paragraphs (a) and (c) of
Section 4.02.
(e) The Administrative Agent shall have received all fees and
other amounts invoiced on or prior to the Effective Date, including,
to the extent invoiced, reimbursement or payment of all out-of-pocket
expenses (including fees, charges and disbursements of counsel)
required to be reimbursed or paid by any Loan Party hereunder or under
any other Loan Document.
(f) The Administrative Agent shall have received counterparts
of the Security Documents signed on behalf of each Loan Party,
together with the following:
(i) stock certificates representing all the
outstanding shares of capital stock or other Equity Interests
of (a) each Subsidiary of the Borrower, including CFN, iXL
Ventures and any Joint Venture
<PAGE> 65
60
Subsidiary and (b) any other Joint Venture (other than those
included in Schedule 4.01), in each case owned by or on
behalf of any Loan Party as of the Effective Date after
giving effect to the Transactions (except that such delivery
of stock certificates representing shares of common stock of
a Foreign Subsidiary may be limited to 65% of the outstanding
shares of common stock of such Foreign Subsidiary),
promissory notes evidencing all intercompany Indebtedness
owed to any Loan Party by the Borrower or any Subsidiary as
of the Effective Date after giving effect to the Transactions
and stock powers and instruments of transfer, endorsed in
blank, with respect to such stock certificates and promissory
notes;
(ii) all documents and instruments, including
Uniform Commercial Code financing statements, required by law
or reasonably requested by the Administrative Agent to be
filed, registered or recorded to create or perfect the Liens
intended to be created under the Security Agreement; and
(iii) a completed Perfection Certificate dated the
Effective Date and signed by a Financial Officer and Legal
Officer of the Borrower, together with all attachments
contemplated thereby, including the results of a search of
the Uniform Commercial Code (or equivalent) filings made with
respect to the Loan Parties in the jurisdictions contemplated
by the Perfection Certificate and copies of the financing
statements (or similar documents) disclosed by such search
and evidence reasonably satisfactory to the Administrative
Agent that the Liens indicated by such financing statements
(or similar documents) are permitted by Section 6.02 or have
been released.
(g) The Administrative Agent shall have received (i)
counterparts of the Guarantee Agreement signed on behalf of each
Subsidiary Loan Party and (ii) counterparts of the Indemnity,
Subrogation and Contribution Agreement signed on behalf of each
Subsidiary Loan Party.
(h) Each Loan Party shall have obtained all consents and
approvals required to be obtained by it in connection with the
execution and delivery of all Security Documents to which it is a
party, the performance of its obligations thereunder and the granting
by it of the Liens thereunder.
<PAGE> 66
61
(i) The Administrative Agent shall have received evidence
satisfactory to it that the insurance required by Section 5.07 is in
effect.
(j) The Lenders shall be reasonably satisfied as to the
amount and nature of any Environmental Liabilities and the employee
health and safety liabilities to which the Borrower and its
Subsidiaries may be subject, and the plans of the Borrower with
respect thereto, after giving effect to the Transactions and the
consummation of the other transactions contemplated hereby.
(k) The Borrower's Credit Agreement dated as of July 29,
1998, as amended and restated as of November 30, 1998, shall have been
terminated, all obligations thereunder (including obligations related
to the reimbursement of expenses and indemnities and invoiced legal
fees and disbursements) shall have been paid in full and all liens
securing such obligations shall have been released. After giving
effect to the Transactions, none of the Borrower or its Subsidiaries
(other than the CFN Subsidiaries, the iXL Ventures Subsidiaries and
the Joint Venture Subsidiaries) shall have outstanding any shares of
preferred stock or any Indebtedness, other than Indebtedness incurred
or otherwise permitted under the Loan Documents.
(l) The Administrative Agent shall have received a completed
Borrowing Base Certificate calculating and certifying as to the
Borrowing Base as of the end of the most recent calendar month ended
prior to the Effective Date, with supporting documentation (including,
without limitation, the documentation described in Schedule 1 to the
Borrowing Base Certificate), in each case signed on behalf of the
Borrower by a Financial Officer thereof and certified as being
complete and correct in all material respects;
(m) The Borrower shall have established the Chase Account and
a cash management system to the reasonable satisfaction of the
Administrative Agent.
(n) The Lenders shall have received audited consolidated
balance sheets and related statements of income, stockholder's or
member's equity as applicable and cash flows for Borrower for the
fiscal year ended December 31, 1998 reported on by
PricewaterhouseCoopers LLP, independent public accountants, and for
the 1999
<PAGE> 67
62
fiscal quarters prior to the Effective Date, and for all full fiscal
months since the end of the most recent fiscal quarter, and such
quarterly and monthly financial statements shall not (i) reflect any
material adverse change in the consolidated financial condition or
results of operations of the Borrower since December 31, 1998 or (ii)
be materially inconsistent with the financial statements or forecasts
previously provided to the Lenders.
(o) The Lenders shall have received financial projections of
the Borrower and the Subsidiary Loan Parties for the fiscal years 2000
through 2002 in form and substance satisfactory to the Administrative
Agent.
(p) All governmental and third party approvals and consents
necessary or, in the opinion of the Administrative Agent, advisable in
connection with the Transactions shall have been obtained by the
relevant Loan Party, all applicable appeal periods shall have expired,
there shall be no governmental or judicial action, actual or
threatened, that could reasonably be expected to have a Material
Adverse Effect.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on
January 7, 2000 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).
SECTION 4.02. Each Credit Event. The obligation of each
Lender to make a Loan on the occasion of any Borrowing, and of the Issuing Bank
to issue, amend, renew or extend any Letter of Credit, is subject to the
satisfaction of the following conditions:
(a) The representations and warranties of the Borrower and
each Subsidiary set forth in the Loan Documents shall be true and
correct on and as of the date of such Borrowing or the date of
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, except to the extent such representations and warranties
expressly relate to an earlier date in which case such representations
and warranties shall be true and correct as of such earlier date.
<PAGE> 68
63
(b) The Administrative Agent shall have received counterparts
of the depository agreement (in agreed form) signed on behalf of the
Borrower and First Union National Bank.
(c) Pursuant to Section 5.14, the Borrower has caused each of
the banks referred to therein to enter into a depository agreement (in
agreed form), unless otherwise agreed by the Administrative Agent.
(d) Pursuant to Section 5.03 of the Securities Agreement, the
Borrower has caused each Securities Intermediary (as defined therein)
to enter into a control agreement in agreed form.
(e) At the time of and immediately after giving effect to
such Borrowing or the issuance, amendment, renewal or extension of
such Letter of Credit, as applicable, no Default shall have occurred
and be continuing.
(f) After giving effect to such Borrowing or the issuance,
amendment, renewal or extension of such Letter of Credit, as
applicable, the aggregate Revolving Exposures will not exceed the
Borrowing Base.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter
of Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a), (b)
and (c) of this Section.
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall
have been paid in full and all Letters of Credit shall have expired or
terminated and all LC Disbursements shall have been reimbursed, the Borrower
covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. The
Borrower will furnish to the Administrative Agent and each Lender:
<PAGE> 69
64
(a) within 90 days after the end of each fiscal year of the
Borrower, its audited consolidated and unaudited consolidating balance
sheets and related statements of operations, stockholders' equity and
cash flows as of the end of and for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, all
reported on by PricewaterhouseCoopers LLP or other independent public
accountants of recognized national standing (without a "going concern"
or like qualification or exception and without any qualification or
exception as to the scope of such audit) to the effect that such
consolidated financial statements present fairly in all material
respects the financial condition and results of operations of the
Borrower and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, its consolidated
and consolidating balance sheets and related statements of operations,
stockholders' equity and cash flows as of the end of and for such
fiscal quarter and the then elapsed portion of the fiscal year,
setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance
sheet, as of the end of) the previous fiscal year, all certified by
one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of the
Borrower and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end
audit adjustments and the absence of footnotes;
(c) within 30 days after the end of each of the first two
fiscal months of each fiscal quarter of the Borrower, its consolidated
balance sheet and related statements of operations, stockholders'
equity and cash flows as of the end of and for such fiscal month and
the then elapsed portion of the fiscal year, all certified by one of
its Financial Officers as presenting in all material respects the
financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with
GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes;
(d) concurrently with any delivery of financial statements
under clause (a) or (b) above, a certificate of
<PAGE> 70
65
a Financial Officer of the Borrower (i) certifying as to whether a
Default has occurred and, if a Default has occurred, specifying the
details thereof and any action taken or proposed to be taken with
respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Sections 6.13, 6.14 and 6.15 and (iii)
stating whether any change in GAAP or in the application thereof has
occurred since the date of the Borrower's audited financial statements
referred to in Section 3.04 and, if any such change has occurred,
specifying the effect of such change on the financial statements
accompanying such certificate;
(e) concurrently with any delivery of financial statements
under clause (a) above, a certificate of the accounting firm that
reported on such financial statements stating whether they obtained
knowledge during the course of their examination of such financial
statements of any Default (which certificate may be limited to the
extent required by accounting rules or guidelines);
(f) within 20 days after the end of each calendar month ended
after the Effective Date (and, if requested by the Administrative
Agent at any other time when the Administrative Agent reasonably
believes that the then-existing Borrowing Base is materially
inaccurate, as soon as reasonably available but no later than 10 days
after the request), a completed Borrowing Base Certificate in the form
of Exhibit G calculating and certifying the Borrowing Base as of the
last day of such calendar month (or as of such other requested date,
as the case may be), with supporting documentation (including, without
limitation, the documentation described in Schedule 1 to the Borrowing
Base Certificate), in each case signed on behalf of the Borrower by a
Financial Officer thereof and certified as being complete and correct
in all material respects;
(g) at least 30 days prior to the commencement of each fiscal
year of the Borrower, a detailed consolidated budget for such fiscal
year (including a projected consolidated balance sheet and related
statements of projected operations and cash flow as of the end of and
for such fiscal year) and, promptly when available, any significant
revisions of such budget;
(h) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other
materials filed by the Borrower or any of its Subsidiaries with the
Securities and Exchange Commission,
<PAGE> 71
66
or any Governmental Authority succeeding to any or all of the
functions of said Commission, or with any national securities
exchange, or distributed by the Borrower to its shareholders
generally, as the case may be; and
(i) promptly following any request therefor, such other
information regarding the operations, properties, business affairs and
financial condition of the Borrower or any of its Subsidiaries, or
compliance with the terms of any Loan Document, as the Administrative
Agent or any Lender may reasonably request.
SECTION 5.02. Notices of Material Events. The Borrower will
furnish to the Administrative Agent and each Lender prompt written notice of
the following:
(a) the occurrence of any default with respect to Permitted
Preferred Stock or any other Default;
(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority
against or affecting the Borrower or any Affiliate thereof that, if
adversely determined, could reasonably be expected to result in a
Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be
expected to result in liability of the Borrower and its Subsidiaries
in an aggregate amount exceeding $1,000,000; and
(d) any other development that results in, or could
reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth
the details of the event or development requiring such notice and any action
taken or proposed to be taken with respect thereto.
SECTION 5.03. Information Regarding Collateral. (a) The
Borrower will furnish to the Administrative Agent prompt written notice of any
change (i) in any Loan Party's corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of any Loan Party's chief executive office,
its principal place of business, any office in which it maintains
<PAGE> 72
67
books or records relating to Collateral owned by it or any office or facility
at which Collateral owned by it is located (including the establishment of any
such new office or facility), (iii) in any Loan Party's identity or corporate
structure or (iv) in any Loan Party's Federal Taxpayer Identification Number.
The Borrower agrees not to effect or permit any change referred to in the
preceding sentence unless all filings have been made under the Uniform
Commercial Code or otherwise that are required in order for the Administrative
Agent to continue at all times following such change to have a valid, legal and
perfected security interest in all the Collateral. The Borrower also agrees
promptly to notify the Administrative Agent if any material portion of the
Collateral is damaged or destroyed.
(b) Each year, at the time of delivery of annual financial
statements with respect to the preceding fiscal year pursuant to clause (a) of
Section 5.01, the Borrower shall deliver to the Administrative Agent a
certificate of a Financial Officer (i) setting forth the information required
pursuant to Section 2 of the Perfection Certificate or confirming that there
has been no change in such information since the date of the Perfection
Certificate delivered on the Effective Date or the date of the most recent
certificate delivered pursuant to this Section and (ii) certifying that all
Uniform Commercial Code financing statements (including fixture filings, as
applicable) or other appropriate filings, recordings or registrations,
including all refilings, rerecordings and reregistrations, containing a
description of the Collateral have been filed of record in each governmental,
municipal or other appropriate office in each jurisdiction identified pursuant
to clause (i) above to the extent necessary to protect and perfect the security
interests under the Security Agreement for a period of not less than 18 months
after the date of such certificate (except as noted therein with respect to any
continuation statements to be filed within such period).
SECTION 5.04. Existence; Conduct of Business. (a) The
Borrower will, and will cause each of its Subsidiaries to, do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence and the rights, licenses, permits, privileges, franchises,
patents, copyrights, trademarks and trade names material to the conduct of its
business; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 6.03.
(b) The Borrower will, and will cause each of its
Subsidiaries to, conduct its business without infringement of any trademarks,
trade names, copyrights, patents or other
<PAGE> 73
68
intellectual property of any other Person that could reasonably be expected to
result in a Material Adverse Effect.
SECTION 5.05. Payment of Obligations. The Borrower will, and
will cause each of its Subsidiaries to, pay its Indebtedness and other
obligations, including Tax liabilities, before the same shall become delinquent
or in default, except where (a) the validity or amount thereof is being
contested in good faith by appropriate proceedings, (b) the Borrower or such
Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP, (c) such contest effectively suspends collection of the
contested obligation and the enforcement of any Lien securing such obligation
and (d) the failure to make payment pending such contest could not reasonably
be expected to result in a Material Adverse Effect.
SECTION 5.06. Maintenance of Properties. The Borrower will,
and will cause each of its Subsidiaries to, keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted.
SECTION 5.07. Insurance. The Borrower will, and will cause
each of its Subsidiaries to, maintain, with financially sound and reputable
insurance companies (i) adequate insurance for its insurable properties, all to
such extent and against such risks, including fire, casualty and other risks
insured against by extended coverage, as is customary with companies in the
same or similar businesses operating in the same or similar locations and (ii)
such other insurance as is required pursuant to the terms of any Security
Document.
SECTION 5.08. Books and Records; Inspection and Collateral
Review Rights. (a) The Borrower will, and will cause each of its Subsidiaries
to, keep proper books of record and account in which full, true and correct
entries in conformity with GAAP in all material respects and all requirements
of law are made of all dealings and transactions in relation to its business
and activities. The Borrower will, and will cause each of its Subsidiaries to,
permit any representatives designated by the Administrative Agent or any
Lender, upon reasonable prior notice, to visit and inspect its financial
records and properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested.
(b) From time to time upon the reasonable request of the
Administrative Agent, the Borrower will, and will cause each
<PAGE> 74
69
of its Subsidiaries to, permit the Administrative Agent or professionals
(including investment bankers, consultants, accountants, lawyers and
appraisers) retained by the Administrative Agent to conduct evaluations and
appraisals of (i) the Borrower's practices in the computation of the Borrowing
Base, (ii) the assets included in the Collateral and (iii) other related
financial information, and pay the reasonable fees (including in the case of
the Administrative Agent reasonable and customary fees) and expenses in
connection therewith, including without limitation, the fees (including in the
case of the Administrative Agent reasonable and customary fees) and expenses
associated with collateral monitoring services performed by the Collateral
Agent Services Group. In connection with any evaluation and appraisal relating
to the computation of the Borrowing Base, the Borrower also agrees to make such
other adjustments to the Borrowing Base as the Administrative Agent shall
reasonably require based upon the results of such evaluation and appraisal
(which may include maintaining additional reserves, modifying the advance rates
or modifying the eligibility criteria for the components of the Borrowing
Base).
(c) In the event that historical accounting practices,
systems or reserves relating to the components of the Borrowing Base are
modified in a manner that is adverse to the Lenders in any material respect,
the Borrower will agree to maintain such additional reserves (for purposes of
computing the Borrowing Base) in respect of the components of the Borrowing
Base and make such other adjustments to its parameters for including the
components of the Borrowing Base as the Collateral Agent or the Administrative
Agent, on behalf of the Required Lenders, shall reasonably require based upon
such modifications.
SECTION 5.09. Compliance with Laws. The Borrower will, and
will cause each of its Subsidiaries to, comply with all laws, rules,
regulations and orders of any Governmental Authority applicable to it or its
property, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.10. Use of Proceeds and Letters of Credit. The
proceeds of the Loans will be used only for general corporate purposes,
including working capital, acquisitions approved by the board of directors (or
other comparable governing body) of the Person to be acquired prior to the
initial public announcement thereof and capital expenditures. No part of the
proceeds of any Loan will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, for any purpose that entails a
violation of, or that is inconsistent with, any of the Regulations of the
Board, including Regulations U and X. Letters of Credit will be issued only to
support obligations incurred by
<PAGE> 75
70
the Borrower in the ordinary course of its businesses, including operating
leases with respect to premises used by the Borrower and its Subsidiaries
(other than any CFN Subsidiary, any iXL Ventures Subsidiary and any Joint
Venture Subsidiary) in the conduct of its business.
SECTION 5.11. Additional Subsidiaries. If any additional
Subsidiary of the Borrower or any Joint Venture (other than any Subsidiary or
Joint Venture not owned by or on behalf of any Loan Party) is formed or
acquired after the Effective Date, the Borrower will notify the Administrative
Agent and the Lenders thereof and (a) will cause such Subsidiary (other than a
Foreign Subsidiary or a Joint Venture Subsidiary) to become a party to the
Guarantee Agreement, the Indemnity, Subrogation and Contribution Agreement and
each applicable Security Document in the manner provided therein within 10 Days
after such Subsidiary is formed or acquired and promptly take such actions to
create and perfect Liens on such Subsidiary's assets to secure the Obligations
as the Administrative Agent or the Required Lenders shall reasonably request
and (b) if any Equity Interests or Indebtedness of such Subsidiary or Joint
Venture are owned by or on behalf of any Loan Party, will cause such Equity
Interests and promissory notes evidencing such Indebtedness to be pledged
pursuant to the Pledge Agreement within 10 days after such Subsidiary or Joint
Venture is formed or acquired (except that, if such Subsidiary is a Foreign
Subsidiary, shares of common stock of such Subsidiary that are owned by or on
behalf of any Loan Party and that are to be pledged pursuant to the Pledge
Agreement may be limited to 65% of the outstanding shares of common stock of
such Subsidiary).
SECTION 5.12. Further Assurances. (a) The Borrower will, and
will cause each Subsidiary Loan Party to, execute any and all further
documents, financing statements, agreements and instruments, and take all such
further actions (including the filing and recording of financing statements,
fixture filings, mortgages, deeds of trust and other documents), that may be
required under any applicable law, or which the Administrative Agent or the
Required Lenders may reasonably request, to effectuate the transactions
contemplated by the Loan Documents or to grant, preserve, protect or perfect
the Liens created or intended to be created by the Security Documents or the
validity or priority of any such Lien, all at the expense of the Loan Parties.
The Borrower also agrees to provide to the Administrative Agent, from time to
time upon request, evidence reasonably satisfactory to the Administrative Agent
as to the perfection and priority of the Liens created or intended to be
created by the Security Documents.
<PAGE> 76
71
(b) If any material assets (including any real property or
improvements thereto or any interest therein but excluding real property
leases) are acquired by the Borrower or any Subsidiary Loan Party after the
Effective Date (other than assets constituting Collateral under the Security
Agreement that become subject to the Lien of the Security Agreement upon
acquisition thereof), the Borrower will notify the Administrative Agent and the
Lenders thereof, and, if requested by the Administrative Agent or the Required
Lenders, the Borrower will cause such assets to be subjected to a Lien securing
the Obligations and will take, and cause the Subsidiary Loan Parties to take,
such actions as shall be necessary or reasonably requested by the
Administrative Agent to grant and perfect such Liens, including actions
described in paragraph (a) of this Section, all at the expense of the Loan
Parties.
(c) The Borrower will as soon as practicable and in no event
later than 120 days after the date hereof, execute a pledge agreement,
representing the pledge of 65% of the shares of capital stock of iXL-Germany
GmbH in the form substantially identical to the Pledge Agreement dated as of
June 9, 1999 among the Borrower, iXL-Germany GmbH and The Chase Manhattan Bank.
(d) The Borrower will deliver, no later than 10 days
following the date hereof, an executed depository agreement among the Borrower,
The Chase Manhattan Bank, as Collateral Agent and First Union National Bank, as
Sub-Agent, substantially in the form of Exhibit H attached hereto, or otherwise
agreed by the Administrative Agent.
SECTION 5.13. Federal Reserve Regulations. Neither the
Borrower nor any of its Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
buying or carrying Margin Stock.
SECTION 5.14. Bank Account. The Borrower will, and the
Borrower will cause each of its Subsidiaries (other than the CFN Subsidiaries,
the iXL Ventures Subsidiaries and the Joint Venture Subsidiaries) to, transfer
to the Chase Account on a daily basis all of its cash pursuant to the terms and
conditions contained in the Security Agreement; provided that (i) the Borrower
will cause each of the banks (other than Chase) holding accounts of the
Borrower or its Subsidiaries in the ten locations in the United States which
generate the greatest percentage of revenues for the Borrower and its
Subsidiaries, taken as a whole, and any other bank, in the discretion of the
Administrative Agent, to enter into a depository agreement, in a form to be
mutually agreed upon between the Administrative Agent and the Borrower, as soon
as practicable and in no event later than March 31, 2000, (ii) the Borrower
will cause each of the banks holding accounts of the Borrower or its
Subsidiaries established after the Closing Date to enter into a depository
agreement, in a form to be mutually agreed upon between the Administrative
Agent and the
<PAGE> 77
72
Borrower, as soon as practicable and in no event later than 90 days after such
account has been established and (iii) if an Event of Default has occurred and
is continuing, the Collateral Agent may, at its election, (A) apply the funds
then held in the Chase Account pursuant to the terms of the Security Agreement
and (B) review the cash management system of the Borrowers and its Subsidiaries
and require the Borrower to institute a new cash management system (including,
without limitation, the use of a lockbox system).
ARTICLE VI
Negative Covenants
Until the Commitments have expired or terminated and the
principal of and interest on each Loan and all fees payable hereunder have been
paid in full and all Letters of Credit have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees
with the Lenders that:
SECTION 6.01. Indebtedness and Preferred Stock.
(a) The Borrower will not, nor will it permit any of its Subsidiaries (other
than the CFN Subsidiaries, the iXL Ventures Subsidiaries or the Joint Venture
Subsidiaries, except at any time that loans or advances by the Borrower to any
of the CFN Subsidiaries, the iXL Ventures Subsidiaries or the Joint Venture
Subsidiaries, as applicable, pursuant to Section 6.04(d) shall remain
outstanding) to, create, incur, assume or permit to exist any Indebtedness,
except:
(i) Indebtedness created under the Loan Documents;
(ii) Indebtedness existing on the Effective Date and set
forth in Schedule 6.01, and any extensions, renewals or replacements
of any such Indebtedness that (A) do not increase the outstanding
principal amount thereof, (B) do not result in an earlier maturity
date or decreased weighted average life thereof and (C) are
consummated on terms and subject to conditions no more restrictive
than are in existence with respect to such Indebtedness as of the
Effective Date; provided, that any Indebtedness owed by any of the CFN
Subsidiaries, the iXL Ventures Subsidiaries
<PAGE> 78
73
or the Joint Venture Subsidiaries to the Borrower or any Subsidiary
Loan Party shall not be reborrowed following repayment thereof;
(iii) Indebtedness of any Loan Party to any other Loan Party;
(iv) Guarantees by the Borrower of Indebtedness of any other
Subsidiary Loan Party permitted hereunder;
(v) Indebtedness of the Borrower or any Subsidiary Loan
Party incurred to finance the acquisition, construction or improvement
of any fixed or capital assets, including Capital Lease Obligations
and any Indebtedness assumed in connection with the acquisition of any
such assets or secured by a Lien on any such assets prior to the
acquisition thereof, and extensions, renewals and replacements of any
such Indebtedness that do not increase the outstanding principal
amount thereof; provided that (A) such Indebtedness is incurred prior
to or within 90 days after such acquisition or the completion of such
construction or improvement and (B) the aggregate principal amount of
Indebtedness permitted by this clause (v) shall not exceed $15,000,000
at any time outstanding;
(vi) Indebtedness of any Person that becomes a Subsidiary
after the Effective Date; provided that (A) such Indebtedness exists
at the time such Person becomes a Subsidiary and is not created in
contemplation of or in connection with such Person becoming a
Subsidiary and (B) the aggregate principal amount of Indebtedness
permitted by this clause (vi) shall not exceed $4,000,000 at any time
outstanding; and
(vii) Indebtedness not yet due that arises pursuant to
provisions in acquisition agreements relating to minimal contingent
purchase price adjustments in connection with Permitted Acquisitions;
and
(viii) Permitted Subordinated Indebtedness.
(b) The Borrower will not, nor will it permit any of its
Subsidiaries (other than the CFN Subsidiaries, the iXL Ventures Subsidiaries
and the Joint Venture Subsidiaries) to issue or permit to exist any shares of
preferred stock, except shares of Permitted Preferred Stock.
SECTION 6.02. Liens. The Borrower will not, nor will the
Borrower permit any of its Subsidiaries (other than the CFN
<PAGE> 79
74
Subsidiaries, the iXL Ventures Subsidiaries and the Joint Venture Subsidiaries,
except at any time that loans or advances by the Borrower to any of the CFN
Subsidiaries, the iXL Ventures Subsidiaries or the Joint Venture Subsidiaries,
as applicable, pursuant to Section 6.04(d) shall remain outstanding) to,
create, incur, assume or permit to exist any Lien on any property or asset now
owned or hereafter acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect of any thereof, except:
(i) Liens created under the Loan Documents;
(ii) Permitted Encumbrances;
(iii) any Lien on any property or asset of any Subsidiary
of the Borrower existing on the Effective Date and set forth in
Schedule 6.02; provided that (A) such Lien shall not apply to any
other property or asset of any Subsidiary of the Borrower and (B) such
Lien shall secure only those obligations that it secures on the
Effective Date and extensions, renewals and replacements thereof that
do not increase the outstanding principal amount thereof.
(iv) any Lien existing on any property or asset prior to
the acquisition thereof by the Borrower or any Subsidiary or existing
on any property or asset of any Person that becomes a Subsidiary after
the Effective Date hereof prior to the time such Person becomes a
Subsidiary; provided that (A) such Lien is not created in
contemplation of or in connection with such acquisition or such Person
becoming a Subsidiary, as the case may be, (B) such Lien shall not
apply to any other property or assets of the Borrower or any
Subsidiary, (C) such Lien shall not exist on any such acquired assets
intended to be included in the Borrowing Base and (D) such Lien shall
secure only those obligations that it secures on the date of such
acquisition or the date such Person becomes a Subsidiary, as the case
may be, and extensions, renewals and replacements thereof that do not
increase the outstanding principal amount thereof;
(v) Liens on fixed or capital assets acquired,
constructed or improved by the Borrower or any Subsidiary; provided
that (A) such security interests secure Indebtedness permitted by
clause (v) of Section 6.01, (B) such security interests and the
Indebtedness secured thereby are incurred prior to or within 90 days
after such acquisition or the completion of such construction or
improvement, (C) the Indebtedness secured thereby does not
<PAGE> 80
75
exceed 100% of the cost of acquiring, constructing or improving such
fixed or capital assets and (D) such security interests shall not
apply to any other property or assets of the Borrower or any
Subsidiary; and
(vi) Liens (other than those permitted by paragraphs (i)
through (v) above and other than Liens on Collateral) securing
liabilities permitted hereunder in an aggregate amount not exceeding
$500,000 at any time outstanding.
SECTION 6.03. Fundamental Changes. (a) The Borrower will not,
nor will the Borrower permit any of its Subsidiaries (other than the CFN
Subsidiaries, the iXL Ventures Subsidiaries and the Joint Venture Subsidiaries)
to, merge into or consolidate with any other Person, or permit any other Person
to merge into or consolidate with it, or liquidate or dissolve, except that, if
at the time thereof and immediately after giving effect thereto no Default
shall have occurred and be continuing (i) any Subsidiary (other than a CFN
Subsidiary, an iXL Ventures Subsidiary or a Joint Venture Subsidiary) may merge
into the Borrower in a transaction in which the Borrower is the surviving
corporation, (ii) any Subsidiary may merge into any Subsidiary Loan Party in a
transaction in which the surviving entity is a Subsidiary Loan Party, (iii) any
Foreign Subsidiary may merge into any other Foreign Subsidiary and (iv) any
Subsidiary of the Borrower may liquidate or dissolve if the Borrower determines
in good faith that such liquidation or dissolution is in the best interests of
the Borrower and is not materially disadvantageous to the Lenders; provided
that any such merger involving a Person that is not a wholly owned Subsidiary
immediately prior to such merger shall not be permitted unless also permitted
by Section 6.04.
(b) The Borrower will not, nor will the Borrower permit any
of its Subsidiaries to, engage to any material extent in any business other
than internet or media related businesses.
(c) The Borrower will not engage in any business or activity
other than (i) the ownership of all the outstanding shares of capital stock of
the Subsidiary Loan Parties and any Foreign Subsidiaries, (ii) the maintenance
of investments permitted under Section 6.04 and (iii) activities incidental
thereto. The Borrower will not own or acquire any assets (other than shares of
capital stock of the Subsidiary Loan Parties, CFN, iXL Ventures, any Joint
Venture Subsidiary or any Foreign Subsidiaries, cash and Permitted Investments)
or incur any liabilities (other than Indebtedness permitted by Section 6.01,
liabilities under the Loan Documents, liabilities imposed by law,
<PAGE> 81
76
including tax liabilities, and other liabilities incidental to its existence
and permitted business and activities).
SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions. The Borrower will not, nor will the Borrower permit any of its
Subsidiaries (other than the CFN Subsidiaries, the iXL Ventures Subsidiaries
and the Joint Venture Subsidiaries) to, purchase, hold or acquire (including
pursuant to any merger with any Person that was not a wholly owned Subsidiary
prior to such merger) any capital stock, evidences of indebtedness or other
securities (including any option, warrant or other right to acquire any of the
foregoing) of, make or permit to exist any loans or advances to, Guarantee any
obligations of, or make or permit to exist any investment or any other interest
in, any other Person, or purchase or otherwise acquire (in one transaction or a
series of transactions) any assets of any other Person constituting a business
unit, except:
(a) Permitted Investments;
(b) investments existing on the Effective Date and set forth
on Schedule 6.04, to the extent such investments would not be
permitted under any other clause of this Section;
(c) investments by the Borrower in the capital stock of the
CFN Subsidiaries, the iXL Ventures Subsidiaries, any Joint Venture
Subsidiary, the Subsidiary Loan Parties and any Foreign Subsidiaries
and investments by any Subsidiary Loan Party, CFN Subsidiary or iXL
Ventures Subsidiary in the capital stock of its Subsidiaries; provided
that (i) any such shares of capital stock owned by or on behalf of a
Loan Party shall be pledged pursuant to the Pledge Agreement (subject
to the limitations applicable to common stock of a Foreign Subsidiary
referred to in Section 5.12), and (ii) the aggregate amount of
investments by the Borrower in, loans and advances by the Borrower to,
and Guarantees by the Borrower of Indebtedness of the Subsidiary Loan
Parties, the CFN Subsidiaries, the iXL Ventures Subsidiaries and any
Joint Venture Subsidiary shall not exceed $10,000,000 at any time
outstanding plus the amount of any investment by the Borrower in the
CFN Subsidiaries, the iXL Subsidiaries and the Joint Venture
Subsidiaries permitted under clause (b) above; notwithstanding the
foregoing, as of any date, in the event the aggregate amount of
investments by the Borrower pursuant to this clause (c) is equal to
$10,000,000, the Borrower may make additional investments in, loans
and advances to and Guarantees of Indebtedness of any Person
<PAGE> 82
77
described in (ii) above in an aggregate amount not in excess of an
additional $15,000,000; provided that (i) cash and cash equivalents of
the Borrower total at least $50,000,000 in the aggregate and (ii) no
Loans are outstanding;
(d) loans or advances made by (i) any Subsidiary Loan Party
to any other Subsidiary Loan Party, (ii) any Foreign Subsidiary to any
other Foreign Subsidiary and (iii) subject to the limitations set
forth in clause (c) above, the Borrower to any CFN Subsidiary, any iXL
Ventures Subsidiary or any Joint Venture Subsidiary; provided that any
such loans and advances by a Loan Party shall be evidenced by a
promissory note pledged pursuant to the Pledge Agreement;
(e) Guarantees by the Borrower constituting Indebtedness
permitted by Section 6.01; provided that no Loan Party may enter into
any Guarantee in respect of a CFN Subsidiary, an iXL Subsidiary or any
Joint Venture Subsidiary;
(f) Guarantees by the Borrower of operating lease obligations
of any Subsidiary Loan Party; provided that such operating leases are
entered into in the ordinary course of business;
(g) Guarantees by the Borrower of credit card Indebtedness
incurred by employees of the Borrower or any Subsidiary Loan Parties;
provided that the aggregate amount of such Guarantee permitted by this
clause (g) shall not exceed $250,000 at any time outstanding;
(h) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes
with, customers and suppliers, in each case in the ordinary course of
business;
(i) Permitted Acquisitions;
(j) prepaid expenses in the ordinary course of business;
(k) loans to employees of the Borrower and the Subsidiaries
in their capacity as such, in an aggregate principal amount not to
exceed $250,000 at any time outstanding;
(l) Hedging Agreements permitted under Section 6.07;
<PAGE> 83
78
(m) promissory notes received upon a sale of assets permitted
under Section 6.05;
(n) investments in an executive employee benefit fund;
provided that such investments do not exceed $7,500,000 during any
fiscal year and $15,000,000 in the aggregate;
(o) Loans by the Borrower to Foreign Subsidiaries in an
aggregate amount not to exceed $20,000,000; provided that any such
loans shall be evidenced by a promissory note pledged pursuant to the
Pledge Agreement;
(p) other investments in an aggregate amount not to exceed
$2,000,000 at any time outstanding; and
(q) non-recourse loans made by the Borrower to any of its
employees in connection with the purchase of stock of the Borrower by
such employee; provided that (i) such employee pledges such purchased
stock as collateral with respect to such non-recourse loan, (ii) any
such transaction does not involve the payment of cash by the Borrower
to such employee and (iii) the aggregate amount of such loans does not
exceed $5,000,000 at any time outstanding.
SECTION 6.05. Asset Sales. The Borrower will not, nor will
the Borrower permit any of its Subsidiaries (other than the CFN Subsidiaries,
the iXL Ventures Subsidiaries and the Joint Venture Subsidiaries) to, sell,
transfer, lease or otherwise dispose of any asset, including any capital stock
owned by any of them, nor will the Borrower permit any of its Subsidiaries
(other than the CFN Subsidiaries, the iXL Ventures Subsidiaries and the Joint
Venture Subsidiaries) to issue any additional shares of its capital stock or
other ownership interest in such Subsidiary, except:
(a) sales of inventory, used or surplus equipment and
Permitted Investments in the ordinary course of business;
(b) sales, transfers and dispositions by any Subsidiary of
the Borrower to any other Subsidiary of the Borrower; provided that
(i) capital stock of a Subsidiary Loan Party shall not be sold or
transferred to a Subsidiary that is not a Subsidiary Loan Party and
(ii) any such sales, transfers or dispositions involving a Subsidiary
that is not a Subsidiary Loan Party shall be made in compliance with
Section 6.09;
<PAGE> 84
79
(c) sales, transfers and dispositions of any asset by the
Borrower or any Subsidiary for which the aggregate fair market value
of all consideration payable for such asset sold, transferred or
otherwise disposed of does not exceed $250,000; and
(d) sales, transfers and dispositions of assets by
Subsidiaries of the Borrower (other than capital stock of a
Subsidiary) that are not permitted by any other clause of this
Section; provided that the aggregate fair market value of all assets
sold, transferred or otherwise disposed of in reliance upon this
clause (d) shall not exceed $5,000,000 in the aggregate;
provided that all sales, transfers, leases and other dispositions permitted
hereby shall be made for fair value and for at least 80% cash consideration
except to the extent set forth on Schedules 6.05 and 6.09.
SECTION 6.06. Sale and Lease-Back Transactions. The Borrower
will not, nor will the Borrower permit any of its Subsidiaries (other than the
CFN Subsidiaries, the iXL Ventures Subsidiaries and the Joint Venture
Subsidiaries) to, enter into any arrangement, directly or indirectly, with any
Person whereby it shall sell or transfer any property, real or personal, used
or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property which it intends to
use for substantially the same purpose or purposes as the property being sold
or transferred, except for any such sale of fixed or capital assets that is
consummated within 90 days after the date the Borrower or any such Subsidiary,
acquires or finished construction of such fixed or capital asset; provided that
the sum of the aggregate amount of Attributable Debt in respect of all such
sale and leaseback transactions shall not exceed $1,000,000 at any time
outstanding.
SECTION 6.07. Hedging Agreements. The Borrower will not, nor
will the Borrower permit any of its Subsidiaries (other than the CFN
Subsidiaries, the iXL Ventures Subsidiaries and the Joint Venture Subsidiaries)
to, enter into any Hedging Agreement, other than nonspeculative Hedging
Agreements entered into by the Borrower in the ordinary course of business to
hedge or mitigate risks to which the Borrower or its Subsidiaries (other than
the CFN Subsidiaries, the iXL Ventures Subsidiaries and the Joint Venture
Subsidiaries) is exposed in the conduct of its business or the management of
its liabilities.
SECTION 6.08. Restricted Payments; Certain Payments of
Indebtedness. (a) The Borrower will not, nor will the
<PAGE> 85
80
Borrower permit any of its Subsidiaries (other than the CFN Subsidiaries, the
iXL Ventures Subsidiaries and the Joint Venture Subsidiaries) to, declare or
make, or agree to pay or make, directly or indirectly, any Restricted Payment,
or incur any obligation (contingent or otherwise) to do so, except (i) the
Borrower may declare and pay dividends ratably with respect to its capital
stock payable solely in additional shares of its common stock, (ii) any
Subsidiary Loan Party may declare and pay dividends ratably with respect to its
capital stock to the Borrower; (iii) any Subsidiary of a Subsidiary Loan Party
may declare and pay dividends ratably with respect to its capital stock to a
Subsidiary Loan Party or the Borrower, (iv) the Borrower's Subsidiaries may
make payments to the Borrower pursuant to and in accordance with the Tax
Allocation Agreement dated the date hereof between the Borrower and its
Subsidiaries and (v) the Borrower may, pursuant to and in accordance with stock
option plans, warrant plans or other benefit plans for management or employees
of the Borrower and its Subsidiaries, make Restricted Payments not exceeding
$3,000,000 during any fiscal year so long as no Event of Default has occurred
and is continuing. The Borrower will not permit any CFN Subsidiary, iXL
Ventures Subsidiary or any Joint Venture Subsidiary to make any payment
(whether in cash, securities or other property) on account of the purchase,
redemption, retirement, acquisition, cancelation or termination of any shares
of capital stock of the Borrower or any option, warrant or other right to
acquire any such shares.
(b) The Borrower will not, nor will the Borrower permit any
of its Subsidiaries (other than the CFN Subsidiaries, the iXL Ventures
Subsidiaries and the Joint Venture Subsidiaries) to, make or agree to pay or
make, directly or indirectly, any payment or other distribution (whether in
cash securities or other property) of or in respect of principal of or interest
on any Indebtedness, or any payment or other distribution (whether in cash,
securities or other property), including any sinking fund or similar deposit,
on account of the purchase, redemption, retirement, acquisition, cancelation or
termination of any Indebtedness, except:
(i) payment of Indebtedness created under the Loan
Documents;
(ii) payment of regularly scheduled interest and principal
payments as and when due in respect of any Indebtedness (to the extent
not prohibited by applicable subordination provisions, if any);
<PAGE> 86
81
(iii) refinancings of Indebtedness to the extent permitted
by Section 6.01; and
(iv) payment of Indebtedness permitted by Section 6.01
(iii) or (vi).
SECTION 6.09. Transactions with Affiliates. Except as set
forth in Schedule 6.09, the Borrower will not nor will the Borrower permit any
of its Subsidiaries to, sell, lease or otherwise transfer any property or
assets to, or purchase, lease or otherwise acquire any property or assets from,
or otherwise engage in any other transactions with, any of its Affiliates,
except (a) transactions in the ordinary course of business that are at prices
and on terms and conditions not less favorable to any Subsidiary of the
Borrower than could be obtained on an arm's-length basis from unrelated third
parties, (b) transactions between or among the Loan Parties not involving any
other Affiliate and (c) any Restricted Payment permitted by Section 6.08.
SECTION 6.10. Restrictive Agreements. The Borrower will not,
nor will the Borrower permit any Subsidiary Loan Party to, directly or
indirectly, enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon (a) the
ability of the Borrower or any Subsidiary Loan Party to create, incur or permit
to exist any Lien upon any of its property or assets, or (b) the ability of any
Subsidiary Loan Party to pay dividends or other distributions with respect to
any shares of its capital stock or to make or repay loans or advances to any
other Subsidiary Loan Party or to Guarantee Indebtedness of any other
Subsidiary Loan Party; provided that (i) the foregoing shall not apply to
restrictions and conditions imposed by law or by any Loan Document, (ii) the
foregoing shall not apply to restrictions and conditions existing on the
Effective Date identified on Schedule 6.10 (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale; provided such restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted hereunder,
(iv) clause (a) of the foregoing shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness and (v) clause (a) of the foregoing shall not
apply to customary provisions in leases restricting the assignment thereof.
<PAGE> 87
82
SECTION 6.11. Amendment of Material Documents. The Borrower
will not, nor will the Borrower permit any of its Subsidiaries to, amend,
modify or waive any of its rights under (a) its certificate of incorporation,
by-laws or other organizational documents (other than of the CFN Subsidiaries),
(b) the Tax Sharing Agreement or (c) any of the instruments, agreements or
documents evidencing or related to the Borrower's Permitted Preferred Stock and
any Permitted Subordinated Indebtedness; provided that the Borrower or any
Subsidiary may amend, modify or waive any of its rights under clause (c) above
if such amendment, modification or waiver (i) is on terms no less favorable to
the Borrower and its Subsidiaries than would be obtained on an arm's length
basis from unrelated third parties and (ii) is not, individually or in the
aggregate, in any manner adverse to the Lenders in any material respect.
SECTION 6.12. Subsidiaries. The Borrower will not have any
Subsidiary (other than the CFN Subsidiaries, the iXL Ventures Subsidiaries and
the Joint Venture Subsidiaries) unless such Subsidiary is wholly owned,
directly or indirectly, by the Borrower, and the Borrower will not take any
action that would result in any Subsidiary (other than the CFN Subsidiaries,
the iXL Subsidiaries and the Joint Venture Subsidiaries) ceasing to be a wholly
owned Subsidiary of the Borrower; provided that the Borrower may permit the
sale of up to 10% of the outstanding capital stock of iXL - Madrid, S.A.
SECTION 6.13. Capital Expenditures. The Borrower will not
permit the aggregate amount of Capital Expenditures in any fiscal year to
exceed the Budgeted Amount. Notwithstanding the foregoing, in the event the
Borrower has made Capital Expenditures in an amount less than the Budgeted
Amount during any fiscal year, the Borrower may carry over into the following
fiscal year the lesser of (i) $37,500,000 or (ii) such amount of the Budgeted
Amount to the extent not utilized; provided that the Borrower first utilizes
the Budgeted Amount during such subsequent fiscal year.
SECTION 6.14. Minimum Consolidated EBITDA. The Borrower will
not permit Consolidated EBITDA for any of the following periods ending on any
date set forth below to be less than the amount set forth below opposite such
date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
Twelve Months Ending March 31, 2000 $ 8,000,000
Twelve Months Ending June 30, 2000 15,000,000
</TABLE>
<PAGE> 88
83
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
Twelve Months Ending September 30, 2000 22,500,000
Twelve Months Ending December 31, 2000 27,500,000
Twelve Months Ending March 31, 2001 32,500,000
Twelve Months Ending June 30, 2001 35,000,000
Twelve Months Ending September 30, 2001 37,500,000
Twelve Months Ending December 31, 2001 40,000,000
Twelve Months Ending March 31, 2002 40,000,000
Twelve Months Ending June 30, 2002 40,000,000
Twelve Months Ending September 30, 2002 40,000,000
Twelve Months Ending December 31, 2002 55,000,000
</TABLE>
SECTION 6.15. Total Debt to Consolidated Net Worth. The
Borrower will not permit the ratio of Total Debt to Consolidated Net Worth as
of any date to be in excess of .15 to 1.00.
SECTION 6.16. Fiscal Year. The Borrower will not change the
end of its fiscal year from December 31 to any other date.
ARTICLE VII
Events of Default
If any of the following events ("Events of Default") shall
occur:
(a) the Borrower shall fail to pay any principal of any Loan
or any reimbursement obligation in respect of any LC Disbursement when
and as the same shall become due and
<PAGE> 89
84
payable, whether at the due date thereof or at a date fixed for
prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan
or any fee or any other amount (other than an amount referred to in
clause (a) of this Article) payable under this Agreement or any other
Loan Document, when and as the same shall become due and payable, and
such failure shall continue unremedied for a period of three Business
Days;
(c) any representation or warranty made or deemed made by or
on behalf of any Loan Party in or in connection with any Loan Document
or any amendment or modification thereof or waiver thereunder, or in
any report, certificate, financial statement or other document
furnished pursuant to or in connection with any Loan Document or any
amendment or modification thereof or waiver thereunder, shall prove to
have been incorrect (in the case of any representation or warranty
that is not qualified as to materiality, in any material respect) when
made or deemed made;
(d) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in Section 5.01(f), 5.02,
5.04 (with respect to the existence of the Borrower), 5.10, or in
Article VI;
(e) any Loan Party shall fail to observe or perform any
covenant, condition or agreement contained (a) in Section 5.11, and
such failure shall continue unremedied for a period of 10 days or (b)
in any Loan Document (other than those specified in clause (a), (b),
(c) or (d) of this Article), and such failure shall continue
unremedied for a period of 30 days, in each case after notice thereof
from the Administrative Agent to the Borrower (which notice will be
given at the request of any Lender);
(f) the Borrower or any of its Subsidiaries shall fail to
make any payment (whether of principal or interest and regardless of
amount) in respect of any Material Indebtedness, when and as the same
shall become due and payable;
(g) any event or condition occurs that results in any
Material Indebtedness becoming due prior to its scheduled maturity or
that enables or permits (with or without the giving of notice, the
lapse of time or both) the holder or holders of any Material
Indebtedness or any trustee or agent on its or their behalf to cause
any Material Indebtedness to become due, or to require the prepayment,
<PAGE> 90
85
repurchase, redemption or defeasance thereof, prior to its scheduled
maturity; provided that this clause (g) shall not apply to secured
Indebtedness that becomes due as a result of the voluntary sale or
transfer of the property or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of the Borrower or any of
its Subsidiaries or its debts, or of a substantial part of its assets,
under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any of its
Subsidiaries or for a substantial part of its assets, and, in any such
case, such proceeding or petition shall continue undismissed for 60
days or an order or decree approving or ordering any of the foregoing
shall be entered;
(i) the Borrower or any of its Subsidiaries shall (i)
voluntarily commence any proceeding or file any petition seeking
liquidation, reorganization or other relief under any Federal, state
or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition
described in clause (h) of this Article, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any of its
Subsidiaries or for a substantial part of its assets, (iv) file an
answer admitting the material allegations of a petition filed against
it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of
effecting any of the foregoing;
(j) the Borrower or any of its Subsidiaries shall become
unable, admit in writing its inability or fail generally to pay its
debts as they become due;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $1,000,000 shall be rendered against the
Borrower, any of its Subsidiaries or any combination thereof and the
same shall remain undischarged for a period of 30 consecutive days
during which execution shall not be effectively stayed, or any
<PAGE> 91
86
action shall be legally taken by a judgment creditor to attach or levy
upon any assets of the Borrower or any of its Subsidiaries to enforce
any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion
of the Required Lenders, when taken together with all other ERISA
Events that have occurred, could reasonably be expected to result in a
Material Adverse Effect;
(m) any Lien purported to be created under any Security
Document shall cease to be, or shall be asserted by any Loan Party not
to be, a valid and perfected Lien on any Collateral, with the priority
required by the applicable Security Document, except (i) as a result
of the sale or other disposition of the applicable Collateral in a
transaction permitted under the Loan Documents or (ii) as a result of
the Administrative Agent's failure to maintain possession of any stock
certificates, promissory notes or other instruments delivered to it
under the Pledge Agreement; or
(n) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either
or both of the following actions, at the same or different times: (i) terminate
the Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower;
and in case of any event with respect to the Borrower described in clause (h)
or (i) of this Article, the Commitments shall automatically terminate and the
principal of the Loans then outstanding, together with accrued interest thereon
and all fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
<PAGE> 92
87
ARTICLE VIII
The Administrative Agent
Each of the Lenders and the Issuing Bank hereby irrevocably
appoints the Administrative Agent as its agent and authorizes the
Administrative Agent to take such actions on its behalf and to exercise such
powers as are delegated to the Administrative Agent by the terms of the Loan
Documents, together with such actions and powers as are reasonably incidental
thereto.
The bank serving as the Administrative Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other Lender
and may exercise the same as though it were not the Administrative Agent, and
such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any of its
Subsidiaries or other Affiliate thereof as if it were not the Administrative
Agent hereunder.
The Administrative Agent shall not have any duties or
obligations except those expressly set forth in the Loan Documents. Without
limiting the generality of the foregoing, (a) the Administrative Agent shall
not be subject to any fiduciary or other implied duties, regardless of whether
a Default has occurred and is continuing, (b) the Administrative Agent shall
not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated by the Loan Documents that the Administrative Agent is required to
exercise in writing by the Required Lenders (or such other number or percentage
of the Lenders as shall be necessary under the circumstances as provided in
Section 9.02), and (c) except as expressly set forth in the Loan Documents, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by
it with the consent or at the request of the Required Lenders (or such other
number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02) or in the absence of its own gross
negligence or wilful misconduct. The Administrative Agent shall be deemed not
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by the Borrower or a Lender, and the
Administrative Agent shall not be responsible for or have any
<PAGE> 93
88
duty to ascertain or inquire into (i) any statement, warranty or representation
made in or in connection with any Loan Document, (ii) the contents of any
certificate, report or other document delivered thereunder or in connection
therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth in any Loan Document, (iv)
the validity, enforceability, effectiveness or genuineness of any Loan Document
or any other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article IV or elsewhere in any Loan Document, other than
to confirm receipt of items expressly required to be delivered to the
Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by
telephone and believed by it to be made by the proper Person, and shall not
incur any liability for relying thereon. The Administrative Agent may consult
with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
The Administrative Agent may perform any and all its duties
and exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of each Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor the
Administrative Agent as provided in this paragraph, the Administrative Agent
may resign at any time by notifying the Lenders, the Issuing Bank and the
Borrower. Upon any such resignation, the Required Lenders shall have the right,
in consultation with the Borrower (provided that no Event of Default under
clause (h) or (i) of Article VII has occurred and is continuing), to appoint a
successor. If no successor shall have been so appointed by the Required Lenders
and shall have accepted such appointment within 30 days after the retiring
Administrative
<PAGE> 94
89
Agent gives notice of its resignation, then the retiring Administrative Agent
may, on behalf of the Lenders and the Issuing Bank, appoint a successor
Administrative Agent that shall be a bank with an office in New York, New York,
or an Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor. After the Administrative Agent's resignation hereunder, the
provisions of this Article and Section 9.03 shall continue in effect for the
benefit of such retiring Administrative Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Administrative Agent.
Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement, any other Loan Document or related agreement or any document
furnished hereunder or thereunder.
The provisions of this Article applicable to the
Administrative Agent also shall apply to the Collateral Agent in its capacity
as such. The Syndication Agent shall not have any duties or obligations
pursuant to this Agreement.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. Except in the case of notices and
other communications expressly permitted to be given by telephone, all notices
and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
<PAGE> 95
90
(a) if to the Borrower, to iXL Enterprises, Inc., 1888 Emery
Street, N.W., Atlanta, GA 30318, Attention of Wayne Boylston (Telecopy
No. 404-267-3801);
(b) if to the Administrative Agent, to The Chase Manhattan
Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th
Floor, New York, New York 10081, Attention of Camille Wilson (Telecopy
No. (212) 552-5700), with a copy to The Chase Manhattan Bank, 270 Park
Avenue, New York, New York 10017, Attention of Joseph Brusco (Telecopy
No. 212-270-4164);
(c) if to the Issuing Bank, to The Chase Manhattan Bank, 270
Park Avenue 37th Floor, New York, New York 10017, Attention of Joseph
Brusco (Telecopy No. 212-270-4164); and
(d) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.
SECTION 9.02. Waivers; Amendments. (a) No failure or delay by
the Administrative Agent, the Issuing Bank or any Lender in exercising any
right or power hereunder or under any other Loan Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Administrative Agent, the
Issuing Bank and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of any Loan Document or consent to
any departure by any Loan Party therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) of this Section, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. Without limiting the generality of the foregoing,
the making of a Loan or issuance of a Letter of Credit shall not be construed
as a waiver of any Default, regardless of whether the Administrative Agent, any
Lender or the Issuing Bank may have had notice or knowledge of such Default at
the time.
<PAGE> 96
91
(b) Neither this Agreement nor any other Loan Document nor
any provision hereof or thereof may be waived, amended or modified except, in
the case of this Agreement, pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or, in the case of any
other Loan Document, pursuant to an agreement or agreements in writing entered
into by the Administrative Agent and the Loan Party or Loan Parties that are
parties thereto, in each case with the consent of the Required Lenders;
provided that no such agreement shall (i) increase the Commitment of any Lender
without the written consent of such Lender, (ii) reduce the principal amount of
any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce
any fees payable hereunder, without the written consent of each Lender affected
thereby, (iii) postpone the Revolving Maturity Date or the scheduled date of
payment of the principal amount of any LC Disbursement, or any interest
thereon, or any fees payable hereunder, or reduce the amount of, waive or
excuse any such payment, or postpone the scheduled date of expiration of any
Commitment, without the written consent of each Lender affected thereby, (iv)
change Section 2.16(b) or (c) in a manner that would alter the pro rata sharing
of payments required thereby, without the written consent of each Lender, (v)
change any of the provisions of this Section or the definition of the term
"Required Lenders" or any other provision of any Loan Document specifying the
number or percentage of Lenders (or Lenders of any Class) required to waive,
amend or modify any rights thereunder or make any determination or grant any
consent thereunder, without the written consent of each Lender (or each Lender
of such Class, as the case may be), (vi) release any Loan Party from its
Guarantee under the Guarantee Agreement (except as expressly provided in the
Guarantee Agreement), or limit its liability in respect of such Guarantee,
without the written consent of each Lender, or (vii) release all or
substantially all of the Collateral from the Liens of the Security Documents,
without the written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent or the Issuing Bank without the prior written consent of
the Administrative Agent or the Issuing Bank, as the case may be.
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The
Borrower agrees to pay (i) all reasonable out-of-pocket expenses incurred by
the Administrative Agent, the Collateral Agent and their Affiliates, including
the reasonable fees, charges and disbursements of counsel for the
Administrative Agent and the Collateral Agent, in connection with the
syndication of the credit facilities provided for herein, the preparation and
administration of the Loan Documents or any amendments, modifications or
waivers of the provisions thereof (whether or
<PAGE> 97
92
not the transactions contemplated hereby or thereby shall be consummated), (ii)
all reasonable out-of-pocket expenses incurred by the Issuing Bank in
connection with the issuance, amendment, renewal or extension of any Letter of
Credit or any demand for payment thereunder and (iii) all out-of-pocket
expenses incurred by the Administrative Agent, the Collateral Agent, the
Issuing Bank or any Lender, including the fees, charges and disbursements of
any counsel for the Administrative Agent, the Collateral Agent, the Issuing
Bank or any Lender, in connection with the enforcement or protection of its
rights in connection with the Loan Documents, including its rights under this
Section, or in connection with the Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of
Credit.
(b) The Borrower agrees to indemnify the Administrative
Agent, the Collateral Agent, the Issuing Bank and each Lender, and each Related
Party of any of the foregoing Persons (each such Person being called an
"Indemnitee") against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including the fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of any Loan Document or any other
agreement or instrument contemplated hereby, the performance by the parties to
the Loan Documents of their respective obligations thereunder or the
consummation of the Transactions or any other transactions contemplated hereby,
(ii) any Loan or Letter of Credit or the use of the proceeds therefrom
(including any refusal by the Issuing Bank to honor a demand for payment under
a Letter of Credit if the documents presented in connection with such demand do
not strictly comply with the terms of such Letter of Credit), (iii) any actual
or alleged presence or release of Hazardous Materials on or from any property
currently or formerly owned or operated by the Borrower or any of its
Subsidiaries, or any Environmental Liability related in any way to the Borrower
or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; provided that such indemnity shall not, as
to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or wilful misconduct of such Indemnitee.
<PAGE> 98
93
(c) To the extent that the Borrower fails to pay any amount
required to be paid by it to the Administrative Agent or the Issuing Bank under
paragraph (a) or (b) of this Section, each Lender severally agrees to pay to
the Administrative Agent or the Issuing Bank, as the case may be, such Lender's
pro rata share (determined as of the time that the applicable unreimbursed
expense or indemnity payment is sought) of such unpaid amount; provided that
the unreimbursed expense or indemnified loss, claim, damage, liability or
related expense, as the case may be, was incurred by or asserted against the
Administrative Agent or the Issuing Bank in its capacity as such. For purposes
hereof, a Lender's "pro rata share" shall be determined based upon its share of
the sum of the total Revolving Exposures and unused Commitments at the time.
(d) To the extent permitted by applicable law, the Borrower
shall not assert, and hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Loan or Letter of Credit or the use of the
proceeds thereof.
(e) All amounts due under this Section shall be payable
promptly after written demand therefor.
SECTION 9.04. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns permitted hereby (including
any Affiliate of the Issuing Bank that issues any Letter of Credit), except
that the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by the Borrower without such consent shall be
null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent,
the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided that
(i) except in the
<PAGE> 99
94
case of an assignment to a Lender or an Affiliate of a Lender, each of the
Borrower and the Administrative Agent (and, in the case of an assignment of all
or a portion of a Revolving Commitment or any Lender's obligations in respect of
its LC Exposure, the Issuing Bank) must give their prior written consent to such
assignment (which consent shall not be unreasonably withheld), (ii) except in
the case of an assignment to a Lender or an Affiliate of a Lender or an
assignment of the entire remaining amount of the assigning Lender's Commitment
or Loans, the amount of the Commitment or Loans of the assigning Lender subject
to each such assignment (determined as of the date the Assignment and Acceptance
with respect to such assignment is delivered to the Administrative Agent) shall
not be less than $2,000,000 unless each of the Borrower and the Administrative
Agent otherwise consent, (iii) each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender's rights and
obligations under this Agreement, except that this clause (iii) shall not be
construed to prohibit the assignment of a proportionate part of all the
assigning Lender's rights and obligations in respect of one Class of Commitments
or Loans, (iv) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Acceptance, together with a processing
and recordation fee of $3,500, and (v) the assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; provided further that any consent of the Borrower otherwise
required under this paragraph shall not be required if an Event of Default under
clause (h) or (i) of Article VII has occurred and is continuing. Subject to
acceptance and recording thereof pursuant to paragraph (d) of this Section, from
and after the effective date specified in each Assignment and Acceptance the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a
Lender under this Agreement, and the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 2.12, 2.13, 2.14 and 9.03). Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this paragraph shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices
<PAGE> 100
95
in The City of New York a copy of each Assignment and Acceptance delivered to
it and a register for the recordation of the names and addresses of the
Lenders, and the Commitment of, and principal amount of the Loans and LC
Disbursements owing to, each Lender pursuant to the terms hereof from time to
time (the "Register"). The entries in the Register shall be conclusive, and the
Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat
each Person whose name is recorded in the Register pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement, notwithstanding
notice to the contrary. The Register shall be available for inspection by any
of the Borrower, the Issuing Bank and any Lender, at any reasonable time and
from time to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Issuing Bank, sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such Lender's
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower, the Administrative Agent, the Issuing
Bank and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce the Loan Documents and to approve any amendment, modification or waiver
of any provision of the Loan Documents; provided that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the
first proviso to Section 9.02(b) that affects such Participant. Subject to
paragraph (f) of this Section, the Borrower agrees that each Participant shall
<PAGE> 101
96
be entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent
as if it were a Lender and had acquired its interest by assignment pursuant to
paragraph (b) of this Section. To the extent permitted by law, each Participant
also shall be entitled to the benefits of Section 9.08 as though it were a
Lender; provided such Participant agrees to be subject to Section 2.16(c) as
though it were a Lender.
(f) A Participant shall not be entitled to receive any
greater payment under Section 2.13 or 2.15 than the applicable Lender would
have been entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the Borrower's prior written consent. A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 2.15 unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrower, to
comply with Section 2.15(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.
SECTION 9.05. Survival. All covenants, agreements,
representations and warranties made by the Loan Parties in the Loan Documents
and in the certificates or other instruments delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the other parties hereto and shall survive the
execution and delivery of the Loan Documents and the making of any Loans and
issuance of any Letters of Credit, regardless of any investigation made by any
such other party or on its behalf and notwithstanding that the Administrative
Agent, the Issuing Bank or any Lender may have had notice or knowledge of any
Default or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any fee or any other amount
payable under this Agreement is outstanding and unpaid or any Letter of Credit
is outstanding and so long as the Commitments have not expired or terminated.
The provisions of Sections 2.13, 2.14, 2.15 and 9.03 and Article VIII shall
survive and remain in full force and effect regardless of
<PAGE> 102
97
the consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement,
the other Loan Document and any separate letter agreements with respect to fees
payable to the Administrative Agent constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all
previous agreements and understandings, oral or written, relating to the
subject matter hereof. Except as provided in Section 4.01, this Agreement shall
become effective when it shall have been executed by the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof that,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be
effective as delivery of a manually executed counterpart of this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement
held to be invalid, illegal or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular
provision in a particular jurisdiction shall not invalidate such provision in
any other jurisdiction.
SECTION 9.08. Right of Set-off. If an Event of Default shall
have occurred and be continuing, each Lender and each of its Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set-off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
obligations at any time owing by such Lender or Affiliate to or for the credit
or the account of the Borrower against any of and all the obligations of the
Borrower now or hereafter existing under this Agreement held by such Lender,
irrespective of whether or not such Lender shall have made any demand under
this Agreement and although such obligations may be unmatured. The rights of
each Lender under this Section are in addition to other
<PAGE> 103
98
rights and remedies (including other rights of set-off) that such Lender may
have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to
Service of Process. (a) This Agreement shall be construed in accordance with
and governed by the law of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to any Loan Document, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement or any other Loan Document shall affect any right
that the Administrative Agent, the Issuing Bank or any Lender may otherwise
have to bring any action or proceeding relating to this Agreement or any other
Loan Document against the Borrower or its respective properties in the courts
of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any other
Loan Document in any court referred to in paragraph (b) of this Section. Each
of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.01. Nothing
in this Agreement or any other Loan Document will affect the right of any party
to this Agreement to serve process in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN ANY
<PAGE> 104
99
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
SECTION 9.11. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Administrative
Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality
of the Information (as defined below), except that Information may be disclosed
(a) to its and its Affiliates' directors, officers, employees and agents,
including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to any
assignee of or Participant in, or any prospective assignee of or Participant
in, any of its rights or obligations under this Agreement, (g) with the consent
of the Borrower or (h) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section or (ii) becomes
available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis from a source other than the Borrower. For the purposes
of this Section, "Information" means all information received from the Borrower
relating to the Borrower or its business, other than any such information that
is available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by the Borrower; provided that, in
the case of information received from the Borrower after the Effective Date,
such information is clearly identified at the time of delivery as confidential.
Any Person
<PAGE> 105
100
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.
SECTION 9.13. Interest Rate Limitation. Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Loan, together with all fees, charges and other amounts that are treated as
interest on such Loan under applicable law (collectively the "Charges"), shall
exceed the maximum lawful rate (the "Maximum Rate") that may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the interest and
Charges payable to such Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated
amount, together with interest thereon at the Federal Funds Effective Rate to
the date of repayment, shall have been received by such Lender.
<PAGE> 106
101
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
iXL ENTERPRISES, INC.,
by /s/ Mark Steele
-------------------------
Name: Mark Steele
Title: SVP Finance
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent,
by /s/ Bruce Borden
-------------------------
Name: Bruce Borden
Title: Vice President
FIRST UNION NATIONAL BANK,
by /s/ Glenn F. Edwards
-------------------------
Name: Glenn F. Edwards
Title: Senior Vice President
FIRST HAWAIIAN BANK,
by /s/ Donald C. Young
-------------------------
Name: Donald C. Young
Title: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION,
by /s/ Kenneth M. Gacevich
--------------------------
Name: Kenneth M. Gacevich
Title: Duly Authorized Signatory
<PAGE> 107
102
ABN AMRO,
by /s/ Jerold M. Sniderman
--------------------------
Name: Jerold M. Sniderman
Title: GVP
/s/ Michael S. Garrett
--------------------------
Name: Michael S. Garrett
Title: AVP
<PAGE> 1
EXHIBIT 10.73
IXL ENTERPRISES, INC.
TESSERA 1995 STOCK OPTION PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 31, 2000)
1. PURPOSE.
Effective as of December 19, 1995, Tessera Enterprises, Inc. (f/k/a
Tessera, Inc.; "Tessera") adopted the Tessera, Inc. 1995 Stock Option Plan (the
"Tessera Plan"), and thereafter granted options pursuant to the Tessera Plan.
Effective as of January 11, 2000 (the "Effective Time"), Tessera was merged
into iXL-Massachusetts, Inc., a Delaware corporation and a subsidiary of iXL
Enterprises, Inc., a Delaware corporation (the "Company") pursuant to the terms
of a Merger Agreement dated Agreement and Plan of Merger, dated as of October
4, 1999, by and among iXL Enterprises, Inc., iXL-Massachusetts, Inc., and
Tessera Enterprise Systems, Inc. (the "Merger Agreement"). Pursuant to Section
6.6(b) of the Merger Agreement, the Company assumed as of the Effective Time
the obligations of Tessera under the Tessera Plan, and the shares underlying
the options granted under the Tessera Plan became options with respect to the
common stock, par value $0.01, of the Company (the "Common Stock"), and the
number of shares underlying those options that are exerciseable with respect to
Company Stock, and the exercise price for such options, was adjusted inversely,
based upon the conversion ratio provided in the Merger Agreement for Tessera
Stock. As a result of the foregoing, the Tessera Plan is hereby amended and
restated to effectuate the requirements under the Merger Agreement.
The purpose of this plan (the "Plan") is to secure for the Company and
its shareholders the benefits arising from capital stock ownership by
employees, officers, directors, consultants or advisors who are expected to
contribute to the Company's future growth and success. For purposes of this
Plan and the determination of eligibility for the grant of options hereunder,
and unless the context otherwise requires, the term "Company" shall include any
future parent or subsidiary corporation of the Company as defined in Sections
424(e) and 424(f) of the Internal Revenue Code of 1986, as amended or replaced
from time to time (the "Code"). Those provisions of the Plan which make express
reference to Section 422 of the Code shall apply only to Incentive Stock
Options (as that term is defined in the Plan).
2. TYPE OF OPTIONS AND ADMINISTRATION.
(a) Types of Options. Options granted pursuant to the Plan may be
either incentive stock options ("Incentive Stock Options") meeting the
requirements of Section 422 of the Code or non-statutory options which are not
intended to meet the requirements of Section 422 of the Code ("Non-Statutory
Options").
<PAGE> 2
(b) Administration.
(i) The Plan will be administered by the Board of Directors
of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors
may in its sole discretion grant options to purchase shares of the Company's
common stock, without par value ("Common Stock"), and issue shares upon
exercise of such options as provided in the Plan. The Board shall have
authority, subject to the express provisions of the Plan, to construe the
respective option agreements and the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the respective option agreements, which need not be identical,
and to make all other determinations which are, in the judgment of the Board of
Directors, necessary or desirable for the administration of the Plan. The Board
of Directors may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any option agreement in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be
the sole and final judge of such expediency. No director or person acting
pursuant to authority delegated by the Board of Directors shall be liable for
any action or determination under the Plan made in good faith.
(ii) The Board of Directors may, to the full extent permitted
by or consistent with applicable laws or regulations and Section 3(b) of this
Plan delegate any or all of its powers under the Plan to a committee (the
"Committee") appointed by the Board of Directors, and if the Committee is so
appointed all references to the Board of Directors in the Plan shall mean and
relate to such Committee.
(c) Applicability of Rule 16b-3. Those provisions of the Plan
which make express reference to Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act"), or any successor rule ("Rule
16b-3"), or which are required in order for certain option transactions to
qualify for exemption under Rule 16b-3, shall apply only if and when holders of
the Company's stock may be subject to such rule, and then only to such persons
as are required to file reports under Section 16(a) of the Exchange Act (a
"Reporting Person").
3. ELIGIBILITY.
(a) General. Options may be granted to persons who are, at the
time of grant, employees, officers or directors of, or consultants or advisors
to, the Company; provided, that the class of employees to whom Incentive Stock
Options may be granted shall be limited to employees. A person who has been
granted an option may, if he or she is otherwise eligible, be granted
additional options if the Board of Directors shall so determine.
(b) Grant of Options to Directors and Officers. From and after any
registration of the Common Stock of the Company under the Exchange Act, and so
long as Rule 16b-3 shall so require in order for certain option transactions to
qualify for exemption, the selection of a director or an officer (as the terms
"director" and "officer" are defined for purposes of Rule 16b-3) as a recipient
of an option, the timing of the option grant, the exercise price of the option
and the number of shares subject to the option shall be determined either (i)
by the Board of
2
<PAGE> 3
Directors, of which all members shall be "disinterested persons" (as defined in
and interpreted under Rule 16b-3), or (ii) by two or more directors having full
authority to act in the matter, each of whom shall be a "disinterested person."
In the event Rule 16b-3 shall at any time provide for additional or different
procedures to qualify for such exemption, the Board of Directors may implement
such procedures.
4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 15 below, the maximum
number of shares of Common Stock which may be issued and sold under the Plan is
634,392 shares. If an option granted under the Plan shall expire or terminate
for any reason without having been exercised in full, the unpurchased shares
subject to such option shall again be available for subsequent option grants
under the Plan. If shares issued upon exercise of an option under the Plan are
tendered to the Company in payment of the exercise price of an option granted
under the Plan, such tendered shares shall again be available for subsequent
option grants under the Plan; provided, that in no event shall such shares be
made available for issuance to Reporting Persons or pursuant to exercise of
Incentive Stock Options.
5. FORMS OF OPTION AGREEMENTS.
As a condition to the grant of an option under the Plan, each
recipient of an option shall execute an option agreement in such form not
inconsistent with the Plan as may be approved by the Board of Directors. Such
option agreements may differ among recipients.
6. PURCHASE PRICE.
(a) General. Subject to Section 3(b), the purchase price per share
of stock deliverable upon the exercise of an option shall be determined by the
Board of Directors, provided, however, that in the case of an Incentive Stock
Option, the exercise price shall not be less than 100% of the fair market value
of such stock, as determined by the Board of Directors, at the time of grant of
such option, or less than 110% of such fair market value in the case of options
described in Section 11(b).
(b) Payment of Purchase Price. Options granted under the Plan may
provide for the payment of the exercise price by delivery of cash or a check to
the order of the Company in an amount equal to the exercise price of such
options, or, to the extent provided in the applicable option agreement, (i) by
delivery to the Company of shares of Common Stock of the Company already owned
by the optionee having a fair market value equal in amount to the exercise
price of the options being exercised or (ii) by any other means (including,
without limitation, by delivery of a promissory note of the optionee payable on
such terms as are specified by the Board of Directors) which the Board of
Directors determines are consistent with the purpose of the Plan and with
applicable laws and regulations (including, without limitation, the provisions
of Regulation T promulgated by the Federal Reserve Board). The fair market
value of any shares of the Company's Common Stock or other non-cash
consideration which may be delivered upon exercise of an option shall be
determined by the Board of Directors.
3
<PAGE> 4
7. OPTION PERIOD.
Each option and all rights thereunder shall expire on such date as
shall be set forth in the applicable option agreement, except that, in the case
of an Incentive Stock Option, such date shall not be later than ten years after
the date on which the option is granted, or five years in the case of options
described in Section 11(b), and, in all cases, options shall be subject to
earlier termination as provided in the Plan.
8. EXERCISE OF OPTIONS.
Each option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of the
Plan.
9. NONTRANSFERABILITY OF OPTIONS.
Options shall not be assignable or transferable by the person to whom
they are granted, either voluntarily or by operation of law, except by will or
the laws of descent and distribution, and, during the life of the optionee,
shall be exercisable only by the optionee; provided, however, that
Non-Statutory Options may be transferred pursuant to a qualified domestic
relations order (as defined for purposes of Rule 16b-3).
10. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP.
Except as provided in Section 1l(d) with respect to Incentive Stock
Options, and subject to the provisions of the Plan, the Board of Directors
shall determine the period of time during which an optionee may exercise an
option following (i) the termination of the optionee's employment or other
relationship with the Company, or (ii) the death or disability of the optionee.
Such periods shall be set forth in the agreement evidencing such option.
11. INCENTIVE STOCK OPTIONS.
Options granted under the Plan which are intended to be Incentive
Stock Options shall be subject to the following additional terms and
conditions:
(a) Express Designation. All Incentive Stock Options granted under
the Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
(b) 10% Shareholder. If any employee to whom an Incentive Stock
Option is to be granted under the Plan is, at the time of the grant of such
option, the owner of stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company (after taking into account
the attribution of stock ownership rules of Section 424(d) of the Code), then
4
<PAGE> 5
the following special provisions shall be applicable to the Incentive Stock
Option granted to such individual:
(i) The purchase price per share of the Common Stock subject
to such Incentive Stock Option shall not be less than 110% of the fair market
value of one share of Common Stock at the time of grant; and
(ii) the option exercise period shall not exceed five years
from the date of grant.
(c) Dollar Limitation. For so long as the Code shall so provide,
options granted to any employee under the Plan (and any other incentive stock
option plans of the Company) which are intended to constitute Incentive Stock
Options shall not constitute Incentive Stock Options to the extent that such
options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate fair market value
(determined as of the respective date or dates of grant) of more than $100,000.
(d) Termination of Employment, Death or Disability. No Incentive
Stock Option may be exercised unless, at the time of such exercise, the
optionee is, and has been continuously since the date of grant of his or her
option, employed by the Company, except that:
(i) an Incentive Stock Option may be exercised within the
period of three months after the date the optionee ceases to be an employee of
the Company (or within such lesser period, including under specified
circumstances, as may be provided in the applicable option agreement),
provided, that the agreement with respect to such option may designate a longer
exercise period and that the exercise after such three-month period shall be
treated as the exercise of a non-statutory option under the Plan;
(ii) if the optionee dies while in the employ of the Company,
or within three months after the optionee ceases to be such an employee, the
Incentive Stock Option may be exercised by the person to whom it is transferred
by will or the laws of descent and distribution within the period of one year
after the date of death (or within such lesser period as may be specified in
the applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provision thereto) while in the
employ of the Company, the Incentive Stock Option may be exercised within the
period of one year after the date the optionee ceases to be such an employee
because of such disability (or within such lesser period as may be specified in
the applicable option agreement).
For purposes of the Plan and any option granted hereunder, "employment" shall
be defined in accordance with applicable provisions of the regulations issued
pursuant to the Code from time to time. Notwithstanding the foregoing
provisions, no Incentive Stock Option may be exercised after its expiration
date.
5
<PAGE> 6
12. ADDITIONAL PROVISIONS.
(a) Additional Option Provisions. The Board of Directors may, in
its sole discretion, include additional provisions in option agreements
covering options granted under the Plan, including without limitation
restrictions on transfer of, and repurchase rights for the shares issued upon
exercise of the option (whether in an option agreement or in a separate
document to be executed with such agreement or upon exercise of the option),
commitments to pay cash bonuses, to make, arrange for or guaranty loans or to
transfer other property to optionees upon exercise of options, or such other
provisions as shall be determined by the Board of Directors; provided that such
additional provisions shall not be inconsistent with any other term or
condition of the Plan and such additional provisions shall not cause any
Incentive Stock Option granted under the Plan to fail to qualify as an
Incentive Stock Option within the meaning of Section 422 of the Code.
(b) Acceleration, Extension, Etc. The Board of Directors may, in
its sole discretion, (i) accelerate the date or dates on which all or any
particular option or options granted under the Plan may be exercised or (ii)
extend the dates during which all, or any particular, option or options granted
under the Plan may be exercised.
13. GENERAL RESTRICTIONS.
(a) Conditions to Exercise of Options. The Board of Directors may,
in its discretion, require as conditions to the grant or exercise of options
and the issuance of shares thereunder either (a) that a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the options and the shares to be issued on the exercise thereof
shall have become, and continue to be, effective, or (b) that the participant
(i) shall have represented, warranted and agreed, in form and substance
satisfactory to the Company, that he or she is acquiring the shares for his or
her own account, for investment and not with a view to or in connection with
any distribution, (ii) has had such opportunity as he or she has deemed
adequate to obtain such information as is necessary to evaluate the merits and
risks of an investment in the Company, and is able to bear the economic risk of
holding shares for an indefinite period; (iii) shall have made such
representations, warranties and covenants as the Company shall deem desirable
with respect to the shares' status under Rule 144 of the Securities Act and the
public sale of such shares following the filing of a registration statement by
the Company; (iv) shall have agreed to restrictions on transfer in form and
substance satisfactory to the Company; and (v) shall have agreed to an
endorsement which makes reference to such representations, warranties,
agreements and restrictions on the certificate(s) representing the shares. In
addition, all shares issued to participants upon exercise of options shall be
subject to any and all restrictions on transfer, including without limitation
rights of first refusal, imposed by applicable state or federal securities laws
or by the Articles of Organization or the By-Laws of the Company as then in
effect.
(b) Compliance With Securities Laws. Each option shall be subject
to the requirement that if, at any time, counsel to the Company shall determine
that the listing, registration or qualification of the shares subject to such
option upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental or regulatory
6
<PAGE> 7
body, or that the disclosure of non-public information or the satisfaction of
any other condition is necessary as a condition of, or in connection with, the
issuance or purchase of shares thereunder, such option may not be exercised, in
whole or in part, unless such listing, registration, qualification, consent or
approval, or satisfaction of such condition shall have been effected or
obtained on conditions acceptable to the Board of Directors. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification, or to satisfy such condition.
14. RIGHTS AS A SHAREHOLDER.
The holder of an option shall have no rights as a shareholder with
respect to any shares covered by the option (including, without limitation, any
rights to receive dividends or non-cash distributions with respect to such
shares) until the date of issue of a stock certificate to him or her for such
shares. No adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
15. ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS AND RELATED TRANSACTIONS.
(a) General. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar transaction, (i) the outstanding
shares of Common Stock are increased, decreased or exchanged for a different
number or kind of shares or other securities of the Company, or (ii) additional
shares or new or different shares or other securities of the Company or other
non-cash assets are distributed with respect to such shares of Common Stock or
other securities, an appropriate and proportionate adjustment may be made in
(x) the maximum number and kind of shares reserved for issuance under the Plan,
(y) the number and kind of shares or other securities subject to any then
outstanding options under the Plan, and (z) the price for each share subject to
any then outstanding options under the Plan, without changing the aggregate
purchase price as to which such options remain exercisable. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this Section 15 if such
adjustment would cause the Plan to fail to comply with Section 422 of the Code.
(b) Board Authority to Make Adjustments. Any adjustments under
this Section 15 will be made by the Board of Directors, whose determination as
to what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
16. MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.
(a) General. In the event of a consolidation or merger or sale of
all or substantially all of the assets of the Company in which outstanding
shares of Common Stock are exchanged for securities, cash or other property of
any other corporation or business entity, or in the event of a liquidation of
the Company, the Board of Directors of the Company, or the board of directors
of any corporation assuming the obligations of the Company, may, in its
discretion, take any one or more of the following actions, as to outstanding
options: (i) provide that such options shall be
7
<PAGE> 8
assumed, or equivalent options shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof), provided that any such
options substituted for Incentive Stock Options shall meet the requirements of
Section 424(a) of the Code, (ii) upon written notice to the optionees, provide
that all unexercised options will terminate immediately prior to the
consummation of such transaction unless exercised by the optionee within a
specified period following the date of such notice, provided that in such
event, the vesting date for all then-unvested options will be accelerated to
such termination date, (iii) in the event of a merger under the terms of which
holders of the Common Stock of the Company will receive upon consummation
thereof a cash payment for each share surrendered in the merger (the "Merger
Price"), make or provide for a cash payment to the optionees equal to the
difference between (A) the Merger Price times the number of shares of Common
Stock subject to such outstanding options (to the extent then exercisable at
prices not in excess of the Merger Price) and (B) the aggregate exercise price
of all such outstanding options in exchange for the termination of such
options, and (iv) provide that all or any outstanding options shall become
exercisable in full immediately prior to such event.
(b) Substitute Options. The Company may grant options under the
Plan in substitution for options held by employees of another corporation who
become employees of the Company, or a subsidiary of the Company, as the result
of a merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the
circumstances.
17. NO EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time
to terminate such employment or to increase or decrease the compensation of the
optionee.
18. OTHER EMPLOYEE BENEFITS.
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares
received upon such exercise will not constitute compensation with respect to
which any other employee benefits of such employee are determined, including,
without limitation, benefits under any bonus, pension, profit-sharing, life
insurance or salary continuation plan, except as otherwise specifically
determined by the Board of Directors.
19. AMENDMENT OF THE PLAN.
(a) The Board of Directors may at any time, and from time to time,
modify or amend the Plan in any respect, except that if at any time the
approval of the shareholders of the Company is required under Section 422 of
the Code or any successor provision with respect to
8
<PAGE> 9
Incentive Stock Options, or under Rule 16b-3, the Board of Directors may not
effect such modification or amendment without such approval.
(b) The termination or any modification or amendment of the Plan
shall not, without the consent of an optionee, affect his or her rights under
an option previously granted to him or her. With the consent of the optionee
affected, the Board of Directors may amend outstanding option agreements in a
manner not inconsistent with the Plan. The Board of Directors shall have the
right to amend or modify (i) the terms and provisions of the Plan and of any
outstanding Incentive Stock Options granted under the Plan to the extent
necessary to qualify any or all such options for such favorable federal income
tax treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code and (ii) the terms and
provisions of the Plan and of any outstanding option to the extent necessary to
ensure the qualification of the Plan under Rule 16b-3.
20. WITHHOLDING.
(a) The Company shall have the right to deduct from payments of
any kind otherwise due to the optionee any federal, state or local taxes of any
kind required by law to be withheld with respect to any shares issued upon
exercise of options under the Plan. Subject to the prior approval of the
Company, which may be withheld by the Company in its sole discretion, the
optionee may elect to satisfy such obligations, in whole or in part, (i) by
causing the Company to withhold shares of Common Stock otherwise issuable
pursuant to the exercise of an option or (ii) by delivering to the Company
shares of Common Stock already owned by the optionee. The shares so delivered
or withheld shall have a fair market value equal to such withholding
obligation. The fair market value of the shares used to satisfy such
withholding obligation shall be determined by the Company as of the date that
the amount of tax to be withheld is to be determined. An optionee who has made
an election pursuant to this Section 20(a) may only satisfy his or her
withholding obligation with shares of Common Stock which are not subject to any
repurchase, forfeiture, unfulfilled vesting or other similar requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting
Person, no election to use shares for the payment of withholding taxes shall be
effective unless made in compliance with any applicable requirements of Rule
16b-3 (unless it is intended that the transaction not qualify for exemption
under Rule 16b-3).
21. CANCELLATION AND NEW GRANT OF OPTIONS, ETC.
The Board of Directors shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
canceled options, or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options.
9
<PAGE> 10
22. EFFECTIVE DATE AND DURATION OF THE PLAN.
(a) Effective Date. The Plan shall become effective when adopted
by the Board of Directors, but no option granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, options previously granted
under the Plan shall not vest and shall terminate and no options shall be
granted thereafter. Amendments to the Plan not requiring shareholder approval
shall become effective when adopted by the Board of Directors; amendments
requiring shareholder approval (as provided in Section 19) shall become
effective when adopted by the Board of Directors, but no option granted after
the date of such amendment shall become exercisable (to the extent that such
amendment to the Plan was required to enable the Company to grant such option
to a particular person) unless and until such amendment shall have been
approved by the Company's shareholders. If such shareholder approval is not
obtained within twelve months of the Board's adoption of such amendment, any
options granted on or after the date of such amendment shall terminate to the
extent that such amendment was required to enable the Company to grant such
option to a particular optionee. Subject to this limitation, options may be
granted under the Plan at any time after the effective date and before the date
fixed for termination of the Plan.
(b) Termination. Unless sooner terminated in accordance with
Section 16, the Plan shall terminate upon the close of business on the day next
preceding the tenth anniversary of the date of its adoption by the Board of
Directors. Options outstanding on such date shall continue to have force and
effect in accordance with the provisions of the instruments evidencing such
options.
23. PROVISION FOR FOREIGN PARTICIPANTS.
The Board of Directors may, without amending the Plan, modify awards
or options granted to participants who are foreign nationals or employed
outside the United States to recognize differences in laws, rules, regulations
or customs of such foreign jurisdictions with respect to tax, securities,
currency, employee benefit or other matters.
10
<PAGE> 1
EXHIBIT 11.1
IXL ENTERPRISES, INC.
STATEMENT RE COMPUTATION OF NET LOSS PER SHARE
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Net loss $ (15,440) $ (48,866) $ (70,213)
================================================
Dividends and accretion on mandatorily redeemable
preferred stock -- (9,099) (20,966)
------------------------------------------------
Net loss available to common stockholders $ (15,440) $ (57,965) $ (91,179)
================================================
Weighted average common shares outstanding 6,540 11,777 43,747
Basic and diluted net loss per share $ (2.36) $ (4.92) $ (2.08)
================================================
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
The following are wholly owned subsidiaries of the iXL Enterprises,
Inc., unless otherwise noted:
<TABLE>
<CAPTION>
COMPANY JURISDICTION OF INCORPORATION
<S> <C>
AppGeneSys Holdings, Inc. (1) Delaware
Campana New Media, S.L. (2) Spain
CFN Agency, Inc. (3) Delaware
CFN Agency of Hawaii, Inc. (3) Hawaii
CFN Finance, Inc. (3) Delaware
Consumer Financial Network, Inc. (4) Delaware
Creative Video Library, Inc. Georgia
Denovo New Media Limited (5) United Kingdom
FootageNow, Inc. (6) Delaware
iExpert, Inc. (3) Delaware
iVisit, Inc. (7) Delaware
iXL-Espana, S.A. Spain
iXL Germany GmbH Germany
iXL, Inc. Delaware
iXL Japan, K.K. Japan
iXL Live, Inc. Delaware
iXL-Massachusetts, Inc. Delaware
IXL-Memphis, Inc. Delaware
iXL (UK) Limited United Kingdom
iXL Ventures, Inc. Delaware
Tessera GmbH (8) Germany
The Other Media, S.L. (2) Spain
</TABLE>
1. AppGeneSys Holdings, Inc. is a wholly-owned
subsidiary of IXL-Memphis, Inc.
2. Campana New Media, S.L. and The Other Media, S.L.
are wholly-owned subsidiaries of iXL-Espana, S.A.
3. CFN Agency, Inc., CFN Finance, Inc., CFN Agency of
Hawaii, Inc. and iExpert, Inc. are each a
wholly-owned subsidiary of Consumer Financial
Network, Inc.
4. The Company owns 76%, General Electric Capital
Corporation owns 10%, and GE Capital Equity
Investments, Inc. owns 13% of Consumer Financial
Network, Inc.
5. Denovo New Media Limited is a wholly-owned
subsidiary of iXL (UK) Limited
6. FootageNow, Inc. is a majority-owned subsidiary of
Creative Video Library, Inc.
7. iVisit, Inc. is a wholly-owned subsidiary of iXL-Los
Angeles, Inc., as successor by merger with BoxTop
Interactive, Inc.
8. Tessera GmbH is a wholly-owned subsidiary of
iXL-Massachusetts, Inc. (as successor by merger with
Tessera Enterprise Systems, Inc.)
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-92505) of iXL Enterprises, Inc. of our report
dated February 14, 2000 relating to the financial statements and financial
statement schedules, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Atlanta, Georgia
February 14, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF IXL ENTERPRISES, INC. FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 120,812
<SECURITIES> 34,895
<RECEIVABLES> 66,857
<ALLOWANCES> 4,021
<INVENTORY> 0
<CURRENT-ASSETS> 246,947
<PP&E> 73,398
<DEPRECIATION> (21,125)
<TOTAL-ASSETS> 357,855
<CURRENT-LIABILITIES> 47,497
<BONDS> 48,955
0
0
<COMMON> 676
<OTHER-SE> 259,419
<TOTAL-LIABILITY-AND-EQUITY> 357,855
<SALES> 0
<TOTAL-REVENUES> 218,343
<CGS> 0
<TOTAL-COSTS> 125,725
<OTHER-EXPENSES> 161
<LOSS-PROVISION> 165,195
<INTEREST-EXPENSE> 987
<INCOME-PRETAX> (70,213)
<INCOME-TAX> 0
<INCOME-CONTINUING> (70,213)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (70,213)
<EPS-BASIC> (2.08)
<EPS-DILUTED> (2.08)
</TABLE>
